In the Field: Report from Brazil - Pharmaceutical Technology

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In the Field: Report from Brazil
Is Brazil's pharmaceutical industry following the consolidation trend?

Pharmaceutical Technology
Volume 34, Issue 1, pp. 18, 20, 22

Capitalizing on distinctions

Alexandre Geyer, president of the National Pharmaceutical Laboratories Association (Alanac), and owner of a small pharmaceutical company in Porto Alegre, Rio Grande do Sul, agrees that mergers and acquisitions in Brazil's pharmaceutical industry are on the rise but, more important, he notes that the trend may bring to light the unique advantages of this particular emerging market.

Most drugs sold in Brazil have controlled prices, but certain drugs made from natural products, as well as vitamins and fruits found in Brazil, do not have price controls. Because Brazil has so much biodiversity, there is significant investment opportunity in biotechnology and natural-drug products. The country's ecosystem could also open the doors for smaller firms to compete, says Geyer.

According to Alanac, Brazil is among 10 countries that hold the largest share of the global pharmaceutical market in terms of sales. In Latin America, Alanac considers Brazil the most developed in terms of its regulatory processes, sanitary measures, and IP laws.

On Sept. 22, 2009, Moody's Investors Service announced an additional upgrade on Brazil's foreign and local-currency government bond ratings to Baa3, granting the country investment-grade status (Standard & Poor's [S&P] granted Brazil the upgrade on Apr. 30, 2008, while Fitch Ratings did so on May 29, 2008). S&P reiterated Brazil's investment-grade status Dec. 8, 2009, and reaffirmed its BBB- long-term and A–3 short-term foreign currency sovereign credit ratings, adding that the outlook remained stable. The upgrade is expected to increase foreign investment and indirectly improve the financial status of the population, according to Daniel Gewehr, a healthcare analyst for Santander Bank. Gewehr notes that Brazil has nearly 200 million inhabitants, and according to a Santander report, nearly 50 million people will be over age 65 by 2050. "A growing, ageing, and wealthier population would certainly need developed and consolidated healthcare services and drugs," says Gewehr.

Looking ahead

Brazil has come a long way from a three-digit inflation rate in the 1990s (currently around 4.3%) to investment- grade status in 2008. As millions of Brazilians step away from poverty and start spending, not only on cellphones and televisions, but also on insurance and pharmaceuticals, companies such as sanofi-aventis are eyeing Brazil's potential. Analysts forecast Brazil's GDP growth to round out at 5.0% in 2010 (from an estimated 2% in 2009), when the worst effects of the global crisis are expected to be over. "Brazil's industry tends to grow in line with the GDP.... I am very optimistic," adds Gewehr.
Hellen Berger is a business writer based in São Paulo, Brazil


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