Egypt Pharma 2021: Not entirely defensive; Macro dynamics to support growth

  • Sector Outlook, Hopes, Fears, and Top Picks
  • Sector Valuation Table and Inter-company Comparison
  • Individual Pharma Players: 2021 Fundamental Review
Egypt Pharma 2021: Not entirely defensive; Macro dynamics to support growth

Egypt is the MEA region’s largest producer and second-largest consumer of pharmaceuticals, growing by a CAGR (2013-2019) of 19%, surpassing the region’s CAGR of 8%. Market growth is predominantly driven by out of the pocket expenditure (61% of total health expenditure), alongside a heavily growing population by c.2% per annum. Yet, Egypt still exhibits one of the lowest pharma expenditure per capita figures in the MENA region, implying vast room for future growth. We forecast the total pharma market to grow at a 5yr CAGR of 11.6% between 2020-25f.

The Egyptian pharma market’s growth is largely price-driven; where almost two-thirds of the growth is driven by the growth in ASP and one-third of the growth is driven by volumes sold. The ASP for the total market grew at a CAGR of 15% between 2013-19a, compared to a volume CAGR of only 5% during the same period.

The Universal Healthcare Act would serve as a long-term catalyst that further boosts Egypt’s pharma market growth, which should come into full effect by 2032. The program (6 phases) started phase one at the end of 2018 in Portsaid, and is currently being implemented in Luxor, bringing the total beneficiaries to less than 2% of Egypt’s population YTD. We believe that the impact of this act will not fully materialize until the end of phase six in 2032, which encompasses Cairo and Giza, Egypt’s heaviest populated cities (c. 19% of the total population).

The new Law establishing the Egyptian Drug Authority (“EDA”) and the Unified Medical Procurement Authority (“UMPA”) started being practiced in July 2020 and might reshape the non-retail pharma market dynamics and gradually increase the contribution of the non-retail segment to the total pharma sales from 30% currently to around 35% by 2025f, according to our estimates.

The Law outlines the mandate of the UMPA, which mainly includes: 1) purchasing of pharmaceuticals for the relevant public sector entities, 2) managing a system for the storage, transportation, and distribution of pharmaceuticals, 3) monitors warehouses of governmental entities, and 4) establishing a comprehensive database for medical technology in all public health institutions and their warehouses in order to monitor needs, and consumption. Under the law, governmental agencies are prohibited from purchasing pharmaceuticals directly and not through the UMPA. This Law aims to solve the crises facing the supply of Egyptian medicine, in maintaining its strategic stockpile and in preventing the state from suffering from drug shortage crises.

Download our full 48-page Egypt pharma sector update for 2021, in which we present:

1) Our sector Outlook, Hopes, Fears, and Top Picks

2) Sector Valuation Table and Inter-company Comparison

3) Individual Pharma Players Fundamental Review:

  • Ibnsina Pharma (ISPH) | Transitioning from Growth to Maturity

  • EIPICO (PHAR) | Positioned to Capture Pharma Market Recovery; Working Capital Pressures Cash Flows

  • Rameda (RMDA) | Superior Growth Justifies The Premium

  • Alexandria Pharmaceuticals (AXPH) | Performance Shielded by Favorable Product Portfolio

  • Cairo Pharmaceuticals (CPCI) | Growth Supported by Pharma Market Dynamics; But Hindered by Weak Operational Developments

  • Arab Pharmaceuticals (ADCI) | Strategic Portfolio Drives Solid Performance; Company Trajectory Seems Promising

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