Big Pharma’s businesses in emerging markets grew 6.1% sequentially in the second quarter, the fastest in more than two years, according to a recent tally by Bernstein analysts, but some grew much faster than others.

AstraZeneca, GlaxoSmithKline, Eli Lilly, Merck & Co., Novartis, Pfizer, Roche and Sanofi together turned in that growth, and it’s a strong trend when compared with the 0.1% in sales growth these drugmakers managed to cultivate from the U.S. and the rest of the world. Pfizer enjoyed the fastest emerging markets growth, at 7%, driven primarily by its essential health business.

The prosperity wasn’t equally shared, and recent troubles in some markets show the dangers drugmakers can face when looking to grow in the developing world. Currency devaluations in Venezuela, M&A missteps, price controls and other pitfalls can unexpectedly put a drag on growth.

At the opposite end of the spectrum to Pfizer were GSK and Lilly. When averaged over the past four quarters, GSK and Lilly posted the slowest (1.8%) growth from emerging markets. For those companies, emerging markets made up the smallest share of total Q2 revenues—18% and 14%, respectively—among the businesses Bernstein tracked.

Coincidentally—or maybe not—both companies are going through major R&D overhauls that claim their R&D facilities in Shanghai as casualties.

Also not coincidentally, GSK still seems to be suffering from a major China bribery scandal in 2013 that resulted in a $489 million fine and significant slowdown for its business there. Then-CEO Andrew Witty said late last year that GSK’s China business has fundamentally returned to growth, but according to Bernstein’s calculation, except for a sharp recovery boost in Q3 2014 and a smaller above-average performance in Q3 2016, GSK has been holding its peers back in terms of growth in China.

Even as China drove an overall 12.4% growth rate in Q2 among Bernstein’s companies, GSK, without providing specific numbers, said that its total revenues in the country were down low single digits including the effects of divestments. The British pharma didn’t specifically disclose its performance in China in its Q1 report.

It’s a different story at AstraZeneca, which has the most exposure to China; 44% of its emerging markets sales, or 13% of total revenues, come from the country. CEO Pascal Soriot, in his Q2 earnings call, stressed several times that “China is growing rapidly,” pointing to the fact that though AZ reported 8% growth rate in the first half of 2017, the number was actually 17% when divestment is taken out. The company is also expanding its plant in Australia to meet high respiratory demands from China.

Sanofi had the best quarter among Bernstein’s companies in China, with 17.1% growth stemming from continued recovery in vaccines and growth of established products.

On the broader picture, a series of policies either proposed or already implemented by the Chinese government aiming at faster drug approval and wider reach of innovative treatments is opening up new growth opportunities for multinational pharma companies. One of them is two recent updates to the National Drug Reimbursement List.

Roche’s bestselling cancer meds Herceptin, Avastin, Rituxan and Tarceva are among the latest added to the list, after big price cuts. Although it’s unclear how many more patients those meds will be able to reach to warrant those discounts, previous examples offer a reference. According to a July Bernstein report, sales of antiviral drug Viread, marketed in China by GSK, enjoyed a volume increase of about 400% less than a year after reimbursement began to roll out. GSK slashed the drug’s price by two-thirds to get the drug on the list in 2016, but sales jumped 78% year-over-year. AstraZeneca’s Iressa saw Chinese sales volume up by 89%, but sales value was down 5%. Bernstein analysts did caution that these are still early numbers and might not qualify as apple-to-apple comparisons to other meds.

Although emerging regions continue to spur growth for the drug industry, Bernstein warned that off-patent drugs are likely to see increased pricing pressure over time. India is notably one of those countries that continue to pressure for cheaper meds. India’s National Pharmaceutical Pricing Authority, operating under the Indian Drugs Price Control Order, have made several moves to tighten control of drug prices, fining companies the agency believes have overcharged their meds, which only adds pressure to both domestic and global drugmakers.

In some instances, emerging markets’ volatile economic and political atmosphere could also become threats to Big Pharma’s earnings. One recent example, beginning in the fourth quarter of 2015 and still in effect today, is Venezuela. Battered by an economic crisis and political uproar that turned violent in the South American country, companies including Novartis, Sanofi and Pfizer all reported millions of dollars in losses.

With all these challenges, it’s no surprise that GSK and Lilly aren’t the only companies that have retrenched a bit in emerging markets. But big pullbacks could be a mistake, given demographic trends and healthcare system evolution in developing markets.
“Drug companies should continue to invest to ensure they capture share in the longer-term, gradual, yet inevitable shift from older off-patent medicines to more lucrative, on-patent medicines,” Bernstein analyst Tim Anderson said in the report.

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