Big Pharma targets emerging mkts

On Wednesday, GlaxoSmithKline (GSK) announced a joint venture in China for the manufacture and distribution of vaccines in the region. This was the second such alliance for GSK this year in that country. In June, the company had signed an agreement with a Chinese biotech company to develop and manufacture flu vaccines.

Back home, Hyderabad-based Shantha Biotech was acquired in July by European vaccine major Sanofi Pasteur to leverage on its low-cost vaccine manufacturing strengths. Sanofi expects the deal to help the company position itself in important emerging markets.

These are a couple of examples of how multinational drug companies, known so far for an appetite in acquiring companies owning potential blockbuster medicines, are increasingly going for a new breed of targets — firms with key marketing presence in emerging markets such as India and China.

The interest in research on hitherto neglected tropical illnesses endemic to such regions are also increasing, indicating Big Pharma’s newly found business potential of the region. For instance, Abbott Laboratories acquired the entire pharmaceutical business of European chemical giant Solvay for $6.6 billion last month. It feels the deal, among other advantages, will help it expand the drug and vaccine portfolio in key high-growth emerging markets. A couple of months earlier, global drug majors Pfizer Inc and GSK formed a joint venture company that focuses exclusively on HIV/AIDS medicines. The new company is conducting R&D activities meant to specifically address accessibility issues in developing countries.

Japanese major Daiichi Sanyo’s acquisition last year of the country’s biggest drug company, Ranbaxy, was again aimed at leveraging the latter’s emerging market strengths. Hardly a year after Ranbaxy became a Daiichi subsidiary, the strategy is paying off, with Daiichi beginning to sell its products through Ranbaxy’s marketing channels in India, Romania and, very recently, Mexico.

Recent exclusive manufacturing pacts such as GSK-Dr Reddy’s and Aurobindo-Pfizer are also intended to strengthen the multinational companies’ presence in the emerging markets of Asia, Europe and Latin America.

Industry experts feel the developing world and the tropical illnesses endemic to these regions are becoming increasingly attractive to the big players, due to the high economic growth in key markets like India and China. The drying of new drug portfolios in the developed markets has also been cited as a reason for Big Pharma to search for new revenue-generating business models.

Multinational interest in researching medicines for tropical illnesses has also been increasing in recent years. Last month, US drug major Merck Inc announced the setting up of a joint venture with England’s Wellcome Trust to develop affordable vaccines that can prevent diseases that commonly affect low-income countries.

MSD Wellcome Trust Hilleman Laboratories (the name of the JV) will also collaborate with local pharmaceutical companies that can cheaply produce any vaccines it develops. Through this model, the MSD-Wellcome JV hopes to deliver vaccines specifically designed to meet the needs and practical realities in developing countries. This could also pave way for Western vaccine makers to allow generic versions of vaccines, such as those against the human papilloma virus or pneumonia, available in rich countries but too expensive for poorer ones, it was felt.

Bangalore-based Advinus Therapeutics, a Tara group-promoted drug discovery company is already running a collaborative research programme with not-for-profit Medicines for Malaria Venture (MMV) and Genzyme to counter the drug resistance problems in anti-malarial treatments. Drugs for Neglected Diseases Initiative , another not-for-profit organisation, has similar research tie-ups with companies such as Sanofi and Merck to find medicines for tropical diseases.

Novartis, AstraZeneca, Eli Lilly and GSK have set up research facilities and programmes dedicated to tropical diseases.

According to a recent KPMG study, drugs worth $65-70 billion are expected to go off-patent in five years, while there are very few new drugs that can generate similar revenues. The price erosion for drugs going off-patent is almost 90 per cent in key markets like the United States. On the other hand, developing countries like India offer a growing market and an open field for introduction of new medicines for illnesses that kill millions of people every year.