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Baxter enters untapped Russian market

Baxter enters untapped Russian market

Baxter International Inc.’s work with a Russian manufacturing group to produce surgical instruments at a plant in Moscow should help position the company on the ground floor of a large, relatively untapped market, according to a Baxter spokesman.

Based in Deerfield, Ill., Baxter recently joined a Russian manufacturer, NIIAP, to make hand-held surgical instruments such as vascular damps, scissors and needle holders. Baxter will own 75% of the venture, with the remaining 25% held by NIIAP, a Russian government organization whose name translates to The Scientific Research Institute for Automation and Instrumentation. NIIAP expects to become a private operation in the future.

Baxter plans to introduce “Western-style” customer sales and service to the new country, delivering products using vans marked with the Baxter logo. Baxter also will establish a Moscow-based sales and manufacturing force totalling 200 to 300 employees, according to Baxter spokesman Geoffrey D. Fenton.

The instruments will be sold to Russian medical facilities only. A severe shortage exists for these core instruments, Fenton said. Current manufacturers are able to fill only about 30% of demand. In addition, Russian instruments lack the durability of those manufactured in the United States, he said.

“During the Cold War, there was a misappropriation of resources,” Fenton said. “The healthcare system, some would say, is decades behind us. There’s a tremendous need.”

Baxter’s Moscow manufacturing facility will occupy part of a massive 10,000sf to 11,000sf facility that had been used to produce missile guidance systems. The site was selected because it had modem equipment and was a center for precision machining and manufacturing, Fenton said. The same processes also are required for production of surgical instruments. Preliminary production is scheduled to begin in June 1993 with full production starting in early 1994.

Baxter invested just under $10 million as part of the agreement in the hope that this project will mark the beginning of a long-term relationship in Russia.

“Obviously, this is a very large market,” said Fenton. “It’s a growing economy and it’s important to get in on the ground floor. Surgical instruments is largely an untapped market.”

Baxter has always maintained a global outlook on product production and sales, Fenton said. The company was one of the first to begin manufacturing in Europe during the 1960s. Baxter has since established manufacturing and marketing facilities in other countries. In 1992, Baxter setup sales forces in Czechoslovakia, Hungary and Poland. Plans are to add manufacturing plants in those nations.

“International expansion has been part of Baxter for a number of years,” Fenton said.

“International expansion has been a part of Baxter for a number of years,” Fenton said.

The Russian venture presents some challenges, Fenton noted. In particular, the country’s monetary system is unstable. In fact, the ruble is experiencing hyper-inflation with its value fluctuating daily. But Baxter is accustomed to working with such unstable markets, he said. It currently has a sales and manufacturing facility in Brazil, which has experienced similar hyper-inflation.

The joint venture will primarily serve Moscow and St. Petersburg, where more than one-third of Russian surgical procedures are performed. The region encompasses 2,800 hospitals with 710,000 hospital beds.

“This could be just the beginning of our investment in the Russian economy and people,” said Tony L. White, Baxter executive vice president for global businesses. “If we are successful in this venture, we may explore bringing other technologies–including blood products, intravenous solutions and renal therapy–to Russia.”

In the past, Baxter provided enteral and parenteral nutrition supplies as part of humanitarian aid to Russia. The venture involved Clintec Nutrition Co., Deerfield, Ill. Clintec is a 50-50 partnership between Baxter and Nestle S.A., Switzerland.

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