As profit margins in established markets decreased, “pharmerging markets” became the new El Dorado for pharma and medtech companies in the 2010s. Many put in big investments only to discover that the volatility of these geographies often meant that the expected returns did not materialise. However, especially post-COVID, emerging markets are once more being seen as promising targets, provided the right strategies are in place, as a number of recent PharmaBoardroom interviewees have noted.
Pharma companies have long been present in emerging markets. That said, a few years ago there was a “pharmerging markets” boom and as drug revenues stagnated in mature markets, companies sought new sources of revenue in these less developed markets. While drugmakers may have underestimated the challenges and returns may not have been as great as expected, these markets have undeniably demonstrated growth. According to IQVIA data from the European Federation of Pharmaceutical Industries and Associations (EFPIA), between 2016-2021 the Brazilian, Chinese and Indian markets grew by 11.7 percent, 6.7 percent and 11.8 percent respectively as compared to an average market growth of 5.8 percent for the top 5 European Union markets and 5.6 percent for the US market.
Progress and Potential
For Patrick van der Loo, regional president of Middle East, Russia and Africa (MERA) at Pfizer, the industry has made considerable progress in emerging markets. “After years of mismatch, there is now a growing sense of progress and potential for emerging markets to play a significant role in driving growth and innovation in the industry,” he says.
After years of mismatch, there is now a growing sense of progress and potential for emerging markets
Patrick van der Loo, Pfizer
Although less predictable than established markets where van der Loo says that companies can see the results of their investments within three years, he believes in the potential of emerging markets. “These countries are investing in their healthcare systems, creating an investor-friendly climate, and actively seeking partnerships,” he says.
Van der Loo recognises that many emerging markets are still not mature. “It is important to note that not all countries are on the same trajectory, and some still face challenges,” and that for pharma companies wishing to develop a presence in these markets “comprehensive planning and coordination to ensure market access, manufacturing agreements, and a complete ecosystem” are required.
Stating a case for collaboration across countries to grow regional potential, van der Loo claims that “it is not feasible for every country to have all stages of the process, but collaboration and specialization can contribute to a forward path.” He also argues that more alignment among nations is needed to unlock the potential of regions such as MERA. “Once the region achieves a more unified approach and collaboration in terms of infrastructure, regulations, and initiatives, it has the potential to become a powerhouse,” he contends. “It is important for stakeholders, including pharmaceutical companies, to support these efforts and work towards a collective and mutually beneficial approach.”
In the medtech space, Siemens Healthineers, Middle East, Southern and Eastern Africa CEO Ole Per Maloy feels that expectations for emerging markets were previously somewhat unrealistic and needed to be readjusted. “I will say that a few years ago, many emerging markets were overhyped and there was some expectation that double-digit growth year on year was going to be the norm,” he asserts. “This did not happen and there has been a realignment of expectation with reality.”
A few years ago, many emerging markets were overhyped and there was some expectation that double-digit growth year on year was going to be the norm
Ole Per Maloy, Siemens Healthineers
Siemens Healthineers, despite having perhaps adjusted its own expectations, has nonetheless experienced considerable success in certain emerging markets. “One success story is Egypt. For a decade we saw double-digit growth and the government and several private investors were investing heavily in the drive for better healthcare,” states Maloy. Although the country later suffered a massive devaluation of its currency and high inflation, Maloy remains optimistic. “I sincerely believe that this will change back, and what we have seen lately is just a bump in the road. In the medium- and long-term, Egypt will recover.”
For Andrew Bird, Interim CEO at Acino, a company where the Middle East, Turkey and Africa (META) region accounts for about 35 percent of its global revenues, emerging markets still offer unique opportunities. “Emerging markets are an exciting place,” he says. “They contain countries that have some of the world’s fastest-growing economies, with continued population expansions and increasing GDP. There are many opportunities for high-quality and effective medicines.”
In emerging markets, you cannot simply take a mature market strategy and try to force it to work
Andrew Bird, Acino
According to Bird, the company owes its success in emerging markets to its ability to adapt its strategy to each market. “As a global pharmaceutical company headquartered in Switzerland, we operate with a Swiss mindset in everything we do. However, in each market we adopt a variety of business models to succeed, essentially being global but acting local,” Bird maintains. “In emerging markets, you cannot simply take a mature market strategy and try to force it to work.”
Applying Leadership Lessons in Mature Markets
After working for a number of years in emerging markets, Maria Fernanda Prado, returned to Europe to head up Janssen Benelux as managing director. In her opinion and in light of the current economic pressures in Europe, the unpredictability she faced in emerging markets prepared her for her current role. “Working in emerging markets is about managing unpredictability and ensuring your innovative pipeline can reach patients despite these factors. This is a useful experience, given the pressure the European market faces today,” she confirms. “My experiences in regions with higher levels of uncertainty have prepared me for this role in Benelux and Europe in its current context.”
Working in emerging markets is about managing unpredictability and ensuring your innovative pipeline can reach patients despite these factors
Maria Fernanda Prado, Janssen
Prado recommends working in diverse geographies, including emerging markets, both from a career development perspective and for the good of the company. “We encourage our talents to experiment with different environments and businesses, to gain diverse experiences and new perspectives. This is great for their development and careers, great for the company in forming future leaders, and great for our countries, to count on highly qualified professionals with a robust background in improving healthcare systems in diverse geographies.”
New Models Coming to the Fore
Joe Henein of NewBridge Pharmaceuticals, a specialty innovative biopharmaceuticals distributor for the Middle East and North Africa (MENA) region, sees that the high prices of cutting-edge innovation is forcing Big Pharma to choose carefully in which geographies to maintain a footprint. This, in turn, is creating significant opportunities for outfits like Henein’s which can represent these innovative portfolios in markets where it may not be economically viable for the sponsor company to do so otherwise.
We have started to witness a rationalization of [Big Pharma’s] presence [in emerging markets] contrary to the global footprint mandates they once believed in … [therefore] the business model offered by NewBridge is becoming more relevant
Joe Henein, NewBridge Pharmaceuticals
“We see many breaking grounds and promising innovations that represent a massive leap forward in medicines that address serious and challenging diseases, in the field of large protein-based molecules, biotechnology, rare diseases therapies, personalized and gene therapy, targeted oncology therapies and vaccines,” begins Henein. “All of these are great advancements in medicines however many come at a price that could be difficult for some emerging markets to swallow.”
“As a result of all the above shifts, many pharma companies started to be selective on where geographically they must be present, and where else they can depend solely on reliable partners. We have started to witness a rationalization of their presence contrary to the global footprint mandates they once believed in, more visible in emerging markets, and MENA is no exception.
He concludes, “13 years ago many were sceptical about the future of our business model. However today, in part because of these shifts and evolving dynamics, I can confidently say that the business model offered by NewBridge is becoming more relevant and a mainstay in the industry across emerging markets, not just MENA.”