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Diabetes Care Market Is Expected to See Fast Growth

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Diabetes care market

With 415 million people suffering from diabetes in 2015, diabetes care offers significant growth opportunities for pharmaceutical companies such as Novo Nordisk (NVO), GlaxoSmithKline (GSK), Eli Lilly (LLY), and Sanofi (SNY). As only half of this patient population has actually been diagnosed, and only a very small portion of the diagnosed patients receive optimal treatment, there is significant unmet demand for new and improved therapies in the diabetes care market. Additionally, private health payers have displayed an increasing tendency to pay for innovative and effective diabetes care therapies.

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Being the number one player in the diabetes care segment, Novo Nordisk is expected to significantly benefit from these trends in terms of revenues and profit margins. These trends may also have a positive impact on share prices of the company as well as those of the Vanguard FTSE All-World ex-US ETF (VEU). Novo Nordisk makes up about 0.34% of VEU’s total portfolio holdings.

Growth trends

According to EvaluatePharma, the global diabetes care market is expected to grow at a compounded average growth rate of about 6% to 7% from 2014 to 2020, while the overall pharmaceutical industry is estimated to grow at a CAGR of 4% in the same time period.

In addition to underlying demographic trends, growth in the diabetes care market has been higher due to significant barriers of entry for new entrants in this field. To effectively compete in this segment, huge capital investment is required to produce large volumes of drugs. Additionally, the company also has to develop effective pen devices for the delivery of the drug. Novo Nordisk has managed to leverage these factors to maintain its leadership in the diabetes care segment.

Challenges

Novo Nordisk has to manage multiple distribution channels for its diabetes care drugs. Additionally, as the health insurance companies continue to consolidate, Novo Nordisk expects to witness significant pricing pressures due to higher rebates.

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