Latin Finance - July/August 2012 - 40

Healthcare

The right medicine
By Karen Schwartz atin American’s healthcare industry is maturing fast as the region gets richer – and older. Increasing affluence and an aging population are proving a powerful mix for the pharmaceuticals sector, which is undergoing a radical makeover through a wave of consolidation. Interest and investment in the industry tends to focus on Brazil and Mexico: the former had by 2010 becomes the seventh leading nation worldwide in drug sales, while for the latter, pharmaceuticals is one of the fastest growing sectors, undergoing a 4.8% expansion in 2011. And the healthcare sector in both countries meanwhile has seen a surge in mergers and acquisitions as companies seek to expand their reach in high growth markets. Brazilian pharmacies Droga Raia and Drogasil, for example, merged last August in a stock-for-stock transaction valued at 1.84 billion reis ($591 million) which created Raia Drogasil, the second largest drugstore company in Brazil and Latin America after Drogarias DPSP – itself the result of last year’s merger Prescription drugs: take your pick of Drogaria Sao Paolo and Drogaria Pacheco. In Mexico, leading pharmaceutical been successful. Genomma, for example, and hygiene products company Genomma dropped plans to take over Prestige Lab is seeking brand buys at home, but Brands, a US healthcare and cleaning also across Central and South America, brands company, after the latter rejected with price tags of up to $100 million, its unsolicited bid of $834 million, saying according to its chief financial officer, the 23% premium was too low. Oscar Villalobos. In Brazil, the extension of health Between its 2008 IPO and 2011, insurance has gone hand in hand with the company acquired 20 brands in job creation. A rising employment rate Mexico. And last year, Genomma signed has helped an otherwise relatively less a domestic 2 billion peso dual tranche well developed healthcare sector grow, loan. Today it is eyeing multinational and as employers grant benefits to an everlocal brands in the OTC and personal care increasing number of workers, says Iago sector that trade up to three times Ebitda, Whately, an analyst at Banco Fator. and already has credit lines in place, says Since public healthcare is free in Villalobos. Brazil, a large part of the population is But not all attempts at acquisition have unlikely to ever opt for private care. But

Latin America’s rapidly consolidating healthcare sector is poised to continue growing as the population ages and gets wealthier

although only 25 percent of Brazilians have access to private health insurance, Whatley insists that this figure “is still lower than the market potential.” But the industry is likely to have to wait to see the fruits of consolidation before the next wave, a process analysts say could take years. Even though the industry is not fully consolidated, Whately says the largest phase of mergers and acquisitions in Brazil may have passed, especially since further consolidation could raise anti-trust concerns. However, with increasing medical costs, there is pressure to improve scale. In many cases, including that of healthcare plan operator Amil Participações, this has

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July/August 2012

Latin Finance - July/August 2012

Table of Contents for the Digital Edition of Latin Finance - July/August 2012