How slow can Big Pharma go in emerging markets?

Print 13 August 2015
Carly Helfand / FiercePharma

Industry watchers have pointed to a slowdown in pharma's emerging markets growth as a worrying sign for companies that have been heavily targeting developing nations while the U.S. and European markets stagnate. But just how slow has the growth become?

Bernstein's Tim Anderson

According to Bernstein's Tim Anderson, emerging markets growth rang in at 5.5% across some of Big Pharma's biggest. That's the slowest rate in two years, Anderson wrote in a Wednesday note to clients. And on top of that, while emerging markets growth may still be outpacing the sluggish growth in developed markets, "the gap narrowed in Q2," he wrote. That 5.5% only narrowly beat out the U.S.' 4.7%, for instance.

Problems in China--once considered a gold mine for drugmakers, thanks to its aging and expanding population and its growing economy--helped drag figures down. Growth in the country "slowed meaningfully" in Q2, Anderson pointed out, sinking to 4.6% from 15.1% in Q1. Eli Lilly ($LLY) and GlaxoSmithKline ($GSK) weighed things down most, though sales slowed quarter-on-quarter for many of their peers, including AstraZeneca ($AZN), Merck ($MRK), Novartis ($NVS) and Pfizer ($PFE). Only Roche ($RHHBY) and Sanofi ($SNY) posted stable-to-increasing growth in China for the period, he noted.

Companies have pegged growth issues on a variety of factors. In its most recent earnings presentation, Novo Nordisk ($NVO) blamed government cost cuts and reduced access to doctors for a diabetes decline. Lilly has pointed the finger at government policies that hold back volume growth. A market shift to lower-priced (read: local) generics has also taken its toll, Anderson wrote.

The way Anderson sees it, the real question is this: "Is this just variation around the mean, or does it mark the beginning of a more prolonged deceleration?" It's too early to say. But if growth really is slowing down, more than a few companies have something to worry about.

Sanofi, he notes, boasts pretty high exposure to any negative emerging markets trends that may crop up. 34% of the French drugmaker's total revenues come from developing nations. "European drug companies have tended to have greater EM exposure than their U.S. peers, but the gap is narrowing," he said.

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