Devices & Diagnostics

In tapping emerging market opportunity, medtech industry lags behind pharma

A new, in-depth analysis from Morgan Stanley shows the medical technology industry has a long way to go in truly tapping the opportunity that emerging markets represents. In the 101 page report titled “Emerging Markets: Search for Growth,” Morgan Stanley analysts point out that compared to the pharmaceutical industry, whose sales in emerging markets comprises […]

A new, in-depth analysis from Morgan Stanley shows the medical technology industry has a long way to go in truly tapping the opportunity that emerging markets represents.

In the 101 page report titled “Emerging Markets: Search for Growth,” Morgan Stanley analysts point out that compared to the pharmaceutical industry, whose sales in emerging markets comprises 3o percent to 35 percent of overall sales, that of medical technology and services sectors account for only 9 percent to 15 percent of overall sales.

But now the tide is changing. As governments both in the U.S. and EU adopt austerity measures and as there is more R&D productivity pressures, Morgan Stanley analysts believe that there is limited growth opportunities in developed markets.

“We believe emerging markets provide the only realistic medium-term opportunity for the medtech and services sectors to offset the growth pressures in developed markets,” the analysts wrote.

The good news is that there is plenty of opportunity for revenue upside in these markets with the report projecting that U.S. medical technology firms will see an increase in their emerging markets sales to 43 percent of overall sales by 2014, up from 36 percent in 2011.

So, which segments within the medical technology sector stand to gain the most from emerging markets opportunity?

They are:

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  • Cardiac rhythm management
  • Dialysis
  • In vitro diagnostics
  • Injectable generics
Other areas that hold potential include clinical nutrition, orthopedic reconstruction, diagnostic imaging, corrective lenses and general capital equipment.

Even within emerging markets, defined as the world minus North America, Japan and developed markets in Europe, there are pockets that are more attractive than others.

“We think the BRIC [Brazil, Russia, India, China] countries will be the focus of Western medtech companies’ investment, given their demographic profile and drivers of healthcare reform,” the report said. “We expect this to be driven by companies stepping up their allocation of capital to the emerging markets, both organically and through acquisitions.”

Which U.S. companies are best positioned to take advantage of the emerging markets opportunity and grow their sales compared to their competition? They are Baxter International, Becton Dickinson, Medtronic and C.R. Bard.

[Photo Credit: Freedigitalphotos.net]

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