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China’s Diabetes Epidemic Boosts Big Pharma

The world's largest population of diabetics is growing alarmingly


The remarkably rapid growth of middle-class consumers in China has been a boon to companies like KFC, owned by Yum Brands (NYSE:YUM), Coca-Cola (NYSE:KO) and McDonald’s (NYSE:MCD). And now those very same demographic forces and products are creating a huge opportunity for drug companies, because China has emerged as the world capital of diabetes.

An aging population, more sedentary lives, different eating habits and an increase in obesity have contributed to an explosion in Type 2 diabetes in China over the last decade, according to the International Diabetes Federation.

Indeed, Type 2 diabetes, which is usually associated with age, inactivity, excess calories and obesity, has tripled in China over the last 10 years. The nation now leads the world in diabetes, with 90 million people suffering from the disease, according to the IDF. By comparison, the U.S., struggling with a diabetes epidemic of its own, has 26 million diabetics.

True, much of the increase of diabetes in China is related to age, as authors of a study of diabetes in the population of Shanghai point out. But it’s also largely part and parcel of the global boom in this most post-industrial of diseases.

“Over past decades, a continuous increase in prevalence of Type 2 diabetes, which parallels a marked lifestyle transition and a worldwide epidemic of obesity, has been observed in both developed and developing countries,” write researchers at the Shanghai Municipal Center for Disease Control and Prevention. “Unlike the gradual transition in most Western countries, these changes in China have occurred over a very short time.”

So, while Yum Brands, McDonald’s and Coke were among the first Western multinationals to benefit from the massive Chinese consumer market, major pharma companies are now poised to reap profits on what those companies’ products helped create.

By 2030, China will have 130 million diabetics, according to the IDF. (India, with the second-largest population of diabetics, will have 100 million suffers.) And China alone will create a $3.2 billion market for diabetes drugs by 2016, according to Shanghai-based industry consultant IMS Health, as reported by Bloomberg.

That bodes well for some of the biggest players in the diabetes drug market, including Merck (NYSE:MRK), Novo Nordisk (NYSE:NVO) and Sanofi (NYSE:SNY).

Merck, for example, makes Januvia, which helps stabilize blood-sugar levels. The drug was approved for use in China three years ago and could see a surge in sales once the government approves it for national insurance reimbursement.

Novo Nordisk, meanwhile, is the world’s largest maker of insulin, and China is now its second-largest market after the U.S. Sanfoi also makes an insulin product, one that claims about 17% of the Chinese market.

“We expect China to grow in the range of 15% a year,” Mads Krogsgaard Thomsen, Novo Nordisk’s chief scientific officer, told Bloomberg. “China has such a huge problem — we are talking about 100 million diabetes patients versus 26 million in the U.S.”

And that’s just the diabetes epidemic. China’s total market for pharmaceuticals is forecast to grow 15% to 18% a year to hit $165 billion by 2016, according to IMS data reported by Bloomberg.

Like the baby boomers, that cohort of 78 million Americans just now hitting retirement age, China’s increasingly aged and infirm demographics could mean big profits for big pharma.

As of this writing, Dan Burrows didn’t hold positions in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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