What we now know…

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Last month it was announced Egypt had developed a “faster, cheaper” test for hepatitis C.

Egypt has an estimated 10 million people with hepatitis C (HCV).

HCV infection is found worldwide. Countries with high rates of chronic infection are Egypt at 22%, Pakistan 4.8% and China at 3.2%.

India is now the world’s largest importer of military arms. Between 2007 and last year, it is estimated India imported 10% of global arms imports.

Annual defense budget: $40 bln USD.

India’s government spend on healthcare (@ 2%) is essentially the same dollar amount as it spends on defense.


Foot and mouth outbreak.

It’s apparently a new virus strain known as SAT-2, from which livestock have no immunity. 6.3 million buffalo and cows, and 7.5 million sheep and goats are at risk in Egypt.

Prices for meat will increase dramatically. Not just cattle meat, and lamb (cloven hoof), but chicken, and more. Likely to have initial, small impact on consumer healthcare spending. Should infection rates increase, watch health spending decrease.

Foot and mouth is not transferable to humans. The rising costs of meat however, directly impacts humans.

Egypt is world’s largest importer of wheat.

Its foreign currency reserves have been decreasing since last year’s political change. Reserves are at approximately $15 bln, enough to pay for 3 months of total imports.

Challenge: Further erosion of foreign currency reserves (due to downturn in FDI, tourism, etc.) may result in devaluation of its currency, the Egyptian pound. Should this occur, dramatic increase in cost of all imports, including medicines, medical devices, etc.


Private Equity:
Global PE investments in 2011 were $302 billion USD vs. $230 billion in 2011, a significant increase, but well below the $764 bln USD of 2007.

11% of those investments were in emerging markets the last two years.


Military coup ousts democratically elected president.

Separately, rebels in the north take Timbuktu.


Ljubljana-listed Slovenian drug maker Krka will motion for a dual listing on the Warsaw Stock Exchange (WSE), seeking to float all of its 35,426,120 shares.

Krka eyes a market debut in Warsaw in H1 2012.


Moscow – Russia:
Last month it was reported Medsi Group would take on $400 mln USD in investments from the likes of Apax Partners, the Russian Direct Investment Fund, the City of Moscow, and others.

The amount of investment is now being reported at $800 mln to expand the number of Medsi Group’s clinics. Also announced was the merger of the City of Moscow’s hospitals with Medsi.

Following the merger, Medsi will operate 22 out-patient clinics in Moscow, including specialized children’s clinics and large clinical-diagnostic centers; 11 out-patient clinics in the regions; three in-patient hospitals with a total of 1,160 beds in Moscow; over 80 first-aid posts across the country; its own ambulance service; three wellness centres in Moscow and three health resorts in Moscow and the Crimea.

Long a supporter of Russia’s healthcare sector, we’re even more impressed that the investments don’t include pharmaceuticals……right?

Medsi Group is part of AFK Sistema, owners of Russia’s Binnopharm.


Capital outflows continue, picking up steam in 1Q this year, with an outflow of $35.1 bln, nearly double a year earlier.


Russia plans to double defense spending (as a percentage of GDP) over next decade. At what expense?

Price of oil, political promises, current accounts, and ability to finance, are all likely to come into play over next 5 years. Healthcare? Great opportunity for foreign, private investment for those with the nerves to weather the ride.


Indigenization of the countries mining sector continues.  Some international mining companies claim to have submitted plans to “sell” controlling shares to the government.

Challenge: Zimbabwe has little funds to pay for the indigenization process.

London listed AMI (Africa Medical Investments, AMEI: London) has 3 hospitals in Africa, one of which is in Harare, and an air ambulance. The air ambulance is stationed in South Africa.

Last month AMI received an additional $450,000 loan from Harbinger Capital Partners.

Movable assets best kept away from indigenization efforts.


Global Millionaires:
North America had 3.4 million millionaires in 2011.

China had 3.3 million.

Europe? 3.1 million.


Last month, during the last 3 days, India’s stock market saw a net $692.46 million outflow of foreign capital. Likely reason is the avoidance of new “tax avoidance” rules that went into effect April 1.


China’s trade surplus is shrinking due, in large part to increased consumer spending. Increased domestic spending.

Healthcare spending will also continue to increase.


We see increased emphasis by countries promoting the idea of nationalizing businesses and sectors deemed of importance to the state. (Or politicians.)

The end of this month’s cycle has produced two stories we see as problematic. We’ve long noted Russia’s running commentary of the importance of sectors it labels as “strategic state assets,” including pharmaceuticals. But two new actors have entered the fray…

Argentina moved explicitly to nationalize the oil company, YPF SA. President Kirchner’s proposal claims the petroleum industry is of “national public interest.” Sound familiar? Like Russia, Argentina is also experiencing significant capital flight.

Also similar to Russia, South Africa announced just the other day, (see commentary in this issue) its intention to “…create security of demand for domestic production, (pharmaceuticals) attract foreign and domestic investment and to further industrialise the economy.”  Attract foreign investment? Well, it seems to be working in Russia.

Long term? The writings are on the wall.


McKinsey has labeled Brazil healthcare consumers as Committed (20%), self-assured (27%), Compliant, (23%) and Struggling at 30%.

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On April 18, 2012

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