Pharma Futures 3 Emerging Opportunities

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Pharma Futures 3 Section 4 Conclusions Implications for Investors The Need for More Information Investors are increasingly interested in how pharmaceutical companies are positioning themselves in emerging markets, but are hampered by a lack of information. Investors are keen to learn more about companies’ immediate and longer-term business strategies, and need information on key performance indicators, including: percentages of sales in emerging markets (and by country); the percentage of profits; the number of employees; the percentage of assets held; the share of capital expenditure and R&D; the proportion of stock-keeping units (SKUs) available; and the average price of key products in emerging markets versus developed markets. PF3 underscored the excitement and interest of both pharmaceutical executives and investors in the potential of the emerging markets. It stressed the importance for the pharmaceutical industry of developing and scaling up innovative business models that are suited to emerging markets. At the same time, it emphasised the potential for the investment community to improve its understanding and support of these efforts, which aim to deliver long-term value. The dialogue identified the work of social entrepreneurs and firms domiciled in emerging markets as a critical source of learning and inspiration. The core needs identified in the dialogue were: The Potential for New Funding Models PF3 illustrated that the opportunity to leverage the funding and talent of the for-profit investment community to help scale social enterprise solutions to societal challenges is ripe for experimentation. The potential of new hybrid financing models able to help develop service-models, infrastructure, differential pricing challenges and micro-insurance was explored and emphasised. This potential also extends to global pharmaceutical firms – through their venture arms and foundations – to partner with traditional institutional mainstream and philanthropic investors, and possibly sovereign wealth funds, in order to sow the seeds of eventual market growth which will occur well beyond typical investment time frames. The pharmaceutical industry and its investors, who have acknowledged the need to more proactively engage in developing healthcare infrastructure in emerging markets, could reasonably consider what promise hybridfinancing models offer to support this effort. — Investors need clearer signals from industry about the nature of the opportunities in the emerging markets and the investments such opportunities will require. — Pharmaceutical companies will need to adapt their business models from ones developed for Western markets with robust health infrastructure to models that account for the realities of emerging markets. New approaches to distribution and pricing will be required. The Need for Forward- Looking Indicators 42 Investors would also benefit from leading indicators that can help them forecast future success. Metrics that measure how well companies are managing government relationships as well as public expectations would, in particular, provide invaluable insights.
Pharma Futures 3 — Improved communication, not just between companies and investors, but also between the industry, governments, global health experts and local people will facilitate effective emerging markets solutions. The media, in particular, has a role in the promotion of accountability and transparency. Implications for the Pharmaceutical Industry Human-Centred Companies need to continuously ensure that their products/services meet customer needs. Pharmaceutical companies expanding into emerging markets must critically examine their product offerings for individual markets. PF3 identified the three common elements that are particularly relevant to pharmaceuticals and healthcare in the business models that have been successful in meeting the needs of lower income consumers in emerging markets: Affordable Middle-income consumers in emerging markets have lower capacities to pay than their counterparts in Western markets. To reach these customers requires going beyond cost-cutting to thinking about approaches such as volumebased business models and customer aggregation. Other companies are experimenting with financing mechanisms that tap consumer willingness and ability to pay despite limited or no access to credit. Pricing was a recurrent theme throughout PF3 with considerable interest expressed in exploring tiered pricing and affordability for lower-income populations. While the details are commercially sensitive, it appears that many companies are already experimenting with innovative pricing schemes. These efforts, however, are hampered by concerns over (1) the potential detrimental impact of new pricing models for industrialised markets, and (2) the risk that investors will respond negatively, assuming that lower prices will lead to lower profitability. 43 (1) they are human-centred; (2) they have taken a radically new approach to understanding affordability; and (3) they have sought new means of achieving market penetration, by taking a much more active role to ensure that their offering is accessible. Accessible The absence of healthcare infrastructure means that to expand meaningfully to serve low-income populations requires the development of different approaches to distribution. The potential for developing partnerships with local organisations – social entrepreneurs, companies, governments, local business and NGOs – who understand the landscape were strongly supported. It was acknowledged that the industry could learn much from other companies and social entrepreneurs who have been successful in meeting the needs of the low-income consumers. Such partnerships could enhance both access to medicines and market development. The partnerships likely to be most successful are those that emphasise health outcomes and the development of service innovation to complement product innovation.
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Page 31 and 32: Pharma Futures 3 Patrimonio Hoy’s
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