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'Safari,' So Good: Africa Tracks to Become Pharma Hot Spot

By Randy Osborne
Staff Writer

Say "emerging markets," and anyone within earshot is likely to think of Brazil, Russia, India and China, the so-called BRIC countries.

Africa, not so much.

Common ideas about the world's second largest land mass date back a decade or so, when The Economist famously dubbed Africa "the hopeless continent." Pharmaceutical firms, though, have recognized Africa's potential for a few years now, said Sarah Rickwood, director of European Thought Leadership with IMS Health.

"People hear the bad news, and sometimes their perceptions change more slowly than reality," Rickwood said, but there's "a realization by the pharmaceutical industry that emerging markets can't all be about the Asia Pacific, plus maybe Brazil and Russia, indefinitely."

Wised-up pharma firms have been quietly expanding in Africa. "There is the need to start planning for the next wave," Rickwood said. "It took a long time, really, for China, for example, to develop." Africa, made up of more than 50 countries – 49 of which are covered by the World Health Organization's National Health Accounts database – faces unique, "very heterogeneous" challenges that need similar patience.

African countries range in population from The Seychelles with fewer than 100,000 people to Nigeria with more than 170 million. "South Africa, and some of the North African countries, have well established pharmaceutical markets," Rickwood said. "Other, sub-Saharan countries are at the very beginning."

Rickwood and her team at IMS, including analyst Daniel Rosen, recently finished a whitepaper about Africa titled, "Africa: A Ripe Opportunity." By 2016, pharmaceutical spending in Africa is expected to reach $30 billion, according to IMS, with a 10.6 percent compound annual growth rate through that year, second only to Asia Pacific (12.5 percent) and about the same as Latin America (10.5 percent).

"The fact is, Africa has stabilized," Rosen told BioWorld International. "It's forecast to have seven of the 10 fastest growing economies [among its countries] over the next five years. There's been a commodity boom. There's been Chinese investment in resource extraction and infrastructure. You've seen a boom in the services sector as well. Many governments have passed more pro-business legislation."

All are reasons why a continent that accounts for only 3 percent of the global economy – a continent hit hard by the 2008 collapse of Lehman Brothers, which caused money to leave the region, and by the Arab Spring protests in 2010, which reduced investments in North Africa – can show such promise.

Another hint to a richer future lies in the mobile-phone upsurge in Africa. By the middle of last year, the continent had 600 million subscribers, beating American and European numbers. The working-age population is rising steadily, already accounting for 34 percent of inhabitants. By 2050, Africa's urban areas are expected to grow denser with more people than China's and India's.

They'll need health care, and many will be able to pay for it.

Standout Player: Sanofi SA

"The definition of what makes a person middle class remains very different from what we would classify as middle class in developed countries," Rosen said. "In Africa, it generally means anyone with discretionary income beyond what is needed to survive. The point where you start having discretionary spending – that's when the ability to pay out of pocket for health care, which is still very important in a lot of South African countries, starts coming in." Four established markets in Northern and South Africa, taken together, account for more than half of 2011 pharmaceutical sales in the continent: South Africa, Egypt, Algeria and Morocco

And don't forget Angola. Not widely recognized, Rosen said, is the fact that the African country of Angola's gross domestic product (GDP) has been growing over the past decade at a faster rate even than China's: 11.5 percent vs. 10.2 percent. "Angola came out of a civil war and has enormous amounts of oil," Rosen said. "High commodity prices are definitely a part of that [GDP explosion] but not all of the story."

Top among the players to draw handsome revenues from Africa is Paris-based Sanofi SA, which recorded a moving annual total (counting four quarters) of $1.3 billion in from the continent. In the first three quarters of fiscal 2012, Sanofi earned €753 million (US$1.02 billion) from Africa.

Sanofi is hardly alone. Among the first companies (or precursors of today's companies, the case of Sanofi) to enter the continent were Abbott (South Africa, 1930s), Sanofi-Aventis (Morocco, 1953), Novartis (Egypt, 1962), Pfizer (Morocco, 1963) and GlaxoSmithKline (GSK, Nigeria, 1971).

"Success will depend on the type of company, portfolio, and the nature of [the company's] objectives," Rickwood said. "Historically, the companies have tended to do best in regions that have been divided along colonial lines. Sanofi does well in French West Africa because it's a French company – the ties, the culture, the business organization are conducive to it. The big UK companies [such as GSK] have done well in the English-speaking parts of Africa. The ex-colonial ties have worked for them as well."

Companies mulling Africa should first decide which population segments they want to target, the kind of therapies they want to offer, and whether they want to be involved in public health or the private sector, Rickwood said. Another question is whether to focus on branded or generic drugs, "knowing they will run up against Chinese and Indian players, who will probably always be able to undercut" them in pricing. India accounted for 17.7 percent of African pharmaceutical imports in 2011 (up from 8.5 percent in 2002) and China for 4.1 percent (up from around 2 percent in 2002).

The generic or biosimilar route still may make a smart choice, as a recently published BioWorld data report suggests about the Middle East and Northern Africa (MENA) region. "With the government paying the health care bills in many of the countries, biosimilars and generics are likely to be the players of choice in the MENA region," noted the report, The Biosimilars Game: A Scorecard for Opportunities, Threats and Critical Strategies. "Most of the MENA countries don't have designated approval paths for biosimilars, but some are taking their cue from the WHO rulebook or from other countries."

Also important to consider, Rickwood said, is "whether they want to be involved in developing the market, in terms of building the path to effective patient care. They wouldn't have to do this in a mature market, or in some of the other emerging markets, whether it's about education, or a secure distribution, or even pharmacovigilance, which they will have to build their own systems for."

Analyst Rosen said that, in emerging markets, "a lot of what they buy are brands that have lost patent exclusivity," and Africa is undersupplied.

"You don't have to sell the latest product, [but] they're brand-conscious. They like knowing that there's an element of quality assurance that comes with buying a Western brand, because of the levels of counterfeits in Africa," Rosen explained. "It depends where you're playing, but you don't have to go to the ultra-high-end biologics level. Likewise, you don't have to cut the price of your products by 75 percent to succeed."

Rickwood noted that rising income has brought an increase of chronic ailments, "the diseases of the Western middle-aged," with their sedentary lifestyle and bad diets. "HIV, malaria and tuberculosis are problems, but there is also rising hypertension, diabetes and dyslipidemia. Particularly in North and South Africa, there is a Type II diabetes epidemic going on," she said, which created "an opportunity not only for the insulins and the standard generic diabetes agents, but we're also seeing the newer diabetes agents – the DPP-4 inhibitors and GLP-1 agonists – start to come into the market in certain segments."

Editor's note: For a copy of BioWorld's new biosimilars report, please contact the BioWorld Data account managers for exclusive introductory pricing at (800) 477-6307.