Marketing Resume Samples

Strength Emerging In The Health-Care Sector

(By Damien Conover, CFA)

A recent shift in sentiment is increasing valuations of health-care stocks. As wealth creation in emerging markets continues to develop, these geographies offer attractive areas of growth for Big Pharma firms and other health-care industries. Subsectors of consumer and animal health-care look attractive. 

Shifting Sentiment Supports Recent Health-Care Rally Although relatively late to the upswing in the stock market, health-care stocks have recently posted solid gains. With macroeconomic health-care trends improving and uncertainty over health-care reform-related costs subsiding, we believe the investment community has gained increased confidence in the health-care sector. Furthermore, as uncertainty with the overall market's outlook increasing, the defensive nature of health care is also appealing to investors. Even with the recent health-care rally, we continue to think there are attractive investment opportunities across a number of industries in health care.

Emerging Markets Offer Upside Growth for Big Pharma and Other Health-Care Industries

Emerging markets offer significant upside for the large pharmaceutical companies. However, we believe the market is discounting this opportunity for several reasons, including: one, the analyst tradition of focusing on the historically dominant U.S. market; two, mistaken investor perception that margins in emerging markets are too low to matter; and three the lack of understanding of sales growth in emerging markets.

Historically, emerging markets have not been attractive for branded drugs. Incomes in these geographies were too low to pay for drugs, and the lack of respect for the law along with poor law enforcement of intellectual property led to rampant counterfeit drugs. However, the wealth explosion and the importance of brands signifying quality have created very important new markets for the drug industry. These areas represent a paradigm shift for the investment community, which has long viewed the United States, Western Europe, and Japan as the sole contributors to pharmaceutical sales growth. Furthermore, while pricing is generally not as strong as in developed markets, even at an average discount of close to 30% compared with developed-market margins, these sales provide a strong contribution to the bottom line.

Emerging-Market GDP Growth Drives Pharmaceutical Spending Growth in gross domestic product is directly correlated with drug spending. Based on a sample of 63 emerging and developed countries, World Markets Monitor calculated an 80% correlation between GDP per capita and pharmaceutical spending. Furthermore, the rapid growth in emerging-markets incomes during the last five years has led to dramatically higher drug purchases. From 2004 to 2009, the BRIC (that is, Brazil, Russia, India, and China) population with household income above $5,000 increased by 27% annually. Although this growth is expected to slow from 2009 to 2014, 16% annual growth is still expected. This massive expansion in wealth should directly increase the market opportunity for drug companies.