|Novo Nordisk's insulin plant in Tianjin, China--Courtesy of Novo Nordisk|
Emerging Markets Sales 2012: 17.48 billion kroner ($3.1 billion)
Percentage of Sales in Emerging Markets: 22.4%
For Novo Nordisk ($NVO), the early bird wins the market. Internationally, the Danish drugmaker has focused on getting into a country early and expanding its organization as the market grows. Because of its heavy focus on diabetes, getting a foothold involves a lot of public-health work--education, screening, access to care. And in the poorest countries, it also means cheap prices. Sometimes free.
Growth in emerging markets isn't just about winning people over to a product or slate of products; it's also about making sure that healthcare basics are covered. If patients can't get to doctors, and doctors don't have the training they need, then people go untreated--and drugs go unsold. So, Novo aims to train at least 10,000 doctors a year and works to get those doctors out where people live. The company has set up mobile clinics in minivans, trailers and trucks to help remote patients get screening and treatment.
But Novo Nordisk is a company, not a charity, and so all that work isn't for goodness alone. It's a foundation for building relationships and building up sales, and rising as economies grow. The company has operated a Chinese affiliate since 1994, so it was ready and waiting when the dragon awoke. It opened an R&D center there in 2002 and relocated and expanded it in 2004. Together with partners, the company trained 55,000 doctors and 280,000 patients there between 2006 and 2010. By 2012, Novo had grabbed 60% of the insulin market there--37% of the diabetes market overall--and "Region China" brought in 6.4 billion kroner (about $1.13 billion).
These days, more than 4,000 people work for Novo Nordisk in China. A look at the company's hiring plans gives a hint of which countries it expects to pick up the pace in the near term. Last fall, the company said it would recruit 1,000 new employees in emerging markets--specifically Colombia, Egypt, Ukraine, Malaysia, Indonesia, and especially Vietnam. Indeed, according to Novo's 2012 annual report, Vietnam is one of two countries that's blossoming after years of investment. "Vietnam is going to be a new mini-China," Novo's international operations chief Jesper Hoiland said at the time.
Meanwhile, in many African countries--and some on other continents--Novo is laying the groundwork for future sales by giving away insulin to children and selling it at rock-bottom prices for adults. Under its Changing Diabetes for Children program, the company trained 2,000 healthcare professionals in 9 of the world's poorest countries last year and set up 70 clinics there.
What Novo Nordisk doesn't do, unlike its bigger rivals, is expand into new markets by acquisition. The company prefers to hire up and train people in "the Novo Way."
Pricing can be a tricky subject in emerging markets, but Novo has a particular, differentiated-pricing strategy that it's been using for years. The company aims its least expensive products at markets with little financial wherewithal, mid-range drugs at mid-range customers, and its most expensive treatments at the higher end. In the world's 49 poorest countries, that means shipping human insulins at no more than 20% of their cost in mature markets, which works out to about two cents per patient per day. In Brazil, that means selling human insulin in vials to the government on the cheap, mid-range products to the social security system, and newer, more expensive products in the private-pay market. In China, the less expensive products are covered by the government health system, but Victoza, launched there in late 2011, isn't reimbursed, so patients have to buy it out of pocket--and so far, that means its growth isn't breaking any records.
"At the lowest part of the pyramid, it's philanthropy," CEO Lars Rebien Sørensen told The Telegraph early this year. "So we help these countries build healthcare capacity and know-how and allow them to buy our products at cost. And we don't discontinue production of the cheapest drugs. ... [A]t the top of the pyramid--which is supposed to be the U.S., Europe and Japan--the idea is they should only buy the new, innovative products.
In China, Novo Nordisk's sales have more than doubled since 2008; in its other international markets, sales have grown by almost 75%, to 11.08 billion kroner (about $1.96 billion). To fuel all that growth, the company has been investing big money in local manufacturing, R&D and sales and marketing. In September 2012, it cut the ribbon on a $100 million expansion of its R&D complex in China, adding more than 70 scientists to its ranks there. In Russia, the company started building a $100 million insulin-cartridge plant in the Kaluga region last year.
"I see this as a long-term investment," COO Kåre Schultz said in an interview published in Novo's 2012 annual report. "It can take many years to create a sustainable business in these countries, but once the economy allows for proper diabetes care for the population, doctors and health authorities will remember that we were there for them when the going was tough. That's our experience."
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