Despite slow growth, US stays drugmaker heavenLilliputs keep cropping up here and there, but can Gulliver be ignored?

Despite slow growth, US stays drugmaker heavenSure, emerging economies are racing ahead as the latest grounds for pharma play, but the US, the largest of them all, would continue to be the cynosure of companies for a long time to come, say experts.

Key countries in the developing world — Brazil, Russia, India China, Mexico, Indonesia, Turkey, collectively called the E7 or Emerging 7, are expected to gallop ahead and constitute about a fifth of global pharmaceutical sales of $1.3 trillion by 2020.
IMS Health, the pharma market intelligence provider, foresees the pharma market in developing countries growing at 14-15% in 2009, far faster than the 1-2% expected in the US.

Bino Pathiparampil, vice president, research, at institutional brokerage IIFL, said that’s because the US is simply the largest market globally and well-lubricated in nature.

Estimates peg the US drug market sales at about $270-300 billion annually, or about 48% of the world total.US per capita expenditure on drugs is estimated at $1,141 (around Rs 50,000) in 2009.

That’s nearly half of the world market, and the most profitable one at that, so it just can’t be ignored, says Sujay Shetty, associate director, PricewaterhouseCoopers.

“Prices in the US will remain better than most markets. Health insurance in that country will be the prime facilitator of growth there,” says Shetty.

Analysts say margins in the US are around 16%, much less than the 20-25% available in emerging countries. But clearly, sheer size overrides all such concerns.

“An approval from the US FDA (Food and Drugs Administration) for any drug would mean access to such a vast market. And no company would want to miss that opportunity,” said Pathiparambil.

Sun Pharma has 108 products awaiting approval from the FDA, a company spokesperson said. “In the last fiscal, US sales for us were $337 million. The country will continue being a high-priority area,” said the spokesperson, adding Sun will file more products, improve share in existing products and keep looking for acquisition targets in the US.

A top official from Ranbaxy Laboratories said the company is hopeful of monetising its 180-day exclusivities on billion dollar drugs such as Flomax (to treat enlargement of prostrate gland in men), Lipitor (cholesterol fighter), and Nexium (for treating heartburn or acidity) in the next few years in the US.

Analysts predict Ranbaxy to garner about $3.5 billion in exclusivity sales for the three drugs alone.

Despite its growing presence in markets like Mexico, Romania, Africa, the US is a key market for the Gurgaon-based company, and accounted for approximately 24% of its sales last fiscal.
Likewise, Mumbai based Lupin is also banking heavily on the US.

A company spokesperson says from about 30% or about $311 million at present, US business would contribute to about 40-50% of the total turnover of the company by 2013. “We also have several first to file or FTF opportunities to cash in on.”