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South Korea Pharmaceuticals and Healthcare Report Q3 2011
Business Monitor International, May 2011, Pages: 103
BMI View:
Unlike some observers, BMI classes South Korea as a developed country and this is underpinned by its pharmaceutical market having a balanced risk/reward profile. Negative attributes include the sub-standard enforcement of intellectual property rights, market access issues and price cuts. Demand for pharmaceuticals will be supported by an ageing population and a culture of medication. The anticipated free trade agreement with the US will be emphatically welcomed by foreign multinational drug-makers.
Headline Expenditure Projections:
- Pharmaceuticals: KRW13,212bn (US$11.43bn) in 2010 to KRW13,971bn (US$12.70bn) in 2011; +5.7% in local currency terms and +11.2% in US dollar terms. Our forecast has been revised up moderately from Q211 due to macroeconomic factors.
- Healthcare: KRW79,058bn (US$68.37bn) in 2010 to KRW84,823bn (US$77.11bn) in 2011; +7.3% in local currency terms and 12.8% in US dollar terms. Our forecast has been revised up moderately from Q211 due to macroeconomic factors.
- Medical devices: KRW4,151bn (US$3.59bn) in 2010 to KRW4,529bn (US$4.18bn) in 2011; +9.1% in local currency terms and 14.7% in US dollar terms. Our forecast has been revised up moderately from Q211 due to macroeconomic factors.
Business Environment Rating:
South Korea’s Pharmaceutical Business Environment Rating (BER) has dropped from 67.9 out of 100 in Q211 to 66.4 in Q311. The downgrade is due to a negative revision to its Industry Rewards, which comprises pharmaceutical market size, per-capita spending on medicines and sector value growth. South Korea retains second place in the 17-country Asia Pacific ratings system.
Key Trends & Developments:
South Korean units of leading multinational pharmaceutical companies registered a significant rise in sales during 2010, according to financial statements submitted to the Financial Supervisory Service. Novartis Korea posted sales growth rates of 20.3%, while Pfizer Korea and MSD Korea registered a surge of 26.9% and 16.3% respectively. However, the subsidiaries of medium-sized firms including Abbott Korea, Janssen Korea, Bayer Korea, Wyeth Korea and Otsuka Korea saw single-digit sales growth during the same period. The average sales growth for 23 Korean pharmaceutical companies stood at 6%.
BMI Economic View:
South Korea's current account surplus widened in March 2011, coming in at US$1.4bn from a revised US$1.1bn in February. Both goods exports and imports hit record highs, with the increase in exports exceeding that of imports, boosting the goods surplus. Meanwhile, the services deficit narrowed, as services exports similarly outperformed services imports. While this research expects the underlying trend of current account surpluses to remain intact, this report notes that the upside is limited. As South Korea's oil-intensive economy is very dependent on oil imports (the world's fifth largest net oil importers), elevated oil prices will continue to prop up import costs.
BMI Political View:
The ruling Grand National Party (GNP) won only one of the three key races during the April 27 by-elections and the disappointing results could stall President Lee Myung-bak's reform drive and exacerbate factionalism within the party. In contrast, the opposition Democratic Party (DP) won both the Bundang and Gangwon races, two areas which were previously thought to have a conservative bias, and this strong resurgence will likely strengthen the party's position within the opposition camp.
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