Switzerland Pharmaceuticals and Healthcare Report Q3 2012

BMI View: The period 2011-16 is forecast to witness the proliferation of government initiatives supporting the growth of Switzerland's generic medicines market, which will increasingly attract prominent international players in the field, as well as prompt local companies to get more involved in the segment. According to data published by Swissmedic, Sandoz Pharmaceuticals, Novartis's generic medicines arm, has 556 preparations locally approved, while Teva has 345 preparations locally approved. However, the implementation of further price controls on the already low-value medicines sector means that drugmakers will find it difficult to maintain suitable levels of sales and profits.

Headline Expenditure Projections

Pharmaceuticals: CHF6.77bn (US$7.63bn) in 2011 to CHF6.58bn (US$7.00bn) in 2012; -2.8% decline in local currency terms and -8.2% in US dollar terms.

Healthcare: CHF65.30bn (US$73.6bn) in 2011 to CHF67.42bn (US$71.72bn) in 2012; +3.2% growth in local currency terms and -2.6% in US dollar terms.

Medical devices: CHF4.77bn (US$5.38bn) in 2011 to CHF4.76bn (US$5.06bn) in 2012; -0.3% growth in local currency terms and -5.8% in US dollar terms.

Risk/Reward Ratings: In BMI’s risk/reward ratings (RRRs) for Western Europe in Q312, Switzerland has maintained its position as the top market in the Western Europe matrix, above the UK and France.

Switzerland’s score for the quarter stands at 70.9, well above the regional average of 65.5. However, BMI anticipates that Switzerland may slip down the world rankings in the medium- to long-term as large, highgrowth emerging markets such as Brazil and China become more alluring to multinational drugmakers.

Key trends and developments in the sector include:

A study by Santésuisse in early 2012, assessing the prices of medicines in the country, concluded that the Swiss ex-factory prices of off-patented original brand medicines were higher than that in France, the UK, Austria and the Netherlands, but they were lower than in Denmark and Germany. Furthermore, the Swiss ex-factory price of generic medicines was higher than in the entire six reference basket of countries. We note that the analysis was based on MAT/09/2011 volumes and prices at September 2011 and did not include discounts or rebates to pharmacists and payers.

Multinational drugmaker Novartis posted a 2% decline in net sales in US dollar terms (-1% in constant currency terms) to US$13.74bn for Q112, compared with sales of US$14.03bn in Q111.

The strength of the US dollar against most major currencies negatively affected sales by 1%. BMI Economic View: The Swiss economy's trade flows continue to be hampered by the eurozone sovereign debt crisis and as export growth remains muted in the coming quarters, the country's economic growth will remain weak. That said, resilient Swiss domestic demand will assist economic activity and we have modestly revised up our 2012 headline growth forecast to 0.8%, from a previous forecast of 0.6%, as we expect slightly stronger fixed investment growth. We stick to our 1.8% real GDP growth forecast for 2013.

BMI Political View: The Swiss government's decision to loosen its stance on the country's cherished banking secrecy laws is set to dominate the political sphere in 2012. The political establishment has already come under pressure, and as Swiss President and Finance Minister Evelyn Widmer-Schlumpf negotiate further terms to allow EU states to crack down on tax evasion, we expect domestic tension to increase.