Malaysia Pharmaceuticals and Healthcare Report Q2 2012

BMI View: Malaysia’s longer term potential as an attractive pharmaceutical market will remain shaped by the
prevailing economic conditions and the export situation, which are crucial for the country’s overall economic
development and thus also the availability of individual funding for medicines, given the high out-of-pocket
contribution to healthcare. Nevertheless, volume demand will continue to grow on the back of demographic and
epidemiological changes, supported by the expansion of modernisation of healthcare provision in both public and
private sectors.

Headline Expenditure Projections
.. Pharmaceuticals: MYR4.92bn (US$1.61bn) in 2011 to MYR5.23bn (US$1.64bn) in 2012; +5.9% in local
currency and +2.1% in US dollars. Forecast down slightly from Q212 due to macroeconomic factors.

.. Healthcare: MYR38.93bn (US$12.73bn) in 2011 to MYR41.32bn (US$13.01bn) in 2012; +6.1% in local
currency and +2.3% in US dollars. Forecast down slightly from Q212 due to macroeconomic factors.

.. Medical devices: MYR3.82bn (US$1.25bn) in 2011 to MYR4.00bn (US$1.26bn) in 2012; +4.9% in local
currency and +1.1% in US dollars. Forecast broadly unchanged from Q212.

Business Environment Rating: In our latest proprietary Pharmaceutical Risk/Reward Rating (RRR) matrix for Asia
Pacific, Malaysia ranks in an unchanged position 8 out of the 18 countries surveyed regionally. The country’s
rewards are considered modest at best, given the low per capita spending on pharmaceuticals, but its matrix position
continues to be supported by the strong risk scores.

Key Trends & Developments
.. In January 2012, Malaysian Minister of Health Liow Tiong Lai stated that a dengue fever vaccine will be
available in the country by 2014 or 2015. The health ministry is set to enter the third phase of clinical trials
on a vaccine by the end of 2012. Liow said the ministry achieved success during the second phase of trials,
which involved monitoring about 2,000 people from Penang and Putrajaya. The ministry and French
drugmaker Sanofi have been developing the vaccine to treat dengue.

BMI Economic View: Despite a better-than-expected real GDP growth reading of 5.2% year-on-year (y-o-y) in
Q411, we are happy to maintain our below consensus view on the Malaysian economy in 2012. Our core view that
cooling global demand will continue to drag on production of cyclical goods – including industrial metals and
electrical and electronic components – means that we expect manufacturing sector growth to remain weak going
forward. Accordingly, we expect Malaysia's real GDP growth to come in at a subdued 3.3% in 2012, compared to
consensus forecast of 4.2%.

BMI Political View: The opposition Democratic Action Party (DAP) has proposed new measures aimed at
addressing corruption. Some of the key measures include a ban on political parties' involvement in businesses and the
adoption of an open tender system for government contracts. DAP Secretary General Lim Guan Eng said that
economic losses due to corruption are close to estimates published by Washington-based financial watchdog Global
Financial Integrity (GFI) at MYR1.1bn (US$0.3bn) annually. We believe that the move will put further pressure on
the ruling Barisan Nasional to speed up efforts to tackle corruption.