GlobalData Release: Analyst Insight: Rough Diamonds? Sanofi (France) Eyes Columbia, Indonesia, and Vietnam
Published: Sep 17, 2012
Coming on the heels of the ongoing re-assessment of emerging markets by pharmaceutical companies, GlobalData believes Sanofi could be trying to achieve comparative advantage over its competitors by moving most of its labor-intensive processes to CIVETS (Columbia, Indonesia, Vietnam, Egypt, Turkey and South Africa) countries. The CIVETS countries, which are regarded as second-generation emerging markets by virtue of their dynamic economies and young, growing populations, are regarded by economists as being quite promising. Recent calls for caution by analysts about the overestimation of emerging markets by pharmaceutical and biotech executives have prompted some of these companies to announce more realistic financial estimates. Pfizer recently reduced its growth projections in emerging markets, while Eli Lilly has declared that slower growth in China and pricing pressures in certain countries are affecting sales and could impact its goal of doubling its 2010 emerging market revenues to $4.6 billion by 2015. The European debt crisis has not helped pharmaceutical companies, many of which are already reeling from staggering revenue losses due to the expiration of patents of their blockbuster drugs. According to Viehbacher, the financial situation in Europe has been costing Sanofi €200m–€300m ($262m - $393m) a year, with governments repeatedly cutting healthcare spending.
As explored in GlobalData’s Pharmaceutical Leaders 2012- Key Trends, Emerging Strategies and Financial Analysis of the Top Performers Report, the major pharmaceutical players are progressively exploring other options outside of the developed markets for sales growth. Despite concerns about the growth and sustainability of emerging markets, they arguably remain one of the best sources of drug sales for pharmaceutical companies grappling with the patent cliff. However, Sanofi appears to be positioning itself to reap significant benefits from its proactive attitude in scouting for untapped, fertile economies outside of the emerging markets. If the company succeeds in finding suitable targets for strategic collaborations or M&As in Columbia, Indonesia, and Vietnam, its costs could be significantly reduced as wages in these countries are expected to be lower than in first-generation emerging markets. In addition, establishing itself as a force to reckon with in these countries could potentially increase the barrier to entry for other pharmaceutical companies that may decide to later focus on the CIVETS countries.
Like every good story, the end is inevitable — at some point, emerging markets are bound to become developed economies. At this juncture, pharmaceutical companies would again be faced with questions of how and where to find alternative growth opportunities and profitability. Sanofi is aiming to get a head start; who’s next?
Related research: Global Healthcare Policy Analysis 2012 – Regulatory, Pricing, and Reimbursement Assessment This expert insight was written by Adefemi Adenuga, GlobalData's Healthcare Industry Dynamics Team analyst. For more information, or to request an interview, contact our press office on the details below.
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