GLOBAL PHARMACEUTICAL INDUSTRY

Global Pharmaceutical Industry



Global Pharmaceutical Industry

 

Part 1. Pharmaceutical industry overview. 

Major players of the world pharmaceutical industry 

The pharmaceutical industry is characterized by a high level of concentration with fifteen multinational companies dominating the industry. Table 1.1 contains information about these major pharmaceutical companies that are sorted in the order of their 2004 revenues from the sales of pharmaceutical products. Numbers provided in this table include sales of all subsidiaries and affiliated companies that are consolidated in annual reports of the corresponding companies. In order to facilitate a comparison of different companies revenues of all of them are shown in US dollars; financial data of the companies with headquarters outside of the U.S. was converted to US dollars using average 2004 rates provided in Table 1.2.

 

Table 1.1. Major pharmaceutical companies.

Company

HQ location

Revenue of pharmaceutical segment? mln USD

Total sales? mln USD

Share of pharmaceutical segment? %

 Pfizer

NY? U.S.

46?133

52?516

87.85%

 GlaxoSmithKline

UK

31?434

37?324

84.22%

 Johnson & Johnson

NJ? U.S.

22?190

47?348

46.87%

 Merck

NJ? U.S.

21?494

22?939

93.70%

 AstraZeneca

UK

21?426

21?426

100.00%

 Novartis

Switzerland

18?497

28?247

65.48%

 Sanofi-Aventis

France

17?861

18?711

95.46%

 Roche

Switzerland

17?460

25?168

69.37%

 

As Table 1.1 shows? the majority of the largest pharmaceutical companies are not diversified. They are either concentrated exclusively on pharmaceutical products (Eli Lilly and AstraZeneca are good examples with virtually 100% of their revenues coming from sales of pharmaceutical products) or? although they develop and manufacture other health care products? they still have pharmaceutical divisions as the core of their business that provide more than 50% of their revenues. Other products manufactured by these companies usually include medical devices? nutritional products? consumer healthcare products and

Eli Lilly's $13.1 billion sales figure made it the twelfth largest company - with Pharmaceutical sales considerably larger than Bayer's $5.5 billion but a lot less than Pfizer's $46.1 billion.  

Geographical headquarters of major pharmaceutical companies are approximately evenly distributed between the U.S. and Western Europe with only one Asian company in the list. Indiana is home to one of these companies? Eli Lilly. More detailed analysis of these companies will be made in the second part of this paper. 

 

Table 1.2. Average 2004 exchange rates.

Currency

Exchange rate

EUR / USD

1.2438

GBP / USD

1.8333

USD / JPY

108.1508

USD / CHF

1.2426

Source: calculated using Federal Reserve daily data

 

Industry Trends 

Here we examine structural changes causing significant transformations? major factors leading to strong future sales growth? and point out the industry's strong reliance on research and development.  

Structural changes 

The pharmaceutical industry is currently undergoing a period of very significant transformation. The majority of “Big Pharma” companies generate high returns? thus providing them with excess cash for further rapid growth - whether organic? or through mergers and acquisitions. Although size of the company on its own does not guarantee success? it gives a significant advantage? especially in pharmaceutical industry. Besides economies of scale in manufacturing? clinical trials and marketing? bigger companies can allow investments in more research and development (R&D) projects that diversify their future drugs portfolio and make them much more stable in the long term. As the result? top-companies in the industry were active participants of mergers and acquisitions (M&A)? new joint ventures and spin-offs of non-core businesses. 

The largest acquisitions in the industry during last years were the acquisition of Pharmacia by ...