Replies to post #78287 on Biotech Values

[DewDiligence]

BRIC-MTVAP Is the Future of the Drug/Biotech Industry

[BRIC, as everyone here presumably knows, is the ubiquitous acronym for Brazil, Russia, India, and China. MTVAP is the second tier of emerging-market pharma markets, comprising Mexico, Turkey, Venezuela, Argentina, and Poland. (Don’t try to google ‘MTVAP’ because you won’t find it, but I’ll bet you will be able to google it in a year or two!)

Companion reads for this post are the chart in #msg-40906989; the articles in #msg-47510095, #msg-39315651, and #msg-2934280; and last but not least the aphorism in #msg-38038167!]

http://www.nytimes.com/2010/03/17/business/global/17drug.html

›March 16, 2010
By NATASHA SINGER

The leading drug makers need to move quickly to adapt to a new world order in which some emerging markets are set to overtake some established national markets in pharmaceutical sales, according to a report issued Tuesday.

Next year, the report predicted, drug sales in China will outpace those of France and of Germany, while Brazil will be buying more medications than Britain. The report was issued by IMS Health, a research company based in Norwalk, Conn., that tracks prescriptions and other data on drug sales.

Unless the world’s current leaders in brand-name drugs move more nimbly to expand into those emerging markets, they will miss the big growth opportunities and cede those markets to local players, the report said.

Annual growth of pharmaceutical sales in mature markets like the United States and Western Europe has slowed to the low single digits in the last eight years. The slowdown is a result of the worldwide economic crisis, but also of patent expirations on a variety of name-brand drugs, growing use of generic drugs, reduced investments in biotechnology and tighter government restrictions on the pharmaceutical market, the report said.

The United States drug market had sales last year of about $300 billion, with an annual growth rate of 5 percent, IMS said. And even if Congress passes health care legislation, which, according to a recent Credit Suisse report, could increase drug sales by $10.7 billion, the impact on the growth rate would be minimal.

By contrast, IMS said, 17 emerging markets are poised for significant growth. The report grouped the countries, which IMS has called the “pharmerging markets,” into three tiers in descending order of market value growth. China alone occupies the top tier. The second tier comprises Brazil, Russia and India, while the third tier includes Venezuela, Poland, Argentina, Turkey and Mexico.

Last year, those countries accounted for $123 billion — about 16 percent — of more than $770 billion in global drug sales, IMS said. The emerging market sales represented 37 percent of industry growth.

By 2013, those same countries are estimated to bring in an additional $90 billion in sales accounting for 48 percent of industry growth, the report said. Overall, emerging markets will represent about 21 percent of total drug sales in 2013, IMS executives said in an interview.

It estimated that China, the leader of the pack in emerging markets, would account for $40 billion in additional sales by 2013. “These traditionally peripheral economies are gearing up to turn the tables on the established pharmaceutical world order,” the report said.

Certainly, developed markets like the United States and Japan still represent a vast majority of pharmaceutical sales. Even so, the report urged leading drug makers to move faster to capitalize on high-growth emerging markets, where they already face competition from entrenched domestic producers with well-established brands.

A few European drug makers, including Novartis, Sanofi-Aventis and GlaxoSmithKline, have been forging ahead by acquiring local companies or increasing their local partnerships in those countries [#msg-47510095] — or by making major investments in research and development in developing markets.

But, overall, the leading drug makers are underperforming in emerging markets. The top 15 pharmaceutical companies, including Pfizer, Merck and Eli Lilly, together derive less than 10 percent of their sales from emerging markets, IMS said.

To build profitable businesses in these countries, drug makers must tailor their approaches to the specific dynamics and challenges of each market, Murray Aitken, a senior vice president at IMS, said in an interview Tuesday. Some emerging markets for pharmaceuticals have been particularly hard hit by the worldwide economic crisis, he said.

“In Romania, the situation is rather dire,” Mr. Aitken said. “Turkey is in bad shape.” He added, “Welcome to the realities of doing business in these sorts of environments.”‹

[DewDiligence]

China’s Weight-Loss Industry Is Gaining

[This article should be read in conjunction with the stories in #msg-49465915, #msg-48221983, and #msg-47908751; the table in #msg-48556414; the bar chart in #msg-40906989; and the sound-bite in #msg-38038167.]

http://www.businessweek.com/magazine/content/10_24/b4182013742927.htm

›Affluence, more sedentary lives, and an increase in processed foods are driving sales of health foods and gym equipment. Bariatric surgery is up too

June 3, 2010, 5:00PM
By Frederik Balfour

As an only child growing up in Shanghai, Simon Wang was plied with dumplings, ice cream, and Kentucky Fried Chicken by his parents and grandparents. After tipping the scales at 220 pounds, the 26-year-old decided to join Weight Watchers last month.

"I will get a heart attack more easily than a normal person," says Wang, who is 5 feet, 9 inches tall and wants to shed 55 pounds. "When I get older I will have lots of problems, maybe high blood pressure and a lot of other illnesses."

After struggling for millennia to feed its population, China, the world's fastest-growing major economy, now faces the opposite problem. Some 30 percent of adults are overweight or obese [and 10% of adults are diabetic—see #msg-48221983], compared with 25 percent in 2004, figures Barry Popkin, director of the Inter-Disciplinary Obesity Center at the University of North Carolina at Chapel Hill. In Beijing, 40 percent of Chinese boys struggle with their weight. Greater affluence, less physical activity, and a diet with more meat and processed food have expanded girths. The problems are most pronounced in cities like Shanghai and Beijing, where more people drive and have easier access to fast food.

The rising rates complicate China's plan to overhaul a health-care system that leaves more than 300 million people without insurance. The government is spending $125 billion to provide coverage for all 1.3 billion Chinese by 2020. The plan includes only basic benefits, not services such as outpatient care for chronic diseases linked to obesity, says Wang Shiyong, senior health specialist at the World Bank in Beijing.

More than 92 million Chinese adults suffer from Type 2 diabetes, caused mainly by a high-calorie diet and sedentary lifestyle, according to a study in the Mar. 25 New England Journal of Medicine. Based on this data, the International Diabetes Federation in Brussels estimates close to half a billion Chinese will have the disease by 2030. The government "is very concerned," says Chen Chunming, professor of nutrition at the International Life Sciences Institute in China, a state-affiliated public-health organization.

Calorie counters like Wang are creating demand for the low-fat foods and weight-loss programs that figure so prominently in the U.S. Sales of soy and fruit bars are growing "really fast, especially to office ladies who are so afraid of gaining weight," said Michael Zhang, chairman of Otsuka (China) Investment. Tokyo-based Otsuka makes the popular Soyjoy bar, which has been available in China since 2008, and Zhang says Soyjoy sales there will overtake those in the U.S. this year. Weight Watchers China, a joint venture between Weight Watchers International (WTW) of New York and Paris-based Danone, the world's largest yogurt maker, opened its first center in Shanghai in August 2008. It has since opened three more there, another in Nanjing, and plans to expand to other cities, according to Shan Jin, director of program development.

The desire to lose weight and achieve "a more healthy lifestyle" are also luring customers for Zhongti Beili Health Club, a joint venture of Bally Total Fitness of the U.S. and Beijing-based China Sports Industry Group, according to the venture's deputy general manager Derek Xue. The company plans to double its chain of gyms to 28 by yearend, he says.

China has about 3,000 health clubs, with about 3 million active members, estimates Marco Treggiari, China managing director of Italy's Technogym. The equipment maker supplies about 400 independent gyms and facilities in 210 five-star hotels. Sales will grow as much as 30 percent this year, to $18 million, he says.

Corporate clients are becoming an important source of that growth. Dow Chemical (DOW) has equipped a 2,600-square-meter sports facility in its Shanghai headquarters with Technogym treadmills and step and weight machines, says Fiona Bao, Dow's medical director for North Asia Pacific. "Obesity is no longer just a personal-health issue. It's related to productivity," she says.

Some Chinese are opting for a quicker fix. Zheng Chengzhu, chief of minimally invasive and bariatric surgery at Changhai Hospital in Shanghai, says he performs about 100 obesity-related operations a year, compared with 20 to 30 a few years ago. Allergan (AGN), maker of a device used in gastric-banding surgery, has applied to the government to sell its Lap-Band in China, says Judy Low, a company spokeswoman in Singapore.

One incentive for a smaller waistline, beyond better health, is the potential to make more money. Wu Yu'e, 23, an engineer who joined Weight Watchers, says employers in China place a premium on physical beauty especially for women. If she slims down, she says she will get a higher-paying job. "It will also help me find a boyfriend," she adds.‹

[DewDiligence]

Stephen MacMillan, ex-CEO of SYK, resigned because he wanted to date an employee and the BoD said no, according to the WSJ:

http://online.wsj.com/article/SB10001424052702304791704577420681311173856.html

At the time of the resignation in Feb 2012, SYK said it for “family reasons.”

p.s. MacMillan is the author of one of my favorite soundbites about The Global Demographic Tailwind: #msg-38038167.

[DewDiligence]

The WSJ, commenting on the BAX-Gambro deal, paraphrased something that Stephen MacMillan, the former CEO of Stryker Corp., said a few years ago.

WSJ (http://online.wsj.com/article/SB10001424127887323901604578159562802281322.html ):

As the world gets richer, lifestyles get unhealthier. At least that's what Baxter International is betting with its $4 billion acquisition of Gambro…

Stephen MacMillan (#msg-38038167):

In the developed world, people are getting older and sicker, and in the developing world, people are getting richer and fatter.

I’m partial to MacMillan’s version.