AstraZeneca shrugs off pharma's emerging markets slowdown, but Lilly's suffering

Bernstein's Tim Anderson

After Q2's glacial emerging markets growth, industry watchers wondered just how slow pharma could go in developing countries. As it turns out, they found a way to decelerate in Q3.

According to Bernstein analyst Tim Anderson, emerging markets growth in the third quarter sank to 5.2% across some of Big Pharma's biggest. That mark shunts aside the second quarter's 5.5% figure, taking the crown for the slowest rate in two years, he wrote in a Thursday note to clients.

What's going on? A few things, he notes. For one, certain emerging markets--such as Brazil and Mexico--have seen generics erode market share for branded meds similarly to the way they do in the U.S. Meanwhile, China and other countries have forced price cuts, reflecting "the risk of having central governments become larger payers." And a general economic slow-down has hurt demand.

All of those factors and more have helped put the brakes on emerging markets growth--so much so, in fact, that U.S. growth outpaced it in the quarter "for the first time in a long time," Anderson points out.

But while 5.2% may have been the average, that doesn't mean all drugmakers are sharing the pain equally. AstraZeneca ($AZN), for one, has posted a 13% average growth rate over the last four quarters. Eli Lilly ($LLY) has struggled over that timeframe, putting up a mark of 0.5%.

The good news for emerging markets-focused drugmakers is that China rebounded last quarter, with growth there increasing from 4.6% in Q2 to 11.5% in Q3. Sanofi ($SNY) benefitted the most in that market, with its China sales expanding by 33%. On the flip side, GlaxoSmithKline ($GSK), which posted a 27% decline, has remained a bottom-feeder in the country since 2013's $489 million bribery scandal--and some say its marketing reforms, meant to root out corruption, may actually be hurting China sales further.

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