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Pharmaceuticals

~$960 billion worldwide market driven by aging demographics, increasing insurance coverage and innovation

We believe that the ~$960 billion global pharmaceutical industry, which includes all branded drugs, biologics, biosimilars and generics, is a highly attractive market for investment.  Driven by innovation and growing demand for safe and effective therapies, the pharmaceutical industry has robust, non-cyclical long-term growth characteristics.  Spending on pharmaceuticals on a global basis is expected to increase 5% p.a. through 2017, with certain subsegments, such as specialty pharmaceuticals, growing even faster.  Furthermore, particularly strong growth is expected in the Emerging Markets, where sales are forecasted to nearly double over the next several years.

 

In developed markets the growth of the pharmaceuticals industry is driven by several tailwinds.  New legislation and regulation in the United States (the Patient Protection and Affordable Care Act) is expected to significantly expand insurance coverage to include over 23 million additional lives by 2019.  Demographic changes also provide tailwinds, specifically, the increasing number of elderly in the US and Europe.  In addition, as health care systems increasingly focus on cost containment, pharmaceuticals will remain one of the most cost effective forms of healthcare.  This dynamic, coupled with advances facilitating personalized medicine will strengthen further in the coming years.  Lastly, innovation will continue to be a source of new product introductions into the market.

 

In the emerging markets, a combination of rising incomes and increasing demand for access to better healthcare should drive significant pharmaceuticals sales growth in these regions relative to developed markets.  Over the next five years, emerging markets are expected to nearly double their spending on drugs, reaching nearly 30% of the global pharmaceutical spend.  As a result, large and mid-sized pharmaceutical companies that have been underweight in these markets have been aggressively seeking new acquisitions to improve market access in key markets, such as China and Latin America. 

Additional Info

  • Attractive ~$960 billion global pharmaceutical industry, growing at 5% overall, with faster growing subsegments, such as specialty products
  • Growth driven by increased insurance coverage, aging demographics, focus on cost effectiveness and innovation
  • Greater spending and advances in treatment paradigms in emerging markets
  • Large and mid-sized pharma, as a result of continued generic erosion and low R&D productivity, are aggressively looking to acquire products to replace lost revenue and strengthen positions in emerging markets