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Kazakhstan Pharmaceuticals and Healthcare Report Q1 2012
Business Monitor International, Dec 2011, Pages: 80
Business Monitor International's Kazakhstan 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 Kazakhstan's pharmaceuticals and healthcare industry.
BMI View:
BMI remains convinced that Kazakhstan is the most accessible pharmaceutical market in Central Asia. The government has committed to investing in healthcare and expanding medicines provision and has moved to centralise tendering for pharmaceuticals and medical devices, easing market access for international players as the decentralised system was deeply flawed.
If the government continues to implement policies aimed at harmonising Kazakhstan's regulatory system with Commonwealth of Independent States (CIS) trading partners and the EU, the country has potential to emerge as an industry hub in the Central Asian/Caspian region. Polpharma's acquisition of number one local player Chimpharm was an important milestone for the market and the region. The market retains significant downside risks, including dependency on commodity prices and structural factors such as a small population and challenging geography.
Headline Expenditure Projections:
- Pharmaceuticals: KZT179.34bn (US$1.22bn) in 2010 to KZT193.69bn (US$1.35bn) in 2011; up by 8.0% in local currency terms and 10.7% in US dollar terms. Forecast adjusted downward from Q411 due to updated macroeconomic data.
- Healthcare: KZT882.31bn (US$5.99bn) in 2010 to KZT1,030.88bn (US$7.18bn) in 2011; up by 16.8% in local currency terms and 19.8% in US dollar terms. Forecast up from Q411 due to increased indicators of state spending.
- Medical devices: KZT78.83bn (US$535mn) in 2010 to KZT90.26bn (US$628mn) in 2011; up by 14.5% in local currency terms and 17.4% in US dollar terms. Forecast virtually unchanged from Q411.
Business Environment Rating:
Kazakhstan ranks 17th in BMI's Q112 Pharmaceutical and Healthcare Business Environment Ratings (BERs) for the region, down from 15th in Q411. The country's score remains virtually unchanged from last quarter. Kazakhstan's country risks ratings continue to reflect a mix of current political stability and an unclear medium-to-long-term outlook. President Nursultan Nazarbayev has yet to name a successor, at least publicly, and this weighs on the country's stability. The country has achieved marked progress in recent years in the management of state institutions and regulations. Investors remain wary of corruption and nepotism but the country provides a far more attractive environment than any other Central Asian market.
Key Trends And Developments
- In the highest profile acquisition of a Kazakhstani drugmaker to date, Poland's Polpharma announced in September that it had acquired Chimpharm. The deal is not the first major foreign investment in the industry – Turkish and South Korean investors are already present – but the takeover of the largest pharmaceutical company in the midst of implementing major, stateKazakhstan backed expansion projects is a major achievement in the country's drive to develop its pharmaceutical industry through a mix of private and public funds. The Polish company has committed to investing about US$85mn in Chimpharm over four years.
- The Chimpharm deal was followed by comments by the head of one of the country's industry associations in September 2011, reported by Russian newswire Interfax, that Almaty-based manufacturer GlobalPharm was in talks with an unnamed partner over a possible takeover. Such a deal could help fund planned expansion by the generic drugmaker.
- A survey by ATF Bank estimated US$7.2bn would be invested in the sector between 2011 and 2014, partly through the state's spending commitments to the sector under the pharmaceutical development strategy.
BMI Economic View:
While a deteriorating global macroeconomy has prompted BMI to revise down its 2011 and 2012 growth forecasts for Kazakhstan to 6.9% and 6.0% respectively from 7.2% and 6.9% previously, growth is nonetheless expected to remain well supported as a result of strong export revenue and the government's healthy fiscal ammunition. That said, should the global economic downturn be more severe than expected, a collapse in commodity prices would almost certainly deal a heavy blow to the country's growth trajectory.
BMI Political View:
BMI sees three main risks to Kazakhstan's social and political stability. In the short term, the industrial dispute between the state-owned oil company Kazmunaigas and workers in the west of the country risks weighing on social stability. BMI continues to see risks from terrorist attacks and BMI also reiterate its long-held concern about the lack of an heir apparent for the aging Nazarbayev.
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