Anyone investing in emerging markets must surely be aware of the risk and take steps to mitigate that risk. Not too many years ago, for example, Ireland had become an extremely desirable destination for technology and life sciences companies, many of which opened offices or divisions there.
It was rosy indeed until it wasn’t. The overly leveraged, debt-laden economy crashed to the point where it led to renewed emigration. Pharmaceutical and medical device manufacturing companies were among those that were negatively impacted.
McKinsey’s Take on Emerging World Markets for Pharmaceutical Companies
Putting Ireland completely aside, a recent McKinsey report, focused on pharmaceutical manufacturers in 20 emerging markets (Algeria, Argentina, Bangladesh, Brazil, Chile, Colombia, Egypt, India, Indonesia, Kazakhstan, Mexico, Nigeria, Pakistan, Philippines, Poland, Russia, South Africa, Saudi Arabia, Turkey, Vietnam) summed it up as follows:
“A few years ago, multinational pharma companies seeking growth and respite from market uncertainty in Europe and the United States found a haven in emerging markets. Their rapid economic growth triggered an expansion in healthcare coverage and the emergence of a new cohort of consumers able to afford larger out-of-pocket spending on drugs.
But the early euphoria was soon replaced by a more somber outlook. Some emerging markets either suffered downturns or showed weaker growth forecasts as commodity prices fell; some healthcare systems struggled to scale up adequately their provision of care, and local companies became increasingly effective competitors in the pharma market. Furthermore, multinationals themselves often found it difficult to scale up in emerging markets, with particular challenges in talent recruitment, compliance, and organizational setup.”1
As markets suffered downturns, pharma companies failed to meet revenue projections, investors grew wary, and funding dried up.
Ultimately, however, the McKinsey study concluded that the long view must take such cycles into account. Basically, there are bound to be ups and downs. And they project that pharma company revenues in emerging market countries will rise significantly again over the next 10 years.1
The Israel Story
Israel is no longer considered an emerging market, but its story is interesting. The population of Israel is roughly the same as that of New York City. Despite its small size, nearly all of the major U.S. healthcare companies have development centers in Israel, including Johnson & Johnson, Philips, General Electric, Merck Serono, Abbott, Foson Pharmaceutical, and Covidien (Medtronics). Apparently, big pharmaceutical companies hunt for smaller firms with new drugs, and Israel is a good place to find them.
“We’re looking for companies that seem to be really aiming at changing the medical world from top to bottom — companies that really understand the medicine of the future, and are headed there,” Dr. Joan Waldstreicher, Johnson & Johnson’s chief medical officer.2
Where to Find More Information on This Topic
This market research site has a surfeit of very up-to-date articles on the topic at hand. More than you could possibly in a dozen or more sittings.
Check it out: https://www.marketresearch.com/Life-Sciences-c1594/Pharmaceuticals-c89/
About Strategic Systems Group (SSG)
SSG is a technology company exclusively dedicated to providing ERP software systems and consulting services for manufacturers, among them many life sciences organizations. This has been our mission since our inception in 1991. A lot has changed in our market since then, but the need for a comprehensive ERP manufacturing solution has been a constant.