Emerging Markets To Make Half Of Pharma Sales Growth By '13 -Study

About half the pharmaceutical industry's growth is expected to come from emerging markets by 2013, with China taking the place of France as the world's third-largest market by as soon as next year, according to a new study released Tuesday.

The report published by IMS Health Inc. (RX), a third-party data collector for the health-care industry, also warned that large multinational pharmaceutical companies are largely "under-exposed and under-performing" in these high-growth areas, dubbed "pharmerging" markets.

"Companies must act now and act fast to respond to the market changes and seize the opportunities within them," IMS said, or else they will lose to local drug manufacturers.

Sales in emerging markets are expected to grow by around $90 billion by 2013, by which time they will be making up 48% of annual market growth, said the report. By contrast, these markets contributed 37% of growth for 2009.

The data underscores a shift for drug makers towards the developing world where steadily growing economies along with rising per-capita income is boosting demand for medications.

On the flipside, sales growth in mature pharmaceutical markets are slowing thanks to patent expirations, tighter government regulation, and because producers of generic medications are seizing market share at a faster clip. Economic concerns in the developed world may too pose a lasting problem.

The report identified 17 countries that fit the high-growth model and "are about to overturn the established pharmaceutical world order."

They are classified into three tiers. China, with its gross domestic product north of $8 trillion, tops the list. The Asian giant is projected to contribute $40 billion in annual sales growth by 2013, on par with sales growth forecast for the U.S. during the same time.

Branded generics will make up much of the growth in China and will be supplied by local producers, though "demand for innovative products from multinational companies is rising in the country's leading urban centers," IMS said.

Brazil, Russia and India make up the next group; each will add $5 billion to $15 billion in sales over the next three years. Brazil is expected to overtake the United Kingdom as the world's eighth-largest pharmaceutical market by next year.

The thirteen countries listed in the third tier will see $1 billion to $5 billion in growth and include Venezuela, Argentina, Turkey, Mexico, Indonesia, and Vietnam, among others.

Many large pharmaceutical companies have already highlighted this trend but have done too little, IMS said.

"In 2009, the world's top 15 pharmaceutical manufacturers derived just 0.9% of their combined sales from China; 2.9% from the second-tier markets of Brazil, India and Russia; and 5.6% from the third-tier markets."

There are signs, however, that the industry is making a more concerted effort to target these markets. A series of large multinationals have announced acquisitions in recent years and many have begun joint ventures with local manufacturers

AstraZeneca PLC (AZN), U.K.'s second-largest pharmaceuticals company, Tuesday said it is targeting double-digit growth from emerging markets and expects those countries to generate one-quarter of its total sales by 2014. The company said emerging markets look set to contribute around 70% of pharmaceutical industry growth in the next five years.

-Kejal Vyas, Dow Jones Newswires; 212 416 2185; kejal.vyas@dowjones.com

IMS Health (NYSE:RX)
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