* Emerging markets strategy not dependent on acquisitions
* Branded generics will be capped at 10-15 pct of EM sales
* Reiterates EM sales to be 25 pct of group total in 2014
(Adds graphic, background on strategy, shares)
By Ben Hirschler
LONDON, March 16 AstraZeneca (AZN.L) expects
double-digit growth in emerging markets, the new battleground
for Big Pharma as Western drug sales stall, but said it would be
much more selective than some of its rivals.
The drugmaker is not planning a wholesale rush to sell
branded generics in the developing world. Instead, it plans to
focus on around 100 medicines in 30 markets where it can achieve
"We will be very selective in branded generics," head of
global commercial operations Tony Zook told reporters on Tuesday
ahead of a briefing for investors.
Cheap off-patent medicines sold in high volumes in emerging
markets under a multinational brand name are a growing target
for major drugmakers, although some investors worry about the
impact on margins of this move down the value chain.
Zook said AstraZeneca's selective approach should limit any
AstraZeneca struck its first branded generics supply deal,
with India's Torrent Pharmaceuticals (TORP.BO), last week and
Zook said other deals could follow, although the group's
strategy was not dependent on acquisitions.
Overall, branded generic medicines are expected to account
for only 10 to 15 percent of total emerging market sales by
A key leg of AstraZeneca's strategy will continue to be
building sales of products developed in its own laboratories,
some of which, like ulcer pill Losec, are off patent but still
Emerging markets are forecast to contribute around 70
percent of pharmaceutical industry growth in the next five
years, making them an enticing target.
For a graphic on emerging market drug sales click on
EARLY INVESTOR IN CHINA
AstraZeneca was an early investor in China but, across the
piece, it has been less aggressive than rivals in pushing into
Zook reiterated that the company expected emerging markets
to account for 25 percent of group sales by 2014, up from 13
percent, or $4.35 billion, in 2009. Yet rivals such as
Sanofi-Aventis (SASY.PA), Novartis NOVN.VX and Bayer
(BAYGn.DE) are already at around that 25 percent level.
The more selective approach underlines a broader strategic
decision by AstraZeneca to stay a "pure play" pharma company
while Pfizer (PFE.N), GlaxoSmithKline (GSK.L), Sanofi and
Novartis have all embraced diversification.
The cautious approach on generics, in particular, also
reflects an acute awareness of margins, since lower prices in
emerging markets mean lower profitability than in Western
AstraZeneca has increased its margins in emerging markets to
around 72 percent of its level in established markets in 2009,
from 55 percent in 2004, and Zook said he didn't see significant
variation in margins going forward.
Like other drugmakers, AstraZeneca hopes emerging markets
can offset generic competition that will erode sales growth in
the United States and Europe. But this is a tall order.
"We think AstraZeneca's sub-scale emerging markets business
will do little to alleviate mid-term patent issues," analysts at
Collins Stewart, who rate the stock a "sell", said in a note
ahead of the investor briefing.
Shares in AstraZeneca were flat in a little changed market
for drug stocks .SXDP by midday.
(Editing by Dan Lalor and Hans Peters)