Increasing number of MNCs based in the US and Europe are facing a major financial crisis since last year. Their sales and profits are steadily on the decline with no immediate prospects of a recovery. The world’s largest pharmaceutical company, the US based Pfizer Inc, suffered a major setback in its financial performance during the fourth quarter ended December 2011. The net profit of the company fell by as much as 50 per cent to US$ 1,439 million from $2,890 million in the same period of last year. There was also a drop in the company’s revenue from $17.4 billion to $16,7 billion during the same quarter. In the current year, three European companies namely AstraZeneca, Sanofi and GSK reported lower profits and sales. AstraZeneca last week reported a third consecutive drop in revenue in the three months ending this September. The company's net profit dropped by more than half to $1.53 billion from $3.48 billion and revenue fell by 19% to $6.68 billion. Sanofi reported a drop in third quarter net profit to €1.56 billion from €2.03 billion a year earlier, reflecting the brunt of competition to some of its best-selling drugs. GlaxoSmithKline’s second-quarter results of the current year show that core operating profit was down 7% to just over £2.00 billion while group turnover fell 2% to £6.46 billion. Pharmaceutical sales were down by 3% to £4.44 billion, hit mainly on account of pricing pressures in Europe and competition of generics. GSK, therefore, expects the group turnover this year to be the same as 2011.
The key reason for the poor performance of these top global pharma companies is the drop in sales of their top selling patented products in the wake of patent expiries of many products. Sales of Lipitor, Pfizer’s largest selling drug declined in the US market by 42% in the last quarter of 2011. And its worldwide sales declined by 11 per cent in 2011 to $9,577 million from $10,733 million in the previous year. In the case of AstraZeneca revenue fell by 19% to $6.68 billion in the last quarter ended September mainly on account of an 82% drop in sales of its patent expired schizophrenia drug, Seroquel, in the US market. GSK’s revenues have been hit by patent expiries for drugs such as Valtrex and Advair, as well safety concerns over its diabetes drug Avandia. A common problem confronted by global pharma companies is absence of a strong pipeline for new products. Their R&D is no more producing potential blockbusters any more unlike in the past decades despite their huge spending for this critical activity. It is not that they are not getting enough drug candidates from their research labs but these candidates are not reaching the market place. The regulatory authorities both in the US and Europe have become extremely cautious in granting new drug approvals as quite a few of the approved drugs had to be withdrawn from the market in the recent past for their adverse drug reactions. Now to arrest the steady drop in the profitability and sales of these global companies, the managements have to contemplate innovative measures apart from joining the generic bandwagon.