Regional pharma suffers most from European turmoil

Struggling countries in Southern Europe have been holding off Big Pharma's debt collectors for some time, causing all sorts of teeth-gnashing. When they are paying for drugs, they're cutting prices. And though the suffering for global drugmakers has been significant, The Wall Street Journal reports, small- and medium-sized regional pharmas are really hurting.

The European market is tough for drugmakers these days; even countries that can afford to pay their bills, such as Germany, are slashing prices to keep budgets in check. The woebegone countries like Greece, Spain, and Italy have discounted branded drug prices by 25% to 27% and imposed measures to force use of cheaper generics. And then there's that bill-paying problem: Cash-strapped Greek hospitals are years behind, and Spanish providers owe so much money that the industry is considering securitizing that debt.

But while global drugmakers have other regions to help hold up sales, regional companies such as Spain's Almirall and Greek's Alapis, the WSJ says, aren't so fortunate. Almirall, which gets more than half of its annual revenues from its home market, expects 2011 sales to drop by 10% and profits to decline by 20%-plus. Its new CEO, Eduardo Sanchiz, is trying to diversify into new markets, but in the meantime worries that the company will have to cut back R&D.

The pain could spread to other regional drugmakers such as Germany's Stada and Italy's Recordati, Jefferies analysts wrote in a recent note, the WSJ points out, particularly if the price-cutting trend intensifies and spreads. Unfortunately, it looks as if that's happening already.

- read the WSJ story