Pfizer Expands Chinese Presence

Pfizer (PFE) is looking to increase its presence in one of the most sought-after emerging markets – China. Currently, it is the world's fifth largest pharmaceutical market and is expected to eventually become the third largest within the next two years. Viewing the huge potential, Pfizer recently entered into a deal with Japan’s biggest drug maker, Takeda Pharmaceuticals, under which Pfizer will co-promote Takeda's Actos (pioglitazone HCl) with Tianjin Takeda Pharmaceuticals in China.

Actos, approved for the treatment of type II diabetes, has been in the Chinese market since 2004 with global annual sales of $4 billion. The drug is sold by Tianjin Takeda Pharmaceuticals, a joint venture between Takeda Pharmaceuticals and Tianjin Lisheng Pharmaceutical, a Chinese company. There is huge potential in the diabetes market in China because of its population size, rapid urbanization and economic expansion. International Diabetes Federation estimates the number of diabetics in China at more than 50 million by 2025.

Although Takeda earns a major share of its revenues from Actos, the situation could change in 2011 with the drug losing its patent in the US in 2011, its biggest market. Takeda has US based Eli Lilly (LLY - Analyst Report) as its marketing partner in many countries.

Pfizer’s strong marketing team in China on top of the existing sales force should further boost the drug’s sales. Pfizer’s Chinese affiliate, in turn, will receive a fixed percentage of Actos’ net sales.

Pfizer, in due course, aims to achieve a growth rate exceeding 25% per year in China bolstered by Wyeth’s operations. Following the acquisition, Prevnar, one of the best selling vaccines to protect children from pneumococcal disease, was included in Pfizer’s portfolio which recorded strong sales in the region. In addition, with the Wyeth acquisition, Pfizer will be able to offer consumer products such as the popular vitamin supplement Centrum as well as baby formula which became more popular in China after local brands were found to be contaminated with toxic melamine last year.

Almost all the players in the pharmaceutical space are eyeing the emerging markets particularly China in anticipation that growth in these areas could help stabilize the base business during the industry’s 2010-15 patent cliff. Emerging markets are a key growth driver today and going forward as well. The growth in this area will help compensate the diminishing US growth contribution.