Pharma in Indonesia: competing for higher margins

2 November 2016

Members of the International Pharmaceutical Manufacturers Group (IPMG) in Indonesia - including Novartis, Merck, Bayer, Boehringer Ingelheim, and Pfizer - have invested more than $1 billion in Indonesia's pharmaceutical industry over the past few years, particularity for the construction of factories and clinical research.

An example is German pharma major Bayer (BAYN: DE), which recently invested 8.1 million euros ($8.9 million) in the expansion of its factory in Cimanggis (West Java). This factory produces multivitamins and medicines, about 75% of which is exported to 26 countries.

Concurrently, Indonesia's largest pharmaceutical company, Kalbe Farma (IDX: KLBF), is shifting from being a maker of generic drugs to a high-tech pharma developer. Besides producing cancer drugs, Kalbe has been investing in R&D on stem cell therapies. Significantly, a lack of generic substitutes in these fields in Indonesia implies no government-set price ceilings, and therefore these products offer higher margins.

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