TOP PHARMACEUTICAL COMPANIES BY HEALTHCARE REVENUE IN 2006
COMPANY RANKING
2006 Sales (in Billions)
% GROWTH
1. Johnson & Johnson (U.S.)
$53.5
+6%
2. Pfizer (U.S.)
$48.4
+2%
3. GlaxoSmithKline (U.K.)
$42.8
+7%
4. Novartis (Switzerland)
$37.0
+15%
5. Sanofi-Aventis (France)
$35.6
+4%
6. Roche (Switzerland)
$33.5
+18%
7. AsfraZeneca (U.K.)
$26.5
+10%
8. Merck (U.S.)
$22.6
+3%
9. Abbott Labs (U.S.)
$22.5
+1%
10. Wyeth (U.S.)
$20.4
+9%
11. Bayer (Germany)
$18.2
+82%
12. Bristol-Myers Squibb
$17.9
<7%>
13. Eli Lilly (U.S.)
$15.7
+8%
14. Amgen (U.S.)
$14.3
+15%
15. Boehringer-Ingleheim (Germany)
$13.3
+11%
16. Schering-Plough (U.S.)
$10.6
+12%
17. Baxter International (U.S.)
$10.4
+13%
18. Takeda Pharmaceutical (Japan)
$10.3
+5%
19. Genentech (U.S.)
$9.3
+41%
20. Procter & Gamble (U.S.)
$9.0
+14%
21. TEVA Pharmaceutical (Israel)
$8.4
+58%
22. Astellas Pharma (Japan)
$7.9
+7%
23. Daiichi Sankyo (Japan)
$7.2
+7%
24. Novo Nordisk (Denmark)
$6.5
+14%
25. Eisai (Japan)
$5.6
+12%
Source: MedAd News 2007
PHARMA NEWS
This year?s pharma ranking has a few interesting surprises (the first of which is that Pfizer is no longer the absolute leader in sales). Pfizer has been surpassed by Johnson & Johnson. It is further expected that Pfizer will further drop in the rankings as the worldwide impact of its largest drugs become generic due to patent expiration. To be fair, the sales represented below are not just pharma (drug) sales. They also include other health care-related products such as diagnostics, medical devices, and nutritional products. It's not quite an apples-to-apples comparison. Nevertheless, it is a fascinating guide for us into the ups and downs of these companies. Almost all the companies have grown by aggressive multiple-company acquisitions with perhaps the exception being Takeda. It has relied for the most part on internal growth (though it has become aggressive in product licensing in recent years). Here are some salient facts:
1.There are five U.S. companies in the top 10 companies and 12 U.S. companies within the top 25 companies with the Midwest having three of those companies (Abbott, Lilly and Baxter).
2.There are eight European companies within the top 25 companies.
3.There are now four Japanese companies in the top 25 companies (but none yet in the top 10 companies). Interestingly, the U.S. headquarters of two of these Japanese companies (Takeda and Astellas) is in the Midwest.
4.There is one Israeli company (TEVA) in the top 25 companies (which not so coincidentally has the highest growth rate of any of the companies at 58 percent).
5.There are two biotech companies in the top 25 companies: Amgen and Genentech (Roche owns a significant chunk of Genentech). The year 2006 saw a number of mergers including: Bayer acquired Schering AG ·Merck acquired Serono ·UCB (Belgium) acquired Schwarz Pharma (Germany) ·Nycomed acquired Altana ·Novartis acquired Chiron and increased its share position in Roche ·Amgen acquired of Ilypsa, Alantos Pharmaceuticals, and Avidia ·Gilead acquired Myogen · AstraZeneca acquired Immunex ·Genentech acquired Tanox · Genzyme acquired of Bioenvision and Anormed ·Watson Pharmaceuticals acquired Andrx and Sekhsaria Chemicals (India) · Mylan Labs acquired Merck's generic business Matrix Labs (India).
Though a number of American companies bought into the fast-growing Indian pharma market via local acquisitions, the large Indian pharma companies themselves were active in expanding presence in both the U.S. and Europe. Continuing this trend, just last week the Indian pharma company Wockhardt acquired the pediatric generic pharma company Morton Grove Pharmaceuticals in Chicagofor less than $100 million. What drives all this activity is the worldwide pharma market, which had sales of $604.5 billion in 2006 and grew about 8 percent. The slowdown in the Japanese market has to do with the Japanese government?s concern about the rising cost of health care. This includes its moves to cap the growth and cost of pharmaceuticals by its continued policy of biannual, across-the-board price cuts along with its newer policy of allowing for generic drugs to play a central role for the first time. As a result of this, there will continue to be further consolidation of Japanese pharma. Just one example is the recent acquisition of Kyowa Hakko Kogyo in 2007 by Kirin Brewery. The Asia Pacific market growth is principally being driven by the growth of both India and China. The Canadian market growth is in part due to the strong revaluation of the Canadian currency to the U.S. dollar along with the growth of the Canadian biotech industry. The Latin American market reflects the growth of both the Brazilian and Mexican markets. Another recent article by pharma market research giant IMS Health predicts a number of things about the world pharma market:
1.Overall market growth will begin to further slow from the 8 percent seen this year to 6 percent to 7 percent next year and 5 percent to 6 percent in 2008.
2.This growth slowdown most impacts the U.S. and Europe where $20 billion a year of annual drug sales will disappear due to patent expiration of blockbuster drugs. Pfizer will be particularly affected. 3.As a result, the overall U.S.share of the world pharma market will most likely drop its share to under 40 percent and eventually even 33 percent of the world market.
4.Though 29 new drugs are expected to be approved and launched in 2008, most of these drugs will not be blockbusters. As they are for less common diseases, they are not replacing the lost sales of blockbuster patent expirations.
5.The growth of the generic pharma business (representing about 60 percent of the actual volume of drug sales and prescriptions) will continue. Pharma R&D: The LifelineAs an industry that has traditionally invested heavily in R&D (in great part due to the long time and high cost it takes to develop and bring a new drug to the marketplace), this year's ranking of pharma R&D expense and investment is an important indicator of the industry.
LARGEST PHARMA LAYOFFS IN 2007
2007 was a rough year for a number of the pharmaceutical and biotech industry’s biggest players. Concerns about patentexpirations, falling sales due to drug safety concerns, redundancy from acquisitions, and a general need streamlineoperations contributed to these companies’ decisions to cut employees. The top pharma and biotech layoffs of 2007 are: 1. Pfizer - 10,000 jobs 2. AstraZeneca - 7,600 jobs 3. Bayer - 6,100 jobs 4. Johnson & Johnson - 5,000 jobs 5. GlaxoSmithKline - 5,000 jobs* 6. Bristol-Myers Squibb - 4,800 jobs* 7. Novartis - 3,750 jobs* 8. Amgen - 2,600 jobs
*These job cut announcement occured after the date this report was originally published. GSK announced cuts on 10/25/07, BMS on 12/6/07 and Novartis on 12/13/07.
2007: THE BEST AND WORST OF TIMES FOR BIG PHARMA
U.S. auto industry vs. U.S. pharma industry
Lessons learned from the car industry are extremely relevant to the U.S. and world pharmaceutical (and biotech industry) today.
Like the car industry, many well-known U.S. Pharma companies and brands have and will continue to disappear; names such as: Rorer, A.H. Robbins, G.D. Searle, Upjohn, Parke-Davis, Warner-Lambert, Lederle, Sterling-Winthrop, Richardson Merrell, Carter-Wallace, and others.
Like the car industry, U.S. Pharma is under siege by “generic” competition coming from Asia, including globalizing Japanese and Indian companies (China is still the sleeping Pharma giant-in-the-making).
The pharma industry, due to its much longer product development cycle (12-15 years versus 3-4 years in the car industry) and much higher regulation by governments around the world (the FDA and its multiple foreign counterparts), is inherently a much riskier business, and this risk is protected to some degree by intellectual property laws allowing these companies to operate like quasi-monopolies for 5-10 year period. However, when the monopoly time offered by patentsends, Big Pharma is today at full risk of rapidly losing business at a rate that would make car companies shutter.
A Wall St. Journal (Dec. 6th) commented that between 2007 and 2012 more than 3 dozen drugs would lose patent protection wiping out $67 billion per year in annual Pharma sales during those years. The impact will be so great that the worldwide Pharma industry will actually decline in 2011 and 2012.
American Pharma companies like Pfizer, Eli Lilly, Merck, Wyeth, Schering-Plough, Abbott Labs, and Bristol-Myers Squibb, are at tremendous risk and exposure, but so are some of their European counterparts such as Sanofi-Aventis, GlaxoSmithKline, and AstraZeneca.
The Pharma industry has already announced job layoffs of at least 21,000 employees during 2007, and shedding of plants, R&Dcenters, offices, etc., in preparation for this huge downtick in profits and sales. And this is only the start! Pfizer is expected to shed close to 35,000 employees from its peak of almost 125,000 employees in 2003 to projected levels of around 80,000 in 2008, according to another WSJ article. At least an additional 50,000 industry positions will be eliminated from Big Pharma over the next 10 years.
The beneficiaries of this patent expiration of major Pharma drugs will be firstly consumers in the U.S. and around the world, as costlymedicines will become more affordable, and secondly, genericPharmacompanies (some of which are American, an Israeli leader - Teva, and mostly Indian Pharma companies).
The first onslaught of generic drugs will focus on the traditional Pharma products, called “small molecule drugs” based on traditional chemistry. This type of product is at the core of Big Pharma's drug pipeline and will radically reshape the companies named above.
But the second, almost equally devastating onslaught will face the “large molecule” drugs invented by the biotech industry which are now reaching the end of their patent life but are still protected by the FDA's inability to come up with a regulatory process on how to approve these “biological” drugs. Companies like Amgen, Genentech, Biogen Idec, and some of the Big Pharma companies who were their marketing partners, will be severely impacted. We witnessed such impact earlier this year when Amgen announced its first-time ever employee-layoff.
These biotech giants have learned how to acquire and develop the newer large molecule drugs much quicker than Big Pharma, and already has the manufacturing and R&D infrastructure in place. Big Pharma shedding its traditional R&D and manufacturing infrastrastructure focused on chemistry and chemists.
According to the WSJ again, the Pharma industry employed 140,000chemists in 2003 which was down to 116,000 chemists in 2006. The number of biologists (critical for the discovery and development of “biological drugs”), however, is on the rise, from 112,000 to 116,000.
Big Pharma, in its panic to replace upcoming lost sales is trying all kinds of strategies, including:
• Product acquisitions
• Company acquisitions
• Ethical to OTC switch of products by regulatory authorities
• Raising drug prices (63 percent since 2002)
Again, according to the WSJ articles, Big Pharma has spent $76 billion since 2005 to buy biotech companies. During the first 9 months of 2007, there were 49 deals totaling $28.7 billion (including the $15.6 billion acquisition of MedImmune by AstraZeneca).
Merck, in order to protect its blockbuster cholesterol-reduction drug Mevacor, has tried several times to seek FDA authorization to sell this product over-the-counter (OTC) without physician prescription. This Ethical-to-OTC Switch, while still representing a loss in sales and profits, provides a much safer and managed decline in profits and sales, and could provide a pathway for other similar drugs called statins with current annual sales of over $16 billion/year, sold by Pfizer and other companies (e.g. the drug Liptor).
Merck's goal, in addition to managing product decline, was to attract to the marketplace millions of individuals who have no health insurance or could not previously afford such therapy.
According to a recent article in the Chicago Tribune, the cost of such therapy on an OTC basiswould cost at least half of what it currently costs in a prescription format ($1- 1.50/day vs. $3-4/day for other prescription therapies). Unfortunately, the FDA hasn't endorsed Merck's strategy and turned down Merck for the third time this past week by a 10-2 vote.
It will be very interesting to see Big Pharma scrambling during the next few years, on the one hand shedding assets and people, and on the other hand acquiring companies and products. It will be equally interesting to see how the U.S. car industry fares as well. Source: Michael Rosen Published: in Wisconsin Technology Network 12/17/07 Pharmaceutical Sales Jobs Medzilla Pharmaceutical Crossing
