Industry Trend Analysis - Brighter Long-Term Outlook For Medicine Sales - MAY 2017

BMI View: The outlook for Mexico ' s pharmaceutical market will be repressed in the short-term, underperforming its emerging market peers. Uncertainty over the future of NAFTA , as well as a rapidly increasing prefer ence for generic medicines, creates downside risk to medicine sales. Moreover, the continued weakness of the peso through 2017 , as well as regulatory challenges , will deter drugmakers. We note that the longer-term ou tlook for the market is positive.

Downside risks dominate the short-term outlook for medicine sales in Mexico. The primary risks to the market are the uncertainty surrounding the North American Free Trade Agreement (NAFTA) and the heightened diplomatic tensions between Mexico and key trading partner the US. These pose risks to pharmaceutical trade and foreign direct investment (FDI) ( see ' End of NAFTA: Short-Term Risks For Pharmaceutical Market ' , March 3 2017).

In addition to the risks posed to the pharmaceutical market by weaker trade and FDI, the market will be shaped by a sharp increase in generic medicine substitution. Given the increasing affordability of lower value generic medicines, this government policy will create an uptick in demand and volume sales. However, this increase will be significantly mitigated by the repression of high-value innovative medicine sales, posing additional downsides to market growth. As a result of these factors, the market's short-term growth will underperform with respect to its key emerging market peers: Brazil, China, India, Russia and Turkey.

Emerging Market Underperformance
LHS: 5-Year CAGR (%, loccur); RHS: Mexico Drug Market Forecast

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