Namibia Pharmaceuticals and Healthcare Report Q3 2012

BMI View: The already modest attractiveness of Namibia’s pharmaceutical, medical device and healthcare markets has declined slightly this quarter, due to a negative revision to the country’s macroeconomic outlook. As evidenced by the recent Aspen Pharmacare deal with GlaxoSmithKline (GSK), we expect South African drugmakers to continue to dominate the market over the medium, despite increasing interest from Indian generic drug manufacturers. We note that the less than expected weakening of the Namibian dollar against the US dollar is positive for foreign firms in 2012. Headline Expenditure Forecasts Pharmaceuticals: NAD1.98bn (US$273mn) in 2011 to NAD2.21bn (US$276mn) in 2012; +11.4% in local currency and 1.1% in US dollar terms. Forecast slightly down in local currency terms due to macroeconomic factors.
Healthcare: NAD5.55bn (US$764mn) in 2011 to NAD5.96bn (US$745mn) in 2012; +7.4% in local currency and -2.5% in US dollar terms. Forecast slightly down in local currency terms due to macroeconomic factors.
Medical Devices: NAD0.62bn (US$85mn) in 2011 to NAD0.69bn (US$86mn) in 2012; +11.5% in local currency terms and +1.3% in US dollar terms. Forecast slightly down in local currency terms due to macroeconomic factors.
Risk/Reward Ratings: In the 30-country Middle East Africa region, Namibia represents a slightly below average proposition to multinational drugmakers, scoring 44.8 out of 100 in BMI’s proprietary Risk/Reward Ratings system for Q312. This score is unchanged from the previous quarter’s update. Namibia scores above the regional average for Industry Rewards and Country Risks, but below the average for Country Rewards. Its Industry Risks score matches the regional average. Key Trends And Developments
?? In April 2012, South Africa’s largest pharmaceutical company Aspen Pharmacare paid ZAR2.1bn (US$270mn) for rights to a selection of over-the-counter (OTC) medicines from UKbased GSK. The deal, which excludes Europe and North America, covers well established brands such as anti-nausea drug Valoid, cough medicine Borstol and antacid Zantac, which generated combined revenue of GBP59.3mn (US$96.3mn) in 2011. The southern Africa part of the deal involves South Africa, Namibia, Botswana, Swaziland, Lesotho, Zambia and Zimbabwe.
?? In April 2012, it emerged that Namibia has failed to receive NAD450mn (US$57mn) from the United States President’s Emergency Plan for AIDS Relief (PEPFAR), due to bureaucracy, reductions in treatment costs and delays in discussions with recipient countries. This funding shortfall has consequentially resulted in some HIV/AIDS centres closing. As of 2011, there were approximately 100,000 people with HIV/AIDS in Namibia.
?? The Namibian medical aid fund industry has recorded a NAD9.54mn (US$1.24mn) net deficit for Q311, compared with NAD23.38mn (US$3.04mn) net surplus in Q211, data from the Namibia Financial Institutions Supervisory Authority show. The deficit was attributed to a higher increase in claims than contributions. Claims increased by 10.35% quarter-on-quarter (qo- q) to NAD391.53mn (US$50.93mn), while contributions went up by 1.63% q-o-q to NAD446.05mn (US$58.02mn). The total assets of the industry increased by 14.21% y-o-y to NAD712.78mn (US$92.71mn) in Q311.
?? In February 2012, The Namibian government reached an agreement with the German Society for International Cooperation (GIZ) for the second phase of the Ministry of Health and Social Services and GIZ's multi-sector HIV/AIDS response programme. The agreement is due to a decline in the funding for Namibia's HIV/AIDS programmes after The Global Fund cut its contributions for salaries in intervention programmes. The GIZ has agreed to contribute towards the internal and external mainstreaming of HIV/AIDS in the public and private sectors. The funds will also be used for efficiency savings through improved management and coordination. BMI Economic View: In March 2012, we slightly adjusted our growth expectations based on newly available data, and we now expect Namibia's GDP to grow at 4.6% in real terms in 2012, an improvement on 2011 but still below pre-crisis levels. Growth will be underpinned by a recovery in the mining sector and agricultural production following a difficult year in 2011, high government spending, and continued investment.
BMI Political View: Namibia has long enjoyed strong ties with the European Union since independence, but leading government figures have become increasingly restive over what they say is unfair leverage employed by the Europeans over trade issues, a dynamic we see continuing in the years ahead. In the future, diversifying trade links, in particular forming closer ties with China and African neighbours, will become an increasingly central priority for the government.