Just read an article in an investors magazine regarding this...

Just read an article in an investors magazine regarding this sector. It relates, in the main, to big pharma and the challenges they face going forwards from a global perspective.

It argues that the pharmaceutical and biotechnology sectors offer exposure to what is a continually growing market. The causes of these rising demands are well known � rapidly aging population in the developed world, growing middle classes in emerging markets and worldwide growth in diabetes and obesity related illnesses.

According to market intelligence group (IMS Health) the global pharmaceutical market is expected to expand by between 5% and 7% to total US $880billion in 2011. This growth will take the US, the biggest pharmaceutical consumer, to a market size of $330 billion approx. Growth will, however, be led by China (already the third largest market). This year will see growth rates of around 27%, which equates to more than $50 billion. On the other hand, emerging markets are expected to grow in the region of 17% to around $180billion.

It all sounds extremely promising but there are well known obstacles to be overcome. Perhaps the most pressing issue currently is patent expiry. Please bear with me as I know the issues surrounding impending patent expiry has been debated at some length on here. However, IMS Health has managed to quantify the potential financial impact of this very problem. For example, they state that this year alone products with sales value of $30 billion are facing the very real prospect of first time generic competition in the developed markets. This potential financial hit is expected to increase over the next five years. This time period may well see products with sales value of over $148 billion being challenged by cheaper rivals.

Given the enormous costs and long timelines of developing new drugs these long established companies have to confront these threats to their earnings power with some degree of urgency. Not forgetting, of course, ever increasing levels of regulation and greater than ever affects of litigation. All of these factors combined are causing the relevant BOD�s to look for effective solutions.

A number of strategies are explored in the magazine article. Glaxosmithkline, for instance has undertaken a programme of diversification, thereby, reducing the risks inherent in the development of branded drugs. They have achieved this by: developing branded generics, moving into healthcare products and developing further its businesses in the emerging markets. Horlicks is a product produced by GSK and is a good example of their diversification into other areas, other than pharmaceuticals. Our expertise in the nutraceuticals field would IMO fit well into a scenario such as this.

AstraZeneca is another company cited and has chosen a different path to mitigate risk by in-licensing late stage drugs thereby reducing internal early-stage development programmes. The writer of the piece suggests that the challenge for any company regarding in-licensing is that ultimate success is highly dependent on the quality of the research carried out during the earlier stages of development. We all know Poh�s excellent track record regarding their development stages to date.

All in all, my take on this magazine item is that these newly emerging global challenges are definitely favouring POH and other similar small biotechs. Our company, in particular, is looking more and more like it could well answer some of big pharma�s prayers on so many levels.

I am still an avid follower and appreciate greatly the first rate contributions made by everyone who takes the considerable time and trouble to put together such in depth and informative posts.

Many thanks.