The $47 Billion Hole in Pharma's Near-Term Future

Big drug makers get hammered when their blockbuster drugs go off patent and face competition from generics. But most of them – including Pfizer (PFE), Merck (MRK), Eli Lilly (LLY), Bristol-Myers Squibb (BMY) and Novo Nordisk (NVO) – have hoped that rising sales in emerging markets would make up for that.

And that’s not going as planned, as the Wall Street Journal and YCharts have reported. Even when big pharma sells generics, local generics companies can undercut them by half. The result: according to the Journal, Ernst & Young says pharma companies have been $47 billion too optimistic in terms of emerging market-sales over the next four years.

So whose sales figures are a bit too rosy?

Eli Lilly’s goal is to double 2010 emerging market sales to $4.6 billion in 2015. But it’s experiencing slower growth in China, says the Journal. In the second quarter, emerging market sales slipped 4%.

LLY Revenue Growth Chart

LLY Revenue Growth data by YCharts

At Pfizer, emerging market sales rose 8% in the second quarter to $2.6 billion. But it has scaled back projections to low single digits.

PFE Revenue Growth Chart

PFE Revenue Growth data by YCharts

Merck, which gets 18% of pharmaceutical and vaccine sales from emerging markets, still expects that to be 25% in 2013.

MRK Revenue Growth Chart

MRK Revenue Growth data by YCharts

Novo Nordisk A/S gets 20% of sales from emerging markets, and it expects that to be 25% in five years.

NVO Revenue Growth Chart

NVO Revenue Growth data by YCharts

At Bristol-Myers Squibb, last year emerging markets brought in $887 million, up 10% -- the same percentage growth it had in the U.S.

BMY Revenue Growth Chart

BMY Revenue Growth data by YCharts

Investors have seemed willing to pay an increasing amount per each dollar earned from drug maker.

LLY PE Ratio Chart

LLY PE Ratio data by YCharts

But some companies seem to be having a harder time delivering those dollars.

LLY Net Income TTM Chart

LLY Net Income TTM data by YCharts

A former Pfizer exec told Pharmalot he wouldn’t be surprised to see some big companies withdraw from some emerging markets. That's the problem with competition: it’s everywhere.

From the editors of YCharts.YCharts Pro Investor Service includes professional stock charts, stock ratings and portfolio strategies.



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