PharmAsiaSummit: Emerging Markets Are Growth, Growth, Growth, But Where's The Beef?

Windhover's PharmAsiaSummit is October 25-26 in San Francisco. For a more information and a complete PharmAsiaSummit agenda, visit our website or email Josh Berlin to learn more. We hope to see you in San Francisco. What follows is an advertisement for the meeting.

A recent forecast by IMS Health demonstrates much of what we've been hearing in emerging markets over the last several years. The market research firm forecasts 15-17% growth next year in the 17 countries designated as "pharmerging" markets, which includes the usual suspects (the BRIC countries), as well as fast followers ranging from Turkey to Indonesia to Mexico.

To be sure it's off a smaller base, but the base is growing, and next year IMS predicts revenue will reach $170-$180 billion. In other words, it isn't peanuts.

In 2011, pharmerging markets will equal roughly half the size of the US market ($320-$330 billion), which will grow at a comparatively paltry 3-5%, IMS says.

China, of course, is the Big Kahuna, with a pharma market set to reach $50 billion next year, making it the third largest. With a growth rate of 25-27% - fueled by demographics (a rapidly aging population and urbanization, for instance) and a massive government push to extend basic health insurance to China's 1.3 billion population - it is no wonder that IMS recently raised China to its own tier as part of its analysis, essentially separating the C from the BRI.

Although much of the growth will come from local manufacturers selling branded generics, there is plenty of growth to go around. Pfizer, for instance, is the largest foreign pharma in China, yet it's captured only 2% of the market, Morgan Stanley notes in a recent report. In India, Abbott is the top dog following its acquisition of Piramal earlier this year, yet it commands only 6% of India's famously fragmented market.

It's no wonder that pharmas from Pfizer to Abbott to Merck to AstraZeneca have jumped into the branded generics space, looking to sell off-patent medications in emerging markets and in some cases partnering with Indian generic companies to expand their offerings.

The editors of our sister publication, PharmAsia News, which has boots on the ground in China, India and elsewhere in Asia, like to talk about the excitement they hear from sources and friends in the industry - excitement about growth opportunities, new models for R&D, commercial strategy, China healthcare reform and so forth.

But one thing we often find missing in the discussion is specifics. What, specifically, are the right commercial strategies for China, or India or Korea? What, specifically, should biopharma companies do to take advantage of China health care reform? What, specifically, are the opportunities for partnerships or outsourcing in China? What specifically, should you do to protect intellectual property in India?

Who should you talk to? What case studies are relevant? Where should you place your bets?

Specifics are hard to come by via channels we use in the West - the media for instance or trusted websites. In Asia, most important lessons are discussed offline, and things change so quickly in markets like China and India that what worked last year might not work today.

In short, you need a strong, local network to understand the rapidly changing market.

That's the idea behind our PharmAsia Summit. We've decided to bring some of our Asia network to San Francisco this month to talk about specifics - what works, what doesn't, and what you need to know to succeed. If you're based in the U.S., it's a great chance to meet face-to-face with Asia pharma leaders.

We won't have all the answers - no one does. And what works today might not work tomorrow. But what you'll have is a forum where industry leaders - from Biogen Idec's Gunther Winkler to Merck's Ramesh Subrahmanian to Onyx's Tony Coles - will discuss Asia case studies on dealmaking, commercial strategy, outsourcing, regulatory risks, IP protection, and pricing and reimbursement.

We'll have leading Asia investors like OrbiMed's Jonathan Wang, top China analysts like Piper Jaffray's Hongbo Lu, commercial gurus like MSD's Sanjiv Navangul - a key figure behind Merck's groundbreaking strategy for Januvia in India - and IMS Health Asia VP Jan Willem Eleveld, who will provide the latest Asia data and trends.

And as policies are changing so quickly in Asia, we also have a few regulators making the trip, including Shanghai FDA's Yi Chengdong, Korea FDA's Hong Soon Wook, and U.S. FDA country directors from China and India, Chris Hickey and Bruce Ross.

2009 M&A/Alliances DOTY Nominee: GSK/UCB

It's time for the IN VIVO Blog's Second Annual Deal of the Year! competition. This year we're presenting awards in three categories--that's 300% more fake prizes than last year!--to highlight the most interesting and creative deal making solutions of the year. The categories are: Big Pharma Deal of the Year, M&A/Alliance Deal of the Year, and Exit/Financing Deal of the Year. We'll supply the nominations (roughly half a dozen in each category throughout December) and you, the voting public, will decide the winners (by voting early and often, commencing once we've announced all the nominees). Strap yourselves in, it's The Race for the Roger™.


OK, it involves some far away places we never think of – even beyond the fabled BRIC countries. But the January deal in which GSK paid UCB $670 million for commercial operations in more than 50 non-core countries, as well as rights to sell some primary care drugs in those territories, could be the IT deal of 2009.

After all, it captures so many of 2009's biggest trends: the land grab in emerging markets, the tug of regionalization versus globalization, the ongoing shake up in primary care, and diversification--the bluster of the big versus the commitment of the focused.

On one level, the deal shows how two companies with very different strategies are reacting to the mania about emerging markets. GSK is looking to be a geographically diversified global provider of medicines at all price points to as many countries as possible—and says its far-flung infrastructure, deep pockets, and global expertise make it the go-to company for late-stage deal-making in emerging markets. In other words, it can be a Big Brother.

UCB, on the other hand, is concentrating on what it does best: it is in effect taking a "master craftsman" approach. At a fraction of the size of GSK or other Big Pharma, it can't be everywhere selling everything. And so, it is joining a small, but important group of biopharma—including the much bigger Bristol-Myers Squibb and Lilly—that has chosen to intensify its focus rather than diversify. It recently repositioned itself as a spec pharma focused on CNS and inflammatory diseases and is extending that idea globally.

GSK's funds enable UCB to pay down its burdensome debt by shedding non-core assets—which were attractive enough for GSK to pay nearly 4X sales. UCB is not giving up on emerging markets, by any means, and still plans to sell specialty drugs in the BRIC countries, along with Mexico, Canada and South Korea. But it won't be stuck with infrastructure or products it can't afford.

GSK is another matter. Even as it cuts expenses in its Western markets, it is bulking up in emerging markets, where antiquated Western terms like "sales force arms race" and "shortage of human capital" –are real business concerns, not just pleasant reminders of the now-gone good old days in the West.

And that strategy is based on fortifying its product portfolio with a series of deals in the mature products and primary care sectors of the pharma industry; the assets UCB sold to GSK include rights to the anti-epileptic Keppra and the allergy drugs Zyrec and Xyzal in certain countries in Africa, the Middle East, the Asia Pacific region and Latin America.

GSK is being ultra-aggressive: along with Sanofi it's been a high-profile deal maker in emerging markets in 2009. Pre -2009, GSK was a player in four of the 10 fastest-growing therapeutic areas in the Middle East and North Africa. Now, the company is in nine of the top 10 therapeutic areas in those countries—a stat it's been communicating as it circles the globe for partners.

Eventually, it expects doors in emerging countries to open for its novel, proprietary specialty drugs. Meanwhile, it, like others, is making hits of some of primary care drugs that are flailing back home, for in emerging markets, primary care drugs still have good value. Hard to believe, but GSK's second largest product in emerging markets is the antibiotic Augmentin, which is growing 30% a year, even as it faces competition from 15-20 generics--people there are so eager for quality, they're willing to pay more out of pocket for branded, proprietary drugs, despite generic alternatives. Now that's a market worthy of a land-grab, and a deal worthy of IVB's Deal of the Year.

image from flickr user mondayne used under a creative commons license.