The Pharmabiz study of financial performances of top 15 international pharmaceutical companies last month has revealed some disturbing trends in this sector. The study covered operations of Pfizer, Sanofi-Aventis, GSK, AstraZeneca, Johnson & Johnson, Merck, Roche, Novartis and 7 others during 2005. Aggregate sales of pharmaceutical products of these 15 companies increased by just 2.1 per cent to 309 billion dollars in 2005 from 303 billion dollars in 2004. The net profit, at the same time, registered a 7.9 per cent growth at 75 billion dollars from 70 billion dollars in the previous year. As per the study although Pfizer, Sanofi-Aventis and GSK remained as the top three companies in terms of pharma sales, all the three reported negative growth in sales during 2005. The sales of Pfizer declined by 4.1 per cent, Sanofi-Aventis by 5.9 per cent and GSK by 2.5 per cent. Merck and Bristol-Myers are the other two companies reported a decline in growth during last year. Three relatively smaller players namely Amgen, Abbott Labs and AstraZeneca, however, reported a double digit growth during 2005 with Amgen recording the highest growth rate of 20.5 per cent. The study showed that the US continued to remain the largest market for pharmaceuticals in the world. Out of the total pharmaceutical sales of 309 billion dollars of 15 companies in 2005, sales in the US accounted for 168 billion dollars which is almost 54.4 per cent. In 2004, the US accounted for 55.5 per cent of the total market of these companies. This reflects shrinking sales of some of the top brand companies in the US market. Pfizer's own sale in the US market fell by 11.8 per cent to 23.44 billion dollars in 2005 from 26.58 billion. Sanofi-Aventis reported a 5.3 per cent drop in sales in the US market while GSK sales fell by 3.5 per cent during 2005. Drop in sales of three top pharma companies in the world's largest market is a matter of concern for them with continuing stiff competition from generics and increasing expiration of patents. The pharma companies are taking this threat from the generic players quite seriously by spending more on R&D. The total R&D expenditure by the 15 companies during 2005 touched 56.94 billion dollars as against 55.65 billion dollars in 2004. As a percentage of total sales, R&D spend works out to 14 in 2005. Eli Lilly stood out as the largest spender of R&D in 2005 with its spending of 20.7 per cent of gross turnover. Amgen, another relatively smaller player among the 15, has spent 18.6 per cent of its turnover on R&D. On the other hand, Pfizer's R&D expenditure declined by 3.1 per cent to 7.44 billion dollars in 2005 from 7.68 billion. Merck also reduced its R&D spend to 3.84 billion dollars in 2005 from 4 billion. Growing generic competition and the need to spend more on R&D are hitting the profit growth of top companies. Top companies like Pfizer, Roche and Merck thus reported major setbacks during 2005. Pfizer's net profit declined by 28.8 per cent and that of Merck's by 20.3 per cent. And Roche's profit went down by 13.2 per cent. Whereas, Wyeth and Bayer reported record growth rates of 196 per cent 102 per cent in 2005.What is emerging from these results is that the top companies need to fight a different battle to survive the onslaught of smaller companies and generic players in future. Spending more on research alone will not help. Launching of authorised generics adopted by some of the brand companies is one way to beat generic companies in their own game. But that is only one such strategy. More needs to be invented.