Hong Kong Pharmaceuticals Opportunities on the Rise

 

BMI View: Despite an increasingly ageing population (consequently increasing burden of noncommunicable
diseases), Hong Kong will only be moderately attractive to investors given its small
market size. While the dominance of patented medicines is set to continue in the medium term, costcontainment
measures will increasingly prioritise the use of generic drugs in the public sector. We also
note that the anticipation of a year of the dragon baby boom can bring about short-term opportunities for
pharmaceutical companies with infant care products as part of their portfolios.
Headline Expenditure Projections

§ Pharmaceuticals: HKD8.66bn (US$1.11bn) in 2011 to HKD9.32bn (US$1.20bn) in 2012;
+7.6% in local currency terms and +7.8% in US dollar terms.

§ Healthcare: HKD86.24bn (US$11.08bn) in 2011 to HKD89.68bn (US$11.53bn) in 2012;
+4.0% in local currency terms and +4.1% in US dollar terms.

§ Medical devices: HKD4.22bn (US$542mn) in 2011 to HKD4.37bn (US$562mn) in 2012;
+3.5% in local currency terms and +3.6% in US dollar terms.

Risk/Reward Ratings: Hong Kong’s composite score in Q312 remains 60.2 out of 100, which again
places it seventh of the 18 markets surveyed in BMI’s proprietary Risk/Reward Ratings (RRRs) matrix.
The special administrative region (SAR)’s rewards profile, dragged down by market maturity and small
population numbers, remains considerably less attractive than its risk environment. We expect Hong
Kong’s position in the table to be increasingly challenged by emerging markets in the Asia Pacific region.
Key Trends And Developments

In April 2012, health institutions in Hong Kong urged the government to issue guidelines for
biosimilars to ensure their safe use. Vivian Lee Wing-yan, associate professor of the School of
Pharmacy at the Chinese University of Hong Kong, said industry professionals and the
government should collectively issue regulations and guidelines, as well as raising public
awareness about biosimilars through education, as they are more complex to manufacture. Lee
also asked the government to monitor the efficacy and side-effects of biosimilars after they are
registered.

In April 2012, Swedish healthcare company Meda opened an affiliate in Hong Kong, following
the company’s decision in 2011 to establish an affiliate presence in Beijing. The openings point
towards the increasingly important role China will play in the company’s Asian expansion
strategy.

In May 2012, the World Health Organization (WHO) designated the Chinese Medicine Division
(CMD) of the Department of Health (DH) as the Collaborating Centre for Traditional Medicine
(CCTM) in Hong Kong. It is the first of its kind in the world as the Centre will focus on assisting
the WHO to formulate policies and strategies, as well as setting regulatory standards for
traditional medicine. Addressing the inauguration ceremony, the secretary for food and health,
Dr York Chow, said that there was a clear trend of increasing demand for Chinese medicine
services from the public, and the government has been actively incorporating Chinese medicine
services into the public healthcare system including the setting up of 16 Chinese medicine clinics
in the territory and the provision of Chinese and Western medicine shared care services in some
20 public hospitals.

BMI Economic View: The recent uptick in Hong Kong’s Q411 real GDP growth is likely to reverse in
the first half of 2012. Weakening external demand conditions should see Hong Kong’s exports take a hit.
Meanwhile, the correction in the domestic real estate market is likely to gather pace through 2012, having
ramifications on consumption and investment spending. Consequently, we have revised our 2012
forecasts and now see real GDP growth slowing to 2.2% from a previous estimate of 3.0%.
BMI Political View: Leung Chun-ying won Hong Kong’s 2012 Chief Executive Elections on March 25
with more than double the votes of previous front-runner and Beijing-favourite Henry Tang. However, his
public support remains low given his purported political leanings and this is likely to be the main source
of concern regarding his tenure going forward. Near term volatility in the business environment is
unlikely given that he will have to placate and win over business leaders in order to consolidate support
for his administration.

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