Future Macroeconomic Environment
Data provided by the IMF indicates that the global economy is likely to gain momentum in 2016. Owing to the economic expansion of the emerging markets and a strong U.S. economy, growth of 3.6% is forecast for this year, compared with 3.1% last year.
According to the IMF, the growth of the U.S. economy will continue at a nearly unchanged pace, rising from 2.6% last year to 2.8% in 2016. Once again, consumer spending will be the most significant growth driver.
Economic recovery within the eurozone is likely to pick up speed only minimally in 2016: experts are expecting an increase of 1.6% compared with 1.5% the year before. Here as well, consumer spending in particular will support growth.
A plus of 6.4% is expected in the Asia | Pacific region, down slightly from 6.5% the previous year. The IMF predicts that China’s economic growth will slow from 6.8% during the reporting year to 6.3%.
Future Exchange and Interest Rate Trends
Experts predict that base interest rates will remain at a very low level in 2016, as they did last year.
Market forecasts of the euro-U.S. dollar exchange rate for the course of 2016 range between 0.94 euro | U.S. dollar and 1.20 euro | U.S. dollar.
Sources: International Monetary Fund, World Economic Outlook October 2015; Reuters Forex Poll, December 2015
Outlook for the Sectors
Solid Prospects in the Pharmaceutical Industry
The future of the global pharmaceutical industry continues to be driven in large part by the constantly expanding and aging global population, increasing access to healthcare in the emerging and developing countries, and the development of new medicines, particularly for diseases that are currently difficult to treat. However, the expiration of patents and austerity measures to restrict healthcare spending, in particular in industrialized countries, trend to slow growth in the industry. Market researchers at IMS Health are forecasting overall growth of between 4% and 7% for the global pharmaceutical industry during the period 2015 to 2020.
The U.S. pharmaceutical market – the world’s largest – is expected to grow at a rate of 5% to 8% on average during the period 2015 to 2020. Expansion will be driven principally by new, innovative medications, a fading influence from expiring patents, and the expansion of state health insurance.
Growth in the European pharmaceutical market is likely to remain moderate over the next few years as continuing austerity measures affect its national healthcare systems. Thus, average growth of between 1% and 4% is projected for the region until 2020. Expansion in the emerging economies (including China, India, Brazil and Russia), in contrast, will remain above average at around 7% to 10% per annum from 2015 - 2020 owing to demographic trends, rising levels of state investment in healthcare systems and increased private spending.
Biotech Sector Enjoys Above-Average Growth
Experts forecast that the biopharma segment of the pharmaceutical market, which has been enjoying particularly strong growth for years, will continue to outperform the market: the proportion of sales revenue accounted for by medications and vaccines manufactured using biotech methods is expected to rise from currently around 24% to approximately 27% in 2020.
This ongoing overproportionate growth will be driven largely by the increasing market penetration of already approved biopharmaceuticals and an expansion in the range of indications. However, this comparatively young segment also has great innovative power, as reflected in strong research and development pipelines. Overall, around 40% of the medications in these pipelines are based on biological manufacturing processes.
The great innovative power of the biotechnology sector, particularly in recent years, can also be seen in the rising number of new product approvals: the number of newly approved biological medications in the USA during the last five years is around 50% higher than the number of approvals from the period 2006 to 2010.
On the whole, the market observer Evaluate Pharma estimates that growth in the global biotechnology market will average 8% to 9% per year during the years 2015 to 2020.
Strong Growth of the Biopharma Market
1) Source: Evaluate Pharma®: World Preview 2015, Outlook to 2020; June 2015; CAGR 2014 to 2020.
Since a number of medications manufactured using biotech methods are due to lose their patent protection over the next few years, experts forecast that the market for biosimilars will post strong growth. Currently, more than 200 companies are working around the world on more than 700 projects for the development of biotech copycat medicines. However, regulatory, patent- and marketing-related uncertainties are making it difficult to predict the market launch of these drugs accurately. The market share of biosimilars is currently still very small, but experts estimate that by the year 2020, sales will quadruple to more than U.S. $10 billion.
Public-Sector Research: Moderate Growth Expected
Demand from the public sector is likely to rise only slightly in 2016. Frost & Sullivan expects growth of around 2% in the USA, the world’s largest market for laboratory products. In Europe, comparatively moderate economic growth is likely to result in demand that is only slightly above last year’s levels. One source of support is the EU-wide Horizon 2020 research and development program, which will provide a total of €80 billion in funding between 2014 and 2020.
Slight Growth in the Chemical Industry
The American Chemistry Council is estimating that global production will increase around 3.3% during the current fiscal year, compared with 2.8% in 2015. Moderate production growth of approximately 1.5% is being forecast for the European market.
Sources: IMS: IMS Health Market Prognosis, May 2015; Evaluate Pharma: World Preview 2015, Outlook to 2020, June 2015; Frost & Sullivan: 2015 Annual Report: Forecast and Analysis of the Global Market for Laboratory Products, November 2015; www.fda.gov; Citi Research: Biosimilars Real, Dangerous, Coming Soon, February 2015; Bernstein: Biosimilars Who is doing what?, November 2015; Cefic: 2015 Cefic General Assembly, October 2015; American Chemistry Council: Year-End 2015 Chemical Industry Situation and Outlook, December 2015.
Outlook for 2016
The outlook for 2016 considers the sector environment, economic trends and the opportunities and risks outlined in this Annual Report. The following forecast is provided under the assumption that we have accurately anticipated the relevant trends for Sartorius:
Sartorius expects that its dynamic business expansion will continue. Therefore, the company forecasts that consolidated sales for the full year will grow approximately 10% to 14% in constant currencies.
In view of profitability, we project that the underlying EBITDA margin will gain around one percentage point in constant currencies compared with the prior-year figure of 23.6%. This margin increase is expected to result in approximately equal proportions from economies of scale and from last year’s favorable currency changes that will only be fully reflected in 2016 due to the time-deferred effect of currency hedges.
With regard to our financial position, we forecast that our ratio of net debt to underlying EBITDA, which was 1.3 at the end of 2015, will be below 1.3 at the end of the current year. This ratio does not take any potential acquisitions into account.
For the Bioprocess Solutions Division, management expects significant gains for the full year of 2016 as well. The division's sales revenue is projected to increase by approximately 13% to 17% and its underlying EBITDA margin by around one percentage point over the year-earlier figure of 26.5%.
The Lab Products & Services Division partially depends on general economic cycles. For this division, management projects that assuming an overall stable economic environment, sales will grow approx. 3% to 7% and the division's underlying EBITDA margin will likewise increase by around one percentage point from 16.0% in the previous year. (All forecasts for the divisions in constant currencies)