BERLIN: Nearly 80% of pharmaceutical firms believe they need to transform current business models, as emerging markets, generic products and rising R&D costs redefine the sector.

Roland Berger, the management consultancy, polled executives from leading pharma manufacturers, of which 78% agreed it was important to "adjust their business models to fit new market requirements."

A 51% majority of operators would be prepared to relocate their sales departments to fast-growth economies, standing at 44% for administration functions, as did 43% for research and development.

This is because fast-growth economies are pegged to make up almost 40% of the global pharmaceutical category by 2016, a total which may continue to rise as affluence and infrastructure both progress.

Indeed, while the sector will expand by 4.5% per year worldwide from now to 2016, this figure is set to reach around 12% in developing nations, not least thanks to Brazil, China, India and Russia.

"Pharmaceutical markets such as Europe and the US are stagnating," said Martin Erharter, a Roland Berger consultant. "But in emerging markets we are seeing strong growth. Nevertheless ... margins here are lower and driven heavily by non-patent protected products."

The study also predicted that establishing innovation partnerships with third parties was likely to become more common, as R&D costs have grown by 80% in the last ten years while the number of new launches has fallen by 43%.

In keeping with this trend, almost half of the firms questioned for the analysis thought that the return on investment from R&D is "more or less negative" at present, indicating the importance of change.

A separate report from Ernst & Young, the advisory group, suggested that flat sales in mature economies mean the 16 biggest pharma companies by revenue worldwide have to look to emerging markets.

However, the slowdown in GDP expansion being experienced in many developing nations has contributed to the formation of a "growth gap" between forecasts for the growth of the sector as a whole and for these major corporations.

Ernst & Young stated that this "growth gap" - or the amount of extra revenues these 16 corporations have to generate to match industry growth - is due to reach $100bn in 2015, making mergers attractive.

"With fewer options for organic growth, pharma companies will need transactions and, more than ever, measures to build and conserve firepower are vital," said Jeffrey Greene, Ernst & Young's global life sciences transaction advisory leader.

Data sourced from Ernst & Young/Roland Berger; additional content by Warc staff