From the pharma C-suite: Novartis on Asia, emerging markets in Q2

FiercePharmaAsia combs earnings calls by major drug companies for notable and quotable nuggets on emerging markets and Asia to track the latest sales trends and insight into business outlooks in markets as diverse as China, India and Japan to Southeast Asia.

Novartis CEO Joe Jimenez

For the second quarter, top executives from Novartis ($NVS) on a July 21 earnings call showed upbeat sentiment on emerging markets for pharmaceuticals overall though a noticeable slowdown in China and a disappointing time for eyecare in the Alcon division.

CEO Joe Jimenez kicked off the call noting that growth products were up 38%, and account for 44% of the pharma division's total sales, while emerging markets' growth helped to offset the loss of exclusivity on Diovan and Exforge.

He also said the integration of oncology products bought from GlaxoSmithKline's ($GSK) helped Novartis oncology sales grow 30% in the quarter with a new field force fully operational in over 50 markets around the world.

The results of that spread, according to the chief of the pharmaceutical unit, are apparent in emerging market contributions.

Novartis pharma head David Epstein

"Our emerging markets now represent 26% of our total business," said David Epstein, head of pharmaceuticals. "In both the mature as well as the emerging markets posted nice sales growth. Of note, in the emerging markets, about half of that 10% growth came from the addition of the new oncology assets. And we will face, going forward, challenges, as we predicted at the beginning of the year as emerging markets begin to slow down in places like China, Russia as well as in the Middle East and North Africa."

But Jeff George, head of Alcon, noted the use of the word "crappy" by Jimenez earlier in the call to describe the unit's second quarter earnings and pointed to emerging markets as an area of focus as an analyst asked for some color on second quarter performance.

"There is an accelerating competitive environment within eye care, because it's fundamentally a very attractive area of healthcare with the aging demographics and the expansion of emerging markets," George said. "I think Q2 was definitely a disappointing quarter for us and reflected the slowdown in emerging markets that Joe had referenced earlier."

Tim Race, an analyst with Deutsche Bank, fortunately asked for an update on China across business segments and what to watch for going forward, a question Jimenez took quickly to lay out the big picture.

"We have seen a slowing of growth in China, specifically across I think every one of the segments," Jimenez said. "So what's happened is healthcare, because the Chinese government has increased the coverage in terms of ensuring that every citizen in China has at least some level of medical coverage, you can imagine that the expense from a healthcare standpoint has been growing. Just in pharma it's been in the mid-teens, and I think there's a conscious effort to slow it down a bit. And then on top of that, you have what's happening from an economy standpoint in the stated shift towards what they're calling sustainable economic growth, which is leading to lower overall growth rates. So we're starting to feel it."

- here's the earnings release
- and here's the presentation