Macroeconomic Environment and Conditions in the Sectors
The two divisions of the Sartorius Group operate in sectors with different economic sensitivities. The Bioprocess Solutions Division is active in an environment that is largely unaffected by economic fluctuations. The Lab Products & Services Division, in contrast, conducts its business in part in sectors that are more dependent on economic developments.
2015 was marked primarily by developments on the oil and foreign exchange markets and by geopolitical tensions. According to statements by the International Monetary Fund (IMF), the global economy grew by 3.1% during the reporting year, thus falling short of the original forecast of 3.8%.
The industrialized countries grew 2% (up from 1.8% the year before), but as expected, the emerging economies made the greatest contribution to global economic growth, with a 4.0% increase in the GDP during the reporting year. The growth driver continued to be the Asian economic area, though with weaker momentum: Asia ended the year with growth of 6.5%, slightly under the previous year’s level of 6.8%. The continued deceleration of China’s development in particular had a dampening effect on growth there, which lay at 6.8% during the reporting year after reaching 7.3% the year before.
The GDP of the USA, the world’s largest economy, rose markedly by 2.6%. Increased consumer spending and a decline in production costs owing to the downslide in the oil price both contributed positively to growth, but economic activity was hampered slightly by a decline in exports caused by the strong dollar.
Growth in the Euro zone economies amounted to 1.5%, according to the IMF, and was thus better than predicted at the beginning of the year. The low price of oil, export conditions made favorable by the weak euro, and the European Central Bank’s expansive fiscal policy all had a positive impact.
Exchange Rate Trends
Alongside the euro, important currencies for the Sartorius Group include especially the U.S. dollar and other currencies such as British pound, Swiss Franc, Chinese yuan, Japanese yen, Indian rupee and the Korean Won.
The euro-U.S. dollar exchange rate was influenced during the reporting year by the continued sluggishness of the European economy as well as by robust economic developments in the USA. As a result, the euro depreciated over the course of the year and ended it on December 31 at 1.09 U.S. dollars compared to 1.21 U.S. dollars at the end of 2014.
Interest Rate Trends
Average interest rates remained at historic low levels in the reporting year. Thus, the European Central Bank kept its base rate at the record low of 0.05%. The 3-month EURIBOR rate – the rate of interest on fixed-term deposits denominated in euros in interbank business – was at -0.13% on December 31, 2015 (previous year: 0.08%)
Sources: International Monetary Fund: World Economic Outlook October 2015; Bloomberg; ECB; de.euribor-rates.eu.
The key customers served by the Sartorius Group are from the biopharmaceutical and pharmaceutical industries, public research institutes and the chemical and food sectors. The progress of the Group's business accordingly depends to a considerable extent on developments in these industries.
Significant Growth in the Pharmaceutical Markets
The most important growth drivers in the global pharmaceutical industry remained unchanged during the reporting year: the world’s steadily growing population, demographic change, improved access to health care in emerging markets in particular, and the availability of new medications. These positive factors were countered by austerity measures in healthcare systems and the expiration of patents.
According to the market research institute IMS Health, growth in the global pharmaceuticals market in 2015 was, at 6%, slightly above the long-term average of 5.4% (2009-14). As in previous years, the strongest growth dynamic was evident in the regions of Asia and Latin America, where conditions were favorable owing to the expansion of state-funded healthcare provision and higher out-of-the pocket spending. In the USA, the world’s largest pharmaceutical market, growth normalized in comparison with the extraordinarily strong dynamic of the previous year, which was driven by a large number of new product approvals.
Above-Average Growth in the Biotechnology Market
The market for pharmaceuticals manufactured using biotech methods has grown overproportionately within the world’s pharmaceutical market for many years now, and enjoyed particularly dynamic development during the reporting year. This is primarily attributable to the launch of many new biopharmaceutical drugs as well as additional market penetration of existing medicines, in part through expanded indications. For instance, the high R&D productivity of the biotechnology sector led to almost twice as many new approvals in the USA in 2014 as in previous years. Overall, the proportion of sales revenue on the world’s pharmaceutical market accounted for by medications manufactured using biotech methods grew from around 20% in 2012 to approximately 24% during the reporting year.
Biosimilars, which are biological copycat medications, played a minor role in the growth of the biotechnology market in 2015. Compared with the markets for biosimilars in Europe and Asia, the important U.S. market is still underdeveloped. However, here the industry recorded significant progress during the reporting year: five biosimilars have meanwhile been submitted to the U.S. health authority FDA for approval, and the first market authorization was granted on the basis of an abbreviated approval procedure.
Trend Towards Single-Use Systems in Biopharmaceutical Production Continues
Biotech production methods are much more complex and cost-intensive than traditional methods. Consequently, manufacturers and suppliers are continuously looking to develop more efficient production technologies. Single-use products play a decisive role in this effort, because they require significantly less capital expenditure, reduce costs for cleaning and validation, and minimize downtime. They also offer greater flexibility and help accelerate time to market. Thanks in particular to their cost-efficiency, single-use technologies have already become well established in a large number of process steps.
Continued Soft Demand in the Public Research Sector
Some of the demand for our laboratory instruments and consumables comes from public-sector research. According to the market observers Frost & Sullivan, public-sector spending during the reporting year lay only slightly above last year’s levels, thus corresponding to the moderate growth of the world’s economy overall.
Chemical Sector Shows robust Increase in Production
The global chemical sector recorded an increase in production of approximately 2.8% during 2015. The U.S. chemical industry posted production growth of around 3.6% owing to the robust development of the domestic economy, but its counterpart in Europe grew by just 1.0%, according to statements by the European Chemical Industry Council (Cefic).
The competitive environment in each of our two divisions is as follows:
The Bioprocess Solutions Division operates as a total solution provider, covering the core process steps in biopharmaceutical production and process development. It holds a leading global position in key technological fields, and offers the sector’s most extensive portfolio of single-use technologies. The Bioprocess Solutions Division's principal competitors include Merck | Millipore, Danaher | Pall, General Electric and Thermo Fisher.
The Lab Products & Services Division is positioned as a premium provider of products along with excellent services, and serves both research and quality assurance laboratories across many industries. Our product range in this area includes laboratory balances and pipettes as well as a wide range of consumables. The division ranks among the leading providers worldwide in these areas. Principal competitors include Mettler Toledo, Thermo Fisher, Merck | Millipore, Danaher | Pall and Eppendorf.
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.