|Improving access to healthcare in underserved communities--Courtesy of EMD group|
Emerging Markets Sales 2012: €1.74 billion ($2.3 billion)
Percentage of Sales in Emerging Markets: 29% (34% with materials division)
In volume terms, Merck KGaA's emerging markets sales are the smallest on our list. But in terms of its own revenues, emerging markets are big--and getting bigger. Last year, emerging markets accounted for 40% of the growth at Merck's prescription drug division, Serono. And emerging markets sales themselves grew by 13% overall, 9% at Serono.
One of the pillars of Merck Serono's emerging markets business is Glucophage (metformin), the diabetes treatment. In Latin America, the company is already the largest insulin provider partly because of that product's success there. And it aims to be a leading diabetes force in China: In April 2013, Merck Serono teamed up with Bristol-Myers Squibb ($BMY) to copromote Glucophage in that country. Since 1999, BMS has been promoting the Merck-developed drug in China, but now, the two will work together to take a number of different Glucophage formulations into new areas of the country. Merck's ($MRK) Belén Garijo, now CEO of the Serono division, said the BMS deal would strengthen its already "solid position" in emerging markets.
Merck's fertility products are also growing in emerging markets these days. Previously out of reach for most people in developing countries, fertility drugs like Gonal-f now fit into the budgets of a growing middle class. Erbitux, a cancer treatment, grew by 7.4% in emerging markets last year. In consumer health, a vitamin C brand, Cebion, drove a 6.5% sales increase in emerging markets--the only region where that unit eked out growth.
Meanwhile, Merck Serono is also focusing on growth in the Middle East. As part of its localized-production strategy, the company partnered with an Abu Dhabi-based manufacturer, Neopharma, to turn out branded drugs for the region. The first drug to emerge will be Euthyrox (levothyroxine), a thyroid drug, later this year, with Glucophage following in 2014. Serono has also teamed up with India-based Dr. Reddy's Laboratories to develop biosimilar versions of biotech cancer-drug blockbusters. It's a global partnership, with the two sharing the U.S. and Merck handling the rest of the world, except for "select" emerging markets that will either be handled jointly or run exclusively by Dr. Reddy's.
Emerging markets also share the distinction of being the only countries where Merck Serono's workforce is growing. While laying off hundreds in a sweeping restructuring, the company has increased its headcount in emerging markets. That, in fact, is one of the aims of the restructuring--shifting from Europe, where pharma growth is stagnant, to "higher-growth" regions. Some 30% of the company's employees, about 11,500 of them, work in emerging markets.
Recent currency shifts have eaten away at Merck's growth in emerging markets. Prescription drugs and consumer health both felt the hit, with on-the-ground sales growth for the first half of 2013 offset by foreign-exchange effects.
It should be noted that Merck's definition of emerging markets differs somewhat from the usual: It comprises Latin America and Asia, except for Japan. Africa is accounted for in a separate region that includes Japan.
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