Replies to post #114203 on Biotech Values

[jbog]

Dew,

And so, the key there is operating margins, which are very, very consistent with our overall business.

GSK is one of the few companies that break out operating margins has their margins at 65% in the US, 54% in Asia/Japan and 34% in Emerging markets (no RD charges).

GSK actually looks like it treats urban and rural China differently.

GSK

Whether you are in New York or New Delhi, receiving a medical diagnosis of cancer, diabetes, or asthma is a daunting prospect. The desire for good health is the same worldwide. However, unlike in the developed world, the emerging markets are an enormously diverse group of budding economies that have experienced dramatic growth in recent years. This means that a pharmaceutical company like mine, GlaxoSmithKline, cannot take a mature market strategy and try to force it to work. A single approach to improving medical care is difficult, inappropriate, and inequitable. To succeed in emerging markets, pharmaceutical companies will have to adopt a variety of models.

There are many different definitions of emerging markets. The World Bank's classification of low-income, lower-middle-income, and middle-income countries starts at GNI per capita of $975 and goes up to $11,906 — a huge range. Affordability of medicines and vaccines is one of many barriers to accessing health care in these countries — where the vast majority of health-care spend is out of pocket and people's ability to pay for medicines varies significantly. In addition, varying standards of health care exist; many of the poorest do not have access to hospitals or clinics let alone the high quality medicines that we take for granted in developed markets. These challenges are exacerbated by an increasing incidence of chronic diseases such as asthma and diabetes.

Yet emerging markets represent an important source of future business for health care companies. Their populations are huge and growing. For example, every year China adds almost the equivalent of one new Australia to the world's population. As GDP growth continues in emerging markets, roughly 100 million people are added to the middle class each year, and they are investing in health care for their families. Some have suggested that the so-called BRICMT countries — Brazil, Russia, China, India, Indonesia, Mexico, and Turkey — could account for 20% of the global pharmaceuticals market by 2020.

To be successful, we have to understand the dynamics in these markets and the wealth pyramids that exist. It is fundamental that we run all aspects of our business in a responsible manner. The pharmaceutical industry must balance the drive to build a sustainable business through increased market share, volume, and profits with a global commitment to work with governments and other stakeholders to support efforts to deliver our medicines and vaccines to as many people as possible.

Understanding these individual countries means recognizing that very large birth cohorts will result in an increased need for infant and childhood vaccines. It means realizing that emerging markets are brand-driven economies and therefore classic products such as Augmentin, an antibiotic that is 30 years old, are still growing at more than 20% in some parts of the world. It means developing a broad portfolio of medicines that can be offered across the emerging markets' varied health-care systems. And it means working to treat more patients for the same amount of profit, through differentiated pricing; partnering with NGOs, governments and health foundations; and not compromising on quality.

At GlaxoSmithKline, our approach to providing patients with access to our medicines is evolving. We have extended a flexible-pricing strategy for middle-income countries to improve the affordability of our medicines and increase access for patients with lower income levels, while remaining profitable. This is challenging and the work is at an early stage. We have initiated a number of acquisitions or innovative partnerships with high-quality generic players such as Aspen and Dr. Reddy's to expand our product portfolio. We also have some projects looking at alternative distribution channels.

Our goal is to transform our company and strengthen our contract with society to enable us to navigate the coming years successfully and retain our leading-edge position as a company able to meet patients' and health-care providers' needs into the future.

As Western pharmaceutical companies consider how to be successful in emerging markets, they must address two key questions:

How will we bring high-quality health care to patients wherever in the world they may live?

How do we effectively manage the transformation of the traditional pharmaceutical business model to one that meets the diverse range of needs of the emerging markets?

Abbas Hussain is president of the emerging markets business at GlaxoSmithKline

[DewDiligence]

Pharma/The Global Demographic Tailwind factoid: SNY currently has 19,000 sales reps in emerging markets. (Source: SNY’s 4Q10 CC)

[DewDiligence]

Prescription-drug sales in emerging markets will reach $400B in 2020, according to IMS; this is roughly the same amount as the current combined sales in the US and the big-5 countries of Europe (Germany, France, UK, Italy, Spain).

Source: http://www.bloomberg.com/news/2011-04-03/glaxo-faces-war-for-talent-in-emerging-market-race-with-pfizer.html

[DewDiligence]

ABT and PFE have been trading as though they were engaged in a zero-sum game in the RA market; lately, when one stock goes down, the other goes up. (Today, it’s PFE up and ABT down.)

This seesawing price action is pretty silly insofar as the big story for both companies is The Global Demographic Tailwind and branded generics in emerging markets (#msg-59590951, #msg-61699995, #msg-61960541).

[DewDiligence]

Pfizer Goes Prospecting in Russia

[Russia has some serious problems for investors, of course, but such companies as DE (tractors) and HNZ (ketchup) have done very well marketing their products there. In general, I’d rather own companies whose sales in Russia come from these kinds of “non-strategic” items—including pharmaceuticals—rather than natural resources, where eventual expropriation is a likely outcome. (Note that Russia does not belong to the WTO.)]

http://finance.yahoo.com/news/Pfizer-and-ChemRar-High-Tech-bw-3063152338.html?x=0&.v=1

›Pfizer and ChemRar High Tech Center Announce Plans to Explore Innovative Medical Research and Development Partnership in Russia

Collaboration focused on addressing unmet medical needs of patients in cancer, cardiovascular, central nervous system, and other major therapeutic areas that impact the Russian population

Wednesday June 29, 2011, 9:21 am EDT

WASHINGTON--(BUSINESS WIRE)-- Pfizer Inc. (NYSE:PFE) and the Russian pharmaceutical investment and R&D group ChemRar High Tech Center (ChemRar) announced today that they have signed a Memorandum of Understanding (MoU) to explore a collaboration focused on research, development and commercialization of innovative drugs in Russia and other countries. The announcement was made during the BIO International Convention.

The two companies will explore opportunities for accelerated development and commercialization of certain innovative compounds from Pfizer’s pipeline, through technology transfer and out-licensing deals with venture funding. Through this arrangement, Pfizer and ChemRar plan to develop innovative compounds and vaccines to treat patients with cardio-metabolic, infectious and oncology diseases, which are a high priority for the Russian Federation healthcare system.

Under the terms of the MoU, the two companies can further collaborate with other potential partners, including the Moscow Institute of Physics and Technology, the Skolkovo Foundation and other members of the Russian Biopharmaceutical Cluster “Northern,” created under the Federal Target Program of the Ministry of Industry and Trade of the Russian Federation. In addition, the companies can establish a shared-risk platform for several Pfizer R&D programs designed to achieve clinical candidates and proof of concept in the clinic.

“We see Russia as a potential leader in the innovative pharmaceutical, biotechnological and nano-technological areas,” said David Simmons, President and General Manager, Emerging Markets and Established Products, Pfizer. “The Pharma 2020 Strategy driven by the Russian Government creates favorable conditions for transition of the Russian pharmaceutical industry to the innovative development model, and Pfizer is excited to be a part of these new opportunities.”

“Considering the importance of international partnership to our Government’s vision for Russian business, the expertise of leading pharmaceutical companies such as Pfizer is very important. Agreements such as this are critical to developing the applied sciences and university research in Russia, within the global market environment. We hope our partnership will also help create a belt of small innovative businesses within the Biopharm Cluster “Northern” initiative created under the auspices of the Moscow Institute of Physics and Technology and fully supported by the Ministry of Industry and Trade of the Russian Federation,” says Andrey Ivaschenko, Chairman of the Board, ChemRar.

To expedite cooperation Pfizer and ChemRar will create an Expert Committee, which will include specialists with a high level of experience and expertise.

The partnership with ChemRar is an important component of Pfizer’s broader strategy in Russia named “MORE THAN,” which is designed to contribute to the modernization of the national healthcare system, extended life-expectancy, lowered mortality rate and a better quality of life for all Russians. More Than is designed to create value for the Russian people through progressive partnerships aimed at the modernization of the pharmaceutical industry, accelerating the development of medical innovations, and improving access to medicines and better healthcare.

As part of its investment strategy in Russia, in March 2011 Pfizer announced the agreement with Russian biopharmaceutical company Petrovax Pharm to manufacture Pfizer’s innovative pneumococcal vaccine [Prevnar 13] in the Moscow region, as well as the June 2011 launch of the capability building program MORE THAN EDUCATION in partnership with Saint-Petersburg, St. Petersburg State Chemical-Pharmaceutical Academy and the Russian biotechnology company Biocad. Pfizer and its partners look forward to contributing to the creation of medical innovations, further modernization of the Russian pharmaceutical industry, improving the national healthcare system and delivering better health and quality of life to Russian citizens.‹