Industry Overview

Global Pharmaceutical Market

The value of the global pharmaceutical market is forecast to increase from $ 885 billion in 2009 to $ 911 billion in 2010, witnessed in 2008, 9.5% in 2007 and 7.3% in 2006. Patent expiries, tough conditions for drug companies in the US and unfolding developments in the Eurozone are likely to limit drug spending, going forward. The expected rebound in 2011 is likely to be mainly driven by

translating to a year-on-year (yoy) growth rate of 2.9%. Although this figure is in line with the 2.9% recorded in 2009, it is significantly lower than the growth of 8.0% witnessed in 2008, 9.5% in 2007 and 7.3% in 2006. Patent expiries, tough conditions for drug companies in the US and unfolding developments in the Eurozone are likely to limit drug spending, going forward. The expected rebound in 2011 is likely to be mainly driven by growth in emerging markets. China and other leading emerging markets are likely to continue to see strong growth in 2011.

The Post-Patent-Cliff Outlook
The global pharmaceu􀆟 cal market is expected to return to moderate-to-high single-digit growth after the impending patent-cliff in 2011-’13, during which drugs currently selling an estimated $ 80-100 billion will likely go off -patent. Key drivers for this revival will likely include the growing availability and use of high-value biologics, new product launches and a sustained high growth from the emerging markets. The prevalence of chronic diseases will likely be a growth driver both in developed as well as in the emerging markets.

Emerging Trends in Global Pharmaceutical Market

• Following sectors are expected to lead the growth of the global
  pharmaceuticals sector in the coming years:
  – Oncology
  – Immunology
  – Endocrine
  – Musculoskeletal
  – Hematology
  – Infectious Diseases, and
  – Urology
• Biologics and biosimilars are likely to emerge as the strongest drivers of future pharma growth.
  – The top-selling three drugs in 2014 are expected to be biologics, with eight out of the top-10 selling drugs that    

      year likely belonging to this category.
• Recent acquisitions in pharma sector seem to corroborate this trend.
• High dependency is expected on injectables growth over the coming years.

Global Generics Market & Outlook

• The US continued to be the largest generics market in the world, with sales of ~$ 34 billion, compared with the

   $83 billion global generics sales, in 2009.
• The US generics market is expected to grow at a Compound Annual Growth Rate (CAGR) of ~8% through 2009-

   ‘14, fuelled by low prices, ageing population and proposed changes in health insurance coverage.
• Japan is the world’s second largest generic pharmaceuticals market with a size of ~$ 6 billion in 2009, expected

  to cross $ 8 billion by 2014, owing to patent expiries, a rapidly ageing population and government initiatives to 

  reduce healthcare costs.
• Other generics markets, especially those in emerging markets, are expected to grow at a CAGR of ~15%  

  through 2009-‘14, fuelled by high population growth, low purchasing power and low insurance penetration, among

  others.

MENA Pharmaceutical Market

The MENA pharmaceuticals market is dominated by the GCC countries and Iran. Sales and per capita expenditures vary across the region. In terms of the per capita pharmaceuticals spending and growth profiles of different countries in the region in 2009, most of these countries have been in the relatively low spending-low-growth quadrant. The under-served markets are a huge opportunity for prospective investment and growth.

MENA Healthcare Infrastructure

The state of the healthcare infrastructure varies across the region. Saudi Arabia and Iran lead in the number of hospitals, while Lebanon, Bahrain and UAE lead in terms of number of hospital beds per thousand population; and Bahrain, Qatar and Lebanon lead in terms of doctors per thousand

The under-penetrated markets are a huge opportunity for prospective investment and growth. The strong demand for healthcare infrastructure will also likely boost the demand for pharmaceuticals in the region, going forward.

MENA Generics Market & Outlook

• The MENA generics market is likely to be driven by strong demand resulting from high population growth and

   underserved market, going forward.
• The recent developments in some of the countries in the region are likely to lead to volatility in demand in the

   short-term. However, the long-term potential for strong growth is likely to remain unchanged.

GCC Countries

With regards to the GCC, a number of trends are likely to have a positive effect on healthcare expenditure.
• Growing affluence in the region, driven by soaring oil prices, which should translate into increased demand for

  premium healthcare facilities.
• Growing chronic disease burden could increase long-term treatment costs. Even with the 2011-‘13 patent-cliff

  approaching, high-value medicines in the therapeutic areas of diabetes and obesity-related problems will likely

  continue to dominate the prescription market, triggering interest from generic pharmaceuticals producers in     

  these areas.

• The region could position itself as a major medical tourism destination, going forward, as a possible extension to its positioning as a major tourism destination. From a healthcare perspective, the rising burden of non-communicable diseases such as diabetes, cardiovascular ailments and cancer, partly as a result of obesity and sedentary lifestyles, is expected to lead to a strong demand for quality healthcare infrastructure in the region in the  coming years. In response, countries are likely to steadily increase their expenditure on healthcare. As the largest economy in the region, a large share of the new investments in healthcare is likely to come from Saudi Arabia, with other countries too contributing heavily to this sector. GCC’s health expenditure reached a value of $ 34.7  billion in 2009 and is expected to reach $ 53.5 billion by 2014, growing at a CAGR of 9.1%. The forecasts for growth in total healthcare expenditure in most of the GCC countries, particularly 

to a strong demand for quality healthcare infrastructure in the region in the coming years. In response, countries are likely to steadily increase their expenditure on healthcare. As the largest economy in the region, a large share of the Saudi Arabia, Qatar, Kuwait and the UAE are quite bullish. The GCC, overall, is believed to be planning investments worth $ 10 billion in healthcare in the coming years. Once these healthcare infrastructure projects are completed, they will likely provide a medium-to-long-term boost to healthcare and pharmaceutical spending, which will, in turn, drive growth for pharmaceuticals sales, among others, in the region.

GCC Generics Market & Outlook
• The GCC generics market was worth $ 500 million in 2009.
• The market is projected to grow at a CAGR of 14.5% over 2009-’14. The two leading markets of the region – Saudi Arabia and UAE – are projected to grow at CAGRs of 14.9% and 15.4%, respectively.

• The GCC generics market is likely to be driven by high oil incomes, high government healthcare spending, strong
population growth, underserved market and a potential for higher health insurance penetration.

In terms of the pharmaceutical business environment, the different countries in the region offer different risk-return
profiles. Countries like UAE and Saudi Arabia represents a position of relatively higher return and lower risk.

Most countries seem to be clustered around the centre of the diagram, indicating a predominance of countries with moderate return-moderate risk profiles in the region. Pragmatic changes and boost in healthcare spending will likely push these countries towards a relatively higher return-lower risk position, going forward.

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