BERWYN, Pa. – In this decade, most of the growth in sales of health-care products and services should come from the world’s emerging nations, according to the latest Sector Focus commentary by Turner Investment Partners. In fact, emerging nations like China and India are expected to buy those products and services at a rate at least twice that of developed nations like the United States and Japan.
Turner, an investment firm, publishes Sector Focus commentaries monthly as part of the continuing efforts of its five analyst teams to monitor the market sectors for its growth-stock portfolios.
Entitled, “In Health Care, the Future May Belong to Emerging Nations,” the piece was written by Turner’s health-care sector team: Theresa Hoang, security analyst; Heather Flick McMeekin, portfolio manager and security analyst; Vijay Shankaran, portfolio manager and security analyst; and Frank Sustersic, senior portfolio manager and security analyst. They cite research that predicts the emerging nations of China, India, Brazil, Russia, South Korea, Mexico, and Turkey will experience growth in drug sales at an annual rate of 10.7 percenet in the 2010s. In contrast, drug sales in the United States, Western Europe, and Japan are each likely to grow at a compound annual growth rate of less than 3 percent during that time.
The authors give three reasons for the growing health-care markets in emerging nations: rising gross domestic product, expanding health-care coverage, and aging populations. Specifically, expanding per-capita GDP and increases in health-care spending typically go hand-in-hand in emerging nations. And, as governments grow, they tend to increase health-insurance coverage as part of a “bigger social safety net.” Finally, the share of emerging nations’ population that’s elderly is increasing – the share that typically requires the most health care.
All of this potential growth is attracting the attention of big U.S. pharmaceutical companies, prompting their acquisition of smaller companies with an established presence in emerging countries. The Turner analysts have found nine companies they believe have strong fundamentals and earnings growth potential; some of these companies may be acquisition targets over the next three to five years, they say.
The nine companies:
In the pharmaceutical industry: Dr. Reddy’s Laboratories in Hyderabad, India; Genomma Lab Internacional in Mexico City; Hikma Pharmaceuticals in London; Kalbe Farma in Jakarta, Indonesia; and United Laboratories in Mandaluyong, Philippines.
In the diagnostic-testing industry: Diagnosticos da America and Fleury, both based in Sao Paulo, Brazil.
In the medical-device industry: Shandong Weigao Group Medical Polymer in Weihai, China.
In the medical-plan industry: Amilpar in Rio de Janeiro, Brazil.
While acknowledging the significant risks in investing in emerging nations, the analysts conclude: “We think emerging nations . . . represent the most promising health-care markets of this decade. . . . Paced by superior economic growth rates and fundamentally attractive companies like the nine firms just cited, emerging nations appear poised to shake up the established order in the world’s health-care markets, in our judgment.”
Turner Investment Partners, founded in 1990 and based in Berwyn, Pa., is an investment firm with more than $16 billion in assets under management in stocks. Turner manages growth, international, core, value, quantitative, and alternative separately managed accounts and mutual funds for institutions and individuals.