Pharma Distribution M&A Opportunity

Despite of their apparent large sizes, many of the CACA countries are not very densely populated and are relatively new to market economics, which leaves them very vulnerable to ‘the giants’ lurking around- whether in the form of China & India, or Russia & Turkey, but also EU, S.Korea, Japan…

This begs the question whether they can compete in any industry, but even more so in giant-company dominated pharmaceuticals market!? Well, as it turns out some of the negative exogenous influences on the local players, turn out as advantages when thinking of foreign competition & barriers to entry:

• existing market prices are often not attractive enough for setting up shop
• government initiatives & regulation seem too burdensome from far
• licensing for small volumes & targeted production is overwhelming
• long-term state, hospital & doctor rolodexes the locals have are golden
• reliability of the local brand & pharmacist is not substitutable
• there is a touch of xenophobia as well, worried that ‘their’ sheer numbers will overrun the country in question
• knowledge of the local personnel, education & training markets is an edge
• own distribution and logistics is strengthening local producers
• own local ‘generic-brands’ are known while a no-name imported generic is not
• mid-segment is the key hunting ground for many a locals, by adding a little margin to the locally known product / brand

As one can imagine it is not easy finding consistent, reliable & up-to-date data on one EMMA country alone, let alone on a whole region like CACA which is not always known for its transparency. So when we found a source that collected & sorted some statistics for 11 countries we imagine the CACA region, we jumped on it regardless how old or potentially erroneous… No wonder, it was published by the International federation of pharmaceutical manufacturers & associations (IFPMA, 2017):

While the data can be informative in many ways, we wanted to rank the countries for a select representative category indicators that were reported. In terms of Life expectancy at birth (yrs), Physicians (per 1,000), Health expenditure ($ per capita) and Pharma sales ($ per capita), the ranking was as follows (from most developed to least): Georgia, Kazakhstan, Azerbaijan, Iran, Mongolia, Armenia, Uzbekistan, Kyrgyzstan, Turkmenistan, Tajikistan, Afghanistan. Note that some of the countries may be quite closed to the rest of the world & their data does not best reflect the reality, while others may have inherited better infrastructure & public health standards.

With that in mind, we present a case study for an interesting ‘consolidation cross-border play opportunity’ spanning the CACA region (or even wider)

• A thesis that would under current market access include country pharma leaders in Kyrgyzstan & Mongolia, as well as one of top players in Uzbekistan & Armenia each

To a reader it may seem that we are mimicking Chingiz Aitmatov’s “Tales of the Mountains and Steppes” given the main choice of the countries, but it is in the middle that the democratic or market processes are relatively advanced, and where potentially best or easiest CACA pharma opportunities lie…