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Analysis: Opportunities in the Philippines

In the third part of his series about operating healthcare companies across the APAC region, Marcus Pitt, managing partner of Fortuna Corpus Asia, focuses on the opportunities in the Philippines.

The hospital segment remains highly fragmented in the Philippines. One of the larger operators/ owners, Metro Pacific Investments (MPI) has been taking advantage of the current state of the market and has acquired more than 15 hospitals with a capacity of upwards of 3,000 beds. It has been reported since January last year that the company is considering an up to US$300 million IPO in the next couple of years, certainly CLSA and UBS have been mandated.

The Medical City is the main competitor of MPI, present both in inpatient and outpatient care segments through hospitals and clinics. One of the only operators to explore opportunities outside of the market, it has recently embarked on a partnership-investment in the Middle East with Kuwait based Sama Medical Services.

Other groups now entering the sector include Villar Property, which this year announced it will create a chain of clinics as a service offering with each of its residential offerings. Foreign firms have also been eyeing opportunities, for example, Spanish multinational Sanitas International, which has health centres and insurance operations, has earmarked several projects in the Philippines.

In the pharmaceutical sector – similar to markets such as Indonesia and Thailand – the Philippines enjoys high growth of around 12-14% a year, largely driven by growing middle class, increased spend in health and government policy.

It is generics that dominate the market, indeed they represent almost two-thirds of all drug products sold in the country. In recent years, the government introduced an essential drug list which lowed the price of generics and core OTC products dramatically. In addition, the government has also backed local production and attracted imports from markets such as India and Pakistan where production costs are comparatively lower.

The top ranking MNC manufacturers include Sanofi, Pfizer, Astra Z, GSK, MSD – for domestic companies, United Laboratories continues to lead the domestic market and has a significant regional presence. It is closely followed by Pascual Laboratories, GC International and Natrafarm.

In terms of supply chain, retailers have the largest share with an estimated 80%, hospitals at 10% and the remaining is made up of clinics, NGOs and government agencies. For some time now, Mercury Drugs has held a significant market share of the retail pharma space. Some say it controls more than 45% with steady competition coming from the Robinson Group, which acquired The Generics Pharmacy (TPG) in 2016. Together with Generika (which opened a further 150 stores last year) both make up a third of the market with the remaining coming from chains such as Watsons and other independent drug stores.

In addition to traditional retail models, Ayala Group (parent of Generika) – has recently invested in several online businesses. Earlier this year it took an undisclosed minority stake in Wellbridge Health, a start-up that owns online pharmacy MedGrocer. This follows the launch of FamilyDoc, a chain of clinics offering primary care services. Through this operation, a patient can see a FamilyDoc HCM, get laboratory tests and receive generic drugs all in the same clinic.

Retail groups are also cashing in on the growth of generics – creating house brands that compete on price and have the added vantage of offering their substitutes at point of sale. They compete on price with un-branded generics and although are currently a small segment, they are expected to growth significantly because of the priority pharmacy chains are giving on this segment – it is expected that growth and market share will outperform both un-branded and branded generics in the next few years.

Marcus Pitt is a board member, advisor and consultant for the healthcare and life-sciences industries across southeast Asia. He can be reached via email: marcus.pitt@fortunacorpusasia.com.

Posted on: 27/11/2017 UTC+08:00


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