Sectoral Report: Pharmaceuticals (April 2022)

Greek pharma industry: In position to capitalize on EU shift towards more self-reliance
 

Greece’s pharmaceutical sector has been growing at a fast pace during the past five years (with sales up by 80%, vs 43% in the EU and 7% for other Greek manufacturing) – with exports being the main growth engine (with its extroversion increasing to 50% of sales in 2021 vs 30% in 2016). Noteworthy is the fact that the sector’s investment appetite is gradually recovering, with the gross fixed capital formation-to-sales ratio reaching c. 10% (up from 7% five years ago and c. 15% in the EU).

Looking ahead, the vigorous performance of Greek pharma is expected to be further boosted by a powerful combination of favourable factors:

  • Driven by technological advances and increased health concerns (due to the covid pandemic), global pharma sales could almost double by 2030 (reaching $3 tr, from $1.4 tr. currently), following a two-decade period of healthy sales growth (c. 6% per year).
  • Against this expansionary background, the recent introduction of the «European Common Pharmaceutical Strategy», presents new opportunities. The new strategy was triggered by concerns of high inter-regional dependencies (e.g. China provides 23% of EU pharma raw materials in 2019, up from 12% in 2010) and product shortages due to global supply chain disruptions (related with the shocks of covid pandemic and recent geopolitical turmoil). With its new strategy, the EU primarily aims i) to promote R&D towards both innovator and generic drugs, ii) establish a favourable institutional framework for manufacturers and iii) reinforce diversification of supply chains.
  • Amid an environment of advantageously changing conditions, Greece has also two unique circumstances working in its favour: (i) an imminent institutional reform mainly regarding clawback, and (ii) the reversal of past decade’s tight financing conditions, being further boosted by the freshly available RRF funds.

Despite a generally favorable environment, a word of caution is appropriate concerning rising energy and transport costs, affecting competitiveness in a highly regulated sector (especially for low-priced medicines).

Leveraging on these prospects, Greek pharma manufacturers have already announced investment plans of c. €1bn for the period 2022-2026 – providing clear signs of their ongoing growth strategy. Based on our estimates, the sector has the potential to almost double its sales by 2026, mainly through higher extroversion. More importantly, the production boom could be coupled with increased R&D activity by cashing in on the significant pool of specialized human capital – therefore, turning Greece to a comprehensive hub for the pharma industry across the board, from research to production.

 

Sectoral Report: Pharmaceuticals (April 2022)
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