Gabon Pharmaceuticals and Healthcare Report Q1 2013

BMI View: The recent announcement that Gabon's National Drug Office budget for 2012 would bealmost doubled compared with 2011 will be welcomed by pharmaceutical companies. However, we notethat the absolute funding is still very low and the vast majority of expenditure will be on low-marginessential medicines. Due to tepid economic growth, our outlook for Gabon's pharmaceutical market isbelow that expected to be posted by many of its sub-Saharan Africa neighbours.

Headline Expenditure Forecasts

Pharmaceuticals: XAF63.8bn (US$135mn) in 2011 to XAF68.4bn (US$132mn) in 2012;+7.2% in local currency and -1.9% in US dollar terms. Forecast very slightly up in US dollarterms compared with Q312.

Healthcare: XAF256bn (US$541mn) in 2011 to XAF284bn (US$551mn) in 2012; +11.2% inlocal currency and +1.8% in US dollar terms. Forecast very slightly up in US dollar termscompared with Q312.

Medical Devices: XAF11.1bn (US$24mn) in 2011 to XAF12.1bn (US$23mn) in 2012; +8.9%in local currency and -0.3% in US dollar terms. Forecast very slightly up in US dollar termscompared with Q312.

Risk/Reward Rating: Gabon's RRR score, which measures the attractiveness of a pharmaceuticalmarket, for Q113 is 40.2 out of 100. This is unchanged compared with the previous quarter. Gabon scoresbelow the regional average for all of the four major components of the proprietary rankings system,except Country Rewards. This particular indicator assesses urbanisation, population growth and thepercentage of the population aged over 65 years.

Key Trends And Developments

In October 2012, it emerged that XAF2.7bn (US$5.3mn) had been awarded to the National DrugOffice for the purchase of pharmaceuticals, which would be distributed free-of-charge at publichealthcare facilities. The amount given to the agency represented a significant increase comparedwith the XAF1.3bn (US$2.5mn) budgeted in 2011. It is anticipated that the National Drug Officewould receive XAF3bn (US$5.8mn) for medicines in the 2013 financial year.

In October 2012, the government of Gabon stated that it purchases antiretrovirals (ARVs)through the National Drug Office, which itself buys them from World Health Organization(WHO)-accredited pharmaceutical companies. This statement followed allegations that substandardHIV/AIDS medications were circulating in Gabon. More than XFA2bn (US$3.9mn) isspent on ARVs in Gabon each year.

In October 2012, the Société des Cigarettes du Gabon (SOCIGA) donated XAF8mn(US$15,000) to the non-government organisation (NGO) Malachi Pepecy Ogoulinguende toreduce the burden of malaria. According to the WHO, between 31% and 71% of the populationof Gabon is infected with the mosquito-borne illness.

BMI Economic View: Oil has made Gabon one of the richest countries in Sub-Saharan Africa on a percapita basis, but declining production now threatens the country's economic future. Like neighbouringEquatorial Guinea, Gabon has only a few years to develop alternate industries and avoid economicstagnation. While President Ali Bongo's dedication to economic diversification is admirable,BMI believes that structural factors will make developing the country's non-oil economy difficult andwe doubt that any industries will replace declining oil production over the medium term.

BMI Political View: Opposition leader and former presidential candidate André Mba Obame's dramaticreturn to Gabon will raise tensions in the politically repressive oil producing state. While we believe thatthe Gabonese regime has the resources and elite cohesiveness to retain its grip on power, a more activeopposition could see protests increase over the medium term. We believe the government would respondto this with a combination of police repression and higher social spending, putting pressure on thebudget.