BMI's Executive Summary

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Ukraine's pharmaceutical market continued to grow at one of the fastest rates in Central and Eastern Europe (CEE) in 2007, with BMI estimating the total market grew 22% year-on-year (y-o-y) to reach a value of US$2.40bn, following a 24% increase in 2006. BMI's updated forecast for the period 2007 to 2012 sees average annual growth of 8.3%. This forecast is based on the assumption that Ukraine's economy will muddle through continued political instability and such pressures as rising energy prices and maintain a respectable 5.5% annual average GDP growth rate. As underlined by BMI's Business Environment Rankings, however, the general level of risk remains among the highest in the CEE region. In terms of country and market risk, Ukraine ranks last among 15 countries in Emerging Europe, despite robust growth.

This growth has been almost wholly driven by the retail market and out-of-pocket spending by consumers. The upside to this is a lack of price controls, with the clear downside being the absence of effective regulation and reimbursement. From a market value perspective, this limits the purchase of higher value, patented medicines to all but the wealthiest segment of the population. A major audit of state medicines tenders undertaken in 2007 showed a litany of irregularities, highlighting the mix of poor governance and corruption pervading the state healthcare system.

Indeed, the healthcare system remains in a state of drift. Out-of-term parliamentary elections at the end of September had yet to yield a new government as of mid-December as President Viktor Yushchenko's nominee, Yulia Tymoshenko, had yet to be approved by the narrowly divided Rada (parliament). Tymoshenko is backed by the reconstructed Orange Coalition and represents the nominal liberal wing in Ukraine's fractured political landscape. Assuming she is able to form a government, there is some hope that her party's election pledge to introduce a medicines reimbursement system and mandatory insurancebased system could gain traction in 2008. Such moves are badly needed. But it will be many months before any serious reforms could see the light of day and this optimistically assumes a level of cooperation between parties and the cooperation of regional leaders.

A lack of regulatory controls and a poorly-functioning judiciary also leave many otherwise well-run local companies at risk of rival business groups using lawsuits and other mechanisms to try and wrest assets or control over whole companies. Leading producers Darnytsa and Borshchagovsky claimed to have fended off such attacks from local groups during 2007, prompting an extraordinary show of frustration and solidarity by major producers, who halted production briefly in protest in October. More positively, Bulgaria's Sopharma inked a deal to acquire producer Vitaminy for US$5.3mn. Turkish generics producer Deva opened a representative office in Kyiv in Q407. Still, for regional and multinational players, the market remained a source of robust growth in 2007, but the perilous risk environment has meant another year has passed without any major investments in local production facilities – signalling continued worries about the market's long-term prospects.

Contents

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Chapter 1 - Executive Summary

Ukraine Pharmaceuticals Industry SWOT

Chapter 2 - Ukraine: Business Environment Ranking

Business Environment Ranking

Economics - Long-term Risk

Politics - Long-term Risk

Regulatory Barriers

Domestic-Sector Threat

Market Growth Potential

Market Size Ranking

Chapter 3 - Market Summary

Chapter 4 - Regulatory Regime

Intellectual Property Issues

Pricing & Reimbursement Issues

Other Market Entry Barriers

Chapter 5 - Industry Developments

Chapter 6 - Industry Forecast Scenario

Overall Market Forecast

Table: Drug Market Indicators

Key Growth Factors - Industry

Table: Health Expenditure Indicators

Key Growth Factors - Macroeconomic

Table: Ukraine: Macroeconomic Data And Forecasts

OTC Market Forecast

Table: OTC Market Indicators

Prescription Market Forecast

Table: Prescription Drug Market Indicators

Generics Market Forecast

Table: Generic Market Indicators

Export/Import Forecasts

Table: Import/Export Forecasts

Other Healthcare Data Forecasts

Table: Healthcare Data

Chapter 7 - Competitive Landscape

Manufacturing Sector

Wholesale

Retail

Table: Pharmacies & Pharmacy Market Ratios

Chapter 8 - Company Monitor

Arterium

Gedeon Richter

Krka

Lek (Novartis/Sandoz)

Chapter 9 - BMI Forecast Modelling

How We Generate Our Industry Forecasts

Pharmaceutical Industry

Sources

Chapter 10 - Appendix: Regional Demographic Data

Wages (ave labour force per annum), US$ PPP

Population

Household Spending Per Capita, US$

Private Consumption Per Capita, US$ PPP

Market Size, GDP, US$bn

Chapter 11 - Country Snapshot: Ukraine Demographic Data

Section 1: Population:

Table: Demographic Indicators (2005)

Table: Rural/Urban Breakdown

Section 2: Education & Healthcare

Table: Education

Table: Healthcare: Vital Statistics

Table: Healthcare: Expenditure

Section 3: Labour Market And Spending Power

Table: Employment Indicators

Table: Consumption and Stratification

Table: Wages per year

Competitive Landscape for Europe Pharmaceuticals and Healthcare: Sample of Companies Ranked

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Cross-border analysis of regulatory systems comparing the patenting environment, summarising regional pricing and reimbursement factors and monitoring the growth of the Pharmaceuticals sector across the region. Company SWOTs cover leading multinational and national drug companies operating in each market.

Network of European Pharmaceutical & Healthcare Sources

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BMI's Pharmaceuticals & Healthcare Reports are based on an extensive network of multilateral organisations, government departments, pharmaceutical & healthcare industry associations, chambers of commerce and company reports. Information sources include: