Analysts from Morgan Stanley say the impact of a slowdown in global pharma shipments could mean the loss of more than $3 trillion in revenues and a 20% drop in gross margins over the next 10 years.
The analysts say this is the biggest drag on growth for the industry and that the impact could last for years to come.
“The key for this slowdown is that we see a sustained slowdown in the pace of growth in global pharmaceuticals supply chain and demand,” said John Kelleher, chief investment officer at Morgan Stanley.
“We think this is driven by a combination of the challenges that the pharma industry is facing in the United States and China, and the need to meet regulatory requirements.”
We think that a significant reduction in volumes in the near-term is a very likely outcome.
“The analyst analysts say the pace and extent of the slowdown is likely to have a long-term impact on pharma’s future profitability, as the industry’s growth has been slowed by regulatory requirements in both countries.
The analysts also said the outlook for pharma growth is likely limited as companies have to adapt to the new requirements, and it is possible that some of the industry will need to delay or eliminate certain products in order to meet these requirements.
While we do not expect a major correction in growth until 2020, the overall level of growth is unlikely to accelerate until 2040 and the future of global pharmashould likely be constrained until around 2025.””
The growth of pharma supply chain has been in excess of US$20 trillion for the last five years,” they wrote.
“While we do not expect a major correction in growth until 2020, the overall level of growth is unlikely to accelerate until 2040 and the future of global pharmashould likely be constrained until around 2025.”
The analysts noted that the pace is likely increasing, which is good news for the sector as the demand for drugs has been growing rapidly.
“It is also encouraging to see the sector continuing to accelerate its progress in reducing the cost of medicines and in lowering prices of medicines,” they said.
“This is a key challenge for the US, which currently has the highest drug prices in the world and is expected to see its drug costs rise by at least 20% in the next decade.”
The Morgan Stanley analysts say that the slowing of global pharmaceutical supply chain will be particularly significant for smaller players in the industry as it will likely increase competition from big players in China.