Kazakhstan Pharmaceuticals and Healthcare Report Q1 2010

March 18. Research and Markets

Kazakhstan Pharmaceuticals and Healthcare Report Q1 2010Kazakhstan Pharmaceuticals and Healthcare Report provides industry professionals and strategists, corporate analysts, pharmaceutical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Kazakhstan’s pharmaceuticals and healthcare industry.

BMIs updated five-year growth forecast for the Kazakhstan pharmaceutical market remains somewhat conservative, at a compound annual growth rate (CAGR) of 7.55% in US dollar terms and 13.54% in local currency terms for 2009-2014. The markets total value should reach US$925mn in 2009, with the weakening of the tenge pushing US dollar growth rates down throughout the forecast period. Government intervention and increased spending will be important drivers of the market, with the state, by its own forecasts accounting for up to 45% of the market by 2011. The countrys unified state-sector distributor SK Farmatsiya will also play a key role in price formation and shaping demand, in particular from the small but growing domestic production sector.

One major reason the state is taking a very active role in the pharmaceutical sector is the governments deep concern over import dependence, as well as President Nursultan Nazarbayevs public statement earlier this year that 50% of the countrys pharmaceutical supply must come from domestic sources by 2014 instead of the 30% in volume terms covered today. Most big producers have plans to build additional facilities and modernise production lines to meet Good Manufacturing Practice (GMP) standards. As the industry is wholly in private hands, the governments key lever is the provision of funding through the Kazakhstan Development Bank (KDB), the National Innovation Fund and other bodies a key advantage given the shortage of private domestic capital sources.

The pharmaceutical industry forms a part of the countrys wider industrialisation and diversification strategy, and, according to sources, a new strategy for the industry will be unveiled in early 2010. As in other large Commonwealth of Independent States (CIS) markets, the country is focused on import substitution and exports, although a primary challenge will be mirror strategies in key export markets, such as Uzbekistan. Two key but as yet difficult to measure developments will be the implementation of the new Customs Union with Russia and Belarus with the threat of external tariffs and elimination of internal barriers. This will open up the local market to Russian production, in particular, which produces similar products to Kazakhstan’s domestic industry.

Leading local player Chimpharm is planning to build a new tablet factory in Astana, the first plant in the capital, as well as expanding existing production facilities for producing ampoules, infusions, solutions and suspensions of antibiotics in Shymkent. KDB is providing financing for the project. Other state funding may also be provided to expand production of plant-based original medicines in Karaganda by start-up company Phytokhymia. Other players are reported to be planning to expand existing facilities or build new plants over the next five years, although it is not yet clear how these will be financed. Real constraints exist however, in expanding the domestic industry, not least of which is the poor infrastructure, as well as relatively high labour costs and new modern production capacity coming online in key export destinations, namely Uzbekistan and Kyrgyzstan.