Algeria Pharmaceuticals and Healthcare Report Q1 2012

BMI View: Algeria’s attractiveness to foreign drug makers remains tarnished by the heightened political and security risks, despite its relatively attractive demographic and socio-economic profile. Additionally, the authorities’ protectionist stance towards the local pharmaceutical industry will continue to detract from direct investment, which is further hampered by the deficient intellectual property (IP) environment. Nevertheless, rising per capita incomes and expanding population numbers will continue to represent a solid longer-term opportunity, provided the other issues are addressed.
Headline Expenditure Projections
􀂃 Pharmaceuticals: DZD195.77bn (US$2.54bn) in 2010 to DZD200.99bn (US$2.78bn) in 2011; +2.7% in local currency terms and +5.0% in US dollar terms. Forecast down moderately from Q411 due to new historical data.
􀂃 Healthcare: DZD637.33bn (US$8.62bn) in 2010 to DZD719.22bn (US$9.96bn) in 2011; +12.8% in local currency terms and +15.4% in US dollar terms. Forecast up slightly from Q411 due to new historical data.
􀂃 Medical devices: DZD32.67bn (US$439mn) in 2010 to DZD36.92bn (US$511mn) in 2011; +13.7% in local currency terms and +16.3% in US dollar terms. Forecast down slightly from Q411 due to foreign exchange considerations.
Business Environment Rating: In Q112, Algeria slightly improved its overall table placement, now ranking 11th out of the 30 regional markets surveyed in the expanding Middle East and Africa matrix. Its composite score rose by 3.1% quarter-on-quarter (q-o-q), but still stands at a modest 47.4 out of the maximum 100 points, which compares with the regional average of 44.6.
Key Trends & Developments
􀂃 In terms of clinical trials, Algeria has yet to attract substantial interest. In October 2011, the country had only 21 clinical trials registered with the clinicaltrials.gov, mostly in the therapeutic areas covering non-infectious diseases, such as oncology and diabetes. Nevertheless, there is some recent interest, as stipulated by US-based contract research organisation (CRO) Arianne Corporation, which presented its views during the recent Algerian-American forum.
BMI Economic View: Algeria’s consumer price inflation, which came in at 5.2% year-on-year (y-o-y) in July 2011, will moderate over the medium term in our view. The July print, which was a marked rise from the 3.7% recorded in the previous month, was mainly due to a rise in food prices, which comprise the bulk of the consumer price basket. We note that base effects have played a major role in the elevated July print, and therefore we are maintaining our 2011 and 2012 average inflation forecasts of 4.0% and 3.0%, respectively. We also maintain our view that the Algerian economy will grow by just 2.9% y-o-y in both 2011 and 2012. While we foresee elevated growth rates in fixed investment and government spending, we expect the country’s imports to rise much faster.
BMI Political View: Given the current political climate in the MENA region, we caution that a renewal of large-scale public unrest in Algeria could derail the country’s economic progress and lead to a prolonged period of stagnation. While we concede that such a scenario could bolster the country’s economic prospects by causing international oil prices to rise, we expect the loss in fixed investment and the government’s focus on current consumption to have a larger negative effect.