Adam Smith Conferences

The 5th CIS Pharmaceutical Forum

Overview of Ukrainian pharmaceutical market Gorlova Irina, CEO

February 12, 2014

Ukraine remains the 2nd largest market in CIS, shows

positive growth in values and still slow down in units

2

Population,

MM CTYs MM$ Growth, %$ MM Units Growth, %Units

143 Russia* 25 800 13% 5 501 -0,72%

46 Ukraine 3 730 9% 1 260 -2%

17 Kazakhstan** 1 559 24% 660 2%

30 Uzbekistan 948 8% 603 6%

9 Belarus 933 41% 366 15%

9 Azerbaijan 650 24% 199 3%

4 Georgia 458 33% 103 3%

4 Moldova 234 11% 92 5%

5 Turkmenistan*** 200 8% 90 0%

3 Armenia 163 31% 33 19%

8 Tajikistan 110 8% 56 4%

6 Kyrgyzstan 112 21% 93 2%

283 TOTAL ≈ 35 000 9 056 Source: SMD 2012, *DSM 2012, ** Vi Ortis, ***SMD estimation

76%

10%

4%

3%

2%

2%

1%

1%

1% 0% 0% 0%

Market share of CTYs in values (USD) Russia*

Ukraine

Kazakhstan

Uzbekistan***

Belarus

Azerbaijan

Georgia

Moldova

Turkmenistan**

Armenia

Tajikistan

Kyrgyzstan

64% 13%

7%

6% 3%

2% 1%

1%

1% 0% 1% 1%

Market share of CTYs in units Russia*

Ukraine

Kazakhstan

Uzbekistan***

Belarus

Azerbaijan

Georgia

Moldova

Turkmenistan**

Armenia

Tajikistan

Kyrgyzstan

FY 2013 results

Per capita spending in values (USD) and units in CIS,

FY2013 results

3

Per capita consumption in units is much higher in countries, where there are prototypes of

reimbursement system and government participate in compensation of treatment for

population (Kazakhstan, Belarus)

180 81 92 32 104 72 95 59 40 54 15 19 123

38

27

39

20

41

22 26

23

18

11

7

16

32

0

5

10

15

20

25

30

35

40

45

0

20

40

60

80

100

120

140

160

180

200R

ussia

Ukra

ine

Ka

za

kh

sta

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Uzbe

kis

tan

Bela

rus

Aze

rba

ijan

Georg

ia

Mo

ldo

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To

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IS

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rca

pita

in

un

its

per

capita in $

per capita $ per capita units

Ukrainian pharma market is passing through market

redistribution due to obligatory GMP certification

4

Current Market Trends

• Market is driven by out-of-pocket spending

• Obligatory GMP certification market has been cleared from products and companies, that do not meet the requirements

• Obligatory GMP certification concentration of sales among leading companies and products in therapeutical niches

• Growth in segment of food supplements, switch of products from OTC to FS

• Effect of reimbursement pilot project “products against hypertension” growth in cardiology segment

Ukraine: Market Trends in Values (USD)

Source: SMD Retail & Hospital Data; includes all categories

(Rx, OTC, Food Supplements, Patient & Personal Care);

price level – pharmacy purchase price for retail, tender price for

hospital data

41%

27%

21%

28%

-9%

7%

12%

16%

9%

-20%

-10%

0%

10%

20%

30%

40%

50%

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

5,0

2004Y 2005Y 2006Y 2007Y 2008Y 2009Y 2010Y 2011Y 2012Y 2013YG

row

th in

Valu

es (

US

D)

%

Sale

s in

Valu

es, B

ln U

SD

5

Ukraine being the 2nd biggest market in CIS, remains

mainly out-of-pocket

Source: SMD Retail & Hospital Data; includes only medicines

Retail segment

Market size - 3 bln USD Growth in values (USD) +9,3%

Hospital Central Budget Market size - 0,25 bln USD

Growth in values (USD) +12%

Hospital Regional Budget Market size - 0,28 bln USD

Growth in values (USD) +14%

Individual tender hospital

purchases Market size - 0,16 bln USD

Growth in values (USD) - 6%

Sources of financing

81%

4% 8%

7%

Retail - Out-of-pocket

Hospital Individualtender purchases

Hospital RegionalBudget

Hospital CentralBudget690 MM USD

Top 20 corporations in retail segment – local companies

improved position considerably

6

USD(Rank) USD(Rank) Corporation MM USD USD(%) USD(+-%) Ev Index

Y2012 Y2013 RETAIL SEGMENT 3 034 100,0% 9% 100

1 1 FARMAK 136 4,5% 4% 96

2 2 SANOFI 130 4,3% 7% 98

3 3 NOVARTIS 125 4,1% 15% 106

4 4 MENARINI GROUP 123 4,0% 15% 106

5 5 TAKEDA 108 3,6% 12% 103

6 6 TEVA 101 3,3% 10% 101

8 7 DARNITSA 93 3,1% 19% 109

7 8 SERVIER GROUP 90 3,0% 7% 98

10 9 ARTERIUM 83 2,7% 13% 103

11 10 BAYER HEALTHCARE 82 2,7% 18% 108

9 11 GLAXOSMITHKLINE 82 2,7% 10% 101

12 12 GEDEON RICHTER 73 2,4% 16% 106

13 13 KRKA 67 2,2% 14% 105

14 14 ZDOROVJE GROUP 64 2,1% 12% 102

19 15 KIEV VITAMIN FACTORY 51 1,7% 26% 115

17 16 ACTAVIS 51 1,7% 12% 102

16 17 INTERCHEM UKR 51 1,7% 7% 98

18 18 ABBOTT 50 1,6% 20% 109

20 19 BORSHCHAHIVSKY CHIMPHARM 45 1,5% 16% 106

21 20 STADA 39 1,3% 11% 101

Main trends among corporations in retail segment

Many companies lost position and some of them

almost left the market due to GMP certification

(Genom, Grindex, Belbiopharm, Mili, Apotex);

small Indian, Russian, Pakistan companies left the

market.

Some companies used opportunities and

substitute vacant niches (Kiev Vitamin factory,

Abbott, Bayer Consumer, Novartis Consumer,

Astellas, Kuzum)

Local manufacturers lost sales in antibiotic

segment, ophthalmology and antivirals.

Some foreign lost sales in cough & cold,

especially combined ones, musculoskeletal anti-

inflammatory agents and antibiotics.

7

Corporation SU MS (%) 2012Y 2013Y Grw MS

KRKA 42,8% 43,6%

SANOFI 13,6% 13,0%

ACTAVIS 1,1% 6,3%

KIEV VITAMIN FACTORY 4,9% 4,9%

FARMAK 5,4% 4,7%

ASTRAZENECA 3,7% 4,7%

RANBAXY 3,4% 2,9%

MENARINI GROUP 7,6% 2,8%

KUSUM HEALTHCARE 2,3% 2,7%

PFIZER INCORPORATED 2,1% 2,3%

DR.REDDYS LAB 1,7% 1,7%

POLPHARMA 0,9% 1,7%

GEDEON RICHTER 0,6% 1,4%

SERVIER GROUP 0,3% 0,9%

TEVA 1,2% 0,8%

Example from Statins’ life

Source: SMD Retail Data;

Small companies left the market. As well non-GMP factors

played role, shortage of stocks, etc.

Market results of a/hypertensive pilot project – growth in

SU (Standard units) +34% vs retail market decrease (-0,2%)

• 7 molecules participate in project since May 2012; + 3 combinations were added since June

2013

• In Y2013 state budget allocated 39 MM USD, less than half was used

• The highest growth in SU was demonstrated by Lisinopril (+84%), Amlodipin (+64%) Nebivolol

(+65%), Bisosprolol (+47%)

• The best results were demonstrated by Teva, KRKA, and local companies Farmak, BHFZ,

KievVitamin factory and Kusum

8

0

50 000 000

100 000 000

150 000 000

200 000 000

250 000 000

2004Y 2005Y 2006Y 2007Y 2008Y 2009Y 2010Y 2011Y 2012Y 2013Y

sale

s in

sta

ndard

units (

SU

)

AMLODIPINE AMLODIPINE+LISINOPRIL

BISOPROLOL ENALAPRIL+HYDROCHLOROTHIAZIDE

ENALAPRILI MALEAS LISINOPRIL

LISINOPRIL+HYDROCHLOROTHIAZIDE METOPROLOL

NEBIVOLOL NIFEDIPINE

9

INN MM USD USD(+-%) Units(%) SU(+-%)

7 INNs of project since May 2012 78 23,68% 100,00% 33,86%

AMLODIPINE 14 26,76% 15,45% 64,16%

BISOPROLOL 23 23,38% 19,22% 46,97%

ENALAPRILI MALEAS 13 1,77% 35,09% 14,52%

LISINOPRIL 15 53,00% 16,35% 83,44%

METOPROLOL 3 -1,68% 4,52% 7,94%

NEBIVOLOL 8 44,83% 3,63% 65,05%

NIFEDIPINE 3 3,08% 5,74% -2,13%

Additional 3 INNs, enter project in June 2013 27 14,26% 100,00% 5,97%

AMLODIPINE+LISINOPRIL 7 13,05% 9,18% 10,48%

ENALAPRIL+HYDROCHLOROTHIAZIDE 11 5,88% 62,81% 0,45%

LISINOPRIL+HYDROCHLOROTHIAZIDE 10 25,99% 28,02% 15,64%

Source: SMD Retail Data

Market results of a/hypertensive pilot project – growth in

SU (Standard units) +34% vs retail market decrease (-0,2%)

10

The fastest growing ATC3 classes – cardiology and

diabetes

Units(Rank) ATC3 Name Units(%) SU(+-%)

Retail Market growth 100,0% -0,2%

6 M01A Anti-rheumatics, non-steroidal 3,5% 6%

14 C09A AСЕ inhibitors, plain 1,6% 24%

22 A05B Hepatic protectors, lipotropics 1,1% 9%

26 C07A Beta-blocking agents, plain 1,0% 25%

27 A03A Plain antispasmodics and anticholinergics 0,9% 11%

33 B01C Platelet aggregation inhibitors 0,7% 6%

38 C08A Calcium antagonists, plain 0,6% 28%

65 A10J Biguanide antidiabetics 0,3% 19%

67 A11X Other vitamins 0,3% 6%

72 N05C Tranquillisers 0,3% 5%

73 L03B Interferons 0,3% 17%

80 N07X All other CNS drugs 0,2% 9%

83 S01G Ocular anti-allergics, decongestants, antiseptics 0,2% 11%

91 C10A Cholesterol and triglyceride regulating preparations 0,2% 18%

100 R03X All other anti-asthma and copd products 0,2% 8%

102 C09D Angiotensin-II antagonists, combinations 0,2% 22%

111 C09C Angiotensin-II antagonists, plain 0,1% 16%

Source: SMD Retail Data

11

Top 20 leading products – generations change on the

market. Modern and more effective come.

2004Y MM USD Cost of pack ,

USD 2013Y MM USD

Cost of pack

, USD

ACTOVEGIN 7 11,7 ACTOVEGIN 33 23,0

ESSENTIALE FORTE N 7 6,3 CODTERPIN IC 27 1,9

MILDRONAT 6 4,9 NO SPA 19 2,9

NO SPA 6 2,4 CARDIOMAGNYL 18 3,9

NATRII CHLORIDUM 5 0,4 ESSENTIALE FORTE N 17 9,4

FESTAL 5 2,2 GROPRINOSIN 13 12,5

MEZYM FORTE 4 1,1 SPASMALGON 13 2,3

VIAGRA 4 25,2 NIMESIL 13 10,1

CAPTOPRES DARNITSA 4 0,9 NATRII CHLORIDUM 13 0,6

KETANOV 3 2,7 CITRAMON DARNITSA 13 0,3

LASOLVAN 3 3,7 CERAXON 13 41,4

PHEZAM 3 2,5 PREDUCTAL 13 12,2

PREDUCTAL 3 10,3 LINEX 12 4,8

NAPHTHYZIN 3 0,2 CARSIL 12 5,2

BISEPTOL 3 1,1 CANEPHRON N 12 8,3

GLUCOSE 3 0,5 AUGMENTIN 11 6,9

PROSTAMOL UNO 3 8,4 AMIXIN IC 11 8,4

FLUCONAZOL 3 2,4 HEPTRAL 11 46,0

CORVALOL 3 0,2 DETRALEX 11 18,7

FERVEX 3 2,0 DIABETON 10 7,8

Source: SMD Retail Data

12

1 2 3 4 5 6 7 8 9 10 11 12

OPTIMA BADM ALBA

VENTA FRA M FARMPLANETA

Leading retail wholesalers – ongoing concentration

MS Y 2012 MS Y2013

OPTIMA 29% 30%

BADM 26% 29%

ALBA 18% 12%

VENTA 8% 12%

FRA M 5% 4%

FARMPLANETA 4% 2%

Retail sales during Y2013 – ongoing concentration Top 6 make 89% of retail sales

• Leading wholesalers have different portfolio – specialization on foreign vs local products, ATC

groups, etc.

• Due to obligatory GMP certification, that took place on the market in Y2013, leading wholesalers

were effected as well. As some products and companies dropped off their portfolio and should

be substituted in short time period

Source: SMD Retail Wholesalers Report

Leading wholesalers in Hospital segment – level of

concentration is much less

13

• Top 5 companies make 53% of hospital market

• From retail wholesalers BaDM and Alba are either

strong as in retail sales

Rank LEADING WHOLESALERS IN

HOSPITAL MARKET Y2013 USD (%)

HOSPITAL MARKET 100,0%

1 BADM 18,0%

2 ASTA 17,0%

3 ALBA 7,9%

4 MEDFARKOM CENTER 5,4%

5 FRA M 4,9%

6 LUDMILA FARM 4,5%

7 FARMADIS 4,4%

8 LINK MEDICAL 4,1%

9 BIOFARMA 3,5%

10 INDAR 3,1%

11 OPTIMA 2,6%

12 OTHERS (143) 24,5%

18,0%

17,0%

7,9%

5,4%

4,9%

24,5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%OTHERS (143)

OPTIMA

INDAR

BIOFARMA

LINK MEDICAL

FARMADIS

LUDMILA FARM

FRA M

MEDFARKOMCENTER

ALBA

ASTA

BADMSource: SMD Hospital Wholesalers Report

Main trend in retail pharmaceutical chains-kiosks left the

market, number of point of sales decreased to level of 2002

• Total number of point of sales decrease due to the fact that kiosks were closed

• Total number of point of sales according to licenses 20,5 K 15,3K pharmacies and 4,2K

points

14

18500

19000

19500

20000

20500

21000

21500

22000

22500

23000

23500

24000

0

2000

4000

6000

8000

10000

12000

14000

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TO

TA

L #

# O

F P

HA

RM

AC

IES

, P

OIN

TS

, K

IOS

KS

TOTAL

PHARMACIES

KIOSKS

POINTS

Dynamic of licensed point of sales in Ukraine YY 2002 - 2013

Source: State Drug Authority

Main trends retail chains ongoing concentration,

“nationalization”, competition becomes stronger

In (N) – number of oblasts, where there are point of sales

15

# REG PHARMA CHAINS POS# MS

1 UKR (26) MED SERVICE 352 2,29%

2 UKR (19) APTEKA ZDOROVJA 115 2,15%

3 UKR (16) BAZHAEMO ZDOROVJA 105 2,09%

4 UKR (7) APTEKA NIZKIH TSIN/BLAGODIYA 162 1,72%

5 UKR (18) FARMASTOR 119 1,63%

6 LUG LUGANSKAYA FARMACIA 452 1,57%

7 UKR (4) UKR PHARM HOLDING 174 1,55%

8 DON ARNIKA 129 1,32%

9 KIEV KIEV FARMACIA 164 1,19%

10 UKR (17) FALBI 188 1,09%

11 POL POLTAVAFARM 225 1,01%

12 DNE APTEKI MED ACADEMII 22 0,82%

13 UKR (8) SALVE 136 0,76%

14 UKR (2) ODESSA FARMACIA/ APT GAEVSKOGO 144 0,74%

15 UKR (2) KONEKS 64 0,68%

16 KIR LIKI KIROVOGRADSCHINI 159 0,68%

17 DON ECOILLICHPRODUCT 51 0,61%

18 DON DONBASS FARMACIA TRAIDING 117 0,59%

19 UKR (8) FAR TOP 94 0,59%

20 UKR (8) TVA GROUP 58 0,58%

Source: SMD Retail Pharmacy Chain report

Background for forecast

Potential constrains

• Destabilization of internal political situation, threat of military option to resolve the

conflict

• Growth of currency exchange rate and risk of hryvna devaluation

• Ongoing economic recession, loss of purchasing power by population

Potential Drivers

• The National Bank of Ukraine moved to a flexible exchange rate, according to

recommendations of IMF

• International monetary support – tranches of the credit from Russia; potential credit

line from IMF

• Ongoing reimbursement in form of co-payment within pilot projects (hypertension,

oral anti-diabetic products)

16

Current economic and political situation in the country gives no hope for a speedy recovery in the

current year.

Given the high level of inertia in demand for medicines, we expect a positive rate in pharmaceutical

market dynamic in 2014 at the level of 6 - 8% in values (USD).

18

Dynamic of market in values (USD) will slow down in the

short term prospective and will come back to higher growth

with implementation of reimbursement

23,1% 22,5% 24,9%

-6,7%

6,4%

13,2%

12,4% 9,3%

7,3% 9,6%

12,0%

-10,0%

0,0%

10,0%

20,0%

30,0%

0

500 000

1 000 000

1 500 000

2 000 000

2 500 000

3 000 000

3 500 000

4 000 000

4 500 000

2006Y 2007Y 2008Y 2009Y 2010Y 2011Y 2012Y 2013Y 2014Y 2015Y 2016Y

Growth rate Values (thnds USD)

Retail market (thnds USD) Growth rate

Thank you!

Ukraine, 03680

Bojenko str., 86i, Kiev

Tel/Fax: +38 044 206 17 17/18

e-mail: office@smd.net.ua

http://www.smd.net.ua