BMI View: Krka's exposure to Eastern European markets will continue to act as a drag on revenue growth. However, strong sales growth in Western Europe will mitigate the impact of revenue declines for the short term. We expect a continued focus on cost containment by European healthcare payers to moderate Krka's growth outlook over the longer term, unless the company looks to geographically diversify its exposure.
Headline Expenditure Projections
Pharmaceuticals: EUR671mn (USD745mn) in 2015 to EUR645mn (USD690mn) in 2016; -3.9% in local currency terms and -7.3% in US dollar terms. Forecasts revised downwards compared to previous quarter.
Healthcare: EUR3.22bn (USD3.58bn) in 2015 to EUR3.25bn (USD3.48bn) in 2016; 0.9% in local currency terms and -2.8% in US dollar terms. Forecasts revised slightly downwards compared to previous quarter .
BMI Risk/Reward Index
Slovenia scores 56.0 out of a total of 100 in our Pharmaceutical Risk/Reward Index for Q216, up to 9th place from 11th place in the previous quarter. Slovenia scores above the average for the region, which is 52.6.
Key Trends And Developments
Krka has reported its total sales for 9M15 of EUR863.3mn (USD962.7mn), ended September 30 2015, were flat compared to 9M14. The firm commented that sales increased by 6% in terms of quantity of products sold, but the smaller increase in revenues was the result of declining prices of pharmaceuticals and depreciation of certain key currencies. Despite the lacklustre sales performance, Krka's profit for the period rose by 4.7%, from EUR127.4mn for 9M14 to EUR133.3mn (USD148.7mn).
In December, Swiss drugmaker Novartis' Slovenian subsidiary Lek stated that high labour costs in Slovenia are reducing the competitiveness of the business within the international company. 'We urgently need a serious tax reform that will reduce labour costs in a way that will stimulate the employment of top experts,' Lek said (Reuters). In 2013, the government increased personal income tax on annual net wages of above EUR71,000 (USD76,740) to 50% from 41%.
In November, Krka's Notol 2 solid dosage forms production plant has been opened at the firm's main location in Slovenia. The investment in the plant is worth EUR200m (USD215.7mn) and provides Krka with new capacities that will enable it to control the entire production process from development to production of raw materials and finished products.
BMI Economic View
Falling oil prices will help to increase Slovenia's already large current account surplus. Although the surplus in part reflects the weak state of domestic demand, it will help to reduce the large negative net international position accrued across the last decade.
BMI Political View
We have downgraded Slovenia's short-term political risk score as the regional profile has deteriorated slightly. The European migrant crisis will remain at the forefront of the political agenda for the foreseeable future, although the absence of popular support for eurosceptic or nationalist parties suggests that the country's political environment is at a lower risk of extremism compared to other countries.
|f = BMI forecast. Source: WHO, National Sources, BMI|
|Pharmaceutical sales, USDbn||0.896||0.745||0.690||0.718||0.760||0.814||0.842|
|Pharmaceutical sales, % of GDP||1.81||1.77||1.65||1.61||1.56||1.52||1.51|
|Pharmaceutical sales, % of health expenditure||21.0||20.8||19.8||19.7||19.5||19.4||19.4|
|Health spending, USDbn||4.272||3.578||3.480||3.642||3.903||4.201||4.350|
The Slovenia Pharmaceuticals & Healthcare Report features BMI Research's forecasts for drugs and healthcare expenditure and imports and exports, focusing on the growth outlook for the prescription, OTC, patented drugs and generics market segments.
BMI's Slovenia Pharmaceuticals & Healthcare Report provides industry professionals, strategists, company executives, investors, analysts and sales/marketing heads with independent forecasts and competitive intelligence on the Slovenia pharmaceutical and healthcare industry.
- Benchmark BMI's pharmaceutical and healthcare market forecasts for Slovenia, to test other views - a key input for successful budgeting and strategic business planning in the Slovenian pharmaceutical and healthcare market.
- Target business opportunities and risks in the Slovenian pharmaceutical and healthcare sector through our reviews of latest industry trends, regulatory changes and major deals, projects and investments in Slovenia.
- Assess the activities, strategy and market position of your competitors using our company profiles (including SWOTs, KPIs and latest activity) and competitive landscape tables.
BMI Industry View
An at-a-glance perspective on the latest regulatory developments, key forecast indicators and major corporate developments, covering the prescription, OTC and generics markets. The pharmaceuticals and healthcare SWOT outlines strategic factors that affect the basic assumptions underpinning BMI’s forecast analysis, and taken together with BMI’s political, economic and business environment SWOTs, it gives a complete overview of market climate.
BMI Industry Forecast Scenario
Industry forecasts to end-2019 for all key indicators, supported by explicit assumptions, plus analysis of key downside risks to the main forecasts:
- Healthcare: Total healthcare expenditure (USDbn), healthcare expenditure (% of GDP), healthcare expenditure per capita (USD), hospital beds, doctors, and birth & mortality rates (all per ‘000 population).
- Pharmaceutical Market: Drug expenditure in USDbn, % of GDP and per capita (USD).
- Patented Drug Market: Prescription drug sales (USDbn & % of total sales).
- Generic Drug Market: Generic product sales (USDbn), generic sales (% of total sales).
- OTC Drug Market: OTC sales (USDbn & % of total sales).
- Macroeconomic Forecasts: Nominal and real GDP, % real GDP growth, % private consumption growth, % industrial output growth, % consumer price index, % GDP price deflator, exports, imports, trade balance, current account balance, foreign direct investment, exchange rate against USD, government expenditure and external debt.
BMI’s Pharmaceuticals and Healthcare Risk Reward Index
BMI’s Risk Reward Index provides investors (both national and multinational) looking for opportunities in the region with a clear country-comparative assessment of the market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors, with each position explained.
A snapshot of key market characteristics, including total size of the pharmaceuticals and healthcare segments, growth drivers, leading therapeutic areas and the competitive landscape
A focus on government healthcare reforms, epidemiological trends, mergers and acquisitions, product launches, market entries, FDI activity, R&D, biotechnology, clinical trials and supply chain issues.
Details of the industry regulatory framework and key legislation covering the licensing of new products/services, pricing and reimbursements, intellectual property, taxation and advertising, as well as analysis of the overall regulatory burden.
The competitive landscape section provides comparative company analyses and index by USD sales and % share of total sales – for the total pharmaceutical sector, as well as the OTC, generics and distribution sub-sectors.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape to generate Company SWOT analyses. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.