Now that four of the six European pharma majors have reported their fourth quarter and full-year financials (Sanofi will do so on Thursday and Bayer on February 26), cost-cutting and emerging market growth are the two striking areas, according to analysts at Collins Stewart.

The broker has reviewed the results for Novartis, Roche, GlaxoSmithKline and AstraZeneca and identified the aforementioned two dominant themes. The figures provided “strong evidence here again of the sector’s potential, ability and determination to take-out costs”, while in the emerging markets, “double-digit growth rates were delivered again, becoming an increasingly important contributor to groups”.

In the research note authored by James Knight and Emmanuel Papadakis, they note that margins in the European pharmaceutical sector “have been trending up over the last five years”. Whilst currency “has been part of the story for some, we believe the dominant reason has been cost-cutting”, they add.

The analysts go on to say that our ‘life by a thousand cuts' thesis says the sector remains relatively bloated with costs, and there are many further opportunities to make efficiencies”. They claim that “GSK remains the exemplar in our view”, because despite having faced most of its patent expiries, and the unexpected loss of revenues from the diabetes drug Avandia (rosiglitazone), “it has successfully defended and even improved margins”.

The analysis notes that GSK has realised £1.00 billion of its £1.70 billion programme, with the remainder to come by the end of 2011, and also announced new £500 million savings, focused on R&D. Novartis achieved $2.3billion of cuts between 2007-10, beating its target by 50%, and delivering it a year early.

AstraZeneca announced a new $1.0 billion cost-cutting plan in R&D (which partly cost-avoidance, Collins Stewart claims), while Roche. confirmed 1.0 billion Swiss francs of synergies through the integration of Genentech, “and hinted that further cost-saving opportunities were found, though are difficult to disentangle”.

As for the emerging markets, the analysts say the potential in these markets “is clearly enormous” and we expect these growth rates to continue, notwithstanding the occasional bump, eg price cuts in Turkey in 2010”. They add that GSK and Sanofi “are best placed to benefit”.

Collins Stewart concludes that “whilst the five-year outlook for some pharma franchises might be challenging (notably for AstraZeneca, Novartis and Sanofi), the diversified healthcare groups have some cushion”. It says non-pharma assets (eg consumer health, vaccines, diagnostics and animal health) “continue to be undervalued offering very decent returns and relatively low risk”.