Large Opportunity for Big Pharma
We believe that emerging markets' strong competitive advantages aren't being recognized by the investment community.
Emerging markets carry significant barriers to entry and should broaden geographic footprints and strengthen moats for most Big Pharma firms. However, we believe the investment community is discounting the strategic upside of these markets due to 1) recent economic slowdowns that have increased volatility in emerging markets, 2) a historical focus on the dominant U.S. market, and 3) the mistaken investor perception that margins in emerging markets are too low to matter. We expect this discount will dissipate as emerging markets' economies stabilize and their sales contribution increases. In short, emerging markets still offer strong competitive advantages for Big Pharma firms.
We estimate sales from emerging markets will represent 26% of Big Pharma's total sales by 2015, up from 19% in 2011, largely due to patent losses in developed markets along with rapid wealth creation in emerging markets. As the sales contribution increases, we expect the investment community to recognize the importance of these markets.
Damien Conover does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.