Pharmaceutical Market Evolution After Egypt’s Revolution

By: Mohamed S. Morsy

Business EnvironmentSWOT Analysis (1)

Strengths

The country’s geographical location is good for trade as Egypt has access to both the Mediterranean and the Red Sea, not to mention the key Suez canal route, which connects Europe and Asia.

The legal system has issued adjudications in favor of foreign firms, although there are frequent procedural delays.

(1) Egypt Business Forecast Report, Business Monitor International, Q2/2012, Chapter 4, P. 27, 2012

Business EnvironmentSWOT Analysis Weaknesses

Egypt ranks 112th out of 180 states surveyed in Transparency International’s Corruption Perceptions Index 2011, comparing unfavorably with regional peers.

The labor market is relatively inflexible, with Egypt performing markedly worse than the Organization for Economic Co-operation and Development average, and also inferior to the regional average on the World Bank’s Hiring and Firing Workers index.

Business EnvironmentSWOT Analysis Opportunities

Efforts towards banking-sector consolidation should bring down the cost of private-sector credit and fuel small business growth over the long term.

Business EnvironmentSWOT Analysis Threats

Patronage networks impede attempts at fighting corruption and cutting bureaucracy.

Although levels of education are relatively high, there is a considerable mismatch between the skills taught in schools and those required by most employers.

Business EnvironmentRank

(1) Adapted from: Egypt Business Forecast Report, Business Monitor International, Q2/2012, Chapter 4, P. 27, 2012

(1)

Affected Operations* at Q1/2011

* A slowdown in a company’s business activities, scarcity and/or price appreciation of raw materials, logistical difficulties affecting the distribution of products and/or obtaining raw materials, logistical difficulties that led to employees being unable to reach the workplace, etc.

Revenue Changes, PPG% - Q1/2011

Direct Damages On Assets at Q1/2011

Section Conclusion After the low probability, high impact event at

Q1/2011, the general business environment is still not significantly affected except for certain industries.

The business risk rate is still within the average global and regional rate and much more higher than the emerging markets rates.

Pharmaceutical industry did not show any major damage in term of affected operations, industry revenue or direct damage of assets.

WHERE DO WE GO

FROM HERE?

Health Care and Pharmaceutical Expenditure Egypt is the second largest

healthcare market in the MENA region.

Healthcare expenditure in the country in 2010 was estimated to be EGP 50 bn., or 5.0% of the GDP.

Its total health spending on a per capita basis stood at EGP 650 during the year = EGP 54 / M. (1)

EGP 390 / Y EGP 32 .5 / M

EGP 260 / Y EGP 21.6 / M

(1) Adapted from: MENA Healthcare Sector Report, Al Masah Capital Management Limited, P. 28, 2011

Healthcare Expenditure Forecast

12

24

36

48

60

70

84

Bn.

EG

P %

f = forecast. Source: World Health Organization (WHO), CIA World Fact Book, BMI research

CAGR% = 8.25 by 2014

Pharmaceutical Market Structure (Value in bn. EGP)

(1) EGYPT PHARMACEUTICALS & HEALTHCARE REPORT, BMI, P. 15, 2010(2) IMS Data: MAT/10/2011

Total Value = 18.7 bn. EGP

(1)

Pharmaceutical Market Forecast

6

12

18

24

30

36

42

Bn.

EG

P %

f = forecast. Source: Ministry of Health in Egypt, BMI.

The slowdown is a response to changes in the market caused by the 2011 patent cliff, pricing, higher domestic drug production output and a diversification of drugs available with competitive prices in the generic drug sector. (CAGR% = 8.4 by 2014)

21

Prescription Drug Market Forecast

6

12

18

24

30

36

Bn.

EG

P %

f = forecast. Source: American Chamber of Commerce in Egypt, IMS Health, BMI.

CAGR% = 7.61 by 2014The pricing reform for patented and generic medicines will largely affect prescription drugs.

18

Patented Product Market Forecast

3

6

9

12

15

21

Bn.

EG

P

18

CAGR% = 6.57 by 2014Cost saving through generic substitution

f = forecast. Source: Local news sources, domestic companies, BMI.

%13.5

Generic Drug Market Forecast

1.22.4

Bn. EG

P

3.6

4.8

67.2

8.4

9.6

%

CAGR% = 14.1 by 2014Generics will gradually become popular through public education about medicines. Prescribing practices also largely determine the size of the generic marketf = forecast. Source: Local news sources, domestic companies, BMI.

4

OTC Medicine Market Forecast

3

6

9

12B

n. EG

P

%

f = forecast. Source: Local news sources, domestic companies, BMI.

CAGR% = 11.95 by 2014Generics will gradually become popular through public education about medicines. Prescribing practices also largely determine the size of the generic market

4

CAGR% by 2014 summary

Vision and Opinion Based on Egyptian population individual income

during democratic transformation, the personal health care budget will be placed when necessary.

Total pharmaceutical market will continue to grow within its normal growth rate (near to 14%).

There will a significant shift to generics (GP and Specialty products) and OTC products to reduce the cost as possible.

There is an expected strategic growth from multinationals by acquisition of local firms.

Thank You

Mohamed S. Morsy