SEE pharmaceutical market healthy in 2010

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Rosaline Strickland
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1 SEE pharmaceutical market healthy in 2010

2 The pharmaceutical market in Southeast Europe (SEE) continued to grow in 2010 despite the economic volatility brought on by the global financial crisis. Pharmaceutical sales in the region are still dominated by generic drugs, especially in terms of volume, due to low per capita income and underinvestment in research and development activities focused on new medicines. However, the introduction of brand-name drugs is expanding and their share in terms of value is getting close to that of generics. For instance, brandname drugs registered a 15.40% year-on-year growth in Bulgaria to million levs (490.6 million euro) in 2010 and their market share reached 48.90% in value terms. Value of pharmaceutical market in some SEE countries (in billions of euro) Country 2011 (forecast) Y/Y change 2010 Y/Y change Bosnia and Herzegovina N/A N/A % Bulgaria % % Croatia % % Romania % % Serbia % % Slovenia % % Sources: Business Monitor International; IMS Health; Cegedim Romania The growth of the over-the-counter (OTC) pharmaceutical market in SEE in 2010 was driven by higher sales of analgesics, digestives, vitamins and minerals. Oncology drugs also posted higher sales because of an increase in prices and in the number of cancer patients. Pharmaceutical demand in the SEE countries continued to be covered mainly by imports and their share in terms of value reached 80% in both Romania and Bulgaria in Pharmaceuticals producers in the region kept their focus on the manufacturing of lowcost generic drugs with the major companies generating the bulk of their sales revenue abroad. The Bulgarian pharmaceutical market grew in terms of value in The pharmaceutical companies sold drugs worth billion levs (1.032 billion euro) in 2010, which is a 9.0% increase compared to 2009, according to data from global market research company IMS Health. In terms of volume, the market shrank by 2.0% on the year. However, the decrease was not caused by lower consumption of drugs but by the fact that the pharmaceutical companies started to put more tablets in a single package. Sales of brand-name drugs marked growth in both value and volume terms but the market is still dominated by generic drugs, which accounted for 80% of the total number of units sold. The country s largest Bulgarian-owned generic drugs maker is Sopharma AD, which recorded non-consolidated sales of million levs on the domestic market in The company produces the market s top-selling medicine in the past 10 years the analgesic Analgin. In 2010 Sopharma s exports increased by 19.44% and totalled million levs or 69.72% of its net sales revenue. Sopharma ended up in the fifth spot in the ranking of the 15 biggest SEE pharmaceutical companies in terms of total revenue for It was the highest placed Bulgarian drug manufacturer in the ranking with total revenue rising nearly 12% and net profit up 21% last year.

3 In Serbia, pharmaceutical sales were estimated at 67.1 billion dinars (636 million euro), down from 71.2 billion dinars in 2009, according to market intelligence company Business Monitor International. The export of basic pharmaceutical products jumped by 21.9% year-on-year to million euro in Serbia s major pharmaceutical producers are state-owned Galenika AD and Hemofarm AD, controlled by German generic drug-maker Stada Arzneimittel. Hemofarm ranked fourth among the SEE pharmaceutical companies in 2010, while Galenika was sixth. Hemofarm saw a 2.93% rise in total revenue last year while Galenika posted an increase of 5.16%. Both companies, however, slipped in the red in Annual change in total revenue of major pharmaceutical companies in SEE Y/Y change (%) Bosnalijek (BiH) Pliva Hrvatska (Croatia) Krka (Slovenia) Sopharma (Bulgaria) Hemofarm (Serbia) Lek (Slovenia) In 2010, the pharmaceutical market in Romania marked an 18.7% annual increase to billion lei (2.26 billion euro), data from research company Cegedim Romania indicated. The growth was fueled by retail sales, which accounted for 89.4% of the total. The prices of drugs in the country remained among the lowest in the region. The low prices boosted the so called parallel export wholesalers bought medicines from Romania and exported them to countries with higher drug prices. In 2010, the share of parallel exports reached 15% of the Romanian drug market. France s Sanofi-Aventis and Swiss Hoffmann La Roche were the leaders on the Romanian pharmaceutical market in terms of sales value in 2010, each with a market share of 9.1%. Pfizer ranked third with a market share of 6.5%, followed by Swiss Novartis with 6.2%. Romanians take mainly medicines for cardiovascular diseases, digestive system and metabolism disorders and as part of cancer treatment. Only one Romanian company featured among the biggest pharmaceutical makers in the region last year. Majority state-owned Antibiotice ranked tenth after posting nearly flat net profit on a revenue gain of 18.75%.

4 Slovenia is home to two of the largest pharmaceutical companies in the region Krka d.d. and Lek d.d. These companies generate some 90% of their sales revenue from exports, while nearly 60% of the local demand is covered by imports. Krka was the region s top drug maker last year in terms of total revenues with Lek as the runner-up. Krka s total revenue edged up 0.18% last year, while Lek s fell 0.99% compared to Both companies saw a minor decline in net profit in In 2010, Slovenia s export of pharmaceutical products totalled million euro, up 6.7% on the year and imports came in at million euro, compared to million euro in 2009, data from the country s Statistical Office showed. The value of the pharmaceutical market in Bosnia and Herzegovina reached million marka (269 million euro) in 2010, up from million marka in 2009, according to the country s Agency for Medicines and Medical Devices. The value of imported pharmaceuticals continued to account for more than 80% of the market. However, domestic producers managed to raise their share to 19.35% in 2010 from 16.70% in Bosnia s largest pharmaceutical company Bosnalijek d.d. kept its leading position in terms of sales revenue with million marka for a market share of 12.38% in That revenue performance was good enough for the 11 th spot among the biggest pharmaceutical companies in the region last year. Slovenia s Krka was runner-up on the Bosnian market with a share of 9.64% and sales of million marka. Among the other major companies with market shares exceeding 5.0% were Serbia s Hemofarm, UK-based Wellcome Limited, Swiss Roche and Croatia s Pliva Hrvatska d.o.o. The best selling medicines were generic but there was an increase in the sales of high-cost drugs, particularly oncology medicines. The combined sales of the oncology drugs of Novartis and Roche stood at million marka (6.0 million euro) in 2010, up 38.3% on the year. The value of the Croatian pharmaceuticals market rose 0.17% to billion kuna (779 million euro) in 2010, according to data of Business Monitor International. The market is expected to reach billion kuna in 2011 but the negative demographic trend and strict reimbursement criteria may halt its growth in the long term. The country s largest pharmaceutical manufacturer Pliva Hrvatska, part of Israeli-based Teva Group, took third place in the SEE ranking for 2010 despite a 3.0% drop in total sales. It is Croatia s only entrant in the ranking of the biggest 15 drug-makers in SEE. According to market experts, the SEE pharmaceutical sector will maintain its growth throughout 2011 as well as over the next few years. The market s development will be supported by the economic recovery, primarily export-led, the ageing population and the improving health consciousness among the middle class. As the pharmaceutical market will continue to rely on imports, currency exchange fluctuations could impact its growth in value terms in countries like Romania, Croatia and Serbia. The major pharmaceutical producers in the SEE region will keep their focus on manufacturing of generic drugs for export markets to achieve better sales revenues. The industry s development, however, could be impeded by factors such as a weak healthcare system, especially funding difficulties experienced by the government hospitals, low per capita income, a lack of clear government policy for promotion of investments in the sector and the latter s strong focus on generic drugs. Mergers and acquisitions The SEE pharmaceutical market saw no major mergers and acquisitions in The only notable deals took place in Bulgaria. Sopharma continued to increase its stake in its associate Unipharm AD as part of a consolidated effort to boost its competitiveness on the domestic market. Sopharma also merged its pharmaceutical logistics provider Sopharma Logistics AD and drug distributor Sopharma Trading AD in September 2010.

5 In June 2010, Bulgarian drug retailer Farmahold EOOD received a nod to acquire local pharmaceuticals distributor Higia EAD from Dutch Actavis Holding for an undisclosed sum. Actavis Holding bought Higia in 2005 in a deal valued in Bulgarian media reports at 33 million levs. In 2010, the Serbian government cancelled its long-standing plans to sell Galenika, the country's largest pharmaceutical producer, because none of the bidders could meet its requirements. Offers for 100% of Galenika were filed by UK-based AstraZeneca, Greece's Alapis, India's Surya Pharmaceutical Limited and Cyprus-based investment fund RPG Partners Limited. Back in 2009, the government announced it would not consider bids lower than 200 million euro. In Bosnia and Herzegovina, the sale of the state-owned stake of 19.26% in local drug producer Bosnalijek attracted no buyers in May The auction of 1,507,724 shares owned by the government of Bosnia s Muslim-Croat Federation failed as no bids were placed. The Federation government is the biggest single shareholder in Bosnalijek. Other major shareholders include the World Bank s private sector arm, the International Finance Corporation (IFC), with 8.4%, and the Libyan government with 8.8%. In November 2010 IFC too failed in its attempt to exit Bosnalijek due to lack of interest towards its stake. In December, U.S.-based drug maker Alvogen confirmed it was still interested in acquiring Bosnalijek but said it wanted to buy the state-owned stake first. The U.S. company, however, did not place a bid for the state-owned stake in May, hoping for a lower price later on. Alvogen said at the time it aimed with the Bosnalijek acquisition to expand to Europe and become one of the world s top 10 drug makers. Wholesalers In 2010, all of the largest drug wholesalers in the SEE countries managed to increase their total revenue on an annual basis. The sharpest year-on-year growth in total revenue was reported by Romania s Sanofi-Aventis, Europharm Holding and Farmexpert D.C.I. All of the major companies reported net profits with Farmexpert D.C.I. topping the list with net earnings of 12.5 million euro. Bulgaria s Sopharma Trading, majority owned by Sopharma, retained its top position on the local pharmaceuticals market with a 22.8% share by May 2011, according to data of IMS Health. Croatia s leading drug wholesaler Medika d.d. announced its market share stood at 29.36% as of June 2010, compared to 28.15% a year earlier. Pliva Hrvatska, the leading pharmaceutical manufacturer in the country, holds a 25.32% stake in Medika is shaping up as another profitable year for the leading drug wholesalers in SEE. In the first half of 2011, Sopharma Trading reported a 59.7% increase in its net profit to million levs on an 18.16% increase in its total revenue to million levs. Medika s total revenue was up by 6.70% to billion kuna and its net profit rose by 19.26% to million kuna in the first half of 2011.

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