Novo and Lilly Face Tough Growth in Diabetes, Trade Data Shows

China 2600 Earnings 489 Health Care 257 Mexico 730 U.S. 4625

Large pharmaceutical companies have to manage a continual attrition of revenues due to price pressure from both regulatory and competitive sources. This can apply even to ‘growth’ disease groups such as diabetes, where the World Health Organization estimates 422 million adults globally live with the disease.

Yet, diabetes-drug maker Novo Nordisk cut its long term revenue outlook in October due to pricing pressure, Bloomberg reported in late October.  Eli Lilly missed analysts’ forecasts in the third quarter for similar reasons. Most other major pharmaceutical companies including Merck & Co and Sanofi have diabetes franchises that are static or shrinking.

This is reflected in cross-border trade figures. Panjiva data shows U.S. imports of insulin and related equipment fell 14.9% in the third quarter vs. a year earlier in dollar terms, and most recently 15.2% in October according to shipment data. Geographically 81% of imports came from Germany and and 18% from Denmark, reflecting production by the European manufacturers.



Data for imports of insulin salts and related medicines (HS 2937.12, 3003.31 and 3004.31) segmented by country. Lower panel shows change on year earlier – October data uses shipment figures. Source: Panjiva

The slowing of revenues in developed markets is leading companies to pursue growth in less mature markets. One example is China where rising incomes and changes in diet resulted in 114 million adults with diabetes by 2013. Even here though growth is far from guaranteed for exporters to the market.

Panjiva data indicates Chinese imports have been growing in the longer term – by 21.3% in the 12 months to September 30 vs. 2013. Yet, this can be faltering. Growth in the third quarter was 24.0% but the past 12 months were unchanged on a year earlier. This would suggest leading suppliers including Novo Nordisk, Sanofi and Eli Lilly face significant local competition.



Data for imports of insulin salts and related medicines (HS 2937.12, 3003.31 and 3004.31) segmented by consignee name. Source: Panjiva

As the disease grows globally, there will of course be new market opportunities for the rapid innovation in drugs that the pharmaceutical companies are pursuing. This can result in cyclicality in revenues as price pressures come to bear on these innovations.

In Mexico imports over the past 12 months were 52.6% higher than in 2011 and 14.7% higher than in 2013, showing the long term growth potential. Yet, they they were 51.1% lower in the third quarter on a year earlier but rebounded with 19.2% in October. Diabetes treatments look set to remain a vital, but competitive, part of the pharmaceutical industry.



Chart shows change in 12 month trailing total vs. the total imports for calendar 2013 for imports to China, Mexico and the U.S. Source: Panjiva

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