Owing to generics and biosimilars competition, loss of exclusivity, pricing pressure and limited success from research & development activity, the financial performances of 15 international pharmaceutical giants was badly hit during 2016. Several players have taken measures to overcome the snags and have now restructured their operations as well as product portfolios.
The net profit before adjustments of 15 major international companies have declined by 7.3 per cent to US$ 95 billion from $102 billion in the previous year and net profit after tax and adjustments declined by 16.5 per cent to $95 billion from $114 billion. The net sales from pharmaceuticals, consumer care, animal health, diagnostic, medical devices, crop sciences and other increased only by 1.6 per cent to $545 billion from $536 billion in the previous year and out of this pharmaceutical & vaccine sales worked out to $443 billion as against $433 billion in the previous year, a growth of only 2.4 per cent.
A Pharmabiz study of 15 international pharma majors for the year 2016 includes important companies with pharmaceutical & vaccine sales of above $17 billion. For better comparison,, we have converted all currencies i.e. Euro, British Pound and Swiss Franc into US Dollar as at the end of December 2016 and 2015. The exchange rate of one Euro was at US$1.05 at the end of 2016 as compared to $1.09 in the end of 2015. Pound was at $1.23 and $1.48 and Swiss Franc was at $0.98 as compared to $1.01 in the 2015.
In a dead heat among players for higher ranking, Pfizer again climbed to numero uno position with pharmaceutical & vaccines (pharma) sales of $49,417 million, overtaking Novartis which posted pharma sales of $48,518 billion. Roche, Sanofi and Merck & Co have successfully maintained their ranking at third, fourth and fifth places with pharma sales of $38,369 million, $35,633 million and $35,151 million respectively. Johnson & Johnson (J&J) moved to sixth position with pharma sales of $33,464 million as against seventh rank in the previous year. It overtake Gilead Sciences which posted pharma sales of $29,953 million. Similarly, AbbVie also moved up to eighth place with pharma sales of $25,638 million, by overtaking GlaxoSmithKline (GSK) which reported pharma sales of $25,459 million. AstraZeneca, Teva Pharma, Amgen, Bristol-Myers Squibb and Bayer have few ups and down during 2016 in ranking.
The pharmaceutical sales of Pharmabiz sample of 15 companies in the United States increased by 5.1 per cent during 2016 to $224 billion from $213 billion in the previous year and that in Europe declined marginally to $97 billion from $98 billion. Pfizer's US pharma sales moved up by 21.4 per cent to $26,369 million from $21,704 million and remained as leading company. However, Pfizer's European pharma sales declined to $9,306 million from 9,714 million. J&J registered growth of 9.8 per cent in US sales during 2016 and its pharma sales touched to $20,125 million as against $18,333 million. Novartis maintained its top position in Europe with sales of $17,079 million as compared to $16,472 million. Its US sales declined slightly to $17,117 from $18,079 million in the previous year.
The first 100 brands in terms of sales of Pharmabiz 15 international companies registered only three per cent growth in sales during 2016. Out of 100 major brands, 92 brands were blockbusters with sales of over $ one billion. The aggregate sales of first 100 brands touched to $248 billion as compared to $241 billion in the previous year.
AbbVie's Humira maintained its leading position with sales of $16,078 million as compared to $14,012 million, a growth of 14.7 per cent. Similarly, Gilead Sciences' Harvoni also maintained its second position, but its sales declined sharply by 34.5 per cent to $9,091 million from $13,864 million. Roche MabThera/Rituxan remained at third spot with net sales of $7,163 million as compared to $7,108 million. J&J's Remicade brand moved up to fourth place from earlier 6th spot with sales of $6,966 million as against $6,561 million and Roche's Avastin maintained its fifth rank with net sales of $6,656 million, though declined slightly by 1.3 per cent during 2016.
Out of the leading 100 brands, the sales of 43 brands declined during 2016 and 8 brands registered strong growth in sales of more than 100 per cent. The major losers were Harvoni (Gilead Sciences), Lantus (Sanofi), Seretide/Advair (GSK), Sovaldi (Gilead Sciences), Crestor (AstraZeneca), Gleevec/Glivec (Novartis), Symbicort (AstraZeneca), Enbrel (Outside US & Canada) (Pfizer), Atripla (Gilead Sciences), Alimta (Eli Lilly & Co), Nexium (AstraZeneca), Lucentis (Novartis), Lipitor (Pfizer), Lovenox and Plavix (Sanofi), Epogen (Amgen) and Remicade (Merck).
A few brands notched up strong growth of over 100 per cent in sales during 2016 which includes major brands like Opdivo (Bristol-Myers Squibb), Ibrance (Pfizer), Imbruvica (AbbVie), Epclusa (Gilead Sciences), Genvoya (Gilead Sciences), Keytruda (Merck), Cosentyx (Novartis) and Trulicity (Eli Lilly & Co). Further, Eliquis (Bristol), Triumeq (GSK) and Imbruvica (J&J) brands also registered strong sales growth.
The operating profit of 15 companies declined by three per cent to $130 billion from $134 billion in the previous year despite lower R&D expenditure and other costs. The operating profit of GSK declined sharply by 78.7 per cent to $3,285 million from $15,455 million basically due gain in 2015 in respect of sale of oncology assets to Novartis. Similarly, operating profit of Gilead Sciences declined by 21.5 per cent to $17,633 million from $22,193 million. Teva Pharma also suffered setback and its operating profit declined sharply by 35.7 per cent to $2,154 million from $3,352 million. The operating profit of Bristol-Myers moved up sharply by 185 per cent to $5,915 million and that of Merck went up by 38.8 per cent to $7,499 million. Eli Lilly, AbbVie also posted operating profit growth of above 20 per cent.
The cost of goods sold was only 1.6 per cent higher at $164 billion as compared to $162 billion in the previous year. The R&D expenditure increased by four per cent to $91,059 million from $88,522 million which worked out to 16 per cent of net sales. The marketing and administration expenditure declined by 4.6 per cent to $147 billion from $154 billion. The interest cost and related expenditure went up almost 44 per cent to $10,926 million from $7,596 million. Thus the profit before tax and adjustments of 15 companies declined by 5.6 per cent to $119 billion from $126 billion. Taxation provision remained almost same at $24,065 million.
The R&D expenditure of Roche went up by 17 per cent to $11,315 million from $9,667 million in the previous year. Similarly, Gilead Sciences' R&D expenditure went up sharply by over 69 per cent to $5,098 million from $3,014 million. Teva Pharma also stepped up its R&D investment by over 38 per cent to $2,111 million from $1,525 million. The R&D expenditure of Amgen, AstraZeneca, Bristol-Myers, GSK, J&J and Sanofi declined during 2016. Novartis and Pfizer registered small growth of 1.2 per cent and 2.4 per cent in R&D expenditure to $9,039 million and $7,872 million respectively.
The net profit of 15 companies declined by 16.5 per cent to $ 95 billion mainly due to drop in net profit of GSK, Gilead Sciences, Novartis and Teva Pharma. Further, there was single digit growth in net profit of major players like J&J, Pfizer, Roche and Sanofi. However, Bristol-Myers' net profit surged by 185 per cent to $4,457 million. Merck and AstraZenca also achieved net profit growth of 28 per cent and 21 per cent to $5,691 million and $3,406 million respectively. GSK's net declined by 89.5 per cent to $1,306 million and that of Novartis moved down by 62.4 per cent to $6,698 million basically due to gain in the previous year on divestment of operations. Gilead Sciences net declined to 25 per cent mainly due to lower sales of Harvoni and Sovaldi during 2016.
Thus the overall performance of pharma giants remained under pressure during 2016 and outlook seems to be gloomy as the outcome from R&D activities is not quite promising. Further loss of exclusivity and generic competition may put additional pressure on working. Economic conditions in several part of globe, government policies and exchange rate fluctuations may hamper growth in current year. However, consolidation of activities, restructuring and product pipeline may help to overcome these challenges.