4 Drug Stocks to Buy Now to Capitalize on Emerging Market Growth

It is a truth universally acknowledged that a developing country with a rising middle class must be in want of a higher standard of living.

In other words: Emerging economies want more stuff, they want better stuff, and they're willing to pay for it… and this is as true for medicine as for luxury cars and Levi's.

That's why these economies are driving the bulk of growth in the global pharmaceutical market.

Worldwide pharma is a $959 billion market and is expected to grow around 4.5% per year between 2012 and 2016, according to industry research firm IMS Health.

But pharma in emerging markets will grow at nearly three times that rate.

IMS Health calls the biggest players behind this growth the "pharmerging markets."

To qualify as pharmerging, these countries must meet two criteria set forth in IMS Institute for Healthcare Informatics's 2012 "Medicines Outlook Through 2016": They must have more than $1 billion in pharmaceutical spending growth over 2012-2016, and they must have per capita gross domestic product (GDP) of less than $25,000.

Unsurprisingly, China tops the list, followed by the other three BRIC members – Brazil, India, and Russia – in order of 2011 pharmaceutical spending. The remaining countries, also in order, are Mexico, Turkey, Poland, Venezuela, Argentina, Indonesia, South Africa, Thailand, Romania, Egypt, Ukraine, Pakistan, and Vietnam.

These 16 countries are expected to have a compound annual growth rate (CAGR) of between 12% and 15% over the next four years for a total pharmaceutical spend between $345 billion and $375 billon.

That's 31% of the total market.

Even better for investors: There's a major change developing that will benefit drug companies with a strong presence in emerging markets…

Drug Stocks: Rise of the Generics

You see, generic pharmaceuticals are emerging as a serious player in the global pharma market.

Pressures on reducing healthcare costs in the United States alone have resulted in nearly 80% of all U.S. prescriptions being filled with a generic.

And nearly 83% of the growth in pharmerging markets will come from generics and other products, including branded generics, over-the-counter medication, and diagnostics.

This is why David Ansellem, a managing director and senior research analyst with Piper Jaffray, told The Wall Street Transcript that the emerging markets are an "intriguing area of opportunity for global generic players."

Generic usage is still not high, he said, but "if you look at all the big generic players, the best topline growth rates, segment growth rates, are coming out of the emerging markets."

4 Drug Stocks to Buy for "Pharmerging" Profits

A few companies in particular seem to be well positioned for investors to take advantage of the coming boom. Although none of the companies on this list can be considered "pure-play" generic manufacturers, they all have strong and growing positions in multiple pharmerging markets.