Diverse Characteristics Affect Regional Attractiveness


BMI View : Geographic diversification may be a favourable strategy for multinational pharmaceutical companies, but it is vital that firms recognise both the rewards and the risks present in a market, whether developed or emerging. BMI's Risk/Rewards Ratings (RRR) tool, which provides a globally comparative and numerically based assessment of a market's attractiveness, was established to address this. In BMI's Q314 RRRs, the Western Europe region scores 67 out of 100, comparing well with Central and Eastern Europe (52), the Asia Pacific (53), the Americas (49) and the Middle East and Africa (42) regions.

The indicators used to assess the attractiveness of a pharmaceutical market are now visible, improving the transparency of the rating system and enabling the identification of regional or group outperformers across single indicators. A market's RRR score is made up of a sum of the Rewards score (Industry Rewards + Country Rewards) and the Risks score (Industry Risks + Country Risks).

The weight assigned to each subsector (such as Industry Rewards or Industry Risks) shows its influence within the final Rewards or Risks score and the final RRR score. The Rewards component accounts for 65% of the final RRR, while the Risks component accounts for 35%.

Q314 Asia Pacific Pharmaceutical Risk/Reward Ratings
Rewards And Risks Scores

The Industry Rewards, Country Rewards, Industry Risks and Country Risks subsectors are each made up of a number of indicators. The weighting of each indicator (such as market expenditure which is used to assess Industry Reward or economic diligence which is used to assess Country Risk) reflects its relative importance to the pharmaceutical industry and subsequently the relative reward or risk that each factor poses to drug companies. In Q314, Japan is ranked as the most attractive market in the Asia Pacific region (scoring 78.1 out of 100), followed by South Korea (68.6.0) and Australia (65.8). In the same quarter, Myanmar is ranked as the least attractive market in the region (scoring 29.3 out of 100), followed by Cambodia (32.4) and Sri Lanka (38.2).

With regards to assessing rewards, we identify industry-specific factors, such as the size of the pharmaceutical market, and country-specific factors, such as the size of the pensionable population, which represent opportunities to would-be investors. Focusing on the rewards component of the rating system, Japan scores a total of 50.6 out of 65, the highest score in subsector. Japan's score is boosted by the large multi-billion dollar drug market (market expenditure score of 18.0 out of 20) and large pensionable population (pensionable population score of 8.0 out of 8), but dragged down by a declining pharmaceutical market (sector value growth score of 3.6 out of 12) and a declining population (population growth score of 1.0 out of 5). Meanwhile, Cambodia scores a total of 20.4 out of 65, the lowest score in the subsector.

Q314 Asia Pacific Pharmaceutical Rewards
Industry Rewards And Country Rewards Scores

With regards to assessing risks, we identify industry-specific dangers, such as approvals expediency, and those emanating from the state's political and economic profile, such as bureaucracy, which call into question the likelihood of anticipated returns being realised over the assessed time period. With regards to the economic and political assessment, only the aspects most relevant to the pharmaceutical industry are incorporated into the assessment. Focusing on the risks component of the rating system, Myanmar scores a total of 8.4 out of 35, the lowest score in subsector. Compared to its peers, Myanmar's score is dragged down by industry characteristics such as the absence of patent respect (patent respect score of 0 out of 7) and policy enforcement (policy enforcement score of 1.5 out of 7). Meanwhile, Singapore scores a total of 28.1 out of 35, the highest score in the subsector.

Q314 Asia Pacific Pharmaceutical Risks
Industry Risks And Country Risks Scores

In the table below, the subsector scores (ie, Industry Rewards) and full component scores (ie, Rewards) have been expressed as a percentage of the total weight or as a percentage of the maximum score that can be achieved. This allows for the identification of the sub-sector or component that will most positively or negatively affect a single market.

Q314 Asia Pacific Pharmaceutical Risk/Reward Ratings
Rewards And Risks Scores As A Percentage Of The Maximum Score

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