Big Pharma's emerging markets sales growth plunged to a new low last quarter. But within the group's overall average, some companies--such as AstraZeneca ($AZN) and Pfizer ($PFE)--chalked up decent gains.
As Bernstein analysts pointed out in a Tuesday report on second-quarter trends, multinational pharmas put up only 1.8% growth, on average, in up-and-coming countries such as India and China. That’s compared with a 4.4% year-over-year growth rate for Q1--itself a comedown from previous results.
The Q2 growth number was “the lowest we’ve seen” over 18 quarters, analyst Tim Anderson wrote. In contrast, U.S. and E.U. sales growth topped 3%.
Some drugmakers managed more growth in emerging countries: AstraZeneca, for instance, has been on a roll, particularly in China, where Q2 sales grew by 11%. Over the past four quarters, the British drugmaker has put up 8.8% emerging markets growth overall, the highest in Big Pharma. Roche delivered 9% emerging markets growth for the second quarter as well. And Pfizer’s last-four-quarters growth rate came in second to AZ’s at 7%.
Meanwhile, Eli Lilly boasted a whopping 23% growth in China for Q2, though off a smaller base than AstraZeneca’s. The company’s Q2 emerging markets revenue overall grew by 5%.
Which companies are dragging down the total? GlaxoSmithKline is the biggest culprit, with a 9% decline in Q2 and a 7% drop over the past four quarters, Bernstein’s research shows.
Why worry, given that drug sales are growing elsewhere? Because emerging countries have been seen as growth prospects for Big Pharma for years, and companies have spent time and money building up their infrastructure to take advantage of that. Eli Lilly, to name just one, scaled back its salesforce in the U.S. while ramping up a commercial operation in China. To back up growth for its cancer drugs in the same country, Roche went so far as to set up a health insurance venture.
Meanwhile, one major drugmaker after another has spent hundreds of millions on production facilities in China and Russia. Last month, Pfizer said it would spend $350 million on a biologics plant in China, and struck two deals earlier this year for drug production in Russia. Novo Nordisk opened up a $100 million insulin plant in the same country last year. Roche wrapped up a $465 million plant expansion in China in 2015, too.
The slowdown doesn’t mean that companies should stop spending money in emerging countries, Anderson said. As the middle class in key countries grows, healthcare infrastructure builds and chronic diseases continue to spread, opportunities for branded drugs will also burgeon, he figures.
“[T]he industry should continue to invest to ensure it captures share in the longer-term, gradual, yet inevitable shift from older off-patent medicines to more lucrative, novel, on-patent medicines,” he points out.
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