We expect the volatility in the performance of the Belarusian pharmaceutical market to continue, with political tensions increasing risks to our forecasts. Although the government aims to increase local output and meet at least half of domestic drug demand, we note that currency devaluation would have significantly increased the price of imported raw materials and manufacturing equipment. At the same time, the country's political stance may potentially disrupt supplies of high-tech medicines currently imported from a number of developed markets.
Headline Expenditure Projections:
- Pharmaceuticals: BYR6,057bn in 2012 (US$725mn) to BYR7,574bn (US$872mn) in 2013; +25.0% in local currency terms and +20.4% in US dollar terms. Forecast upgraded slightly from Q113 on the basis of new macroeconomic and trade
- Healthcare: BYR26,431bn (US$3.16bn) in 2012 to BYR33,488bn (US$3.86bn) in 2013; +26.7% in local currency terms and +22.0% in US dollar terms. Forecast upgraded from Q113 on the basis of new macroeconomic data.
Risk/Reward Rating: Belarus' Pharmaceutical Risk/Reward Rating (RRR) score for Q213 is unchanged from the previous quarter. This is also the case for all other countries in BMI's proprietary system that ranks pharmaceutical markets according to attractiveness to multinational drugmakers. A minor reweighting of one of the RRR components is being implemented to improve the tool, and the adjusted scores for all markets will be published in the Q313 updates of the Pharmaceuticals & Healthcare reports. Belarus has an RRR score of 42.9 out of 100, making it only the 18th most attractive pharmaceutical market in the Central and Eastern Europe (CEE) region, which covers 20 countries.
Key Trends And Developments:
- In November 2012, German Medigene AG and pan-European group Nordic Pharma entered into an exclusive agreement for the supply and marketing of Veregen (sinecatechins 15% ointment; formerly known as Polyphenon E) for the treatment of genital warts in the Czech Republic, Slovakia, Poland, Hungary, the Baltic countries, Georgia and the Commonwealth of Independent States (CIS). Medigene will benefit from milestone payments and double-digit royalties on sales of Veregen in these countries, as well as certain payments related to the manufacture and supply of the finished product. After conclusion of this agreement, marketing partnerships for Veregen now exist for all 17 countries included in the second wave of the European approval procedure, as well as for numerous other markets, including the US.
BMI Economic View: Despite the rise in Belarusian consumer price inflation recorded in January, we do not expect a return to triple-digit inflation any time soon. President Alexander Lukashenko has reiterated his government's commitment to restraining price levels. However, we do not see this as a cast-iron indicator of rapid rate hikes due to high GDP and low refinancing rate targets, which the central bank governor, as well as ministers, will be keen to achieve in order to preserve their positions.
BMI Political View: Although Belarus has held meetings with a number of European and US officials in recent months, leading to speculation of a rapprochement with the West, there have also been new strains with Sweden and the US has imposed new sanctions. Overall, it is difficult to see a major breakthrough as long as President Alexander Lukashenko remains in power. We thus retain our view that Belarus will continue to orient its economic policy towards Russia over the medium term.