Portugal: Riding the Wave of Economic Reform - Pharmaceutical Executive


Portugal: Riding the Wave of Economic Reform

Pharmaceutical Executive

Laboratorio J. Neves is very attuned to the market changes. The company's acquisition by the Soquifa Medicamentos group nine years ago transformed a family company with little investment behind it into a very successful player. The efforts to rebuild the company's image, rearrange its workforce and introduce new products to the market have certainly paid off. "As a result, from 1 million (US$1.3 million) in turnover in 1997, J. Neves achieved 18 million US$23.6 million in 2006, and the objectives for 2007 are very ambitious: to reach 25 million (US$33 million)," says J.Neves' general manager, Rui Ribas. The company's strategy of consolidating its position in markets bigger than US$13 million annually has guaranteed a performance increase of 25% to 30% every year. In addition to that, J. Neves recently announced the acquisition of a new production unit, which, according to its director, aims more to increase the company's production independence than enhance its turnover.

"J. Neves has its production line distributed in 13 different countries, and the company's volumes are usually low considering its supplier capacities," explains Ribas. "Portugal is a very small country; sometimes the company needs 1,000 boxes, but we have to produce 200,000, an amount for three or four years, which is obviously a big investment added by the warehousing costs. Therefore, in terms of logistics, it is very different to manage a company in such a situation," he concludes. This is a common problem for local companies, but at the end of the day it could be twisted into a competitive advantage. Small markets and volumes demand flexibility, and flexibility is currently Portugal's trademark when it comes to pharmaceutical production.

Still an Attractive Destination for FDI

Although Portugal has been increasingly overshadowed by lower-cost producers in Central Europe and Asia as a target for foreign direct investment FDI, Pierre Fabre, a French company that has been in the country since 1985, mostly in the areas of ambulatory care and oncology, is a clear example of how Portugal can succeed as a destination for pharmaceutical industry investment. Following its strategy of seeking out opportunities in emerging pharmaceutical markets (such as Morocco, Poland, Turkey, Tunisia and Mexico), as opposed to the traditional European countries (such as the United Kingdom or Germany), the company recently announced that it would be targeting Portugal for new investment. "Portugal, competing with other countries such as Germany, Poland and Italy, was able to take the European production of a respiratory products line, which will be done by a third party in the country. The choice of Portugal has shown the commitment and efforts of the Portuguese operations to create and add value to the country's industry," says Gilda Parreira, general director of Pierre Fabre Medicament Portugal.

Despite its success in attracting new production to Portugal, Parreira points out, "the pharmaceutical sector is the easiest target to counter-balance the budget deficit, and this is no different in other European countries. There are bigger and more attractive markets than Portugal, and the Portuguese government has to understand the impact of these measures on the country's ability to attract investors." Noting Pierre Fabre Medicament's ability to foster international partnerships and share development costs, Parreira seems to be very optimistic about the company's prospects in Portugal: "The company will have two very important launches in 2008 driven by the urology market, and in 2010 a very innovative project involving fibromyalgia."


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