Hovione shows the way for Portugal's manufacturers

Portuguese drug producers are small and need to merge or form alliances to compete at a global level, investing more in innovation and increasing their competitiveness like custom manufacturer Hovione has done, a new report by market research firm Espicom suggests.

The Portuguese pharmaceutical market is the tenth largest in the EU-15, valued at $5.3bn (€4.1bn) at retail prices in 2006. Market growth has decreased to around 5 per cent, with the government keen to contain reimbursement and increase generic consumption.

The country's manufacturers have a lot of catching up to do since Portuguese pharmaceutical production was estimated at €1.56bn in 2003, only one per cent of the total combined production from the EU-15 and Switzerland.

However, there are 141 pharmaceutical companies operating in Portugal, so if only the 15 leading indigenous manufacturers are considered, production stood at €471m in 2005, a rise of 12.9 per cent over 2004.

In 2005, these manufacturers employed 3,379 workers, while production in volume increased by 31.3 per cent that year, reaching an estimated 161.9m units.

The report pays special tribute to Hovione, which offers custom synthesis of active pharmaceutical ingredients (APIs) and regulated intermediates for oral, topical, inhalation and injectable grades, including sterile bulk.

More than half of Hovione's sales are products launched in the last five years, such as corticosteroids and antibiotics.

Hovione claims to be the pharmaceutical producer with the highest R&D investment in Portugal, something that the report says other Portugese producers need to aspire to.

Hovione invested an estimated $12.7m in R&D in 2005, equal to around 15 per cent of sales in 2005. These were allocated to its technology transfer centre in New Jersey, IT and R&D capabilities in Loures, and double manufacturing capabilities and environmental protection in Macau.

Apart from innovation, another challenge Portugese manufactures face is in the area of generics, where an effort is being made to diminish the number of generics with similar prices, boost competitiveness among generic producers and increase their participation in active ingredients without generic alternatives, which represent 25 per cent of the market.

There are 122 producers of authorised generics in the Portuguese market, 27 of which are national. Of those, 52 producers specialise in hospital generics, 20 of which are national producers.

In 2005, a Portugese trade association recorded 41 generic producers in the pharmacy sector, with the leading generic producer by value being Merck (20.0 per cent), followed by Ratiopharm (18.9 per cent) and Alter (13.1 per cent).

As far as exports are concerned, Portugal exported $364.3m worth of pharmaceuticals in 2004, 10.2 per cent more than in 2003.

Exports of retail medicines, which increased by 14 per cent, accounted for 76.8 per cent of the total, followed by raw materials (15.5 per cent) and semi-finished medicaments (7.7 per cent).

In 2004, exports of raw materials decreased by 19.2 per cent, while exports of semi-finished medicaments increased by 86.2 per cent.

On the other hand, the Netherlands was Portugal's leading supplier of raw materials in 2004, with imports valued at $47.8m, or 18.1 per cent of the total, while other main EU-15 suppliers were France (16.8 per cent), Germany (9.4 per cent) and the UK (8.2 per cent).

Pharmaceutical imports are expected to continue their upward trend as the country consumes more retail drugs. Exports will continue to rise but at a slower rate.

Portuguese manufacturers will continue to slowly increase their share in the market, the report predicts - they represented 15.2 per cent of the market in 2004.

The report, entitled "The Pharmaceutical Market: Portugal" is available online >here.