2013-02-21 09:26:02 - New Healthcare market report from Business Monitor International: "South Africa Pharmaceuticals & Healthcare Report Q1 2013"

Executive Summary

BMI View: Despite the Medicine Control Council (MCC)'s strong stance on refusing to grant compassionate access to an investigational drug targeting multi-drug resistant tuberculosis, in the face of a heavy disease burden and international pressure, which may have restored some faith by multinationals in the agency's competency and investment return potential in the medicines market, we maintain that ongoing long and inefficient approval times will continue to be the largest deterrent to interest in the sector. In our opinion, the sector's commercial potential will be more attractive to investors in the long-term with the implementation of a new regulatory authority, South African Health Products Regulatory Agency (SAHPRA) and the national public healthcare system.


Full Report Details at
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Headline

Expenditure Projections

Pharmaceuticals: ZAR27.19bn (US$3.74bn) in 2011 to ZAR30.00bn (US$3.66bn) in 2012; +10.3% in local currency and -2.3% in US dollar terms. Forecast slightly higher than Q412 based on revision to historical numbers.

Healthcare: ZAR261.47bn (US$36.00bn) in 2011 to ZAR287.05bn (US$35.01bn) in 2012; +9.8% in local currency terms and -2.8% in US dollar terms. Forecast slightly higher than Q412 based on revision to historical numbers.

Risk/Reward Rating:

South Africa's Q113 score, measuring the degree of investment attractiveness to multinational companies, is unchanged at 55.5 out of 100, with no shift in position at sixth in the matrix out of 30 markets surveyed in the MEA. Despite the country's low risk profile being more favourable than its rewards profile, South Africa has strong longer-term commercial potential because of its sizeable population, economic development and planned widespread public healthcare system.

Key Trends And Developments:

In November 2012, US-based pharmaceutical company Eli Lilly extended its non-communicable diseases (NCD) partnership programme to South Africa in a bid to tackle the rise in diabetes. Around 500,000 people are likely to benefit from the US$30mn Lilly NCD Partnership programme, which aims to manage NCDs in Mexico, Brazil, India and South Africa.

In October 2012, it was reported that the country would be the first outside Thailand to test a vaccine candidate for the treatment of HIV, expected to commence in 2013. The vaccine showed an efficacy of up to 31% against HIV three years ago in Thailand. The vaccine will be tested in a phase III clinical study in South Africa, according to Glenda Gray, co-principal investigator for the HIV Vaccine Clinical Trials Network.

In October 2012, it was reported that the MCC refused to allow compassionate access to bedaquiline (TMC207), a drug discovered by Johnson & Johnson, which is currently being investigated in Phase II trials for the treatment of multi-drug-resistant tuberculosis in adults. Compassionate use permits the distribution of investigational drugs that have shown good efficacy and safety in clinical studies prior to their registration and entry in the market. Bedaquiline is not registered in any country to date but has been provided for compassionate use and is being fast tracked in its application for registration in Europe and the US.

BMI Economic View: BMI sees the South African economy continuing its uneven recovery over the medium term, with real GDP growth forecast expected to slow to 2.5% in 2012 from an estimated 3.1% in 2011, and subsequently rebound to a still-tepid 3.3% in 2013. Although the consumer sector is relatively robust, the supply side is lagging behind and there are widespread concerns that the recovery is not sufficiently broad-based. A key downside risk stems from industrial unrest in the mining sector.

BMI Political View: On August 16, 34 striking miners were shot dead by police in the so-called 'Marikana Massacre' at a platinum mine owned by Lonmin. The incident has sparked further unrest in the mining sector and exposed deeply ingrained political issues, prompting investors to rethink South Africa's risk profile.

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