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Serbia Pharmaceuticals and Healthcare Report Q4 2011
Business Monitor International, Sep 2011, Pages: 92
Serbia 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 Serbia's pharmaceuticals and healthcare industry.
Serbia’s medium- to-longer term convergence with the wider European market will stimulate pharmaceutical demand, especially as the country’s economic prospects improve over the coming years. However, domestic demand will remain subdued, which will hamper the faster growth of pharmaceutical expenditure, given that out-of-pocket payments represent the bulk of the drugs bill. Financial and structural inefficiencies in the hospital and the wider healthcare infrastructure environment will compound this negative effect on pharmaceutical spending, but we still expect steady, if not spectacular, demand-driven growth in the country’s pharmaceutical market values.
Headline Expenditure Projections
- Pharmaceuticals: RSD67.07bn (US$860mn) in 2010 to RSD70.08bn (US$968mn) in 2011; +4.5% in local currency terms and +12.6% in US dollar terms. Forecast down from Q311 due to changed macroeconomic expectations.
- Healthcare: RSD293.11bn (US$3.76bn) in 2010 to RSD319.24bn (US$4.41bn) in 2011; +8.9% in local currency terms and +17.3% in US dollar terms. Forecast down from Q311 due to changed macroeconomic expectations, but historical figure increased on back of new data.
- Medical devices: RSD15.54bn (US$199mn) in 2010 to RSD16.75bn (US$231mn) in 2011; +7.8% in local currency terms and +16.1% in US dollar terms. Forecast slightly down from Q311 due to changed macroeconomic expectations.
Business Environment Rating: In the BMI’s BER matrix for Q411, Serbia is ranked 14th out of the 20 key markets surveyed in Central and Eastern Europe (CEE), down on 12th previously. The country’s composite score fell by 5.8% in relation to Q311, to 49 out of the maximum 100 points, as the result of downward adjustment of its Industry Rewards profile, which broadly reflects Serbia’s modest long-term prospects as a commercial opportunity for drugmakers. At 43, the score now falls below the regional average, which also dropped by one point to 48 in Q411.
Key Trends & Developments
- In August 2011, Bacterin International, a Serbian pharmaceutical company specialising in bone graft material and antimicrobial coatings, reported its Q211 financial results, which included a 135% increase in revenues to US$7.5mn, the seventh consecutive year of record revenues, reported PR Newswire. The company also recently launched its third human acellular biological scaffold, hMatrix, which can be used for applications such as abdominal wall repair and breast reconstruction and is expected to plug a market that the company estimates to be worth more than US$2.5bn annually in the US.
- The Serbian government will offer pharmaceutical company Galenika guarantees for a loan worth EUR70mn (US$99.63mn), according to Minister of Economy Nebojsa Ciric. The minister added that the conditions requiring the company to start production operations – to alleviate medicine shortages – had been secured. Galenika’s director, along with most of the management, is likely to be replaced according to Ciric.
Speaking exclusively to BMI's pharmaceutical and healthcare analysts, Aleksandra Bucic from Galenika's media team outlined the company's current position. Bucic asserted that pharmaceutical production will continue uninterrupted now the company has received state guarantees for the loan and normalised its relationship with suppliers and business banks. She pointed out that even if production had stopped, there were substantial surpluses which would have ensured there were no drug shortages on the Serbian market for at least a few months.
Economic View: According to preliminary estimates, growth in Serbia likely decelerated to 2.2% year-on-year (y-o-y) in Q211, down from 3.4% in the first quarter, suggesting that growth was negative in quarter-on-quarter (q-o-q) terms. Household consumption continues to exhibit starkly depressed features, as real wage growth stays in negative territory and unemployment remains high. This is highly relevant to pharmaceutical consumption, given that much of the medicines bill is funded by out-of-pocket payments.
In the meantime, the country's macroeconomic growth story remains highly dependent on exports and investment, and – with the external environment showing signs of deterioration – we envisage a difficult year ahead for the Serbian economy. We, therefore, remain sanguine in expectations for real GDP growth of 3.2% in 2011.
Political View: While Serbia's path to accession into the European Union (EU) remains far from clear, we see the country continuing its convergence with Western European norm, although the recent border tensions are likely to delay such developments. In the meantime, a sharper-than-expected rise in government spending, in response to flagging political popularity amongst the domestic populace, would see household consumption – including spending on medicines – rise more significantly than we currently forecast. However, we stress that this is not the core view and broadly expect the current government to stick to its fiscal consolidation plans.
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