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Lithuania Pharmaceuticals and Healthcare Report Q4 2008
Business Monitor International, Oct 2008, Pages: 65
This Lithuania Pharmaceuticals and Healthcare Report provides independent forecasts and competitive intelligence on Lithuania's pharmaceuticals and healthcare industry.
In the Business Environment Ranking matrix for Q408, Lithuania has significantly improved its standing in the Central and Eastern European (CEE) region, moving up from thirteenth to ninth place out of the 17 regional markets we surveyed. The change is mainly supported by the country’s recent removal from the US Trade Representative (USTR)'s Special 301 Report watch list for 2008, which indicates an improvement in intellectual property rights (IPR) legislation and its enforcement. However, despite being a larger pharmaceutical market than both of its Baltic neighbours, namely Estonia and Latvia, Lithuania is regarded as being less attractive to investment. Key drawbacks include small population size and a restrictive pricing and reimbursement environment.
Nevertheless, this report forecasts the market value to reach US$654mn by 2012, growing by 35% on the 2007 levels. The over-the-counter (OTC) sector will be stimulated by rising health awareness and improved disposable incomes, although prescription medicines are expected to remain dominant, at around 70% of the total market by value. The position of patented medicines is expected to improve, given the IPR regime developments, but low drug prices in the country will continue to pose one of major barriers to market value growth. While Lithuania recorded a slight rise in pharmaceutical prices in recent months, mainly in line with inflation - we do not expect major changes in the overall market forecasts.
Similarly, due to the low prices and the small market size, this report expects future foreign direct investment (FDI) in the sector to focus on contract research and export-based production along with biotechnology. In terms of recent industry developments, some of the most notable activities included the vertical integration in drug wholesale and distribution. In July 2008, Finnish firm Tamro announced that it will buy all the shares of Lithuanian pharmacy chains UAB Farma vaistines and UAB Herbarijos vaistines. Tamro will gain control over 44 new pharmacies, thus increasing its share to 10% of the retail pharmacy market. Around the same time, one of Germany's largest wholesalers, Andreae-Noris Zahn (ANZAG), acquired a majority stake in Lithuanian distributor Armila as part of the German firm's strategy to position itself in 'high growth markets'. Armila presently holds around 13% share in the wholesale market.
Opportunities in the Lithuanian pharmaceutical market are also being illustrated by the 26% year-on-year (y-o-y) increase in Q108 revenues posted by one of the leading domestic drugmakers, Sanitas. However, most of this growth was realised on the back of foreign sales and operations, with Sanitas’ Polish subsidiary Jelfa estimated to account for up to 80% of total group sales. Nevertheless, the group's foray into Georgia in 2007 has proved a sound move, with Russia also now representing the second largest revenue generator, accounting for 17% of total sales for the period.
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