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South Africa Pharmaceuticals and Healthcare Report Q1 2009
Business Monitor International, Feb 2009, Pages: 104
BMI's South Africa Pharmaceuticals and Healthcare Report provides independent forecasts and
competitive intelligence on South Africa's pharmaceuticals and healthcare industry.
In BMI’s Business Environment Ratings for Q109, South Africa slipped from fourth to sixth position, out of the 17 Middle East and Africa (MEA) markets surveyed. South Africa’s benefits include its large market size in regional terms and favourable growth forecast. However, it is held back by slow population growth and an unfavourable regulatory environment, including strict pricing and reimbursement regimes, when compared with some Middle Eastern markets. Still, the market is expected to continue growing at around 9% in local currency terms, reaching the value of ZAR31.7bn (US$3.9bn) at the end of 2013, illustrating significant commercial opportunities for drug companies willing and able to risk operating in
a risky environment.
Given our sharp revision in external economic activity, we have also lowered our South African growth projection in 2009. Real GDP growth forecasts for 2009 and 2010 are expected at 1.4% and 4.6% (down from our previous estimates of 2.1% and 5.0%, respectively). This is likely to weigh further on domestic companies' profit margins and share valuations, which will also threaten the currently solid performance of the local pharmaceutical industry. For example, South African pharmaceutical company Enaleni Pharmaceuticals (recently renamed Cipla-Medpro) reported revenue growth of 15% for H108, while Aspen Pharmacare, Africa's largest pharmaceutical manufacturer, posted a 21% increase in its full year 2008 (ending June 30) revenue. Aspen’s desire to build its presence alone rather than through joint ventures, as illustrated by the October 2008 dissolution of its partnerships with Indian active pharmaceutical ingredient (API) manufacturers Strides Arcolab and Matrix Laboratories, however, may be curtailed by the current global financial climate.
Nevertheless, some improvements are imminent. In December 2008, the government extensively modified drug registration as part of its new Medicines and Related Substances Amendment Bill, simplifying the current two-step process to get new medicines approved for commercialisation. BMI believes such progress in Africa is a crucial step in encouraging multinationals to introduce new drugs to South Africa, as well as to the wider African market. The new body – the South African Health Products Regulatory Authority (SAHPRA) will replace the current regulator, the Medicines Control Council
(MCC), which has been subject to frequent criticism and controversy due to inefficiency and lengthy drug approval times. At the same time, the new bill curbs the powers of the Health Minister, which should reduce the level of political interference in the drug registration processes.
The research and development (R&D) sector has also witnessed some positive developments. The notfor- profit International AIDS Vaccine Initiative (IAVI) provided South Africa's fledgling biotech industry with a significant boost, with the granting of financial support to local company Elevation Biotech‘s HIV vaccine R&D. Shortly prior to this development, UK-based Synexus revealed that it will be expanding its clinical trial capacity in South Africa, with a focus on phase I-III trials. While South Africa is an important location for HIV/AIDS clinical trials, most early research has to date been conducted out-ofcountry by foreign multinationals.
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