BMI View: As the German economy observes signs of a tentative long-term rebalancing in which private consumption will play a more significant role in economic growth, recent improvements in high frequency indicators have lead us to an upward revision of the pharmaceutical market growth forecast for 2015. However, the pharmaceutical market growth potential will continue to suffer significant downward pressure due to a challenging reimbursement and pricing environment, setting a pattern of marginal market expansion over the next few years.
Headline Expenditure Projections
Pharmaceuticals: EUR44.31bn (USD59.38bn) in 2014 to EUR44.49bn (USD48.94bn) in 2015; 0.4% in local currency terms and -17.6% in US dollar terms. Forecast revised upwards from last quarter.
Healthcare: EUR317.55bn (USD425.51bn) in 2014 to EUR326.18bn (USD358.80bn) in 2015; +2.7% in local currency terms and -15.7% in US dollar terms. Forecast broadly in line with last quarter.
In Q415 Germany retains a RRI score of 69.2 out of 100 after a downward revision in H115. Germany remains ranked as the fourth most attractive market to pharmaceutical investors out of 15 markets in the Western Europe region in our RRI matrix. While high market expenditure indices and risks scores are illustrative of the country's relative attractiveness and favourable operating environment, potential industry rewards are capped by increasingly burdensome reimbursement and pricing regulation.
Key Trends and Developments
Ireland-based generic drugmaker Perrigo signed an agreement to purchase Germany-based Naturwohl Pharma, along with its dietary supplement brand, Yokebe. The second-largest dietary brand in Germany in terms of market share, Yokebe comes in a shake/liquid form and is distributed within the 'meal replacement' category. The brand is estimated to generate net sales of about EUR30mn (USD32.9mn) in 2015.
Boehringer Ingelheim invested EUR72mn (USD81mn) at its Ingelheim, Germany location to expand filling and packaging capacity for the Respimat inhaler from 25mn units to more than twice as many per year. As a result, the company has also created 50 new jobs. This was the second step of a total investment of approximately EUR170mn (USD191mn) in Germany. The expanded Respimat production in Ingelheim went into operation on June 3.
Ipsen signed an agreement to acquire OctreoPharm Sciences, a private German life sciences company focusing on the development of innovative radioactive labelled compounds for molecular imaging diagnostics and therapeutic applications. Ipsen plans to maintain the company location and staff to ensure successful transition of know-how and expertise. The acquisition of OctreoPharma Sciences will enable Ipsen to enhance its position in the neuroendocrine tumour market.
Merck KGaA's Q115 financial results confirm continued growth for the company as revenues rise, driven partially by increasing organic sales which will continue throughout 2015. The company's focus on increased research and development, emerging market expansion and its acquisition of Sigma-Aldrich will ensure Merck KGaA's positive trajectory over the long-term.
Zambon and its partner Newron Pharmaceuticals announced the launch of Xadago (safinamide) in Germany for the treatment of mid- to late-stage Parkinson's disease (PD). Germany is the first country in which Xadago, which has been approved as add-on therapy to a stable dose of levodopa alone or in combination with other PD therapies for mid- to late-stage fluctuating patients, is launched.
BMI Economic View
The German economy is finally showing real signs of rebalancing towards private consumption growth, with real wages set to rise, households feeling confident, and potential tax cuts on the way for households. We have raised our real GDP growth projection for 2015 to 1.9% from 1.5%, and for 2016 to 1.5% from 1.4%.
BMI Political View
Despite there being two years until the German federal election in 2017, it is hard to see past a fourth consecutive term for Chancellor Angela Merkel. She is yet to announce her intentions, but given the weakness of the opposition and her extensive patronage network in the ruling CDU she is unlikely to face a significant threat, leaving only unforeseen events to scupper a re-election bid.