Quarterly earnings calls seem lacking these days unless a company references its plans for emerging markets. PharmAsia News combs through quarterly earnings reports to spot developing trends in emerging market strategies.

J&J Sees BRIC Reform Boon To Device & Diagnostics

Like many healthcare companies, Johnson & Johnson is monitoring healthcare reform that is increasing patient access to healthcare in emerging markets.

"While progress has been made, sizable opportunities still exist," J&J CEO William Weldon told investors Jan. 26, highlighting expectations that India's covered population will double to 220 million by 2015 and China's planned universal coverage by 2020.

China's healthcare reform includes a push to improve hospitals in clinics in smaller cities and rural China. Weldon said reforms like this will especially impact the medical device and diagnostic markets, and in the BRIC markets in particular.

J&J launched a medical device manufacturing plant in the Southern Chinese city of Suzhou in 2008 to produce J&J's DePuy products. Xie Wenjian, managing director of J&J Medical China, said it will become J&J's largest medical device plant by 2013 (Also see "J&J Opens Device Plant In Suzhou, Expects Larger Piece Of China’s Growing Device Market" - Scrip, 9 May, 2008.).

GSK Shuffles SG&A To Emerging Markets

Instead of talking about emerging markets broadly, GlaxoSmithKline broke down its plans to scale-up by region. And GSK CEO Andrew Witty seems to have a bit of advice for companies trying to expand their China operations: Don't go nuts.

"In the Middle East, North Africa, we're getting very close to where we need to be. We're continuing to build up in China, although not in a nuts way, a pretty gradual way. Keeping control of your operations in China is not a trivial proposition," GSK Andrew Witty said during the Feb. 4 earnings call.

GSK reported a 3 percent increase in overall sales, which were hampered by a 13 percent drop in sales by its U.S. pharma unit. On the flip side, the emerging markets grew 20 percent for the year to £2.97 billion ($4.67 billion). In particular, Advair (fluticasone/salmeterol inhalation power) had a strong year in the emerging markets, growing 21 percent to $433.5 million.

Witty also noted the new opportunities in emerging markets thanks to GSK's $2.8 billion acquisition of dermatology firm Stiefel (Also see "GSK Argues Its Strategy Is Delivering As It Makes More Cuts, Including In R&D" - Pink Sheet, 8 February, 2010.).

"With an acquisition like this, we have the chance to now globalize a portfolio ... which for whatever reason has been resource constrained. No Stiefel products in Japan, no Stiefel products in China, no Stiefel products in India. That clearly is an agenda for us to move forward."

GSK, like most companies, has looked for a way to reduce R&D spending and is vocal about reallocating some expenses to non-Western markets.

"We've taken a lot of money away from legacy businesses, particularly in Western Europe and America, and we've redeployed them into our emerging markets," Witty said.

"For the very first time, in December 2009, we employed more representatives outside of America and Europe than we did inside," Witty added.

The day before GSK's earnings call, Pfizer told investors the company aims to reduce costs by $4-5 billion by the end of 2012 while stepping up investments in emerging markets (Also see "Pfizer's Core Leaders Outline Drive To Downsize In U.S., Europe While Expanding In BRIC Countries Including China" - Scrip, 5 February, 2010.).

AstraZeneca's "Regionally Driven" Strategy

AstraZeneca is pushing a branded generics strategy in emerging markets, and despite some hiccups, CEO David Brennan, sees steady progress.

"We believe that we can continue to drive double-digit growth [in emerging markets] by selectively augmenting our emerging markets portfolios with branded generic products that are sourced from outside of AstraZeneca when we see the opportunity for them to create value under the umbrella of the AstraZeneca brand," Brennan said.

"It's a regionally driven strategy. It's not something that applies across all markets," he added.

In 1999, the newly merged AstraZeneca garnered 6 percent of its revenue from emerging markets. Ten years later, they now account for 13 percent of revenue, and Brennan believes emerging markets will contribute more than one-quarter of company revenue by 2014.

"We believe we are very well positioned in those markets," Brennan said.

Indeed, the company is leading its multinational rivals in China with an annual growth rate of almost 30 percent. AstraZeneca touted the prospects of China in its recent tie-up with Forest Laboratories, in which AstraZeneca got ex-U.S., Canada, and Japanese co-development and commercialization rights for the Phase III broad-spectrum antibiotic ceftaroline (Also see "AstraZeneca Sees Emerging Market Opportunity for Forest Anti-Infective" - Scrip, 12 August, 2009.).

Brennan also announced that Executive VP Bruno Angelici, who led the company's emerging market strategy since 2001, is leaving the company. Tony Zook, VP of global marketing, will take on Angelici's responsibilities.

- Daniel Poppy (d.poppy@elsevier.com)

J&J, GSK, AstraZeneca's Emerging Markets Roundup: PharmAsia News Earnings Call Roundup

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