Emerging Markets Expected to Be AstraZeneca’s Key Growth Driver

For 2016, AstraZeneca (AZN) reported revenues of about $5.8 billion for its emerging markets business, which is a YoY (year-over-year) rise of about 6.0% on a CER (constant exchange rate) basis. The Chinese market accounts for less than half of the company’s revenues from emerging markets. In 2016, AstraZeneca’s revenues from China, Russia, and Brazil rose about 10.0%, 13.0%, and 2.0%, respectively, YoY.

If AstraZeneca continues to see solid demand trends in emerging markets in 2017, it may have a positive impact on the company’s stock as well as the VanEck Vectors Pharmaceutical ETF (PPH). AstraZeneca makes up about 4.6% of PPH’s total portfolio holdings.

The above map shows the distribution of AstraZeneca’s revenues across geographic markets based on product sales figures for 2015. The company is confident that it will continue to grow its emerging market revenues at mid- to high-single-digit rates on a YoY basis in 2017.

AstraZeneca’s drugs Brilinta and Forxiga as well as its respiratory franchise continue to be key drivers of the company’s emerging markets business in 2017. The potential launch of Tagrisso and Forxiga in China is expected to further boost revenues in 2017.

Peers such as Celgene (CELG), Pfizer (PFE), and Merck & Co. (MRK) have also adopted the strategy of geographic market expansion to drive future revenue growth.

According to IMS Market Prognosis and the IMS Institute for Healthcare Informatics, the primary care segment will be the key growth area for pharmaceutical companies in emerging markets. However, AstraZeneca anticipates some challenges in Venezuela and Saudi Arabia.

In the next part, we’ll look at trends for AstraZeneca’s respiratory business in 2017.