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Generics companies turn to ‘third tier’ countries Posted 06/07/2012

With pharmaceutical growth in the doldrums in the west, and China and India are becoming increasingly confident, attention is turning to countries such as Indonesia and Turkey.

New wave of interest
The largest pharmaceutical companies are starting to make smaller profits from Europe, Japan and the US. In recent years, Brazil, China, India and Russia have made the headlines as innovator companies battled to introduce their patented products there and the local industries have responded to this challenge. There is now a flourishing pharmaceutical industry in China, India and Thailand. But there has been little interest in establishing manufacturing facilities in smaller countries; they have been seen as not offering a sufficiently large return on investment.

In 2009, IMS identified 17 ‘pharmemerging’ countries that were poised to expand in pharmaceuticals requirements. Amounting to around 16% of the total world market or Euros 98 billion in 2009, they have recently been reassessed as ‘about to overturn the established pharmaceutical world order. Rich in opportunities and growth potential, no company can afford to ignore them.’ These countries have double-digit growth and some have a large population, so that even if a small proportion of inhabitants can afford drugs, it is still a large market.

Indonesia is protective of its pharmaceutical industry. For several years now, Indonesia has made it difficult for foreign firms to sell there unless they also have local manufacturing operations. The potential has attracted Malaysian generics company Pharmaniaga to set aside Euros 8 million to acquire an active pharmaceutical ingredient (API) plant in Indonesia in an effort to break into the pharma sector there. Producing locally will give the company a cost structure that makes it easier to compete in a market dominated by local manufacturers.

Within Indonesia there is also change. Indonesia’s Kalbe Farma, the largest drugmaker in Southeast Asia, is investigating buying several smaller companies to strengthen its existing business portfolio. The Indonesian company has Euros 16 million with which to acquire businesses in the area of consumer health or nutritional products.

Further reports show that a flock of major pharma companies is circling Turkey's MN Pharma. Five companies will move into the second round of bidding, with GSK apparently particularly interested. The government recently introduced a new incentive package aimed at stimulating foreign and local investment into the pharmaceutical industry, and it is hoped this will reduce Turkey’s dependency on foreign drug developers. Another field which is often overlooked, but which is rapidly growing is health tourism in Turkey. Turkey is becoming much more popular, both as a destination in which to undergo surgery, or to recover from surgery in one of the many thermal spas.

Source: IMS Health, Reuters

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