Local Drugmakers To Dominate The Biopharmaceutical Sector
BMI View: The Brazilian government has been proved to have significant influence on the domestic pharmaceutical market. Since domestic production of biosimilars is of next great interest to the local authority, we believe Brazilian drugmakers will soon become more competitive and leave limited market space for foreign companies in this sector. Innovative drugmakers will be placed in a less favourable position. They can only enjoy a secured revenue stream within the PPP deal term, and eventually lose their advanced technologies and market shares to the local players. This aligns closely with our view that local pharmaceutical companies will outpace multinationals in Brazil.
Brazil's local media Valor Economico has reported that by June 2013 half of the Brazilian pharmaceutical sales were generated by domestic manufacturers. In terms of volume sales, local companies accounted for over 70% of the market share. Brazil's domestic pharmaceutical industry has made significant progress, given the fact that its market share was only 25% in 2000. According to primary market research firm IMS Health, Brazilian drugmakers EMS and Hypermarcas were listed among the top ten pharmaceutical companies in Latin America in terms of regional pharmaceutical sales in 2012. In Q213, while Sanofi experienced a 'frustrating quarter', largely due to the 'Brazil generic medicines issue'; Hypermarcas continued to enjoy double-digit growth during the same period. The company, a domestic leader of biosimilar drug producers, is reported to generate approximately 20 % of its revenues from biosimilar drug sector, 8% from generic small molecule drug sales, and 28% from over-the-counter (OTC) medicines.
BMI has highlighted before that Brazilian pharmaceutical companies have been strengthened by the government's favourable policies such as up to 25% price premium for local produced medicines in government procurements, tax incentives, government direct investment in research and development, low-cost loans and technology transfer deals from Public-Private Partnerships (PPPs). The PPPs, one of the Ministry of Health's flagship programs, have facilitated 88 deals between multinational drugmakers and domestic enterprises since it started in 2009. The PPPs, which include sixty-four medicines, six vaccines, four health products and four research programmes, have enabled domestic drugmakers to produce more cost-effective medicines and reduce Brazil's reliance on imported drugs.