Sales and profits of top international pharmaceutical companies are on the decline with growing competition from generic companies and expiry of patents. A Pharmabiz Study of financial performances of top 15 international companies during 2008 reveals that their aggregate sales improved only by 2.1 per cent in terms of US Dollar during the year ended December 2008 at $499 billion as against $489 billion in the previous year. The sales include pharmaceuticals, consumer healthcare, animal healthcare and diagnostic products.
If just pharmaceutical sales are taken, the sales growth is only 1.2 per cent at $369.72 billion in 2008 as against $365.46 billion in the previous year. The aggregate net profit moved up marginally by 1.2 per cent to $94 billion from $93 billion. The top 100 products of 15 companies recorded a growth of 6.6 per cent to $229,714 million as compared to $215,405 million in the previous year.
World ranking of pharmaceutical companies has changed considerably during 2008. The nominal growth last year may worsen in the current year if the R&D activities continue to fail in bringing new products into the markets. Further, generic products will play key role as several governments are cutting down on medical expenses.
The growth rate of 15 international pharmaceutical companies hit by stiff competition, adverse exchange rates, expiration of product patent, poor success in launching new blockbuster and lower than expected returns from R&D investments during the year. Now the major pharma players are taking steps to consolidate their business operations to overcome teething problems.
Pharmabiz Study covered pharma giants namely Pfizer, sanofi-aventis, Roche Group, AstraZeneca, GloxoSmithKline (GSK), Novartis, Johnson & Johnson (J&J), Merck & Co, Eli Lilly & Co, Wyeth, Bristol-Myers Squibb (BMS), Abbott, Bayer, Amgen and Schering -Plough Corporation. The poor performance is mainly due to drop in sales of companies like Pfizer, sanofi-aventis, GSK, Merck and Bayer. However, Bristol-Myers, Abbott and Schering-Plough recorded double digit growth whereas Amgen, AstraZeneca, J&J, Eli Lilly, Novartis, Roche and Wyeth achieved single digit growth in pharmaceutical sales during 2008.
The pharmaceutical sales in US market, excluding Bristol-Myers, declined by 7.1 per cent to $148.345 million from 159,626 million in the 2007. Pfizer and sanofi-aventis maintained their ranking at first and second place during 2008, but GSK failed to maintained the third spot and went down to fifth place giving chance to Roche at third spot and AstraZeneca at fourth place. GSK suffered heavily due to adverse exchange rate.
For better comparison, Pharmabiz Study has converted all currencies into US Dollar at a constant exchange rate as at the end of 2008 and 2007. The British Pound was quoted at 0.69 for one dollar as at the end of December 2008 as against 0.50 as at the end of 2007. Similarly, Euro was quoted at 0.71 as against 0.68 during the last day of 2008 and 2007. Swiss Franc (CHF) touched at 1.06 from 1.13 at the end of 2008 and 2007. These changes in exchange rates impacted the final analysis. Further, the study has not taken into account few Japanese companies like Takeda Pharma and Astellas Pharma as both the companies are closing their accounting year in March.
The lower growth in profitability is mainly due to fall in profit of GSK, Novartis, sanofi-aventis, Wyeth, Bayer and Pfizer. Merck and Bristol-Myers achieved impressive performance on profitability front and registered growth of over 100 per cent during 2008. Similarly, Schering-Plough turned the corner and earned a net profit of $1,645 million as against net loss of $1,591 million in the previous year.
Out of Pharmabiz sample of 15 international giants, seven companies have cut down their R&D expenditure during the year 2008. GSK's R&D expenditure came down by 19.8 per cent to $5,330 million from $6,645 million in the previous year. During 2008, the R&D expenditure of Amgen and sanofi-aventis also declined by 5 per cent and 3.5 per cent respectively to $3,910 and $6,450 million. Pfizer remained highest R&D spender in pharmaceutical area during 2008 with spending of $7,945 million. However, its R&D expenditure declined by 1.8 per cent from $8,089 million.
The sales growth of leading 100 products was restricted to 6.6 per cent to $229,714 million during 2008 as the 30 major products recorded negative growth. The sales of world's largest product Liptor of Pfizer declined by 2.2 per cent to $12,401 million from $12,675 million in the previous year. The sales of second largest product Seretide/Advair of GSK also declined sharply by 14.3 per cent to $5,990 million from $6,989 million. Nexium of AstraZeneca, Zyprexa of Eli Lilly, Aranesp of Amgen, Procrit/Exprex and Risperdal/Risperidone of J&J, Norvasc of Pfizer, HIV product of GSK, Eloxatin of sanofi-aventis, suffered major setback during 2008.
AstraZeneca has 11 blockbuster products among the list of world top 100 products during the year 2008. Followed by Pfizer, Roche and J&J with nine products each Eli Lilly and sanofi has eight blockbusters. Though GSK's nine products appearing in the top product list, its four products lost blockbuster status as their sales declined below one billion mark. Six products each from Wyeth and Bristol-Myers remained in the list. Merck and Novartis also maintained 5 products each as blockbusters.
The new 12 blockbuster products, with sales over $1 billion, entered the list of top 100 products during 2008 and five products lost the blockbuster status with negative growth in sales. Merck's Januvia recorded strong sales growth of 109 per cent and its sales went up to $1,397 from $668 million. AstraZeneca's Synagis product also recorded sales growth of 99 per cent to $1,230 million. The sales of Bonviv/Boniva of Roche increased by 142 per cent to $1,050 million from $435 million.
Few important blockbusters of 2007 namely Imigran/Imitrex, Infanrix/Pediarix, Flixotide/Flovent and hepatitis vaccines of GSK lost blockbuster status mainly due to adverse exchange rate. Similarly, Allegra of sanofi-aventis also lost the blockbuster status as its sales declined to $970 million during 2008 from $1,040 million in the last year.
The pharmaceutical sales of Pfizer, the world's largest drug company, declined by 0.6 per cent to $44,174 million during 2008 from $44,424 million in the previous year. Its sales in US declined significantly by 12.5 per cent to $18,851 million from $21,548 million. Pfizer lost US exclusivity for major products like Zyrtec and Camptosar in January and February 2008. Further, it lost exclusivity for Norvasc in Korea and Japan in early part of 2008. These products collectively decreased its revenues by $2.6 billion.
GSK's pharmaceutical sales declined sharply by 22.9 per cent to $29,510 million from $38,275 million in the 2007. Its sales in US moved down by 30.7 per cent to $12,878 million from 18,575 million in the 2007 mainly due to generic competition for its several mature brands. Its sales in Japan also declined by 14.1 per cent to $1,487 million from $1,732 million mainly due to pharma price cut in Japan. Though its sales were down in terms of dollar, the sales in terms of pound increased by 6.4 per cent.
Similarly, sanofi-avantis' pharma sales in US declined sharply by 13 per cent to $12,137 million from $13,954 million. Wyeth sales in US drop significantly by 23.4 per cent to $8,916 million from $11,638 million in the last year. Roche has stepped up its presence in US and its pharma sales in US increased by 16.4 per cent to $16,011 million from $13,756 million in the previous year. With improved US sales, Roche is became the second largest pharmaceutical company in US during 2008 and followed by J&J with US sales of $14,831 and then AstraZeneca with US sales of $14, 785 million.
The pharma giants are taking steps to improve bottom line in the current year. Pfizer has announced a new cost reduction programme targeting additional net saving of $2 billion by 2011. This new programme plus just-completed programme have potential to yield cost savings of about $4.8 billion. GSK has redefined its business model to increase sales growth, reduce risk and deliver long-term sustainable financial performance. It is implementing new strategic priorities. The company has a late-stage pipeline of around 30 assets and it added six new products into its phase-III pipeline.
The consolidation through mergers and acquisition will be an important strategy of pharma companies in the current year. Some months ago, Pfizer took over Wyeth and Merck has merged Schering to boost their operations and fight competition. Roche last week bought over the controlling stake of Genentech, a biotechnology company in the US. Thus, the consolidation, final outcome of R&D efforts and stable exchange rates will be the key to the growth in the current year.
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