Big Pharma Talks Emerging Markets Strategy
Last year’s JP Morgan Healthcare conference brought a flood of proclamations and projections about growth in emerging markets. Although the topic is now more of a given rather than a new arm of drug companies’ strategies, it seemed worth compiling some of the comments on emerging markets made at this year’s event. Of note? With many of the best assets in developing countries already snatched up and so much attention on what remains, prices are rising. Several big pharma CEOs underscored the need to grow at a profit, instead of just for the sake of growing. Time will tell if companies can heed their own advice.
GlaxoSmithKline is very deliberately shifting resources away from the U.S. and into emerging markets. In just a few years, the number of sales reps in the U.S. is down to 5,000 from 9,000, while the number of reps in emerging markets has grown from about 8,500 to 13,000, said GSK’s chief strategy officer David Redfern.
Of the 17 significant M&A deals undertaken by GSK since mid-2008, nine were in emerging markets. When asked whether that pace would continue, Redfern said the company no longer needed acquisitions to gain entry into those markets. And while bolt-on deals are still possible, he notes that
“There’s no doubt prices are going up in emerging markets and we’ll maintain our discipline,” Redfern said. “In 2008 we did quite a few deals. We’ve walked away from a lot more deals last year.”
Sanofi-Aventis is also bolstering its sales force in emerging markets at the expense of jobs in the U.S. and Europe. Chris Viehbacher said there has been a 40% reduction in pharmaceutical operations between 2009 and 2011, and a significant overhaul of its European operations is underway. Meanwhile, headcount in emerging markets is expected to increase by 40% in that same timeframe. As a result, “in 2011, we expect to sell more in emerging markets than we do in Europe or the U.S.”
Merck said it had also “significantly reduced” the number of sales reps in developed markets. The company’s goal is to grow sales in emerging markets from 18% to 25% by 2013.
“We’ve been frank to say that companies are ahead of us,” Merck’s CEO Ken Frazier said. However, he pointed out that it’s still an open field: the leading player in China only has about 3% of the market share.
Frazier also stressed the importance of achieving profitable growth in those regions, a nod to the rising prices for assets. “We think value-creating partnerships are the right way to go, because that way our partners have a strong stake in the growth and success of our business,” he added.
Eli Lilly & Co. is avoiding pure generics, and instead is trying to expand its presence in emerging markets by increasing sales of its existing product portfolio in six key markets--China, Russia, Brazil, Mexico, Turkey, and Korea. After doubling its sales force in China, among other efforts, the company has doubled sales in emerging markets in the past five years. Sales in emerging markets, now over 10% of total Lilly revenues, are expected to double again in coming years, said Lilly CEO John Lechleiter.
“We will add nominally medicines to our offerings, primarily in our core therapeutic areas, through product acquisitions, licensing deals, or co-marketing arrangements,” Lechleiter said. “We will pursue alliances, possibly including company acquisitions, to bolster our ability to capture growth in areas where our infrastructure is not fully developed.”
Lastly, big biotech is starting to at least think about, if not fully outline its strategy to expand globally. In a passing comment during his presentation, Amgen CEO Kevin Sharer said emerging markets will be an important part of the company’s future, but “not the future tomorrow morning, but the strategic future.”