New Market Report Now Available: Egypt Pharmaceuticals & Healthcare Report Q1 2014

The Egyptian drug authority's complex organisational structure - with various sub-organisations and committees - makes for a difficult drug registration process for local and foreign drugmakers. We also note that, despite a relatively sound intellectual property (IP) environment, compared to other Middle East and North African (MENA) countries, and a recently established international drug pricing referencing system in favour of multinationals, political instability will continue to deter foreign investment in the Egyptian pharmaceutical industry.

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Headline Expenditure Projections

* Pharmaceuticals: EGP12.83bn (US$2.11bn) in 2012 to EGP14.34bn (US$2.02bn) in 2013; +11.8% in local currency terms and -4.4% in US dollar terms. Forecasts in line with the previous quarter's projections.
* Healthcare: EGP74.19bn (US$12.22bn) in 2012 to EGP83.20bn (US$11.72bn) in 2013; +12.5% in local currency terms and -3.8% in US dollar terms. Forecasts broadly in line with the previous quarter's projections.

Risk/Reward Rating: Egypt remains ranked in the middle of our proprietary Middle East and Africa (MEA) Risk/Reward Rating (RRR). While its demographic and epidemiological factors are seen as favourable, the country's operating environment continues to be challenging, both from an industry and country point of view.

Key Trends And Developments

* Domestic medical companies posted a 13% increase in the value of their medical sales over the months of August and September 2013, while volumes only increased by 2%, according to October 2013 reports by Daily News Egypt. Domestic companies witnessed a 15% growth in the value of their medical sales in 2012, with their revenues totalling EGP22.3bn, while the quantity of medical sales only increased by 8% during this time. This suggests a shift in the product mix, away from cheaper and towards more expensive medicines, which has an impact on affordability.

BMI Economic View: The recent dip in Egypt's headline inflation rate has ended, in line with our expectations. We therefore expect inflation to reach 11.0% by the end of the 2013. Despite the weak economic outlook, inflation will remain elevated by a combination of a depreciating Egyptian pound and hikes to energy prices, as well as the recent cut in interest rates.

BMI Political View: Egypt's transition to a fully-fledged democracy is likely to take several years at least, while there is no guarantee that it will achieve this goal. Although the momentum for democratisation is strong, we cannot preclude a return to authoritarianism in some form in the future. Prolonged uncertainty and instability would be negative for economic reform, potentially undermining Egypt's appeal as an investment and tourism destination.

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