Med-tech companies may not get as much bang for their buck in emerging markets, according to a dim forecast for the BRIC economies by investment bank Goldman Sachs.
Indices created by the bank predicted flat 7.9 percent growth for Brazil, Russia, India and China through 2012.
That could be bad news for the clutch of med-tech titans who have just committed big bucks on the growth of emerging markets to compensate for slowing growth in stalwart markets in the U.S. and western Europe. Growth rates overseas are still more robust than in developed markets, and these are not industry-specific figures, but the surge that drew so many companies into big bets in BRIC countries may be a thing of the past.
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"Infrastructure in the BRICs has improved notably in recent years, but still remains far behind developed country norms," according to the report. "Infrastructure investment will need to accelerate in the years ahead to prevent it from constraining future growth rates in the BRICs."
Individual growth rate predictions were:
- Brazil: 4.5 percent for 2011, 4.0 percent for 2012
- China: 9.4 percent for 2011, 9.2 percent for 2012
- India: 7.5 percent for 2011, 7.8 percent for 2012
- Russia: 5.3 percent for 2011, 5.6 percent for 2012
A push overseas was one of the biggest med-tech stories of the summer, but Goldman Sachs warned that BRIC nations are not the powerhouse markets they were.
That means companies who have dramatically increased their holdings in BRIC countries may see a smaller upside on their investments.
"The policy driven boom of the past couple of years will not be repeated any time soon," HSBC Holdings chief economist Stephen King told Bloomberg. "It’s difficult to see how emerging nations can ride to the rescue once more."
Newly minted Medtronic CEO Omar Ishrak recently put his stamp on the world’s largest medical device maker by announcing a big push toward global markets, calling them "potentially less risky than creating new products for the flat U.S. market."
"The population in emerging markets is tenfold that of developed countries," Ishrak said during an annual shareholders meeting last week. "These statistics are further compounded by the fact that U.S. market is essentially flat…reaching the global middle class opens up opportunities to us beyond anything we’ve ever seen before."
The Minneapolis, Minn.-based med-tech goliath isn’t worried about Goldman Sachs’ predictions.
"We believe that there exists significant growth opportunities in emerging markets, continue to see growth in those markets in the double digit range and will continue to invest heavily in them going forward," spokesperson Steve Cragle told MassDevice.
British orthopedic giant Smith & Nephew announced an ambitious plan earlier this month to realign the entire company to focus growth and invest $300 million in R&D with the intention of growing the company’s sales in the BRIC countries from $120 million to $500 million within the next five years.
Last month Boston Scientific Corp. (NYSE:BSX) announced that a $150 million five-year plan to expand Chinese commercial operations, including establishing a wholly owned manufacturing site and developing training centers for Chinese health care providers.
While BRIC markets continue to dominate growth strategies for med-tech leaders, analysts warned that they are no panacea for the global recession.
Emerging economies will probably "avoid a hard landing, but they won’t be able to bail out the world," Morgan Stanley chief economist Joachim Fels told Bloomberg. Morgan Stanley lowered its forecast last month for emerging market growth next year to 6.1 percent from 6.7 percent.
Emily Greenhalgh contributed to this story.