For the major global pharmaceutical companies, the year gone by was nothing to be proud of as their net profit during this period nosedived due to several reasons. A Pharmabiz study of financial results of top 15 global pharmaceutical companies revealed that they have reported a major setback in their financial performances during the year 2017 with a sharp decline in their profit by 36.9 per cent to US $58 billion during 2017 against $92 billion last year. Return on investment from Research and Development had limited success putting further burden on bottom line of these companies. The operating profit before interest, tax and adjustments of 15 companies declined by 14.2 per cent to $108 billion from $126 billion in the previous year. The profit before tax and adjustments also declined by 15.3 per cent to $97 billion from $115 billion despite slightly lower interest burden. Interest cost declined to $11,457 million from $11,778 million. Teva's net loss, after provision of goodwill impairment, reached at $16,265 million during 2017. Eli Lilly incurred net loss of $204 million as against a net profit of $2,738 million last year due to significant provision for tax. The net profit of Bristol-Myers, Gilead Sciences, J&J and Amgen declined sharply by over 50 per cent during 2017. Similarly, Merck, AstraZeneca, AbbVie and Roche also received setback in profits. However, Pfizer's net profit went up to $21,308 million due to benefit in tax of $9,049 million during 2017 as against income tax provisions of $2,123 million in the previous year. Similarly, GSK's net profit went up by 124 per cent to $2,926 million due to lower other operating expenditure. Sanofi's net profit increased by 102.6 per cent on account of demerger of Animal Healthcare business. But, the silver lining was on sales of these companies which did not reflect the downward trend. The sales of these 15 companies, with pharmaceuticals & vaccines sales above US$ 20 billion, increased by 5.5 per cent to US$ 562 billion in 2017 from $532 billion in the last year, of which pharmaceuticals & vaccines sales worked out to 83 per cent at $464 billion in 2017. The pharmaceutical and vaccines (pharma) sales of 15 leading global companies increased by 3.5 per cent during the year 2017 to US$ 464 billion against $ 448 billion in the previous year. Pfizer remained on top among the companies with pharma sales of $ 52,546 million, followed by Novartis at second spot at $49,109 million and Roche at third place at $ 42,219 million. Four companies i.e. Roche, GlaxoSmithKline (GSK), AbbVie and Bayer registered double digit growth in pharma sales in 2017.
One of the major reasons for the sharp decline in the bottom line of these companies is the changes in US tax law pushing up their tax provisions by 98 per cent to $45 billion from $23 billion in the previous year. Besides, these global pharma companies faced tough generic competition, increased US FDA approvals of additional generic versions of off-patent medicines and delays in launches of certain new generic products in 2017. Even their operating profit before interest, tax and adjustments declined by 14.2 per cent largely due to one time provision for goodwill impairments of $ 17.1 billion by Teva Pharmaceuticals. Given this situation, innovation will now become increasingly important in view of persistent challenges in the healthcare segment. The R&D cost of Pharmabiz 15 global pharma companies increased only slightly by 6.8 per cent to $100 billion in 2017 from $94 billion in the previous year. In fact, the R&D expenditure of Novartis, Pfizer, Merck, AstraZeneca, Gilead Sciences, Amgen and Teva Pharma declined during 2017. However, GSK, Johnson & Johnson, Eli Lilly & Co, AbbVie, Bristol-Myers Squibb, Sanofi, Bayer and Roche enhanced R&D spending during 2017. The companies could launch only 12 new blockbusters during 2017 and at the same time losing the blockbuster status for some products. It is time the global giants take note of the issues faced by them during the last year and take corrective measures immediately to scale new heights in times to come.