November 11, 2009 / 6:28 PM / 10 years ago

Drugmakers place big bets on emerging markets

NEW YORK (Reuters) - China is the place to be for Western drugmakers seeking insurance against slowing growth, but plenty of other emerging markets are also tempting for Big Pharma, executives told the Reuters Health Summit.

Joe Jimenez, CEO of Novartis Pharma AG, speaks at the Reuters Health Summit in New York, November 9, 2009. REUTERS/Brendan McDermid

China scores top marks due to its huge population and government investment plans. Other good opportunities include not only Russia, India and Brazil but also smaller markets like Vietnam and Turkey.

“We’re making a big bet on China,” said Joe Jimenez, chief executive of Novartis AG’s NOVN.VX drugs unit.

“We are increasing our field force, we are increasing the number of clinical trials we are doing in China,” Jimenez said in New York. “Our business is growing over 30 percent a year.”

As these countries get richer, people have more disposable income and suffer more so-called lifestyle diseases associated with diet and lack of exercise, like diabetes and high blood pressure.

Forecaster IMS Health sees the drug market in a group of seven major emerging economies — Brazil, China, India, Mexico, Russia, South Korea and Turkey — growing at 12 to 14 percent in 2010 and even faster over the next five years.

That is significantly more than IMS’s predictions for the global drugs market, of 4 percent to 6 percent growth in 2010 and 4 percent to 7 percent through 2013.

In those emerging markets, annual growth of more than 20 percent in China should offset tough economics in Russia, Turkey, South Korea and Mexico, according to IMS.

“Right now I think we’re the number one company in China and the overall opportunity is enormous,” said Pfizer Inc (PFE.N) CEO Jeffrey Kindler.

“What we call established products, branded generics in particular, are a huge part of those markets, so that’s where we think we have a lot of strength and we’ll continue to focus,” Kindler said.

RAPID EXPANSION

Last week Novartis announced three major investments in China, whose government is spending some $124 billion on healthcare reforms and aims to bring basic and affordable medical services to all citizens by 2020.

That underlined the importance of emerging markets for big drugmakers facing slowing growth in developed countries and loss of exclusivity on big-selling medicines. GlaxoSmithKline Plc (GSK.L) and Sanofi-Aventis SA (SASY.PA) are others pushing hard.

The world’s biggest insulin maker, Novo Nordisk (NOVOb.CO), agrees on China’s potential and sees emerging markets in general as its biggest expansion area, targeting sales growth of 20 percent, CEO Lars Sorensen said.

AstraZeneca Plc (AZN.L) CEO David Brennan said emerging markets had been a key plank of the company’s strategy for a few years and had showed the largest absolute cash growth in its business last year.

Joe Jimenez, CEO of Novartis Pharma AG, speaks at the Reuters Health Summit in New York, November 9, 2009. REUTERS/Brendan McDermid

They account for some 15 percent of group sales and are set to grow further, Brennan said, highlighting opportunities in countries like Indonesia and Vietnam, where businesses are smaller but there is plenty of room to grow.

Recession in the United States had also increased the importance of markets in Latin America and Eastern Europe, he said.

“We see a direct correlation between GDP growth and the willingness of the government or even the people in the countries to invest more in healthcare,” Brennan added.

Additional reporting by Bill Berkrot; Editing by Tim Dobbyn

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