Developing markets are the new frontier, still little explored. They may represent a new way to fight competition from generics. The return of investors' risk appetite hurt the pharmaceutical sector. The sector is healthy, but could be even better.
By Marco Caprotti
The return of investors' risk appetite hurt the pharmaceutical sector. The sector is healthy, but could be even better. The Msci World/Health Care index lost 0.20% in August (data in euros, as of August 27), but since the beginning of the year its performance has been positive (+16.79%).
The large companies in the sector have been able to resist and easily overcome the risks associated with the expiry of some important patents which could have given away important market shares to companies specializing in generic drugs. In the US alone, by 2018, patents for drugs with a market share of over 100 billion dollars will expire. The danger was avoided thanks to the inclusion of new preparations in the sample, but also following the attitude of the patients. “There is still a perception that drugs without a strong brand name are of worse quality,” explains Damien Conover, an analyst at Morningstar. “An idea strengthened by the fact that every now and then scandals related to products purchased on the Internet of dubious origin leap to the headlines”. Aifa (the Italian Medicines Agency), placing itself at the same level as the other European regulatory bodies, has decided to make available on its website two in-depth scientific documents on generic drugs, sufficient to deny the inaccuracies circulating .
Emerging opportunities
The pharma giants, however, will not be able to rely on customers' convictions forever. A new way to grow will be (and in part it already is) to focus on emerging markets. According to Conover's calculations, developing countries in 2015 will contribute 25% of the giants' turnover
