Exclusively for the use of Nuno Mendes at Fitch Group, Inc..

Downloaded: 08-Dec-2022

Q2 2022
www.fitchsolutions.com

Asia
Pharmac
Pharmaceuticals
euticals & Healthcar
Healthcare
e
Report
Includes 10-year forecasts to 2031
Exclusively for the use of Nuno Mendes at Fitch Group, Inc.. Downloaded: 08-Dec-2022
 Exclusively for the use of Nuno Mendes at Fitch Group, Inc.. Downloaded: 08-Dec-2022
Asia Pharmaceuticals & Healthcare Report | Q2 2022

Contents
Key View............................................................................................................................................................................................ 4

SWOT .................................................................................................................................................................................................. 5

Industry Forecast........................................................................................................................................................................... 6
Pharmaceutical Market Forecast ........................................................................................................................................................................................... 6
Healthcare Market Forecast ..................................................................................................................................................................................................... 8

Market Overview..........................................................................................................................................................................10

Asia Pharmaceuticals & Healthcare Theme .......................................................................................................................11

China's Volume-Based Procurement Scheme Will Continue To Impact Multinational Drugmaker Performance..............................11

Asia Pharmaceuticals & Healthcare Round-Up .................................................................................................................13

Pharmaceuticals & Healthcare Glossary .............................................................................................................................17

Pharmaceuticals & Healthcare Methodology ....................................................................................................................19

© 20
2022
22 Fit
Fitch
ch Solutions Gr
Group
oup Limit
Limited.
ed. All rights rreserv
eserved.
ed.

All information, analysis, forecasts and data provided by Fitch Solutions Group Limited is for the exclusive use of subscribing persons or organisations (including those
using the service on a trial basis). All such content is copyrighted in the name of Fitch Solutions Group Limited and as such no part of this content may be reproduced,
repackaged, copied or redistributed without the express consent of Fitch Solutions Group Limited.

All content, including forecasts, analysis and opinion, has been based on information and sources believed to be accurate and reliable at the time of publishing. Fitch
Solutions Group Limited makes no representation of warranty of any kind as to the accuracy or completeness of any information provided, and accepts no liability
whatsoever for any loss or damage resulting from opinion, errors, inaccuracies or omissions affecting any part of the content.

This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 (‘FSG’). FSG is an
affiliate of Fitch Ratings Inc. (‘Fitch Ratings’). FSG is solely responsible for the content of this report, without any input from Fitch Ratings. Copyright © 2022 Fitch
Solutions Group Limited.

THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

fitchsolutions.com 3
 Exclusively for the use of Nuno Mendes at Fitch Group, Inc.. Downloaded: 08-Dec-2022
Asia Pharmaceuticals & Healthcare Report | Q2 2022

Key View
Key View: Opportunities for pharmaceutical companies in the Asia-Pacific region will remain diverse. Multinational drugmaker
interest will be skewed towards the larger markets of the region and the smaller, underdeveloped pharmaceutical markets will
present the weakest commercial incentives. Higher growth opportunities in the smaller emerging markets will present themselves
within the generic medicines sector.

Headline Expenditure Projections

• Pharmaceutical: USD425.2bn in 2021 to USD423.7bn in 2022; -0.4% y-o-y in US dollar terms.

• Healthcare: USD2.6trn in 2021 to USD2.7trn by 2022; +3.1% y-o-y in US dollar terms.

PHARMACEUTICALS & HEALTHCARE FORECASTS (ASIA 2020-2026)

Indicator 2020 2021 2022f 2023f 2024f 2025f 2026f

Pharmaceutical sales, USDbn 376.819 425.198 423.674 442.602 466.178 489.985 515.608

Pharmaceutical sales, % of GDP 1.23 1.23 1.19 1.17 1.15 1.13 1.12

Pharmaceutical sales, % of health expenditure 17.0 16.5 16.0 15.5 15.0 14.6 14.2

Health spending, USDbn 2,220.060 2,570.489 2,649.960 2,846.467 3,101.865 3,357.386 3,637.097
f = Fitch Solutions forecast. Source: WHO, Fitch Solutions

Risk/Reward Index

The Asia-Pacific markets will remain key commercial opportunities for multinational drugmakers, presenting a diverse range of
opportunities for innovative pharmaceutical firms. While some markets have high growth potential or favourable regulatory
environments, it is vital that companies appreciate the varying levels of investment risks and rewards that are present.

Key Economic View

We have slightly revised our 2022 China growth forecast from 5.4% to 5.2%, mainly due to our expectation for commodity prices to
remain elevated in 2022, leading to higher input costs for the manufacturing sector. We also considered the worsening Covid-19
outbreak, which is a downside risk we have been highlighting. New daily cases exceeded 2,000 in late March 2022, and the
authorities have locked down Shenzhen, the entire province of Jilin as well as parts of Shanghai. Chinese media have reported
disruptions to factories and ports in Shenzhen, which raises the risks of a further wave of supply chain disruptions. Although
economic activity remained broadly stable in February, according to PMI and industrial production readings, we expect March data
to show more weakness, particularly given ongoing stress in the housing market.

Key Political View

Reform momentum in EM Asia looks poised to slow in the months ahead due to upcoming elections, as well as an environment of
rising inflation. We have already revised down our score to 4.6 out of 10 in Q122, from 4.7 in Q421 due to a series of export bans in
Indonesia. Moreover, we believe the risks to the region’s score lay to the downside. While a number of business and investment-
friendly reforms have been passed in the Philippines in the past quarter, the country is preparing for presidential elections,
scheduled for May, which should see policy making and implementation processes slow considerably in the coming months. There
could also be increasing headwinds to reform in China in the run-up to the Communist Party of China National Congress in Q422.
Elevated global commodity prices following Russia’s invasion of Ukraine could create further headwinds to reform, driving up global
food and fuel prices, especially for commodity importers, and limiting space for leaders to enact economically painful measures.

THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

fitchsolutions.com 4
 Exclusively for the use of Nuno Mendes at Fitch Group, Inc.. Downloaded: 08-Dec-2022
Asia Pharmaceuticals & Healthcare Report | Q2 2022

SWOT
SWOT Analysis
Strengths • Rapid urbanisation, sedentary lifestyles and dietary trends ensures the region's long-term demand for
pharmaceuticals that target chronic, lifestyle-related diseases.
• Commitment to healthcare remains a priority for most Asia-Pacific governments - accelerating the
modernisation and expansion of healthcare infrastructure and provision.
• Policies aimed at economic reforms in the region will introduce increasing opportunities for investment
recorded by healthcare providers and drugmakers.

Weaknesses • Government cost-cutting measures, including the promotion of generic drugs, have weighed on market
growth.
• Weak intellectual property protection and regulatory weaknesses pose risks for innovative drugmakers in
emerging Asian markets.

Opportunities • Widening access to healthcare in emerging Asia will drive high growth rates in medicine sales, particularly in
the generic sector.
• Growing domestic manufacturing capabilities.
• Ongoing improvements to the regulatory environment will enhance attractiveness to multinational
drugmakers.

Threats • High industry-associated risks threaten multinational interest, including lagging patent laws and a high
prevalence of counterfeit medicines.
• Cost containment remains a threat as governments seek to expand access to healthcare while limiting their
expenditure.

THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

fitchsolutions.com 5
 Exclusively for the use of Nuno Mendes at Fitch Group, Inc.. Downloaded: 08-Dec-2022
Asia Pharmaceuticals & Healthcare Report | Q2 2022

Industry Forecast
Pharmaceutical Market Forecast
Key View: Multinational innovative pharmaceutical firms will continue to invest heavily in developed Asian markets due to the
stronger regulatory environments and greater ability to afford high-value medicines. However, these markets will no longer provide
significant revenue growth because of aggressive cost containment. Instead, growth opportunities will be plentiful in emerging Asia.
We note that, with continued regulatory challenges and a growing focus on cost efficiency, the vast majority of this growth will be
driven by the generic medicines sector.

Pharmaceutical Market Forecast

2017-2031

f = Fitch Solutions forecast. Source: National Sources, Fitch Solutions

Structural Trends

Asia-Pacific's (APAC) USD425.2bn (EUR359.5bn) drug market in 2021 is forecast to expand to USD515.6bn (EUR415.8bn) in 2026,
with a 3.9% compound annual growth rate (CAGR) in USD terms and 3.0% in euro terms. The USD41.3bn (EUR34.9bn) South Asia
market will be a strong driver of growth (8.5% CAGR through to 2026), followed by the USD27.7bn (EUR23.4bn) South East Asia
market (7.9% CAGR through to 2026 in USD terms and 6.9% in euro terms). The USD225.3bn (EUR190.5bn) North East Asia market
is also expected to grow steadily (4.1% CAGR through to 2026 in USD terms and 3.1% in euro terms).

Pharmaceutical industry will remain a focus of cost containment. Authorities in APAC will put further pressure on medicine prices as
a way to improve patient access to pharmaceuticals. This will be achieved using a variety of mechanisms such as tenders, reference
prices, and reimbursement decisions. The clearest example of this trend is volume-based procurement (VBP) in China, which
multinational drugmakers continue to highlight as an impediment to global revenue growth. The scheme, which requires
drugmakers to accept steep discounts to gain reimbursed status in the substantial Chinese market, will continue to limit profits,
particularly for multinational firms. We maintain our view that expanding access to publicly funded healthcare and improving
healthcare quality will maintain China's position as the largest and most promising emerging pharmaceutical market globally;
however, VBP will taper the size of this opportunity. In December 2021, China’s National Healthcare Security Administration
published the 2021 edition of its annual National Reimbursement Drug List, which became effective January 1 2022. The list saw
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

fitchsolutions.com 6
 Exclusively for the use of Nuno Mendes at Fitch Group, Inc.. Downloaded: 08-Dec-2022
Asia Pharmaceuticals & Healthcare Report | Q2 2022

the addition of 74 new medicines, down from 119 in the December 2020 edition, with an average discount versus list price of
61.7% (versus 50.6% in 2020).

Another trend is that the Covid-19 pandemic disrupted the upstream supply of active pharmaceutical ingredients from China and
the manufacturing of finished products in India. In 2022 we expect that both pharmaceutical companies and governments will
continue to react to this by diversifying supply sources, ‘near-shoring’ production to regional peers or ‘reshoring’ to the market of
sale. This trend builds on recent examples such as India, Indonesia and Vietnam and will serve to increase costs for sellers of
pharmaceuticals, mainly for cheap generic medicines. For governments, significant public investment in reshoring pharmaceutical
manufacturing will result in the desired benefit of strategic positioning in the event of another global pandemic. South East Asian
markets particularly Vietnam and Indonesia will be potential beneficiaries of the ‘plus one’ strategy. Some markets have already put
forward plans to attract overseas investment as companies look for another centre of production or distribution. These include
Thailand, Malaysia and Vietnam, which have introduced preferential policies for overseas firms investing in the market. Thailand has
made strides in improving its ease of doing business, streamlining the process for obtaining construction permits and improving
minority investor protection. Foreign direct investment (FDI) applications rose 80% y-o-y in Thailand in the first quarter of 2021 with
the medical sector attracting the most FDI projects.

PHARMACEUTICALS SALES, HISTORICAL DATA AND FORECASTS (ASIA 2019-2026)

Indicator 2019 2020 2021 2022f 2023f 2024f 2025f 2026f

Pharmaceutical sales, USDbn 364.168 376.819 425.198 423.674 442.602 466.178 489.985 515.608

Pharmaceutical sales, USDbn, % y-o-y -1.95 3.47 12.84 -0.36 4.47 5.33 5.11 5.23

Pharmaceutical sales, USD per capita 86.5 88.8 99.5 98.4 102.0 106.8 111.5 116.6

Pharmaceutical sales, % of GDP 1.19 1.23 1.23 1.19 1.17 1.15 1.13 1.12

Pharmaceutical sales, % of health expenditure 18.1 17.0 16.5 16.0 15.5 15.0 14.6 14.2
f = forecast. Source: Fitch Solutions

THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

fitchsolutions.com 7
 Exclusively for the use of Nuno Mendes at Fitch Group, Inc.. Downloaded: 08-Dec-2022
Asia Pharmaceuticals & Healthcare Report | Q2 2022

Healthcare Market Forecast

Key View: The demand for healthcare in the Asia-Pacific region will continue to be driven by the rising prevalence of chronic
diseases, universal healthcare implementation efforts, a growing population and increasing urbanisation. Emergency Covid-19
spending measures will be rolled back over 2022, however, the pandemic will boost governments' long-term commitment to the
healthcare sector.

Healthcare Expenditure Forecast

2017-2031

f = Fitch Solutions forecast. Source: WHO, Fitch Solutions

Structural Trends

The USD2.6trn (EUR2.2trn) Asia-Pacific (APAC) market is forecast to expand to USD3.6trn (EUR2.9trn) with a 7.4% compound annual
growth rate (CAGR) in USD terms through to 2026. The USD156.7bn (EUR132.5bn) South Asia market will be a strong driver of
growth (11.3% CAGR through to 2026), followed by the USD143.9bn (EUR121.7bn) South East Asia market (8.8% CAGR through to
2026). The USD1.4trn (EUR1.2trn) North-East Asia market is also expected to grow also strongly (8.0% CAGR through to 2026).

As new variants continue to fuel high cases across the region (albeit with lower hospitalisation and death), governments will
continue to see the pandemic as an opportunity to accelerate reforms in the health sector. Covid-19 highlighted existing
deficiencies in healthcare systems in the region. Markets in the region have seen the number of Covid-19 cases increase rapidly.
Healthcare spending across the region of USD601.2 per capita remains low compared to developed markets such as Western
Europe. Lower spending equates to fewer hospital beds, doctors, nurses per capita to help tackle the spread of Covid-19, and
while APAC’s relatively rural-based populations offer it some protection from the impact of Covid-19, mortality rates among those
hospitalised are likely to be high. Reflecting current constraints, a wide range of regional governments will increase spending
on healthcare services as part of yearly budgets.

THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

fitchsolutions.com 8
 Exclusively for the use of Nuno Mendes at Fitch Group, Inc.. Downloaded: 08-Dec-2022
Asia Pharmaceuticals & Healthcare Report | Q2 2022

HEALTHCARE EXPENDITURE TRENDS, HISTORICAL DATA AND FORECASTS (ASIA 2017-2026)

2017 2018 2019 2020 2021 2022f 2023f 2024f 2025f 2026f

Health
expenditure, 1,782.5 1,931.5 2,016.2 2,220.1 2,570.5 2,650.0 2,846.5 3,101.9 3,357.4 3,637.1
USDbn

Health
expenditure,
6.7 8.4 4.4 10.1 15.8 3.1 7.4 9.0 8.2 8.3
USDbn, %
chg y-o-y

Health
expenditure,
430.7 462.7 479.0 523.3 601.2 615.3 656.3 710.3 763.9 822.4
USD per
capita

Health
expenditure, 6.5 6.5 6.6 7.3 7.4 7.4 7.5 7.6 7.8 7.9
% of GDP

f = Fitch Solutions estimate/forecast. Source: WHO, Fitch Solutions

THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

fitchsolutions.com 9
 Exclusively for the use of Nuno Mendes at Fitch Group, Inc.. Downloaded: 08-Dec-2022
Asia Pharmaceuticals & Healthcare Report | Q2 2022

Market Overview
Key View: The Asia-Pacific market will remain a key commercial opportunity for multinational drugmakers. An ageing population
and rising burden of chronic diseases will play a part in the rising demand for medicine in the region. However, the expansion of
access to healthcare will be the primary driver of robust growth. Nevertheless, cost-containment measures such as greater pricing
pressures, including value-based medicine pricing and generic substitution policies employed by the government to control
expenditure, will create a challenging business environment for pharmaceutical companies.

In 2021, the Asia-Pacific (APAC) drug market (pharmacies and hospitals at consumer price terms) was valued at USD425.2bn
(EUR359.5bn). Per capita pharmaceutical spending in APAC reached a value of USD99.5 in 2021. In the same year, regional
pharmaceutical spending as a percentage of GDP stood at 1.2%, while pharmaceutical sales as a percentage of healthcare spending
stood at 16.5%. While prescription drugs are dominant in APAC, low purchasing power and government measures to encourage the
use of generic drugs will contain medicine spending.

APAC's healthcare market was valued at USD2.6trn (EUR2.2trn) in 2021. Per capita healthcare spending in APAC reached USD601.2,
while healthcare spending as a percentage of GDP stood at 7.4% in 2021. An improving healthcare service system and increasing
demand from the middle class will keep healthcare expenditure high across the majority of the countries in the region. Healthcare
access varies significantly across APAC, with the underdeveloped medical system in the emerging markets weighing on spending.

As one of the fastest growing pharmaceutical markets, the majority of multinational drugmakers have established a presence in the
APAC region. This goes beyond sales offices, with leading firms investing in the development of production plants and R&D facilities
in key countries as well as strengthening their R&D commitment through strategic partnerships with local institutions. Increasing
demand for high-quality medicines and expanding health coverage will continue to boost local market growth. While the majority of
domestic firms are focused on generic medicines, investment into drug discovery has started to flourish, which will create
opportunities for multinational pharmaceutical companies to form joint partnerships. Ongoing improvements to the regulatory
environment will enhance the region's attractiveness to multinational drugmakers.

THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

fitchsolutions.com 10
 Exclusively for the use of Nuno Mendes at Fitch Group, Inc.. Downloaded: 08-Dec-2022
Asia Pharmaceuticals & Healthcare Report | Q2 2022

Asia Pharmaceuticals & Healthcare Theme

China's Volume-Based Procurement Scheme Will Continue To Impact
Multinational Drugmaker Performance
Key View

• Volume-based procurement will continue to impact multinational drugmaker performance in China, due to the requirement of
steep discounts for market access.
• Imported pharmaceutical products with a greater number of alternatives will bear the brunt of price discounts, while products
with less competition (such as rare disease medicines) will fare better.
• Despite intensifying pricing pressure, we maintain our view that China represents the most attractive emerging pharmaceutical
market due to favourable demographics and increasing access to healthcare.

As part of Q421 financial results, announced over February-March 2022, multinational drugmakers continued to highlight volume-
based procurement (VBP) in China as an impediment to global revenue growth. The scheme, which requires drugmakers to accept
steep discounts to gain reimbursed status in the substantial Chinese market, will continue to limit profits, particularly for
multinational firms. We maintain our view that expanding access to publicly funded healthcare and improving healthcare quality will
maintain China's position as the largest and most promising emerging pharmaceutical market globally; however, VBP will taper the
size of this opportunity.

According to our latest forecasts, China’s pharmaceutical market will increase by a ten-year compound annual growth rate of 5.3%,
growing from CNY1.3trn (USD196.0bn) in 2022 to CNY2.1trn (USD288.0bn) by 2031. However, within the overall market, patented
medicines will outperform due to lower competition in the face of intense pricing pressure - this subsector will increase as a share of
the total market from 27.8% in 2022 to 30.5% in 2031.

Patented Medicines To Partly Drive Overall Market Growth

China - Pharmaceutical Market Forecast, CNYbn (2020-2031)

e/f = Fitch Solutions estimate/forecast. Source: National Bureau of Statistics Of China, local news sources, domestic companies, Fitch Solutions

THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

fitchsolutions.com 11
 Exclusively for the use of Nuno Mendes at Fitch Group, Inc.. Downloaded: 08-Dec-2022
Asia Pharmaceuticals & Healthcare Report | Q2 2022

Pricing pressure and preference for domestic firms are intensifying. In December 2021, China’s National Healthcare
Security Administration (NHSA) published the 2021 edition of its annual National Reimbursement Drug List (NRDL), which became
effective January 1 2022. The list saw the addition of 74 new medicines, down from 119 in the December 2020 edition, with an
average discount versus list price of 61.7% (versus 50.6% in 2020). Compared with 2020, multinational drugmakers made up a
smaller proportion of new additions; this continues to be driven by a preference for domestic firms coupled with a tougher
negotiating stance towards multinational drugmakers. For example, China opted to exclude PD-1 and PD-L1 inhibitors
manufactured in developed markets, such as those from Merck & Co - Keytruda (pembrolizumab) - and Bristol-Myers
Squibb - Opdivo (nivolumab). Instead, the NHSA reached deals for locally manufactured alternatives from Junshi Biosciences,
BeiGene and Jiangsu Hengrui.

Reflecting this tough negotiating environment, firms have begun to highlight VBP as an impediment to growth. Q421 marks the first
quarter where we observed numerous examples of firms citing VBP directly as a negative factor in recent performances and, more
importantly, financial guidance for 2022. For example:

• AstraZeneca highlighted decelerating growth in operations in China in Q421 as a result of VBP. The company stated: ‘in China,
total revenue increased by 12.0% (4.0% CER) in the year to USD6.0bn. Pricing pressure associated with NRDL and VBP
programmes led to a decline in growth in the second half of 2021, and in Q4 2021 China's total revenue was 4.0% lower (8.0%
CER) than in Q4 2020.’
• Novo Nordisk highlights VBP with respect to insulin sales as a factor that will impact its 2022 sales growth guidance by 3.0%.
The company stated that ‘intensifying competition within both diabetes care and biopharm, as well as an estimated negative
impact on global sales growth of around 3 percentage points from volume-based procurement of insulin in China, are also
reflected in the guidance.’
• Sanofi, similarly, highlighted a significant impact on its insulins business. According to its Q421 results announcement, the
company negotiated a reimbursement deal that will see sales decline by 30.0% in 2022: ‘Sanofi has participated in the VBP
tender for basal insulin analogues in China in November [2021] and was among the bidding winners in group A, with Lantus
(insulin glargine)/Toujeo (long-acting insulin glargine), and has secured significant volumes of its long-acting insulins at the
hospital level. In 2022, Sanofi expects its glargine sales to decrease by around 30% in China, benefitting from high volumes at
significantly lower prices. Toujeo/Lantus sales were EUR459mn (USD503mn) in China in 2021.’

Products without competition will fare better. We note from company results that the products which appear to be most
impacted by VBP are those for which the patent previously or recently expired, with insulins such as Sanofi’s Lantus as the clearest
examples. Conversely, products without clear competition will fare better; a further seven rare disease medicines were included on
the 2021 list, following the same number in 2020. While these products do not have domestic alternatives and continue to benefit
from an increasing focus on rare diseases in China, we expect more favourable reimbursement outcomes over our forecast period
to 2031.

THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

fitchsolutions.com 12
 Exclusively for the use of Nuno Mendes at Fitch Group, Inc.. Downloaded: 08-Dec-2022
Asia Pharmaceuticals & Healthcare Report | Q2 2022

Asia Pharmaceuticals & Healthcare Round-Up

Key View

• The weak regulatory landscape will continue to hinder revenue-earning opportunities for foreign-based pharmaceutical firms in
the emerging markets of the APAC region.
• Expansion of universal health coverage and an ageing population will continue to stimulate the development of the region's
pharmaceutical market.
• However, issues such as weak medicine pricing policies and low levels of intellectual property protection enforcement will
remain a drag on investment prospects for innovative drugmakers.

Asia-Pacific (APAC)'s USD425.2bn (EUR359.5bn) drug market in 2021 is forecast to expand to USD515.6bn (EUR415.8bn) in 2026,
with a 3.9% compound annual growth rate (CAGR) in dollar terms and 5.3% in euro terms. The USD41.3bn (EUR34.9bn) South Asia
market will be a strong driver of growth (8.5% CAGR through to 2026 in dollar terms and 7.5% in euro terms), followed by the
USD27.7bn (EUR23.4bn) South East Asia market (7.9% CAGR through to 2026 in dollar terms and 6.9% in euro terms). The
USD225.3bn (EUR190.5bn) North East Asia market is also expected to grow steadily (4.1% CAGR through to 2026 in dollar terms
and 3.1% in euro terms).

Pharmaceutical Market Forecast

2017-2031

e/f = estimate/forecast. Source: Fitch Solutions

Developed Asia

In March 2022, we highlighted that multiple major drugmakers are in the process of refocusing their strategies towards innovative
medicines and divesting non-core divisions. We expect to see this trend continue over the long term as demand increases for
innovative treatments for chronic diseases associated with ageing demographics, particularly in developed markets. Divesture of
non-innovative medicine divisions will generate funds to fuel R&D in these areas and will result in a higher number of specialised
pharmaceutical companies.

In March 2022, we highlighted that the number of licensing deals made involving pharmaceutical companies increased over 2020
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

fitchsolutions.com 13
 Exclusively for the use of Nuno Mendes at Fitch Group, Inc.. Downloaded: 08-Dec-2022
Asia Pharmaceuticals & Healthcare Report | Q2 2022

and 2021, as major drugmakers opted for smaller bolt-on deals which offer access to innovative technologies rather than a portfolio
of market-ready products. We expect this trend to continue as licensing deals represent lower risk, require less capital, and are a
simpler way to expand operations into new markets. We expect that smaller companies in developed markets in Asia will
increasingly be involved in such deals.

In February 2022, Daiichi Sankyo reported an increase in revenue of 9.8% y-o-y in local currency terms to JPY281.0bn (USD2.4bn) in
its Q321 financial results, corresponding to months October, November, December 2021. This quarter’s performance was
predominantly driven by sales in the company’s oncology portfolio as well as an increased uptake of established products.

In February 2022, Takeda released financial results for the nine months to December 31 2021 reporting revenue growth of 11.0% y-
o-y to JPY2.7trn (USD23.4bn) in reported terms. This was primarily driven by the sale the of Takeda’s diabetes portfolio in Japan as
well as favourable foreign exchange effects, which more than offset divestiture headwinds. Of this increase, 5.5 percentage points
was due to the sale of a portfolio of non-core diabetes products in Japan to Teijin Pharma Limited for JPY133.0bn (USD1.2bn).

In January 2022, we highlighted that the demographics of cancer are shifting in developing and emerging markets, with changes in
lifestyle and an increasing life expectancy. Due to a number of factors, we expect to see the incidence and mortality of cancer
increasing in developing markets over the coming years, as populations change lifestyle choices, life expectancy increases and
populations grow. Over the 2022-2026 period we expect to see both Sub-Saharan Africa and Middle East and North Africa regions
particularly affected by this trend as the growth of cancer incidence will be most rapid in these regions. Asia and Latin America will
also see a similar trend, but not as pronounced, while Europe and North America will see low growth over the same period.

In January 2022, Biogen announced that it is selling its 50% share of Samsung Bioepis to Samsung Biologics for USD2.3bn.
Samsung will pay Biogen USD1.0bn at deal-closing and USD1.3bn over two years. An additional USD50.0mn payment is
conditioned upon achieving certain commercial milestones. Biogen will retain marketing rights to 25% of profits of marketed drugs
and biosimilars, where Biogen and Samsung Biologics have deals separate to the ownership of Bioepis.

South Asia

In March 2022, the Indian government approved a 10.8% increase in the prices of medicines on the country’s National List of
Essential Medicines. This comes in response to rising costs of active pharmaceutical ingredients from China as supply, logistics and
packaging remain impacted by the Covid-19 pandemic. Local manufacturers that also market pharmaceuticals within the country
are expected to be the main beneficiaries.

In March 2022, VEON-owned Banglalink launched Bangladesh’s first integrated digital health platform, Health Hub, as part of
Banglalink’s MyBL self-care mobile service. The platform will enable all Banglalink customers to gain access to a comprehensive
array of affordable digital health services provided by Health Hub partners, from initial consultations to medicine planning. This is
expected to provide increasing opportunities for private healthcare and telehealth providers, driving long-term growth.

In January 2022, we highlighted that the Drugs Controller General of India granted emergency-use authorisation to several
pharmaceutical companies in India to manufacture and market generic versions of Merck & Co's Covid-19 treatment Lagevrio
(molnupiravir). Local manufacturers will benefit from the voluntary licensing arrangement, including Dr. Reddy’s Laboratories,
Torrent Pharmaceuticals, Cipla, Sun Pharma, Natco Pharma, Viatris, Hetero Drugs and Mankind Pharma. This will make India the
largest global hub for Covid-19 antiviral generic drug productions.

In January 2022, pharmaceutical manufacturers in Pakistan signalled that prices for medicines could rise in response to a general
sales tax on active pharmaceutical ingredients, proposed by the government. Manufacturers note that in some cases where the
prices are fixed by government regulations, the production of medicines may become uneconomical and will therefore halt,
impacting medicines access for patients in the country.

THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

fitchsolutions.com 14
 Exclusively for the use of Nuno Mendes at Fitch Group, Inc.. Downloaded: 08-Dec-2022
Asia Pharmaceuticals & Healthcare Report | Q2 2022

North East Asia

In March 2022, we highlighted that multinational drugmakers continued to cite volume-based procurement (VBP) in China as an
impediment to global revenue growth. The scheme, which requires drugmakers to accept steep discounts to gain reimbursed
status in the substantial Chinese market, will continue to limit profits, particularly for multinational firms. We maintain our view that
expanding access to publicly funded healthcare and improving healthcare quality will maintain China's position as the largest and
most promising emerging pharmaceutical market globally; however, VBP will taper the size of this opportunity.

In February 2022, BeiGene announced Q421 and full year 2021 results. Total revenues were up significantly both for Q421 and full
year 2021, seeing 113.8% and 280.8% y-o-y growth respectively. Impressive increases in product revenues were driven by Brukinsa
(zanubrutinib), and collaboration revenues were boosted by agreements with Amgen, Bristol-Myers Squibb and Novartis.

In February 2022, we highlighted that China and Africa continue to show increased partnership in the healthcare sector. This was
highlighted at the eighth Ministerial Conference of the Forum on China-Africa Cooperation, which was held in Dakar, Senegal at the
end of 2021. At the event, the two parties disclosed an Action Plan for the coming three years (2022-2024) with China continuing to
assist Africa in strengthening its health systems and policies, addressing gaps in health infrastructure and personnel, as well as
building capacity for the production of essential medicines and exploring technology transfer.

From January 2022, the 2021 edition of China’s National Reimbursement Drug List became effective. The newly negotiated list saw
the addition of 74 new medicines, down from 119 in the December 2020 edition, with an average discount versus list price of
61.7% (versus 50.6% in 2020). Compared with 2020, multinational drugmakers made up a smaller proportion of new additions; this
continues to be driven by a preference for domestic firms coupled with a tougher negotiating stance towards multinational
drugmakers.

In January 2022, US-based NeuroSigma and China-based Ignis Therapeutics announced an agreement that will enable Ignis to
develop and market NeuroSigma’s non-drug option for the treatment of attention deficit hyperactivity disorder in China.

South East Asia

In March 2022, Thailand's government signed an agreement with Pfizer to procure 50,000 courses of its Covid-19 antiviral
treatment Paxlovid (ritonavir and nirmatrelvir). The price paid for the courses was not disclosed; however, Thai officials stated that
delivery is expected by mid-April 2022, signalling that the supply tightness observed for Covid-19 vaccines in 2021 is not as severe
for Paxlovid.

In February 2022, Indonesia's Minister of Industry Agus Gumiwang Kartasasmita reiterated that the government seeks to reduce its
imports of medicines by 35% by the end of 2022. The government looks to do this by promoting and growing the local industry.
According to the Indonesian Ministry of Health, there are 241 drug manufacturing businesses, 17 pharmaceutical raw drug
industries, 132 traditional medicine industries, and 18 natural product extract industries in Indonesia as of 2021.

In January 2022, at the World Economic Forum, Indonesian President Joko Widodo announced that Indonesia plans to propose the
creation of a new global health agency. The new agency would establish standard operating procedures for international travel and
health protocols and would also support improved healthcare and medicine access in emerging markets. We note that some of
these areas already fall under the jurisdiction of the WHO.

In January 2022, Vietnam-based drug manufacturer Stellapharm was among 27 generic drug manufacturers to reach an agreement
with Merck & Co and the UN-backed Medicine Patent Pool to produce generic versions of its Covid-19 treatment Lagevrio.
Collectively, the 27 companies will supply 105 markets and will help to reduce the global burden of Covid-19.

THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

fitchsolutions.com 15
 Exclusively for the use of Nuno Mendes at Fitch Group, Inc.. Downloaded: 08-Dec-2022
Asia Pharmaceuticals & Healthcare Report | Q2 2022

PHARMACEUTICAL MARKET FORECAST (ASIA-PACIFIC 2017-2031)

2017 2018 2019 2020 2021e 2022f 2023f 2024f 2025f 2026f 2027f 2028f 2029f 2030f 2031f

North
199.7 204.1 191.5 195.6 225.3 228.8 239.1 250.4 262.2 275.0 289.8 306.1 311.9 318.7 325.6
East Asia

South
21.4 22.4 21.9 22.7 27.7 28.5 31.2 34.2 37.1 40.6 43.7 47.7 51.6 55.9 60.2
East Asia

South
29.1 31.3 33.3 35.9 41.3 44.5 48.5 52.6 56.2 62.1 68.5 74.5 81.0 88.6 96.2
Asia

Australia 12.3 12.0 11.5 11.9 14.6 13.8 14.2 16.8 17.2 18.0 18.6 19.3 20.1 20.9 21.7

Japan 95.7 99.7 103.9 108.5 115.3 107.2 108.8 110.8 115.8 118.3 120.9 123.4 125.8 128.2 130.5

New
0.8 0.8 0.9 0.9 1.3 1.3 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 2.1
Zealand

e/f = estimate/forecast. Source: Fitch Solutions

THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

fitchsolutions.com 16
 Exclusively for the use of Nuno Mendes at Fitch Group, Inc.. Downloaded: 08-Dec-2022
Asia Pharmaceuticals & Healthcare Report | Q2 2022

Pharmaceuticals & Healthcare Glossary

Terms Used In Datasets, Daily Analysis And Reports

Pharmaceuticals, medicines, drugs: synonym terms used interchangeably.

Pharmaceutical market/sales: the sum of revenues generated by generic, patented and over-the-counter (OTC) drugs through
hospitals, retail pharmacies and other channels. Unless otherwise stated, market value is reported at final consumer price including
mark-ups, taxes, etc.

Prescription drugs: patented and generic medicines regulated by legislation that requires a physician's prescription before they
can be sold to a patient.

Patented drug: an innovative medicine granted intellectual property protection by a patent office. The patent may encompass a
wide range of claims, such as active ingredient, formulation, mode of action, etc, giving the patent holder the sole right to sell the
drug while the patent is in effect.

Generic drug: a bioequivalent medicine that contains the same active ingredient as an originator drug. The originator drug is an
innovative medicine that no longer has intellectual property protection due to patent expiry. The definition for generic drugs
includes off-patent originator medicines.

Over-the-counter (OTC) drug: a medicine that does not require a prescription to be sold to patients. Also known as non-
prescription medicines.

Biosmilar: a drug that is similar to a biological reference product, and which is manufactured by a company other than the
originator. Regulatory approval of biosimilars is technically possible following patent expiry of the reference product. There are
several terms used to describe these drugs in various markets, including 'similar biologics' (India), 'similar biological products'
(Singapore) and 'subsequent entry biologics' (Canada). However, biosimilars is the official name given in the EU pharmaceutical
directives, and that was adopted in the 2010 US legislation.

Healthcare expenditure: government and private spending on medical products and services. This includes the purchase of
healthcare services and goods by public entities such as ministries and social security institutions; government purchase of new
assets including investments into buildings, machinery (capital expenditure); or by private entities such as non-profit institutions and
households. The inclusion of this factor in our forecasts necessitates taking into account the essential attributes of country-specific
healthcare sector characteristics such as comprehensiveness, consistency, standardisation and timeliness. The inclusion of this
factor in our forecasts necessitates taking into account the essential attributes of country-specific healthcare sector characteristics
such as comprehensiveness, consistency, standardisation and timeliness.

Government healthcare expenditure: (includes capital healthcare expenditure): refers to current healthcare expenditure which
includes healthcare goods and services used or consumed during the year, capital expenditure on assets, restoration or
enhancement paid by government entities such as a ministry of health, other ministries, parastatal organisations and social security
agencies, including transfer payments to households to offset medical care costs and extra-budgetary funds to finance healthcare
provision.

Private healthcare expenditure: spending on health by private entities such as commercial or mutual health insurance
providers, households, non-profit institutions serving households, resident corporations and quasi-corporations not controlled by
governments.

THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

fitchsolutions.com 17
 Exclusively for the use of Nuno Mendes at Fitch Group, Inc.. Downloaded: 08-Dec-2022
Asia Pharmaceuticals & Healthcare Report | Q2 2022

Medical devices: equipment and products used for diagnosis or therapy in patients. Whereas pharmaceuticals achieve their
principal action by pharmacological, metabolic or immunological means, medical devices act by physical or mechanical means.
Medical devices include a wide range of products, including syringes, thermometers, blood glucose tests, prosthetic limbs,
ultrasound scans and X-ray machines.

Clinical trials: for the purposes of registration, a clinical trial is any research study that prospectively assigns human participants or
groups of humans to one or more health-related interventions to evaluate the effects on health outcomes. Clinical trials may also be
referred to as interventional trials. Interventions include, drugs, cells and other biological products, surgical procedures, radiologic
procedures, devices, behavioural treatments, process-of-care changes and preventive care. This definition includes Early Phase I to
Phase IV trials.

Hospitals: health facilities larger than clinics, including general hospitals, specialised hospitals, public hospitals and private hospitals.

Hospital beds: a piece of furniture for recovery from illness, available at all facilities classified as hospitals by the relevant national
statistical office.

Public inpatient admission: a person receiving medical treatment overnight in a hospital as defined by the relevant national
statistical organisation. Excludes outpatient (non-overnight) visits. Units: thousands of visits.

Outpatient visit: a person who is not hospitalised overnight but who visits a hospital, clinic or associated facility for diagnosis or
treatment.

Physician: a skilled healthcare professional trained and licensed to practice medicine.

Proprietary Tool Terminology

Disease Database: a fully country-comparative interactive tool that provides dynamic forecasts of the burden and number of
deaths of 268 diseases and injuries in 178 countries, from 1990 to 2030. Fitch Solutions’ disease database incorporates WHO, World
Bank, IMF and Fitch Solutions data to create a proprietary dataset. The data is quantified as the sum of disability-adjusted life years
lost to a disease in a particular country.

Disability-adjusted life years (DALYs): the sum of the years of life lost (YLL) due to premature mortality in a population and the
years lost due to disability (YLD) for incident cases of the health condition. The DALY is a health gap measure that extends the
concept of potential years of life lost due to premature death (PYLL) to include equivalent years of 'healthy' life lost in states of less
than full health (broadly termed 'disability'). One DALY represents the loss of one year of equivalent full health.

Communicable disease: an infectious disease transmissible (as from person to person) by direct contact with an affected
individual or the individual's discharges or by indirect means (as by a vector).

Non-communicable disease: also known as chronic diseases, non-communicable diseases are not passed from person to
person. They are of long duration and generally of slow progression.

Innovative Pharmaceuticals Risk/Reward Index (RRI): quantifies and ranks a country's attractiveness in terms of its
pharmaceuticals industry; it balances the Risks and Rewards of launching innovative medicines in different countries. It should be
emphasised that the RRI broadly assess the rewards and the risks that a company will face when looking to launch an innovative
drug in a market. For example, we do not differentiate between drugs that are part of different therapeutic groups or whether the
drug being launched is the first to be launched in the market or will be one of the many different drugs of the same therapeutic
class that has been launched in the market.

Rewards: this component of the RRI is composed of an evaluation of an industry's size and growth potential (Industry Rewards),
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

fitchsolutions.com 18
 Exclusively for the use of Nuno Mendes at Fitch Group, Inc.. Downloaded: 08-Dec-2022
Asia Pharmaceuticals & Healthcare Report | Q2 2022

and also macro industry and/or country characteristics that directly impact the size of business opportunities in a specific sector
(Country Rewards).

Risks: this component of the RRI is composed of an evaluation of micro, industry-specific characteristics, crucial for an industry to
develop to its potential (Industry Risks) and a quantifiable assessment of the country's political, economic and operational profile
(Country Risks).

Acronyms

CAGR: compound annual growth rate

WHO: World Health Organization

LHS: left-hand side

RHS: right-hand side

EUR: euro

USD: US dollar

Pharmaceuticals & Healthcare Methodology

Connected Thinking

We use a simple and transparent forecasting model as a base for our industry forecasts, but rely heavily on our analysts' expert
judgement to ensure our forecasts capture all of the insights we derive using our unique Connected Thinking approach. We believe
analyst expertise and judgement are the best ways to provide the most accurate, up-to-date and comprehensive insight to our
customers.

Our Connected Thinking approach to forecasting and analysis integrates macroeconomic variables from Fitch Solutions Country
Risk to provide our customers with unique and valuable insight on all relevant macroeconomic, political and industry risk factors
that will impact their operations and revenue-generating potential in the industry/industries they operate in.

Pharmaceuticals & Healthcare Methodology

For the Pharmaceuticals & Healthcare sector, we have historical data and 10-year forecasts for 10 pharmaceutical market-level, core
industry variables, and six for healthcare. Healthcare indicators include private and public healthcare spending. Pharmaceutical sales
are broken down into over-the-counter (OTC) and prescription (generic and patented) drugs. We also have historical data and five-
year forecasts for pharmaceutical trade balance for each market covered.

Our forecasts are a combination of regression modelling and analyst expert judgement. Our Pharmaceuticals & Healthcare analysts
interact with other analytical teams in Fitch Solutions, primarily the Country Risk team, to ensure they have a comprehensive
understanding of external factors that may impact the Pharmaceuticals & Healthcare industry outlook either on a market, regional
or global level.

In addition, our Pharmaceuticals & Healthcare forecasts draw on considerations of burden of disease levels, healthcare access,
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

fitchsolutions.com 19
 Exclusively for the use of Nuno Mendes at Fitch Group, Inc.. Downloaded: 08-Dec-2022
Asia Pharmaceuticals & Healthcare Report | Q2 2022

spending power, market and regulatory regime characteristics (pricing, approvals and intellectual property) and company activity.

There is a rolling cycle of data monitoring, with databases being updated on a quarterly basis. Analysts will intervene outside of
these cycles to implement forecasts changes when necessary.

Pharmaceuticals & Healthcare Methodology

* Historical data only. ** Five-year forecasts.

Pharmaceutical Sales Forecast Model

Historic pharmaceutical sales data is collected from a range of sources, including:

• national statistics offices

• regulatory agencies
• pharmaceutical trade associations
• company press releases and annual reports
• local news sources

Our pharmaceutical sales forecasts are based on a regression model, using a market's historical time series and key
macroeconomic explanatory variables, primarily total final consumption, from Fitch Solutions Country Risk.

To remove the effect of inflation, real pharmaceutical sales figures are calculated by removing the annual average consumer price
index (CPI).

In addition, we also apply analyst expert judgement to refine and finalise the pharmaceuticals sales forecast based on exogenous
and endogenous variables or events that are not captured by our regression model.

Pharmaceutical sales are expressed in local currency, US dollars and euros.

THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

fitchsolutions.com 20
 Exclusively for the use of Nuno Mendes at Fitch Group, Inc.. Downloaded: 08-Dec-2022
Asia Pharmaceuticals & Healthcare Report | Q2 2022

Healthcare Expenditure Forecast Model

Historic healthcare expenditure data comes from the World Health Organization (WHO).

Healthcare is defined by the WHO as the sum of the funds mobilised by government and private systems for the operation of a
healthcare system. It includes the purchase of healthcare services and goods by public entities such as ministries and social security
institutions; or private entities such as non-profit institutions, commercial insurances and households acting as complementary
funders to the previously cited institutions or unilaterally disbursing health commodities.

Our public and private healthcare expenditure forecasts are based on a regression model, using a market's historical time series and
key macroeconomic explanatory variables, primarily Government and Private Final Consumption, from Fitch Solutions Country Risk.

To remove the effect of inflation, real healthcare expenditure figures are calculated by removing the annual average CPI. The overall
healthcare expenditure forecast is then calculated by combining government and private healthcare expenditure.

In addition, we also apply analyst expert judgement to refine and finalise the healthcare data and forecast based on exogenous and
endogenous variables or events that are not captured by our regression model.

Healthcare expenditure is expressed in local currency, US dollars and euros.

Pharmaceuticals Trade – Exports/Imports Forecast Model

Historic pharmaceutical trade data is collected from UN COMTRADE and the ITC Trade Map.

Our trade balance is calculated as exports minus imports to determine if a market is a net exporter or importer of pharmaceuticals.
Pharmaceuticals trade data is broken down into blood, vaccines and cultures; pharmaceuticals in bulk form; and pharmaceuticals in
finished dose form.

Our five-year forecasts are based on a regression model, using a market's historical time series. In addition, we also apply analyst
expert judgement to refine and finalise the pharmaceuticals sales forecast based on exogenous and endogenous variables or
events that not captured by our regression model.

Pharmaceutical trade is expressed in local currency, US dollars and euros.

Notes On Methodology

Note 1: National Health Accounts methodology. The global health expenditure database that WHO has maintained for the past 10
years, provides internationally comparable numbers on national health expenditures. WHO updates the data annually, taking,
adjusting and estimating the numbers based on publicly available reports (national health account reports, reports from the Ministry
of Finance, Central Bank, National Statistics Offices, public expenditure information and reports from the World Bank, the
International Monetary Fund, etc). The estimates are sent out to the Ministries of Health for validation prior to publication but users
are advised that data may still differ in terms of definitions, data collection methods, population coverage and estimation methods
used. This database is the source for the health expenditure tables in the World Health Statistics Report and the WHO Global Health
Observatory.

THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

fitchsolutions.com 21
 Exclusively for the use of Nuno Mendes at Fitch Group, Inc.. Downloaded: 08-Dec-2022
Asia Pharmaceuticals & Healthcare Report | Q2 2022

Note 2: System of Health Account 2011

In response to the pressing need for reliable and comparable statistics on health expenditure and financing, the OECD, in co-
operation with experts from OECD members, developed the manual, A System of Health Accounts (SHA), releasing the initial 1.0
version in 2000. Building on SHA 2000, the OECD worked with the World Health Organization (WHO) and Eurostat to publish A
system of health accounts 2011 edition (SHA 2011). The formal process of producing SHA 2011 started in 2007 as a co-operative
activity of health accounts experts from the OECD, WHO and Eurostat, known collectively as the International Health Accounts Team
(IHAT). The resulting manual has been the subject of an extensive and wide-reaching consultation process aimed at gathering
inputs from national experts and other international organisations around the world.

This year, the WHO reported healthcare expenditure data using the framework of System of Health Accounts 2011 (SHA 2011). The
macroeconomic variables were also updated to calculate some indicators. At present, National Health Accounts (previously used
methodology) are at different stages of development in various markets and may not only differ in the boundaries drawn between
health and other social and economic activities but also in the classifications used, the level of detail provided and in the accounting
rules.

The SHA 2011 framework makes health accounts more adaptable to rapidly evolving health financing systems, further enhances
comparability of health expenditures and financing data, and ultimately improves the information base for the analytical use of
national health accounts (NHAs). SHA 2011 reinforces the tri-axial relationship and the description of healthcare and long-term care
expenditure – that is, what is consumed has been provided and financed. The framework provides an approach that better reflects
the complex and changing systems of healthcare financing, eliminates ambiguities regarding some of the financing categories,
provides new approaches for market-specific analysis and is sufficiently flexible to accommodate future changes. The framework
also allows middle and low-income markets to provide a more transparent picture regarding foreign assistance.

In summary, the SHA 2011 financing framework increases the transparency of health financing systems, creating the possibility to
monitor changes, compare health expenditures across markets and over time, as well as providing better information for analysis of
the performance of healthcare financing systems. This is due to the clear distinction between the following four elements: financing
schemes, financing agents managing the schemes; revenues of each scheme and the institutional units providing those revenues.

Note 3: Linear regression equation.

y = mx + b

Where y = unknown variable, m = slope of gradient, x = known variable, and b = where the line crosses the y-axis.

Note 4: Final consumption is the sum of government final consumption expenditure and private final consumption expenditure.
Government final consumption expenditure is the sum of expenditure on final goods and services made by the government.
Included in this are investments into healthcare infrastructure, buildings, machinery, public sector salaries, but it does not include
transfer payments such as unemployment benefits or pensions. Private final consumption expenditure is the sum of all private
consumption of goods and services within the economy, including both durable and non-durable goods. Housing purchases,
however, are excluded. Government final consumption expenditure and private final consumption expenditure are the 'G' and 'C' in
this equation:

GDP = C + I + G + (X - M)

Where GDP = gross domestic product, C = private final consumption expenditure, I = gross investment, G = government final
consumption, X = exports, and M = imports.

THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

fitchsolutions.com 22
 Exclusively for the use of Nuno Mendes at Fitch Group, Inc.. Downloaded: 08-Dec-2022
Asia Pharmaceuticals & Healthcare Report | Q2 2022

Innovative Pharmaceuticals Risk/Reward Index Methodology

Our Innovative Pharmaceuticals Risk/Reward Index (RRI) quantifies and ranks a market's attractiveness in terms of its
pharmaceuticals industry; it balances the Risks and Rewards of launching innovative medicines in different markets. It should be
emphasised that the RRI broadly assesses the rewards and the risks that a company will face when looking to launch an innovative
drug in a market. For example, we do not differentiate between drugs that are a part of different therapeutic groups or whether the
drug being launched is the first to be launched in the market or will be one of the many different drugs of the same therapeutic
class that has been launched in the market.

To form an RRI score, we combine industry-specific characteristics with broader economic, political and operational market
characteristics. We weigh these inputs in terms of their importance to investor decision-making in a given industry - in this case, that
of innovative pharmaceuticals. The result is a nuanced and accurate reflection of the realities facing investors in terms of the
balance between 1) opportunities and risk; and 2) sector-specific and broader market traits. This enables users of our RRI to assess a
market's attractiveness in both a regional and global context.

The RRI also encompasses a combination of our proprietary forecasts and analyst assessment of the regulatory climate, as well as
globally acceptable benchmark indicators (eg, Transparency International's Corruption Perceptions Index). As regulations evolve and
forecasts change, so does the RRI score, providing a highly dynamic and forward-looking result.

The Innovative Pharmaceuticals RRI universe comprises 109 markets.

Benefits Of Using Fitch Solutions’ Innovative Pharmaceuticals RRI

• Global Rankings: One global table, ranking 109 markets for the launch of innovative pharmaceuticals from least (closest to zero)
to most attractive (closest to 100).
• Accessibility: Easily accessible, top-down view of global, regional or sub-regional Risk/Reward profiles.
• Comparability: Identical methodology across 109 markets allows users to build lists of markets they wish to compare, beyond the
confines of a global or regional grouping.
• Scoring: Scores out of 100 with a wide distribution, provide nuanced investment comparisons. The higher the score, the more
favourable the market profile.
• Quantifiable: Quantifies the Risks and Rewards of doing business in the innovative pharmaceuticals sector in different markets
around the world and helps identify specific flashpoints in the overall business environment.
• Comprehensive: Comprehensive set of indicators, assessing industry-specific risks and rewards alongside political, economic and
operational risks.
• Entry Point: A starting point to assess the outlook for the innovative pharmaceuticals sector, from which users can dive into more
granular forecasts and analysis to gain a deeper understanding of the market.
• Balanced: Multi-indicator structure prevents outliers and extremes from distorting final scores and rankings.

THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

fitchsolutions.com 23
 Exclusively for the use of Nuno Mendes at Fitch Group, Inc.. Downloaded: 08-Dec-2022
Asia Pharmaceuticals & Healthcare Report | Q2 2022

Weightings Of Categories And Indicators

Source: Fitch Solutions

The RRI matrix can be split into two distinct components:

Rewards: This component of the RRI is composed of an evaluation of an industry's size and growth potential (Industry Rewards),
and also macro industry and/or market characteristics that directly impact the size of business opportunities in a specific sector
(Country Rewards).

Risks: This component of the RRI is composed of an evaluation of micro, industry-specific characteristics, crucial for an industry to
develop to its potential (Industry Risks) and a quantifiable assessment of the political, economic and operational profile (Country
Risks).

THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

fitchsolutions.com 24
 Exclusively for the use of Nuno Mendes at Fitch Group, Inc.. Downloaded: 08-Dec-2022
Asia Pharmaceuticals & Healthcare Report | Q2 2022

Assessing Our Weightings

We deliberately afford Rewards a greater weighting (65% of a market's final RRI score) and within this, the Industry Rewards pillar
accounts for a majority 75%. This is to reflect the fact that when it comes to long-term investment potential, industry size and
growth potential carry the most weight in indicating opportunities, with other structural factors weighing in but to a slightly lesser
extent. In addition, our focus and expertise in emerging and frontier markets has dictated this bias towards industry size and growth
to ensure we are able to identify opportunities in markets where regulatory frameworks are not as developed and industry size is
not as big (in USD terms) as in developed markets, but where we know there is a strong desire to invest.

INDICATORS - RATIONALE AND SOURCES

Source Rationale

Rewards

Industry Rewards

Denotes breadth of pharmaceutical market. Large markets score higher than

Market Expenditure, USDbn Fitch Solutions Forecast smaller ones. Scores are based on annual average expenditure over a five-
year forecast period.

Denotes depth of pharmaceutical market. High-value markets score better

Spending Per Capita, USD Fitch Solutions Forecast than low-value ones. Scores are based on annual average expenditure over a
five-year forecast period.

Denotes sector dynamism. Scores are based on annual average growth over
Sector Value Growth, % Fitch Solutions Forecast
a five-year forecast period.

Country Rewards

Urbanisation is used as a proxy for the development of medical facilities.

Urban/Rural Split Fitch Solutions Forecast
Predominantly, rural markets score lower.

Shows the proportion of the population over 65. Markets with ageing
Pensionable Population, % Fitch Solutions Forecast
populations tend to have higher per capita expenditure.

Fast-growing markets suggest better long-term demand and thus growth for
Population Growth, % Fitch Solutions Forecast all industries. Scores are based on annual average growth over a five-year
forecast period.

Risks

Industry Risks

Fitch Solutions Markets with fair and enforced intellectual property regulations score higher
Patent Respect
Subjective Indicator than those with endemic counterfeiting.

Markets with a free pricing environment score higher than markets where
Fitch Solutions
Pricing Regime governments and private sector payers put downward pressure on
Subjective Indicator
pharmaceutical prices as a mechanism to control expenditure.

High scores are awarded to markets which have realised the economic and
Fitch Solutions social benefit of pharmaceuticals, in turn modernising the provision of
Protectionism
Subjective Indicator healthcare through reforms and essential drug lists and encouraging local
manufacturing and research and development by foreign firms.

Source: Fitch Solutions

THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data included in the report are solely
derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

fitchsolutions.com 25
 Exclusively for the use of Nuno Mendes at Fitch Group, Inc.. Downloaded: 08-Dec-2022

Fit
Fitch
ch Solutions, 30 North C
Colonnade
olonnade,, Canary W
Wharf
harf,, L
London.
ondon. E14 5GN, UK
Tel: +44 (0)20 7248 0468
Fax: +44 (0)20 7248 0467
Web: www.fitchsolutions.com

IS SN: 2398-1016
ISSN:

Copy Deadline: March 2022

opy

© 20
2022
22 Fit
Fitch
ch Solutions Gr
Group
oup Limit
Limited.
ed. All rights rreserv
eserved.
ed.

All information, analysis, forecasts and data provided by Fitch Solutions Group Limited is for the exclusive use of subscribing persons or organisations (including those
using the service on a trial basis). All such content is copyrighted in the name of Fitch Solutions Group Limited and as such no part of this content may be reproduced,
repackaged, copied or redistributed without the express consent of Fitch Solutions Group Limited.

All content, including forecasts, analysis and opinion, has been based on information and sources believed to be accurate and reliable at the time of publishing. Fitch
Solutions Group Limited makes no representation of warranty of any kind as to the accuracy or completeness of any information provided, and accepts no liability
whatsoever for any loss or damage resulting from opinion, errors, inaccuracies or omissions affecting any part of the content.

This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 (‘FSG’). FSG is an
affiliate of Fitch Ratings Inc. (‘Fitch Ratings’). FSG is solely responsible for the content of this report, without any input from Fitch Ratings. Copyright © 2022 Fitch
Solutions Group Limited.