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ublicly listed pharmaceutical company PT Kalbe Farma is constructing its first biotech-based drug factory in Cikarang, West Java. It is hoped that the construction of the factory will help the country reduce its dependency on imported raw materials for drug production.

The factory will produce erythropoietin, a biosimilar made from the cells of living creatures that will help the body form red blood cells and battle cancers, anemia and kidney failure. The factory is scheduled to be operational by the second half of this year.

The company is expected to start selling the product next year after receiving certification from the government.

The factory will be run by two of Kalbe'€™s subsidiaries, namely PT Kalbio Global Medika and PT Kalbe Genexine Biologics, a joint venture between Kalbe Farma and South Korean biotherapeutics firm Genexine. PT Kalbio Global Medika will produce the ingredients and the medicine and PT Kalbe-Genexine Biologics will be in charge of research and development.

Kalbe Farma president director Irawati Setiady said the new project would help the company expand its grip over the domestic and regional market.

'€œThe construction of this biosimilar factory is a follow up to our commitment to supporting the creation of an integrated pharmaceutical industry, starting from raw materials production to technology expertise and exports,'€ she said during the groundbreaking ceremony on Wednesday.

According to the Food and Drug Monitoring Agency (BPOM), 70 percent of drugs consumed in Indonesia are made by local firms. However, 90 percent of drug ingredients are imported due to limited technology development and difficulties for foreign investors to put money into the sector.

Nevertheless, more companies are starting to go downstream. Earlier this week, state-owned Kimia Farma announced a plan to produce drug materials.

BPOM chairman Roy Sparringa also announced at the event that five out of the country'€™s 208 pharmaceutical firms had stated their commitment to opening biosimilar factories.

Biosimilar is currently not as popular as chemical medicine though it has gained worldwide recognition as a better form of therapy for certain diseases.

Halbe Farma'€™s factory hopes to run at a maximum annual capacity of 10.5 million syringes. The company plans to sell 80 percent of its product in Indonesia, and export the remaining 20 percent to Africa and ASEAN nations.

The product will be one of its newest items. In 2016, the company plans to launch five to 10 new products to boost sales.

'€œThis year, we'€™re aiming to boost sales by more than 10 percent to around Rp 20 trillion,'€ said Kalbe Farma corporate secretary Vidjongtius.

To do that, the company has allocated Rp 1 trillion to Rp 1.5 trillion in capital expenditure, 50 percent of which will be used to develop prescribed medicines. The rest will be allocated for its over-the-counter drugs, consumer products and logistics business.

Vidjongtius added that to support the company'€™s ambition to help reduce the state'€™s dependency on imported materials, the government needed to ease its formula for calculating tax derived from research and development.

'€œResearch and development is expensive and a long term investment. The government could relax its tax formula so we can save more and innovate more,'€ he said.

To encourage more foreign investors to manufacture raw materials in Indonesia, the Investment Coordinating Board (BKPM) has proposed a plan to allow foreigners to own 100 percent of a drug production company, up from the previous level of 85 percent. (rbk)