Bangladesh Pharmaceuticals and Healthcare Report Q2 2012

BMI View: Although the growth of Bangladesh’s pharmaceutical market is expected to remain in doubledigits over the forecast period, some of the gains will be negated by high levels of inflation. Additionally,although economic development and epidemiological changes will continue to stimulate demand forpharmaceutical treatments and medical devices, risks will remain elevated, partly on account of theunsettled political situation. Multinational companies will continue to suffer due to the country’s patentfreeregime, even though this is scheduled to end in 2016.

Headline Expenditure Projections

.. Pharmaceuticals: BDT108.84bn (US$1.50bn) in 2011 to BDT121.07bn (US$1.51bn) in 2012;+11.2% in local currency terms and +0.5% in US dollar terms. Historical figures slightly lowerthan in Q112 on account of new data.

.. Healthcare: BDT270.11bn (US$3.72bn) in 2011 to BDT300.82bn (US$3.74bn) in 2012;+11.4% in local currency terms and +0.6% in US dollar terms. Forecast broadly unchanged fromQ112.

.. Medical devices: BDT12.65bn (US$174mn) in 2011 to BTD14.35bn (US$178mn) in 2012;+13.4% in local currency terms and +2.4% in US dollar terms. Forecast broadly unchanged fromQ112.

Risk/Reward Ratings: For Q212, Bangladesh remains in 15th position of the 18 markets surveyed in theAsia Pacific region. Its Pharmaceutical Risk/Reward Rating (RRR) is an unchanged 41.3, which isconsiderably lower than the average of 53.7 for the region. Despite its rank, we expect Bangladesh’sposition to improve over the medium term as a result of the growing population, economic improvementand efforts by domestic firms to expand their products portfolios and overseas markets. Globally,Bangladesh is 73rd out of the 95 markets surveyed in total.

Key Trends And Developments

.. In December 2011, Japanese medical equipment maker Nipro planned to acquire a 51% stake inBangladesh-based company JMI Pharma, a unit of JMI Group, for US$10.48mn. Through theacquisition the company plans to expand its operations in Bangladesh’s pharmaceutical productsmarket, which is experiencing an annual growth of nearly 12% and is likely to expand in future.

After the acquisition, the name of JMI Pharma will be changed to Nipro JMI Pharma.

BMI Economic View: We continue to believe the Bangladeshi economy will face a cyclical slowdown inthe current fiscal year (FY2011/12, July-June) as significantly tighter credit conditions should keep a lidon economic activity. We forecast a slowdown to 5.9% growth from 6.7% in FY2010/11. Apart fromgovernment expenditure, we expect all components of GDP to undergo some kind of moderation, as theeconomy is expected to slow on both the domestic and external fronts, which will have a bearing on theavailability of funding for pharmaceuticals and healthcare services. We have downgraded our privateconsumption outlook from 6.0% to 4.5%, which is significant given that private funding accounts foralmost two-thirds of healthcare spending.

BMI Political View: Businesses across the country have expressed concern over the deteriorating lawand order situation in the capital Dhaka. However, the Dhaka Metropolitan Police (DMP) has dismissedthese concerns, stating that the city’s situation only ‘fluctuated’ in late 2011. DMP additional policecommissioner Abdul Jalil Mandol told The Financial Express that criminal activity normally increasesduring the winter and the police have stepped up their efforts accordingly. If the situation deteriorates itwould certainly put more pressure on the Awami League-led government.