The world pharmaceutical industry appears to be on an upswing despite stringent drug approval practices, huge recurring research expenditures and increasing instances of drug recalls from the markets. A recent Pharmabiz study on financial performances of world's 15 top pharmaceutical companies has shown precisely this. The study revealed that sales of pharmaceutical products of these companies increased by 10.6 per cent to US$ 289 billion in 2004 from US$ 261 billion in the previous year. Two companies out of these 15 namely Schering-Plough and Bayer however reported a decline in sales during the year. The net profits of the 15 companies after all adjustments towards acquisitions, selling of assets and taxation went up by 28.2 per cent during 2004.This is certainly a record profit considering a 14 per cent R&D expenditure on total sales of these companies. The net profit growth is mainly on account of very high profit rates of 191 per cent reported by Pfizer and 138 per cent by Roche during 2004. Pfizer continued to remain the largest pharmaceutical company of the world with a 17 per cent sales growth at US$ 46 billion during 2004 as against US$ 39.42 billion in the previous year. A notable development of 2004 is the emergence of Sanofi-Aventis of France as the second largest pharma company displacing GSK to the third place. The main reason for Pfizer's undisputed leadership position and emergence of Sanofi-Aventis as the second top company in the world pharmaceutical industry is their strategy of mergers and acquisitions. It was the merger of Pharmacia in April 2003 that has helped Pfizer to push its sales and profits during 2004. And the company has five of the top 20 products including Lipitor which has the highest sale of US$10.8 billion recorded in 2004. Like Pfizer, Sanofi-Synthelabo acquired Aventis in August last and the sales of the merged entity went up by 13.7 per cent to US$34.68 billion. Sanofi-Aventis has thus 11 global brands and six blockbusters. Merck & Co which was slipped to fourth position from third during the year could achieve a sales growth of only 3.1 per cent. The lower growth rate was mainly on account of its worldwide withdrawal of Vioxx, one of its top drug, from the market. Apart from the recall of drugs from the market what could be a serious threat to the profitability of the world's top pharma companies is the fast growing generic sales. What has hit GSK sales during 2004 was the generic competition to Paxil and Wellbutrin. And it is this threat that is making the brand companies to invest heavily on research. The study shows that Amgen, world's largest biotech company based in the US, spent 20 per cent of its total sales which is almost US$ 2 billion on R&D. Pfizer's R&D spend accounted for US$ 7.6 billion which is 14.6 per cent of its total net sales. Eli Lilly had spent about 19 per cent of its sales on R&D. With such heavy spending on research, product pipelines of this industry has increased by 80 per cent in 2004.