Government health programmes and legislative changes are driving the market for affordable antiretroviral drugs in sub-Saharan Africa. Steven Swindells reports
Southern Africa's leading generic drugs manufacturer Aspen is confident that it can capitalise on the increasing take up of life-prolonging generic antiretroviral (ARV) drugs in the fight against HIV-AIDS. But industry analysts have questioned demand forecasts for ARVs and warn that rival Indian generic manufacturers could be a threat to Aspen's market ambitions.
Southern Africa's generics drug market is expanding as governments of some of the world's poorest countries move to boost ARV treatment as part of health programmes aimed at combating the epidemic that affects more than 25 million Africans, according to UNAIDS.
"Aspen is one of the few niche players in the low margin high value ARV market and it should be able to capitalise on the growth prospects that the HIV-AIDS market present, as multilateral donor funding and treatment programmes begin to grow in the region," said Aspen senior executive Stavros Nicolaou. "The scale-up of ARV use from the current unacceptably low 10% consumption in sub-Saharan Africa to 40-50% presents a major growth opportunity for Africa's only niche ARV player, Aspen".
Sub-Saharan Africa is home to more than 60% of all people living with HIV, and while their access to HIV treatment has improved over the past two years, at best only one in 10 people in need of HIV treatment are receiving it.
But there is uncertainty over whether ARV demand growth projections are realistic, especially given the controversial handling of the epidemic by the Pretoria government, which was reluctant for years to endorse a proper ARV programme within the public health system.
"There is a large degree of forecast risk around Aspen's ARV rollout, both within South Africa and the rest of sub-Saharan Africa. Aspen's revenue is dependent on the uptake in the region, the market share that Aspen can achieve and the pricing that will be determined through competition and political will. There is little doubt that it is a high growth category, but at what price and how many players?" argues Robyn Collins, pharmaceutical analyst at Johannesburg-based analysts Barnard Jacobs Mellet (BJM).
Collins is still forecasting a 25% boost to Aspen's headline earnings per share for the next three years, based on its voluntary ARV licence agreements with GlaxoSmithKline, Boehringer Ingelheim and Bristol-Myers Squibb. Aspen has also achieved FDA approval for its triple combination, co-packed, ARV therapy of Lamivudine/Zidovudine and Nevirapine tablets, giving it access to funding available under the US President's Emergency Plan for AIDS Relief (PEPFAR) in sub-Saharan countries.
Aspen has more than 38% of the South African generic drugs market in value terms and holds the major slice of government generic tender (along with fellow South African manufacturer Adcock Ingram), but is faced with growing overseas corporate competition and a slower than expected use of ARVs in the fight against AIDS.
Indian competition
"We believe the greatest risk facing South African manufacturers is increased competition from the Indian generic manufacturers resulting in slower growth and lower prices," said Collins. "However the current and expected growth in the market is sufficient to sustain the incumbents and additional competitors."
Indian generics producer Cipla has increased its market share to almost 12% from 7% just two years ago, and is expected to expand its presence in South Africa and neighbouring states.
Non-ARV generic drugs demand is also being fanned by legislative changes in the main South African drugs market, which aims to get cheaper drugs to consumers through increased use of generics.
"The growth drivers include global generic growth, legislation in South Africa encouraging generic substitution, the implementation of prescribed minimum benefits by medical schemes and the dire need for ARVs in South Africa and the rest of sub-Saharan Africa," says Collins.
Aspen's Nicolaou sees the generic drugs market as a key growth driver: "Generics growth in South and southern Africa is outstripping that of branded products. This trend will continue in South Africa as we enter into an intense period of patent expiry over the next four years and a number of legislative and regulatory reforms, which are set to accelerate provider and consumer demand for generics," he said.