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Viewing report
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Lithuania Pharmaceuticals and Healthcare Report Q4 2011
Business Monitor International, Oct 2011, Pages: 85
BMI View: Demographic considerations – in combination with concerted cost-containment pressures that form part of fiscal austerity measures – will continue to hamper the development of the Lithuanian pharmaceutical market. We, therefore, envisage low single-digit market growth in the coming five years, as generic products increasingly gain traction. The manufacturing and distribution segments are expected to continue consolidating.
Headline Expenditure Projections
- Pharmaceuticals: LTL1.57bn (US$601mn) in 2010 to LTL1.60bn (US$664mn) in 2011; +2.2% in local currency terms and +10.4% in US dollar terms. Forecast up slightly from Q311 due to macroeconomic factors.
- Healthcare: LTL5.90bn (US$2.26bn) in 2010 to LTL6.13bn (US$2.54bn) in 2011; +3.9% in local currency terms and +12.3% in US dollar terms. Forecast down from Q311 due to changes in historical data.
- Medical devices: LTL460mn (US$176mn) in 2010 to LTL475mn (US$197mn) in 2011; +3.3% in local currency terms and +11.6% in US dollar terms. Forecast down from Q311 due to changes in historical data.
Business Environment Rating: In our latest Pharmaceuticals & Healthcare Business Environment Ratings (BERs) matrix for Emerging Europe, Lithuania has dropped one spot, now ranking 16th of the 20 markets surveyed. Its composite score fell by 3% quarter-on-quarter (q-o-q), due to the perceived worsening of its rewards profile. Globally, Lithuania is also found in the bottom half of the table, placing 52nd out of the 84 countries we survey for the BERs. We expect Lithuania to continue representing one of the less attractive pharmaceutical markets, especially in light of the need for cost-containment and fiscal discipline, with its matrix ranking unlikely to show dramatic improvements.
Key Trends & Developments
- In August 2011, Central European Pharmaceutical Distribution (CEPD), a unit of Polandbased healthcare company Polska Grupa Farmaceutyczna (PGF), was poised to conclude the acquisition of Lithuanian pharmacy chain Litfarma Vaistine, after receiving an anti-trust clearance for the takeover in approximately two months. CEPD recently acquired the remaining 50% stake in Vilnius-based pharmaceutical distributor Nacionaline Farmacijos Grupe (NFG).
- In July 2011, Lithuanian pharmacy chain operator Gintarine Vaistine UAB entered a conditional agreement to acquire UAB Saulegrazu Vaistine, a unit of CEPD NV Group, at LTL100 (US$41.46) per share. UAB Saulegrazu Vaistine owns a chain of 65 pharmacies under the Litfarma Vaistine brand in the country. UAB NFG, a domestic unit of the group, is now able to own the maximum number of pharmacies in the market after the country's antitrust authority approved the agreement.
- Sanitas, the country’s leading drugmaker, posted disappointing H111 financial results. Its new owner, the Canadian major Valeant, is unlikely to be satisfied with the 4.6% year-on-year (y-oy) contraction in recorded revenues, which fell to LTL169mn (US$70mn). Unfavourable tax rates also affected final net profit, as did poor sales in Latvia, Germany, the Czech Republic and Slovakia.
BMI Economic View: Lithuania's economic recovery continued to look robust in the first half of 2011, leading us to lift our full-year real GDP growth forecast to 4.2%, from just 2% previously. The 2011 forecast remains well below the central bank's recently revised 6.2% growth projection and also below the less optimistic 5.8% forecast from the finance ministry. We see the economy slowing slightly to 3.3% in 2012, but caution that a deteriorating external economic picture presents downside risk to recovery.
BMI Political View: Lithuania's fiscal austerity drive will continue to see the budget shortfall narrow in the coming years, with the deficit set to reach 3.8% of GDP by 2012. That said, further spending cuts may be necessary, as an elevated unemployment rate may keep the revenue side of the budget firmly limited. As the government is responsible for almost 70% of the country’s total healthcare spend, this area may come under increased scrutiny.
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