|R&D in Bangalore, India--Courtesy of AZ|
Emerging Markets Sales 2012: $5.75 billion
Percentage of Sales in Emerging Markets: 21%
In 2011, AstraZeneca's ($AZN) emerging markets sales amounted to 17% of its business. Last year, that had burgeoned to 21%. Part of that is because its top-selling brand Seroquel went off patent, sending U.S. sales tumbling. But it's also because the company has been investing in emerging markets, hiring thousands of people while cutting back its workforce elsewhere. Sales in developing countries grew by 4%, a not-too-shabby result compared with its overall 17% decline in revenue. Sales in China and Russia grew by 17% each.
In that, AstraZeneca is not alone. Rival Eli Lilly ($LLY), for one, has hired hundreds of sales reps in China as it's decimated its U.S. sales force. And the move is only logical; while U.S. and European pharma sales suffer from patent losses and government price cuts, markets around the globe are growing much, much faster. Particularly for AstraZeneca, which has suffered a series of R&D setbacks and is struggling to remake itself, tapping high-growth markets for new sales is its best option.
So, how has AstraZeneca pushed its emerging markets business forward? First, there's that hiring: The company added 5,700 jobs in emerging markets last year, including 1,800 sales reps in China. According to Booz & Co., the company's emerging markets workforce made up 47% of its worldwide employment in 2011, up from 16% in 2002. With the help of beefed-up commercial operations, AstraZeneca has launched new products, including the hormonal cancer treatment Zoladex in China, the cancer therapy Faslodex in Argentina and the blood thinner Brilinta in Mexico.
The company has made some deals, too, including its 2012 buyout of the Chinese generics maker Guangdong BeiKang, which brought along a portfolio of injectable anti-infectives. Also in China, the company last year tied up with WuXi PharmaTech to develop a rheumatoid arthritis drug, and in India, the company has a three-year-old branded generics supply deal with Torrent Pharmaceuticals. Perhaps more importantly for the long term, AstraZeneca has expanded its R&D facilities in China and India, among other places, to amp up local research. A new, $200 million plant in China is expected to come online next year, along with new production capacity in Russia.
But like its local and international rivals, AstraZeneca's sales in certain countries--Turkey and Thailand, for instance--have suffered because of new government price controls and increased emphasis on generic alternatives. And drugmakers aren't immune from generic competition in emerging markets; cheap copies of AstraZeneca's antipsychotic drug Seroquel and cholesterol fighter Crestor dragged sales down in Brazil. In India, the company had to suspend production at one site after a quality-related recall; the supply interruption naturally hit sales.
The company is aiming to source 25% of its revenue in emerging markets by 2014, with single-digit revenue growth in those countries. In announcing big job cuts in March 2013, AZ executives said they would accelerate their investment in the top 15 emerging countries, planning to focus on such branded products as Symbicort (asthma), Crestor, and Brilinta.
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