Merck & Co., Inc. ([stock]MRK[/stock]) recently announced that it is setting up a joint venture (JV) with Indian multinational pharma company, Sun Pharmaceutical Industries Ltd. The joint venture is for the development, manufacture and commercialization of new combinations and formulations of innovative, branded generics in emerging markets.
While financial details of the transaction were not disclosed, the companies said that Sun Pharma’s proprietary platform technologies would be used for the development of products. Meanwhile, Merck will contribute its expertise in clinical development and registration activities. Moreover, Merck will also be bringing its commercial expertise and global reach to the joint venture.
Deal in-line with Merck’s Growing Focus on Emerging Markets
The joint venture is in-line with Merck’s growing focus on emerging markets. The company has been working on growing its presence in emerging markets – sales in emerging markets increased 19% in the fourth quarter of 2010 with strong performance in key markets like China, Turkey and Korea.
Like many of its peers, Merck is pursuing opportunities in China, India, Turkey, Russia, Poland, Brazil, and South Korea with the intention of achieving a top-5 market presence in each of these countries.
According to experts, emerging markets are expected to drive 90% of global pharma growth in the coming decade. About 75% of this growth is expected from branded generics. Factors like an increase in chronic diseases, population growth, and increasing prosperity are expected to drive growth in emerging markets.
Over the past few quarters, companies like Pfizer ([stock]RDY[/stock]) for the development and marketing of select products in various emerging markets.
Neutral on Merck
We currently have a Neutral recommendation on Merck supported by a Zacks #3 Rank (short-term Hold rating). Merck is currently facing issues such as patent expirations of key drugs, EU pricing pressure, US health care reform and pipeline setbacks. Some of the company’s recent launches should start contributing significantly to the top line in the forthcoming quarters.
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