Alpen Capital (ME) Limited today announced the publication of its GCC Pharmaceuticals Industry Report as a part of its Industry Research services. Other recent reports from Alpen Capital have covered the GCC Takaful, Retail, Insurance, Healthcare, Cement, Education and Petrochemical industries.
"The GCC Pharmaceuticals Industry report projects a sharp increase in the healthcare needs in the coming years, primarily lead by growing and ageing population and a rise in chronic non-communicable 'lifestyle' diseases", says Sameena Ahmad, Managing Director at Alpen Capital. She continues, "This coupled with favourable government policies is expected to drive growth in the pharmaceuticals sector in the region. Some other factors boosting the sector's growth include mandatory medical insurance for employees as well as increasing health awareness."
"Our GCC Pharmaceuticals Industry report highlights the opportunity for private sector participation especially as local manufacturing is limited and not enough to meet the growing demand", says Sanjay Vig, Managing Director at Alpen Capital. He continues," We believe that private equity and venture capital are the most suitable investment vehicles for investors looking at opportunities in the sector considering the limited pharmaceuticals stocks listed on the capital markets."
The GCC Pharmaceuticals industry on a development trajectory in the GCC.
Alpen Capital expects pharmaceuticals sales in the GCC to grow at a CAGR of 7% to US$ 10.8 billion in 2020 from US$ 5.6 billion in 2010. This growth is driven by favourable demographics such as high life expectancy and sharp population growth, increase in healthcare awareness, increasing incidence of lifestyle diseases, conducive government policies and mandatory medical insurance for employees.
While the healthcare expenditure is expected to rise, as the sector matures, pharmaceuticals sales as a percentage of healthcare expenditure in the region are expected to decline and eventually reach that of the developed nations. Alpen Capital estimates the ratio to fall from 14.3% in 2010 to 12.4% in 2020.
There will be a shift in the drug consumption pattern due to the shift in the disease prevalence rate. Urbanization and rising per capita income have led to the consumption of unbalanced diets and a more sedentary lifestyle in the GCC, thereby aggravating the prevalence of lifestyle ailments such as diabetes and cardiovascular diseases. The average treatment cost in the case of lifestyle-related ailments is higher than treating communicable diseases. This will impact the pharmaceuticals industry and lead to higher per capital healthcare costs.
The GCC region imports most of its pharmaceutical products and patented drugs dominate the market, with generic drugs accounting for just 5-6%. Most of the GCC manufacturing plants are focused mainly on production of generic drugs and face difficulties in competing with foreign multinationals importing branded pharmaceutical products.
As local manufacturing is limited, it not enough to meet the growing demand and this creates a strong need for private sector participation; making the GCC pharmaceuticals sector an attractive investment destination. The governments of GCC countries are planning to raise their domestic production via investments in the pharmaceutical industry and adaptation to liberal trade policies and international healthcare standards. Moreover, the private pharmaceuticals sector in the region, which tends to favour branded pharmaceuticals, is marked by tight price controls.
Although plenty of opportunities exist for the pharmaceuticals sector in the GCC, they are punctuated by a few challenges. These include high dependence on imports, growth barriers for OTC medicines and high & uneven price distribution of drugs across GCC countries.
Although the sector is still in a nascent stage compared with international standards, it is undergoing a massive change through reforms, simplified government regulations, and upgradation and expansion of healthcare infrastructure. Alpen Capital believes that the GCC pharmaceuticals sector will witness a major transition in the coming years and will provide interesting investment opportunities.