Moldova Pharmaceuticals and Healthcare Report Q3 2012

BMI View: Full-year trade data for 2011 and Q112 has confirmed that Moldova’s pharmaceutical market has returned to more normal growth. However, with regional economic headwinds returning and with Moldova’s dependence on worker remittance inflows leaving it exposed to external risks in Romania and the eurozone, the seemingly encouraging imports data over the last few quarters does not appear to be sustainable. Our industry growth forecast for 2012 has been cut from 8.8% in local currency terms (- 1.1% in US dollars) to 7.7% (-2.2% in US dollars). Moldova’s small market size and status as one of the poorest countries in Europe limit its attractiveness as a destination for drugmakers; this will not change, though we maintain our view that the pharmaceutical market will achieve elevated growth rates over the next five years.

Headline Expenditure Projections

Pharmaceuticals: MDL2.47bn (US$211mn) in 2011 to MDL2.66bn (US$206mn); +7.7%.in local currency terms and -2.2% in US dollar terms. Forecast moderately lower from Q212 due to increasing regional economic headwinds.

Healthcare: MDL9.01bn (US$769mn) in 2011 to MDL9.70bn (US$752mn); +7.6% in local currency terms and -2.2% in US dollar terms. Historical figures revised based on newly available data and forecasts lowered as a result of macroeconomic factors.

Medical devices: MDL669mn (US$57mn) in 2011 to MDL737mn (US$50.6mn); +10.1% in local currency terms and +0.1% in US dollar terms. 2011 growth came in above expectations and 2012 figures are broadly unchanged.

Business Environment Rating: In our Q312 ratings, Moldova remains near the bottom of regional ratings, ranked 19th of the 20 CEE markets analysed. Moldova’s industry rewards score is stable following an upgrade earlier in the year on the back of encouraging 2011 trade data.

Key Trends And Developments:

Pharmaceutical imports reached MLD2,441mn (US$208.3mn) in 2011, up by 20.0% year-onyear (y-o-y) in US dollar terms and 13.7% in local currency terms. Pharmaceutical exports also returned another year of stronger growth, up by 27.5% in US dollars and 20.7% in the local currency, though the absolute figure of MDL896.7mn (US$76.5mn) is relatively limited. Adjusting for pharmaceutical re-exports, which totalled MLD765.4mn (US$65.3mn), pharmaceuticals that were imported and stayed in the country totalled MLD1,675mn (US$142.9mn), an increase of 14.3% in US dollars and 8.2% in local currency terms.

Pharmaceutical imports for Q112 reached MDL524.5mn (US$44.34mn), up by 7.1% in local currency terms, in line with our annual growth rate assumption for 2012. However, given the volatility of Moldova’s quarter-on-quarter imports data, it is too early to tell if data from the first three months of the year will be indicative of the annual growth rate.

BMI Economic View: Preliminary estimates for GDP growth in 2011 came in at 6.4%, slightly above our target of 6.2%. A strong rise in exports (up 44.9%) played an important role in the economic expansion, while robust industrial output growth of 7.4% also supported growth. Early signs suggest a significant slowdown at the beginning of 2012, as external demand from the EU slumps and domestic uncertainty rises. We therefore retain out target for GDP growth of 2.4% in 2012, expecting another strong recovery to begin in 2013.

BMI Political View: We note that the election of President Nicolae Timofti in March 2012 after almost three years without a leader was an important political breakthrough for Moldova, and a major triumph for its pro-EU government. The decision should help the government push through with EU-approved reforms, though we caution that deep political divisions in parliament and across the country will continue to hamper policy formation and have a destabilising impact on domestic politics.