A recent IMS Health study predicts that by next year, drug sales in China will surpass prescriptions in France and Germany — while Brazil will be buying more medications than the U.K. That means drugmakers in emerging markets are on the verge of a tremendous explosion in sales and profits much like the U.S. pharmaceutical industry saw at the end of the 20th century.
There’s more. The report warned that unless the current leaders in big pharma get their act together — namely Pfizer (PFE), Merck (MRK), Eli Lilly (LLY), and GlaxoSmithKline (GSK) — they will be forever eclipsed by the local players in these markets.
To help you cash in on this upcoming drug boom in emerging markets, here are three exciting emerging market stocks from around the globe that are leaders in their home pharmaceutical market:
Emerging market drug stock #1: India’s Dr. Reddy’s Labs (RDY)
India’s Dr. Reddy’s Laboratories (RDY) develops and manufactures generic and brand name drugs. Since this company is located in India, it has two important advantages: low cost of operation, and immediate access to the tremendous populations of Asia. As more and more big name drugs lose patent protection, Dr. Reddy’s is ramping up production to offer these important medications at much lower costs. RDY isn’t just riding the coattails of other drug makers though. Dr. Reddy’s is building up its biotech business and is expanding its drug discovery research arm. Dr. Reddy’s did post a loss in its latest quarterly report last January, but it was mainly due to one-time charges. The stock has more than tripled since the March 2009 lows and shows no sign of slowing down. During the last quarter, the company launched 27 new generic products, filed 16 new product registrations and filed 11 DMFs globally – meaning it is dedicated to dominating not just the drug industry in India but beyond.
Emerging market drug stock #2: Israel’s Teva Pharmaceuticals (TEVA)
Israel’s Teva Pharmaceutical Industries (TEVA) is the world’s largest generic pharmaceutical company. Through its subsidiary Teva Pharmaceuticals USA, the company makes generic versions of brand-name antibiotics, heart drugs, heartburn medications and about 300 generic products. Teva’s U.S, generic products include equivalents of such blockbusters as antidepressant Prozac and cholesterol drug Mevacor. The company is Israel’s top pharmaceutical company and also develops and manufactures proprietary drugs, including multiple sclerosis treatment Copaxone and Parkinson’s disease treatment Azilect. Teva’s active pharmaceutical ingredients division makes drug components for the company and other pharmaceutical manufacturers. Analysts believe TEVA’s earnings are going to grow at a rate of 15% this year, on top of earnings growth across each of the last four consecutive quarters. This generic drug stock is really hitting its stride right now – and on top of this growth, yields a respectable dividend of about 1.6%.
Emerging market drug stock #3: China’s WuXi PharmaTech (WX)
WuXi PharmaTech (WX) has grown into one of the largest and most successful outsourcing powerhouses in China since its founding in 2000. WuXi PharmaTech was actually started by Dr. Ge Li, a top Chinese research scientist who was educated and trained in America, and co-founded the drug development company Pharmacopeia. Along with Li, WX has a very experienced management team that includes Western-trained Ph.D.s and MBAs with experience in drug R&D procedures and Western-style business practices. This allows them to navigate regulatory approval structures with aplomb. Currently, WuXi has about 250 key customers, including all of the world’s top 10 pharmaceutical companies. In fact, Pfizer and Merck are two of the company’s largest customers, with each accounting for more than 10% of its revenues. What’s more, WX has 100% repeat business from its top 10 customers over last three years. WuXi has ties to bigger companies now, but it could be coming into its own very shortly. A year ago WX took a loss of $93.9 million in its fiscal first quarter, but revenue rose 15% this year to $73.9 due to growth in laboratory service revenue and powered profits of over $12 million.