The global pharmaceuticals industry is looking to cash in by accessing a new market. Over the next decade, the majority of pharma industry growth is likely to come from emerging and developing countries, according to investment research.
Investors looking at health care would do well to look at and explore what leads to well-being, according to UBS Investment Research, and that means vaccines.
Through vaccines, pharmaceutical companies can provide a societal benefit while increasing sales in less developed markets. According to the company’s research, vaccines are the best way for pharmaceutical companies to “do well by doing good.”
Emerging markets have increased the demand for global vaccine. From 2005 to 2011 the year-over-year growth rate for vaccine sales was 15% and that demand should remain high for the next five years. The y-o-y rate should average 8% sales from 2011 to 2017, according to UBS.
The benefit of vaccines is that they are the most cost effective form of health care. The research suggests that when $1 is spent on a vaccine, anywhere from $2 to $45 is saved in treatment costs later on.
Interest in the vaccines industry is picking up too. The Gates Foundation is planning to raise $10 billion to develop and deliver vaccines for the world’s poorest countries. And in 2010, the foundation declared this would be the “Decade of Vaccines.”
And a large benefit of vaccines is that they are easy to roll out. Those needing treatment don’t need to be transported to hospitals, instead the vaccines can be brought to them and easily administered by trained personnel. Plus, the research and development for vaccines enjoy a high success rate, reducing the uncertainty of investment.
However, emerging markets can be difficult with limited health care budgets and infrastructure. Supply can also be unpredictable. Vaccines also take roughly 15 years to be brought to the market.
The companies in this area to keep an eye on are GalxoSmithKline, Sanofi and Merck. Those three companies, plus Pfizer and Novartis generated 83% of the global vaccines market sales in 2011. According to UBS, GSK is the best positioned of the big five.
And since barriers to entry are exceptionally high, these five companies are well positioned. UBS places all five of these companies as Buys.
Right now it is the world’s largest vaccine provider and should hold that title. It has recently had success with a malaria vaccine and currently markets more than 30 total vaccines, plus it has another 20 in development.
The bulk of Merck’s sales (around 75%) are in the U.S. and it has the world’s top-selling HPV vaccine. While Merck lacks a big presence in China, it is making efforts to find local partners.
The key component in Pfizer’s vaccine business, Prevnar, has been approved for use in 13 different types of diseases and has a product launched in more than 90 countries. Sales in emerging markets for this vaccine accounts for 21% of Prevnar total sales.
Present in 150 countries, Sanofi has a broad range of vaccines against 20 different diseases. It is the largest of influenza vaccine producers in the world. Around 12% of Sanofi’s total sales come from vaccine revenues.
The smallest of the big five, most of its sales are driven by influenza vaccines, of which it is the second largest producer. While Merck is looking for local partners in China, Novartis has access after acquiring a Chinese vaccines company.