Roche's Health Train en route in South Africa--Courtesy of Roche


Emerging Markets Sales 2012: 9.342 billion francs ($10.2 billion)
Percentage of Sales in Emerging Markets: 20%

Two emerging markets are two sides to Roche's ($RHHBY) coin. Heads, the Swiss drugmaker has China, where sales grew 27% in 2012. Tails is India, with a 23% drop. But unlike a coin toss, in this case, neither result came up totally by chance.

Like other multinational pharma companies, Roche spends serious time, money and people-power on the Chinese market. Despite the recent political pressures--even despite new pricing pressures--China remains one of the world's most promising drug markets. Increasingly, it's becoming the sort of market that Roche can serve best. Unfortunately for the Chinese citizenry, the number of cancer cases is growing quickly, giving the company a burgeoning group of patients to target with its lineup of standard-of-care oncology treatments. Unfortunately for both the Chinese and for Roche, the money to cover cancer treatment is tight. So, Roche teamed up with the reinsurance giant Swiss Re to offer healthcare coverage through 5 insurers in China. While government healthcare spending grows, so can the private-pay business, putting Roche's cancer treatments within reach of more patients. That includes Roche's own employees; as a way to combat high turnover in the country, the company rolled out new flexible benefits plans last year--and those include cancer insurance for pharma employees and their families. Meanwhile, Roche also has its eye on other diseases in China, with a recent deal with Ascletis to develop and sell its as-yet-unapproved hepatitis C drug danoprevir in the country.

In India, access to medicines is a high-profile problem. Roche's approach to that problem is one reason sales plummeted in that country by almost one-quarter. Rather than attempt to sell its branded cancer drugs Herceptin (trastuzumab) and MabThera (rituxumab, a.k.a. Rituxan) at typical prices, Roche teamed up with a local partner, Emcure Pharmaceuticals. Together, they're developing, making and selling Indian versions of those drugs under Indian brand names at prices discounted by more than 30% off previous local costs. The company is weighing adding another of its top cancer drugs, Avastin, to the mix, along with its anemia-fighting biotech drug Mircera.

But Roche's Indian business hasn't been entirely proactive. It has had to react to some intellectual property threats, which are increasingly common in India: The government's patent authority pulled Roche's patent on the hepatitis C treatment Pegasys and later threatened to issue a compulsory license for Herceptin, allowing particular generics makers to sell cheap copies. Instead of fighting for its patent--and risking a fight over a compulsory license--Roche said it wouldn't pursue patent protection for Herceptin in India. No domestic drugmaker is ready to roll out a Herceptin copy, so Roche and Emcure's local version remains the only option available, at least for now.

The company has country-by-country initiatives in many emerging pharma markets. It slashed the price of MabThera in South Africa by half, hoping to drive up sales volume enough to compensate for the discount. In the Philippines, after Roche won approval for its EGFR-fighting lung cancer drug Tarceva, the company launched a testing project using its own Colas EGFR diagnostic, driving Tarceva's lung-cancer market share upward almost immediately. An HER2 testing program in Asia involves training doctors and pathologists in 12 countries to diagnose HER2-positive cancers, identifying the patients that should be treated with Herceptin.

Overall, Roche is most focused on 7 fast-growing countries, which it calls the "E7." Besides India and China, that group comprises Brazil, Mexico, Russia, South Korea and Turkey. Results in those markets last year were mostly strong, with growth in the biggest--China at 27%  and Brazil at 11%--helping drive the company's overall increase in revenue. Percentage-wise, the results in South Korea came in just behind China's at 21%, with Turkey and Russia at 15% and 14%. But there was that 23% hit in India, and Mexico faltered, dropping 4%.

Prospects for 2013? Roche predicted continued emerging-markets growth for the year, and with certain drugs, it's increasingly relying on international markets--its term for countries outside the U.S., Western Europe and Japan, a group that includes the E7 plus many smaller emerging pharma markets. Its hepatitis drug Pegasys, for instance, is facing new-generation competition in the U.S. and Western Europe, so its growth must come in those emerging areas. Outside the U.S., Herceptin sales grew most last year in emerging markets. The company figures focusing on local manufacturing, local brands and differential pricing--plus market-specific disease programs and the like--will help it grow the drugs it's already selling there. And speeding up development to get more products into each market will fuel further growth at lower cost.

For more:
India's Biocon promises Herceptin biosim launch by fiscal year-end
Roche dropping Herceptin price in India by 30%
Roche sells insurance to gin up paying customers in China
Roche slashes MabThera price in S. Africa to drive sales


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