Latin Finance - May/June 2011 - 24

peru healthcare

Healthy Targets
by Taina Rosa eru’s healthcare industry began 2011 with a bang. In the first two months of the year alone, three M&A transactions involving both pharmaceutical companies and drug store chains were announced. The fragmented nature of the pharmacy chain business, the need for more drug manufacturing facilities and demand for more healthcare infrastructure such as clinics, laboratories and hospitals are all expected to contribute to increased investment in the sector. “In Peru, seven drug store chains have about 60% of the market, which indicates that there is still plenty of room for consolidation and that there are too many chains competing for customers,” says Luis Díaz, general manager of Peru’s national association of drug store chains, known locally by its Spanish acronym Anacab. “The recent acquisitions are part of the evolution of the fragmented nature of the market.” Statistics from Anacab show that Inkafarma, the largest pharmacy chain in Peru, only has about a 25% market share. According to Peru’s Production Ministry, which regulates local industries and reports statistics on commercial activity in the country, Inkafarma had 343 stores as of August 2010. “There will definitely be more consolidation. The largest chains are concentrated mostly in Lima and during the next two years or so we should see this become a market dominated by only three or four large players,” Jorge Kuryla, managing partner at Colombia-based private equity firm Altra Investments, which focuses on the Andean region. Peru’s drug store chain business is also not as developed as that of other LatAm countries. “Asset valuations in Peru can be about 25% higher than in a comparable market such as Colombia because there

M&A activity in Peru’s healthcare industry is heating up. The expansion of state-sponsored healthcare insurance will be a major factor contributing to the sector’s growth.
Martin, CEO of Química Suiza, tells LatinFinance. The merged company will be the second largest player in the country, with a market share of about 13%, he says. “We want to continue expanding via M&A as well as organically by opening about 30 stores per year,” he adds. He does not discard the possibility of eventually expanding to other LatAm markets outside of Peru. According to Peru’s Production Ministry, as of August 2010, Mifarma had 112 stores and BTL 172. BTL had originally been purchased by Ivax in June 2004 from Peru’s Assa Investments for around $10 million. Ivax was later taken over by Teva in 2006. The deal was privately negotiated. Inkafarma was also acquired by Peruvian financial conglomerate Interbank in January. While the buyer did not disclose how much it paid for the chain, bankers off the deal estimate the deal value at around $320 million.

Carlos Acosta of the Peruvian health ministry is more growth potential,” Kuryla tells LatinFinance. “Peru’s drug store chain business is a few years behind that of other markets where drug stores have adopted more of a convenience store model,” Díaz says. “I believe that before Peruvian players can expand to other countries, there has to be more consolidation in the local market.”

Drug Makers Expanding in Peru

Pharmacy Chain Consolidation

Among the deals in the first two months of 2011, Israeli pharmaceutical company Teva sold drugstore chain Boticas Torres de Limatambo (BTL) to Peru-based healthcare conglomerate Química Suiza for an estimated $75 million. “Now that we have purchased BTL, we are merging it with Mifarma,” Engels

In January, Teva also acquired Peruvian drug maker and marketer Infarmasa from Altra Investments and The Rohatyn Group, a US-based PE firm, for an undisclosed amount, although sources in Peru estimate the deal value at between $250 million to $300 million. Altra Investments and the Rohatyn Group bought the company in 2007. Credit Suisse advised the sellers. Teva says it intends to merge Infarmasa with Medco, another pharmaceutical company it owns in Peru, and that the resulting entity will be the

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May/June 2011

Latin Finance - May/June 2011

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