Switzerland Pharmaceuticals and Healthcare Report Q3 2011

BMI View: Despite the threat of austerity measures, the Swiss government’s focus on cost-containment within the pharmaceuticals and healthcare sector and the impact of generic competition as a result of the patent cliff, we expect Switzerland to remain attractive to innovative drugmakers. Furthermore, percapita spending is high, there is a sizeable pensionable population and regulations are transparent – factors BMI believes will continue to bring in substantial income for companies operating in the country. Headline Expenditure Projections
.. Pharmaceuticals: CHF5.98bn (US$5.73bn) in 2010 to CHF6.03bn (US$6.55bn) in 2011; +0.9% growth in local currency terms and +14.30% in US dollar terms. Our forecast has been revised up moderately from Q211 due to macroeconomic factors.
.. Healthcare: CHF59.92bn (US$57.49bn) in 2010 to CHF61.48bn (US$66.83bn) in 2011; 2.6% growth in local currency terms and 16.2% in US dollar terms. Our forecast remains unchanged.
.. Medical devices: CHF5.15bn (US$4.90bn) in 2010 to CHF5.27bn (US$5.73bn) in 2011; 2.3% growth in local currency terms and 16.9% in US dollar terms. Our forecast has been revised moderately due to analyst intervention.
Business Environment Rating: In BMI’s Western Europe Business Environment Ratings for Q311, Switzerland is ranked second, above Germany. Switzerland’s score for the quarter stands at 70.1, well above the regional average of 64.4. Globally, the country is ranked in third position, however, BMI anticipates that Switzerland may fall down the world rankings in the medium to long term as large, highgrowth emerging markets such as Brazil and China become more alluring to multinational drugmakers. This is especially pertinent in the wake of the government’s increasingly cautious attitude to spending, which has resulted in the implementation of cost-containment measures such as drug price cuts.
Key Trends & Developments
.. In May 2011 it was revealed that Japan's largest drugmaker, Takeda Pharmaceutical, is to acquire privately-held Swiss pharmaceutical company Nycomed for US$13.7bn – Takeda's second major buy after its US$8.8bn purchase of Millennium Pharmaceuticals in 2008. Nycomed will be turned into a wholly-owned unit after Takeda finalises the purchase of shares from a consortium of private equity funds including Nordic Capital and DLJ Merchant Banking, an affiliate of Credit Suisse Group.
.. In May 2011, German pharmaceutical company Stada announced that it had entered concrete negotiations with Switzerland's Spirig Pharma AG about the acquisition of Spirig’s generic drugs business in Switzerland. The portfolio in focus will include 56 prescription and 15 nonSwitzerland prescription drugs with an estimated annual sales volume of CHF45mn. However, the acquisition would not include any production facilities. A final decision on the acquisition is expected within the next three months. Stada is seeking to reduce its dependence on the German generic drug market.
BMI Economic View: Switzerland's economy will see continued expansion through the quarters ahead, driven by robust private consumption and firm external demand for Swiss exports. Indeed, despite global headwinds in the form of the March 11 Japanese earthquake and the political crisis in Libya, we have revised up our forecast for Swiss growth in 2011 from 1.8% to 1.9%, on account of the continued resilience of the Swiss export sector in the face of the considerable strengthening of the franc over the past 12 months.
BMI Political View: Switzerland's high short- and long-term political risk ratings reflect the broad-based political consensus within the country, which ensures a high degree of policy continuity and stability. A system of referenda to change the constitution and laws (by request) ensures a high degree of involvement for the population in political affairs, which maintains trust in the system. In addition, despite the existence of several linguistic groups, social stability is among the best in the world, with unrest extremely rare. Switzerland's relative independence from multilateral organisations leaves the government largely free to act, while it has no major disputes with neighbours.