Kazakhstan Pharmaceuticals And Healthcare Report Q2 2010
March 11. OfficialWire
Our five-year outlook for the Kazakhstan pharmaceutical market has become markedly more upbeat as our five and ten-year economic forecasts indicate strengthening GDP growth, driven by such factors as anticipated global oil and gas price growth. Strong increases in export capacity also boost the country as major projects like the Kashagan oil field come online. We are now forecasting a five-year compound annual growth rate (CAGR) of 19.5% in US dollar terms in pharmaceutical market value, from US$1.05bn to US$2.63bn, reflecting the anticipated long-term appreciation of local currency on the back of growing hydrocarbon exports. A sharply revised currency forecast, more favourable to the tenge, is a key factor in the cheerier forecasts. The picture for 2009 was more mixed, according to preliminary data, with a 3.2% decline in US dollar terms and 19.0% increase in tenge terms.
During 2009 pack prices held steady in dollar terms, but consumers saw their purchasing power eroded by nearly 25%. The country’s new state-sector distributor SK Farmatsiya carried out its pilot centralised tender for medicines, indicating that it would be able to exert significant pricing pressure in the future. A significant part of its savings will be achieved from domestic distributors rather than manufacturers. Indeed, as underlined in an interview by the new distributor’s head in February 2010, local producers will enjoy preferential terms, even against other manufacturers within the new Customs Union of Russia, Belarus and Kazakhstan which officially came into being from February. Of course, these terms will not apply in the pharmacy marketplace, where local players continue to face daunting global competition. The authorities are keenly aware of the challenges. Kazakhstan President Nursultan Nazarbayev’s ultimatum, issued in early 2009 and stating that the domestic industry must account for 50% of all pharmaceutical supplies (in volume terms) by 2014 underpins official thinking. The government, in cooperation with industry, is developing a strategy for the sector as part of a wider accelerated’ plan to develop and diversify the country’s industrial base. For the pharmaceutical industry, this entails building a number of new plants very quickly. The 2014 deadline is pushing the government to seek ways to lure outside manufacturers that have generally avoided direct investment in the country.
The furthest-advanced project among locals is one by Chimpharm – by far the biggest player – to build a new tablet factory in Astana, though it is seen by some as a prestige project as no plants have previously been built in the new capital. The project has secured funding from the Kazakhstan Development Bank (KDB), along with a project to expand production facilities in Shymkent. Other players, including GlobalPharm, Nobel AFF, and Romat are reportedly planning new lines or new plants. For the manufacturers, the race is on to beat another 2014 deadline, this time for mandated Good Manufacturing Practices (GMP) compliance. For the bureaucrats, the even more immovable target set by the president to up local production looms. We therefore expects more projects and perhaps some joint venture project announcements in 2010 – as suggested in a December 2009 statement that China and Kazakhstan would collaborate on an unspecified new pharmaceutical plant in the near future.