emerging markets

Bayer eyes 20% annual growth in China

Tracy Staton — Tue, 08 Jul 2008 10:09:10 -0400

Like its Big Pharma brethren, Bayer is casting a gimlet eye on the drug market in China. The company says it's aiming for 20 percent-plus annual growth in China for each of the next five years. Most forecasts show Chinese healthcare growing at a 20 percent clip yearly, and the German company means to expand there faster than the market does to keep its market-share lead there.

Bayer currently operates four manufacturing plans in China and has plans to finish a $39 million expansion of one facility in Beijing that makes aspirin, diabetes meds, and other drugs. Last week, the company wrapped up its $156 million buyout of over-the-counter cough and cold meds from China's Topsun Science and Technology Quidon Gaitianli Pharmaceutical. And yesterday after its Chinese growth pledge--but not only because of it--ING reiterated its "add" rating for Bayer stock.

- check out the post at Pharmalot
- see the story at Trading Markets

Survey: Pharma tries "selling outcomes"

Tracy Staton — Mon, 07 Jul 2008 09:56:12 -0400

Where's the growth? According to a Financial Times survey, a quarter of pharma execs agree that diversifying away from medications and stepping up sales in emerging markets are the way to go. Drugmakers are not only shifting into diagnostics and vaccines, but also are working to boost patients' compliance to their drug regimens for chronic conditions--to keep the sales coming--and are linking payments to performance. "They are shifting...from selling pills to selling health outcomes," said a management consultant who handled the poll.

Think Roche's big buyout of Ventana, the diagnostics firm: It was hailed as a step toward personalized medicine. Patients who'd benefit from Roche meds could be identified with Ventana tests. Or consider Novartis' big diversification push, or Johnson & Johnson's agreement to offer its cancer drug Velcade on a pay-for-performance basis in the U.K.

The execs were also asked about the industry's greatest challenges. Access to new markets and reimbursement problems tied with pricing pressures as the most oft-cited problems. R&D productivity came in a close third.

The survey also found that of execs expect more layoffs and restructuring ahead. Two-fifths say there's still "cost-cutting potential" in sales, and almost as many ID'd marketing as a potential ax victim.

- read the FT article

Sanofi to plow $6B into vaccines

Tracy Staton — Thu, 26 Jun 2008 09:50:29 -0400

If anyone harbors doubts that vaccines are hot properties in today's pharma world, an announcement from Sanofi-Aventis should take care of them. Sanofi says it expects global vaccine sales to double to $34 billion by 2016, and so it plans to invest some $6 billion to expand its production capacity to meet that huge increase in demand. The company will be adding onto current plants and building new ones, at 15 manufacturing sites in all.

Partially driving that mushrooming demand is another big growth area for pharma: the developing world. Sanofi's vaccines CEO says economic growth in emerging markets will goose vaccine demand because as people earn more, they're more likely to seek out immunizations for themselves and their children.

- see the Wall Street Journal story
- get the news from AFX

Sanofi makes $2 billion generics move

Maureen Martino — Wed, 18 Jun 2008 10:52:27 -0400

Sanofi-Aventis has made a $2 billion bid for Czech generic drugmaker Zentiva. The offer will compete with an earlier bid by finance group PPF--Sanofi is offering 10 percent more than the group, however. The company seems to have made the offer for many of the same reasons Daiichi Sanyko bid for Ranbaxy. According to the WSJ Health Blog, "it's understandable why the company might want Zentiva. With its classic Big Pharma combo of strong cash flow and looming patent expirations, Sanofi needs to make some deals." Additionally, a Zentiva buyout would give Sanofi a foothold in Eastern Europe, an emerging market that many large drug companies are targeting. The acquisition is not entirely out of the blue; two years ago, Sanofi spent $518 million to acquire a 25 percent stake in the Czech generics drug business.

"The intended acquisition of the control of Zentiva carries a strong strategic rationale," Sanofi said in a statement. Generic buyouts will probably represent a "strong stragegic rationale" for a number of other Big Pharmas in the coming months. It will be interesting to see which generics maker is next on the buyout list.

- check out Sanofi's statement
- read the WSJ report

AZ's expanded China focus pays off

Tracy Staton — Fri, 13 Jun 2008 10:49:51 -0400

Big Pharma has been talking a lot lately about pushing into emerging markets, seeing as that's where the biggest growth prospects lie. But how, exactly, does a drugmaker go about doing that? The Wall Street Journal lifts the curtain on AstraZeneca's forays into China, particularly beyond the typical commercial strongholds in Beijing and Shanghai. AstraZeneca hired a local sales force--now 2,000 strong--and sent them into the hinterlands to spread the company message to hospitals and doctors.

The focus on fringe cities, such as Urumqi in in the far Western province of Xinjiang, proved fruitful. China sales mushroomed to $435 million last year from $85 million in 2001, making the company No. 1 in the Chinese market. And this foundation in China could position AstraZeneca to capture more than its share of the multibillion-dollar growth expected in China's prescription market. Don't think AstraZeneca's competitors haven't noticed; Novartis, for one, has beefed up its sales force and expanded the number of Chinese cities it targets.

- read the article in the WSJ

Daiichi buys $4.6B stake in Ranbaxy

Maureen Martino — Wed, 11 Jun 2008 10:06:46 -0400

These days, emerging markets and generic drugs are hot, and Japan's Daiichi Sankyo just landed a deal that capitalizes on both trends. The company is shelling out a hefty $4.6 billion for a majority stake in India generics giant Ranbaxy. The deal values Ranbaxy's shares at 737 rupees a piece, a 31 percent premium over yesterday's close. Ranbaxy will become a subsidiary of Daiichi but Malvinder Singh will remain its CEO. In a statement, the companies outlined several reasons for the merger. Daiichi said the move allows it to diversify into generics; it also gets its foot in the door with the fast-growing emerging markets that so many drug developers are targeting. In addition, Daiichi gains access to the affordable Indian R&D and manufacturing facilities Ranbaxy brings to the table.

"The combination of the two companies will give Ranbaxy access to Daiichi's expertise in research while the Jap anese company will benefit from low-cost production on the sub-continent, amid a deepening profits crisis in Japan's drugs industry," observes the Times Online. Last year Daiichi announced a surprising sales-growth target: a whopping 60 percent over the next three years, based on its hopes for Azor and two other meds coming up the pipeline.

"This complementary combination represents a perfect strategic fit and delivers a considerable opportunity for the future growth of the new Daiichi Sankyo Group," said Takashi Shoda, CEO of Daiichi Sankyo

- check out this release for more on the deal
- read this article for more

Brazil poised for big pharma growth

Tracy Staton — Tue, 03 Jun 2008 10:42:39 -0400

Guess who's the new up-and-comer in pharma? Brazil. Despite a burdensome tax structure, foreign companies are investing heavily in the country, taking advantage of incentives to entry into its generics market. India's Ranbaxy, Germany's Hexal, and Canada's Apotex are among the players in manufacturing. Plus, with almost a quarter of manufacturing capacity unfilled, it's in a perfect position to ramp up for increasing demand. All told, Brazil is among seven "pharmerging" markets expected to grow 12-13 percent next year alone.

- read the story at Outsourcing Pharma

IMS: Pace of outsourcing accelerating

Tracy Staton — Tue, 27 May 2008 09:39:45 -0400

Drugmakers are pulling out of manufacturing at an unprecedented rate, according to a new report from IMS Health. Four of the top 10 pharma players announced big new outsourcing programs last year. That's evidence that pharma execs are thinking in vastly different ways from their predecessors, who believed R&D and manufacturing had to work hand-in-glove, and that the skills required to make drugs couldn't be found in emerging markets.

This shift toward contract manufacturing has risks, IMS concludes. First, there are safety concerns. Just think of Baxter's heparin supplier Scientific Protein, which made crude heparin in partnership with a Chinese manufacturer whose plant was riddled with problems when the FDA finally inspected it after millions of doses of the blood thinner had to be recalled. Then there's Sanofi-Aventis, whose contract manufacturer went bankrupt, leaving Sanofi to deal with its manufacturing breaches. Secondly, in other industries, contract manufacturers have found ways to enter the market as competitors. Finally, there's economic implications of shipping work to emerging markets. Europe, for instance, counts 640,000 pharma jobs. If they are perceived to be under threat from outsourcing, politicians might intervene.

- read the story at Outsourcing Pharma

Big Pharma changes rules in emerging markets

Tracy Staton — Wed, 21 May 2008 11:04:31 -0400

If that well-meaning advice-giver in The Graduate were speaking to pharma today, he might well say, "Two Words: Emerging Markets." That phrase is getting more and more traction these days, as drugmakers wake up to the fact that the coming growth areas on the globe aren't found in North America or Europe. And as the importance of countries such as India, China, and Brazil grows more evident to Big Pharma, so is the fact that the strategies that work in the super-industrialized world won't serve in countries where the middle class is just now growing by leaps and bounds.

We all know that the pharma majors are moving into R&D in places like India and China, and that more and more are outsourcing their manufacturing to emerging countries. But to sell products there, on the ground, they're trying things that they'd never do elsewhere. "Differential pricing," for one thing, which takes into account per-capita income in setting prices; soon, there might even be different prices for middle class Indians, for instance, and the subcontinental poor. Standard arguments against it--that these cheaper meds will get resold on the black market, for instance--are falling by the wayside. What else might Big Pharma do to gain a major foothold? We'll have to watch and see.

- see the story in The Economist

Vagelos: Cut prices to cure 'black eye'

Mon, 05 May 2008 06:59:56 -0400

Pharma needs to slap some raw steak on its black eye, Dr. Roy Vagelos said during a speech last week. Pharma's elder statesman--and ex-Merck CEO--says the drug industry has lost goodwill and credibility, and needs to get to work to repair its reputation.

Most drugs are a "bargain," he said; even pricey meds can be a good value. But some products are too expensive, their prices out of step with their value. Those price tags will bring government price controls crashing down on the industry, he predicts. If the feds don't step in, market forces will. He wasn't sympathetic to the "drugs are expensive because R&D is expensive" argument, either. "I don't care what the cost is, it's inappropriate. The industry has a black eye. And the market will correct that."

Drug companies could regain a lot of goodwill by lowering prices themselves, Vagelos predicted. Pharma should focus especially on getting new, life-saving meds to the developing world posthaste. The humanitarian gesture would boost drug companies' images in emerging markets, which are poised to become huge growth areas for the industry. It would also help Big Pharma recover its "credibility," he said.

- see the coverage at Mike Huckman's CNBC blog