2008-12-12 11:45:01 - Ukraine Pharmaceuticals and Healthcare Report Q4 2008 - a new market research report on http://www.companiesandmarkets.com

www.companiesandmarkets.com/Summary-Market-Report/Ukraine-Pharma ..

Despite the manifest uncertainty gripping the Ukrainian economy and political landscape, we retain our aggressive growth forecast – with important caveats – for the total Ukrainian pharmaceutical market, with an average 2008 to 2012 US dollar growth rate of 15.8% and local currency rate of 12.4%. We now forecast 13.84% year-on-year (y-o-y) growth for 2008 in US dollar terms – and 18.8% in local currency terms – against the background of a forecast full-year inflation rate of 24.0%. We have long expressed our concerns about the potential for a major economic crisis in Ukraine on top of persistent political paralysis.



In the final months of 2008, such a crisis looks more likely than it has for many years, although far from

 

 

inevitable. We retain our robust forecast, based on the significant demonstrated growth already delivered by the market in recent years – roughly doubling in size in US dollar terms between 2004 and 2008 – and the still immense pent up demand for modern treatments.



At the same time, we underline the significant downside potential of the market. A significant devaluation of the currency and slowing of economic growth would see a very rapid decline in the market and even a rapid fall in value to 2004 levels or below. As this report was being completed, Ukraine received a US$16.5bn bailout from the International Monetary Fund (IMF) to prevent the teetering banking system from collapsing. Meanwhile, the country is due to go to the polls for yet another round of parliamentary elections in early December to try and produce a functioning government.



Electioneering and crisis have provoked heated rhetoric. One example is the very public controversy over the cost of medicines, after retail prices surged by 50-70% on some products by mid-October. Importers have attributed the rises to strengthening of the US dollar as Ukraine imports around 75% of its medicines. But outgoing Prime Minister Yulia Tymoshenko has spoken in dark terms about a ‘deliberate campaign’. The drug pricing committee, anti-monopoly committee and the tax office have been ordered to investigate distributors and wholesalers. It appears that amid inflation and currency turmoil some players have pushed up prices. In response, the government has moved to tighten margins and capped maximum margins on so-called essential drugs to 10% for wholesalers and 25% for retailers.



In light of the current turmoil, there has been relatively little foreign activity in the marketplace. In September 2008, Chinese vaccine company Sinovac announced that it was conducting clinical trials of its hepatitis A vaccine, Healive, in Ukraine ahead of a possible product launch, representing the highest profile market entry for a Chinese firm in Ukraine to date. Russian wholesaler Katren acquired top-10 Ukrainian distributor Venta. One potential deal to watch will be the sale of 69% of large local drugmaker Borshchagovsky, which has a history of shareholder disputes and court actions, with media naming players such as Russia’s Pharmstandart as potential buyers. Meanwhile, the heads of the country’s largest pharmaceutical companies complained to the government in September about the activity of corporate ‘raiders’ seeking to take over their companies – a reminder of the still huge risks in the marketplace.