Big Pharma Talks Emerging Markets Strategy
Jan14

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...

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Abbott Snags Top Spot in India With Piramal
May21

Abbott Snags Top Spot in India With Piramal

After much speculation about suitors ranging from Pfizer, GlaxoSmithKline, and Sanofi-Aventis, Abbott is coughing up $3.3 billion--$2.12 billion in cash up front and $400 million annually over the next four years--for the formulations business of Piramal Healthcare of India. The move makes Abbott top dog in the Indian pharmaceutical market, with a market share of roughly 7%. It’s a coveted position in an environment where the majority of drug industry growth is expected to come from emerging markets. Abbott has been ramping up its established products business since creating the separate division in 2007. Last fall, the company bought Solvay’s pharmaceuticals business for $7.6 billion, which brought a portfolio of branded generics and a presence in emerging markets. The Piramal deal comes on the heels of a smaller pact with Ahmedabad, India-based Zydus Cadila, which included 24 products sold in 15 emerging markets with the option to add 40 more products. Abbott says emerging markets already represents over 20% of its total business. The companies say the Indian pharma market is expected by 2015 to more than double from the roughly $8 billion in sales this year. With the addition of Piramal, which will have branded generics sales of about $500 million in 2011, Abbott’s Indian business is expected to grow nearly 20% per year, reaching annual sales of over $2.5 billion by 2020. “Emerging markets” have become the buzz words du jour at big pharma, as improving economies mean more people can afford medicines in countries like China, India, Brazil, and Russia. According to Burrill & Co, just 13% of the pharma world was in emerging markets in 2011, whereas forecasts suggest 50% of business will be in those markets by 2020. At the JPMorgan Healthcare conference this fall, most of the big players devoted a healthy portion of their face time with investors to discussing their strategy in those areas. As Sanofi-Aventis CEO Christopher Viehbacher noted at the time, more than 50% of growth in the drug industry will come from those regions. As a result, big pharma firms have been scrambling to establish partnerships that can swiftly get them on the ground in those countries. GSK has a broad deal with South Africa’s Aspen Pharmacare and a pact with India’s Dr. Reddy’s Laboratories. Pfizer has established pacts with several Indian firms, including Strides Arcolab, Aurobindo, and Claris Life Sciences. Sanofi-Aventis has bought Indian vaccines maker Shantha Biotechnics, and the Czech generics firm Zentiva. Even biotechs are starting to get into the game: earlier this year, Cephalon bought Swiss generics firm Mepha. For Piramal, the sale of the formulations business to Abbott appears to be part of...

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Burrill & The State of the Biotech Union
May04

Burrill & The State of the Biotech Union

In what has become the biotech equivalent of the “State of the Union” address, G. Steven Burrill, CEO of Burrill & Co., gave his annual status report on the biotech industry at BIO’s annual meeting in Chicago. While it featured the usual facts and figures (no worries, we’ll get to the highlights), Burrill’s comments on the growing importance of emerging markets stood out. As he told the audience, pharmaceutical sales growth is no longer coming from the usual suspects--U.S., Europe, or Japan. Rather, growth will be driven by India, China, Brazil, Eastern Europe, and other countries where improving economies are enabling more spending on healthcare. Burrill pointed out that in 2001, just 13% of the “pharma world” was in emerging markets, whereas forecasts suggest 50% of business will be in those markets by 2020. And though drug companies are increasingly turning their focus to emerging markets—every big pharma has ambitious growth forecasts in those regions--there is still a long way to go for the industry to truly adapt to the different needs of the developing world. “All of us in this industry are thinking in a U.S.-centric way, and in a 2010, even 2005 way,” Burrill said. “We need to spend time thinking about the subtypes of diseases and markets that are going to be big in a few years.” Industry must consider where the need is as well as consider the cultural context to filling that need. Food for thought. Meanwhile, here are some of those facts and figures Burrill likes to flash up on the screen: --Last year, U.S. biotechs raised $48 billion between capital and partnering activity, the largest sum  in the history of the industry. --Since last year, there have been 10 biotech IPOs and market cap for the industry grew by roughly a third, which Burrill said signaled a return to confidence in biotech. --Sales for the biotech industry were down 8% to $91.5 billion in 2009. Burrill called it “not an important measure,” of the health of the industry. However, R&D spending slowed by 19% to $19.3 billion as companies hunkered down in tougher economic times. --Of the roughly 100 firms that went public between 2003 and 2009, nearly half are still under water. As Burrill noted, that’s an unpleasant figure to cite when approaching Wall Street with a hot new deal. --76% of the prescriptions written in the U.S. today are for generic drugs. “Not a bad business,” Burrill adds. --The year of the patent cliff is nigh. Projected sales losses due to patent expiries is $12.3 billion this year, $32 billion in 2011, and $24 billion in...

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