China's decision this week to spur innovation and approvals in drugs and medical devices has allowed for some long-term silver lining prospects for European drugmakers after disappointing second-quarter sales for most multinational firms there, Reuters reports.
Reuters said a decision this week by China to speed up the review process for products in focus areas such as oncology has been grasped at by some European analysts and fund managers as offering a potential boost--albeit longer term.
At stake for multinational firms in the Aug. 18 notice from China's State Council, or cabinet, is a breakthrough on accepting multi-region clinical trial processes as part of an effort to clear nearly 20,000 medicine approval requests pending and allowing more innovative therapies to reach the market.
"Many European pharma names will benefit from this, our favorites being Roche, GlaxoSmithKline and Novo Nordisk," Gary Paulin, co-founder of brokerage Aviate Global, told Reuters.
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| GSK's Simon Dingemans |
In a July 29 earnings call, Simon Dingemans, GSK chief financial officer, provided some nice color on China for the second quarter with talk of driving volume and for emerging markets, noting as CEO Andrew Witty did that business is lumpy as expected because of tender timings and the impact of changed sales channels after the Novartis ($NVS) transaction.
"In international, sales grew 1% pro forma held back by the performance of our China business, which saw a 14% pro forma decline in the quarter as we continue to reset this business for the future, including new pricing policies designed to drive volume," Dingemans said. "And we are also disposing of a number of peripheral businesses to sharpen our focus in the country."
Novo Nordisk ($NVO) executives led by President and CEO Lars Rebien Sørensen on an Aug. 6 earnings call noted competition from local companies in China and Sanofi ($SNY) as the key reasons for weak sales in the Middle Kingdom in the second quarter.
Novo Nordisk's first-half China sales surged by 25% in Danish kroner, but the increase in yuan was a modest 3%, with sales down 6% in yuan on a mix of timing of shipments and competition.
Reuters said Roche ($RHHBY) and Novo Nordisk could not be immediately reached for comment on the China reforms, while an official at GlaxoSmithKline had no immediate comment.
However, the news agency cited Paul Mumford, a manager at Cavendish Asset Management whose funds own 180,000 GlaxoSmithKline shares, as saying that the new regulatory framework should help GSK with its aim of spurring volumes in China.
The news agency, citing Thomson Reuters StarMine data, said European healthcare stocks are forecast to grow 6.4% in earnings over the next 12 months.
- here's the story from Reuters