Ahead of the game: Global hotspots for business expansion
The pharmaceutical sector holds a prestige position in its contribution to the European economy. Lu Rahman looks at some of the global hotspots and conditions that offer significant opportunity to the market.
The European pharmaceutical industry plays a key role in the European economy. It is Europe’s fifth largest industrial sector, according to the European Federation of Pharmaceutical Industries and Association, which highlights the industry’s strengths as a trade surplus, investment in R&D and the creation of skilled employment across Europe. The European Commission says that in 2012 the market was worth €200bn, employing around 800,000 people.
Despite its established success, emerging markets are key to future success of the overall pharmaceutical sector. A report published by Booz & Company in 2013, discusses the way on which the significance of emerging markets will increase – 52% of those interviewed for the survey’s report expected more than 30% of their global sales to originate in emerging markets by 2018. While Brazil, Russia, India, China, Mexico and Turkey (BRICMT) were highlighted as the dominant areas, second-tier markets such as those in Southeast Asia, would also be increasingly relevant.
In its 2015 Life Sciences Outlook Southeast Asia, Deloitte outlines the potential of this region: “Indonesia is the largest pharmaceuticals market in the growing Southeast Asia/Asia Pacific (SEA/AP) region, followed by Thailand, the Philippines, Vietnam, Malaysia and Singapore. SEA/AP is generally viewed by life sciences companies as secondary to traditional mainstay markets due to lower purchasing power and overall health care system maturity. Yet, the region is developing rapidly and holds considerable future potential.”
Reasons for the region’s potential include a population growth and society’s move away from infectious diseases to chronic diseases. Picking out individual regions, Deloitte says that pharmaceutical sales in Singapore are forecast to grow an average of 9% a year to 2018; the pharmaceutical market in the Phillipines, which was worth $5.2 billion in 2013, also looks likely to grow by 9% a year until 2018.
There are opportunities to be had in this region. According to Deloitte: “Generics account for around 40% of the Philippine drug market by value and 60% by volume. Most of the biggest pharmaceutical companies with operations in the country are foreign but the market share of local companies has been rising slowly.”
Where exactly do opportunities exist? Deloitte highlights innovation as a key factor for businesses looking for long term success. It adds: “While most manufacturers do not consider the region to be an R&D or clinical centre of excellence, some are using facilities there to modify products for emerging/low-cost markets. Moving forward, infrastructure improvements and foreign investment is expected to jumpstart local innovation in numerous forms, including locally based R&D and clinical trials to improve market access, shorten licensing approval periods, or produce a genuine pioneering product developed.”
Deloitte adds that an increasing number of businesses are looking at “SEA/AP as a promising region in which to make bold moves in business model innovation; for example, creating a second brand, forging long-term strategic partnerships, and upgrading supply chains to support near-sourcing of raw materials and finished products to nearby high-growth markets”.
The rise in certain conditions has also created opportunities for pharmaceutical businesses – on of these being obesity. The World Health Organization reports that around 13% of the global population suffered from obesity in 2014 and that the rate of increase in emerging countries is higher than developed regions.
A range of products, including the FDA-approved Contrave, have been developed to service this market. A recent report from Persistence Market Research discusses areas of opportunity for this type of drug: “North America dominates the global market for anti-obesity prescription due to increasing prevalence of obesity and lifestyle associated diseases. Asia followed by Europe are expected to show high growth rates in the next five years in the global anti-obesity prescription market. China and India are expected to be the fastest growing anti-obesity prescription markets in Asia-Pacific region. Some of the key driving forces for anti-obesity prescription market in emerging countries are a large pool of patients, increased government funding and improving healthcare infrastructure”.
Linked to obesity, it's no surprise that diabetes is a growth area for pharmaceutical companies. This year a report by Visiongain predicted that the global market for diabetes medication would hit $55.3bn by 2017. It highlights that the anti-diabetic medicines industry generated $35.6bn in 2012 and revenues will continue to grow to 2023.
Hemant Mistry, a pharmaceutical industry analyst, Visiongain, said: “The incidence of diabetes will surge owing to rising levels of obesity and sedentary lifestyles in the global population. Those trends are most evident in emerging countries, such as China and India, which are expected to account for much of the growth of the treatment market. Also, as companies set up operations and facilities in developing countries, to harness the growing patient pool, this increases market competition. That trend helps stimulate innovation and price reductions, an incentive for less-affluent patients in developing countries.
“Furthermore, the diabetes drug market has a strong R&D pipeline. Also, there’s need for new anti-diabetic treatments with improved efficacy and safety. In addition, as obesity is closely related to type 2 diabetes, medications that target long-term weight reduction and other related conditions are in high demand. Indeed, owing to the multifactorial aspects of diabetes, drug manufacturers developing medications for associated complications – obesity, heart disease, kidney disease or stroke – are evaluating medicines in clinical trials for treating diabetes. That expanded use of anti-diabetics will offer drug manufacturers opportunities to tackle multiple aspects of metabolic disorders and to market drugs to a larger target population, increasing revenues and profits, as well as benefiting patients and healthcare providers. Worldwide, the diabetes drugs market retains great potential for increasing revenues, through technological and commercial progress.”
Like diabetes, the Alzheimer’s market offers opportunities for pharmaceutical manufacturers. There are currently 46.8 million people across the world with the condition – this figure is set to rise to 131.5 million by 2050, according to the Alzheimer’s Society.
While there is currently no cure for the illness, treatments have been developed to aid its decline. One substance which recently received media attention, was LMTX which showed improvement cognitive function and delayed brain shrinkage in those that had a mild to moderate form of the illness. Much work has yet to be done on treatments for this condition but its development offers potential for the sector and those looking to produce similar products.
Over recent years the biologics market has grown in significance. According to Visiongain there are a range of opportunities in this market that will benefit drug developers and producers – in 2014 seven of the ten top selling drugs were biologics. The market holds significant value – BCC Research says it is set to grow from $234bn in 2014 to $386.7bn by the end of 2019. Rheumatoid arthritis for example, has benefitted from the use of biologics.
One company that has taken advantage of the biologics market is Bristol-Myers Squibb – in 2013 the company carried out a $280 million expansion of its biologics facility in Massachusetts. In the same year the company entered into an agreement with Samsung Biologics to manufacture antibody cancer drugs at Samsung’s South Korean plant.
Opportunity for pharmaceutical companies is strong. Societal change and an increase in demand for certain types of drugs mean that new and expanded markets are open to pharmaceutical manufacturers. Thanks to a wealth of market research, future trends are well documented offering increased business for those looking to expand their portfolios.