World's top 15 pharmaceutical companies reported excellent growth in sales and profits during 2004 despite odds like stiff competition from generics, stringent drug approval practices, costly legal battles, low success rate in launching new molecules and withdrawal of some blockbuster drugs from the market.
A Pharmabiz study of these 15 pharmaceutical companies namely Pfizer, Sanofi-Aventis, GlaxoSmithKline, Merck & Co, Johnson & Johnson, AstraZeneca, Roche, Novartis, Bristol-Myers Squibb, Wyeth, Eli Lilly & Co, Amgen, Abbott Laboratories, Schering-Plough and Bayer, revealed that the sales of pharmaceutical products improved by 10.6 per cent to US$ 289 billion in 2004 from $ 261 billion in the previous year. Except Schering-Plough, all other companies achieved positive growth in sales of pharmaceutical products. In Euro terms, the pharma sales of Bayer also declined by 23 per cent due to the expiration of its US patent for the anti-infective Cipro. The pharmaceutical sales in USA by these 15 companies increased to $175 billion during 2004 from $163 billion in the previous year.
Despite huge spending on Research & Development activities, the aggregate operating profit improved by 28.1 per cent to $93 billion in 2004 from $73 billion in the previous year. The R&D expenditure went up to $56,110 million during 2004 from $51,024 million in the previous year. This worked out to nearly 14 per cent of the total net sales. The net profit after adjustments regarding mergers, acquisitions, selling of assets and taxation improved by 28.2 per cent to $68 billion from $53 billion. This is basically due to significant growth in profit of Pfizer and Roche to the tune of 191 per cent and 138 per cent respectively as well as turnaround by Bayer. The net profit of Bristol-Myers, Eli Lilly, Merck & Co and Wyeth declined over 15 per cent and the loss of Schering-Plough went up sharply during 2004.
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The total net sales of 15 companies, including other segments like consumer healthcare, animal health, diagnostic and chemicals, touched to $403 billion during 2004 from $363 billion, registering a growth of 11.1 per cent. The sales of pharmaceuticals as percentage of total sales worked out to 72 per cent. For the purpose of comparison, all figures in British Pound, Euro and Swiss Franc converted into US Dollar with the exchange rates as on December 31, 2004 and 2003. Some unaudited figures have been also taken in the case of some companies, as the audited figures are not yet published.
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Pfizer remained on top with pharmaceutical sales of $46,133 million during 2004 as against $39,425 million in the last year, a significant jump of 17 per cent on account of its world leading product portfolio. Pfizer has merged Pharmacia during April 2003 and the year 2004 is the first full year after merger, which helped the company to push its topline and bottmline during 2004. Lipitor brand continued to achieve strong double-digit revenue growth and became the world's first ten-billion-dollar pharmaceutical product. There is a large gap of more than $11 billion between the sales of top position and the second largest. Further there is neck-to-neck competition for all other positions among major pharma players.
Sanofi-Aventis of France has the second largest pharmaceutical sales during 2004 by pushing down GlaxoSmithKline to third position and Merck & Co at fourth position. Sanofi-Aventis' pharmaceutical sales went up by 13.7 per cent to $ 34,680 million from $ 30,509 million. Its sales of Human Vaccines business increased by 7.5 per cent to $ 2216 million during 2004. Sanofi-Synthelabo acquired Aventis with effect from August 20, 2004 and became Sanofi-Aventis. The merged entity has 11 global brands and six blockbusters like Lovenox, Plavix, Allegra, Taxotere, Stilnox/Ambien and Eloxatin. Further, two products i.e. Lantus and Copaxone are near term blockbusters.
GSK, the third largest pharma giant, achieved pharma sales growth of only by 2.2 per cent to $33,034 million as against $32,335 million in the last year, basically due to exchange rate fluctuations. However, the pharma sales in terms of British Pound declined by 5.7 per cent. The lower growth is mainly due to generic competition to its Paxil and Wellbutrin brands. GSK's highest selling product and 6th largest pharmaceutical product globally, Seretide/Advair for asthma and COPD, notched up sales growth of 19 per cent to $4.8 billion during 2004.
Merck & Co, USA, the fourth largest pharmaceutical company, managed to achieve growth of 3.1 per cent in its pharma products sales at $22,939 million despite the worldwide withdrawal of Vioxx during the fourth quarter of 2004. The removals of Vioxx from the market cause a negative impact of approximately $700-750 million during 2004. Further, the company has to provide $604 million for future legal defence costs related to Vioxx litigation and $141 million for estimated costs to undertake the withdrawal. However, its other products like Singulair, Fosamax Cozaar and Hyzaar remained strong.
Johnson & Johnson (J&J), AstraZeneca, Roche and Novartis also reported sales growth in the range of 12 to 16 per cent during 2004. The pharmaceutical sales of J&J went up by 13.2 per cent to $22,128 million from $19,517 million and its sales in US touched to $ 14,960 million. AstraZeneca's pharma product sales increased by 13.9 per cent to $ 20,150 million during 2004 mainly due to strong growth in sales of products like Nexium, Seroquel, Crestor, Arimidex and Symbicort. Roche's pharma sales moved up by 12.4 per cent on account of better performance by its oncology, virology and transplantation franchises. Novartis' five blockbusters Diovan, Gleevec/Glivec, Lamisil, Zometa and Neural achieved outstanding performance and its sales of pharma products increased by 15.5 per cent to $18,497 million, which worked out to 65 per cent of its total sales.
Amgen, world's largest biotech company based in US, has achieved highest growth rate in sales of pharmaceutical products among the sample of 15 international companies. Amgen's sales has taken a quantum jump of 26.8 per cent to $9,977 million from $7,868 million in the previous year. Its major brands like Epogen, Aranesp, Neulasta, Neupogen and Enbrel achieved robust growth during 2004.
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The world leader Pfizer has spent huge amount of $7,684 billion on R&D, which worked out to 14.6 per cent of its total net sales of $52,516 crore. However, Amgen, $9977 million company, has incurred R&D expenditure of $1,996 million or 20 per cent of its total net sales, which is highest among 15 companies. Eli Lilly & Co has also incurred expenditure over 19 per cent of its sales during 2004. Its R&D expenditure amounted to $2,691 million. Other major companies like AstraZeneca, Merck & Co, Roche, Sanofi-Aventis and Schering-Plough have also invested large funds on R&D activities.
The cost of product sold by 15 companies increased by 7.5 per cent to $112 billion during 2004 from $104 billion in the previous year. Similarly, the selling, marketing and other administrative expenditure increased by 9.8 per cent to $127 billion from $116 billion. Pfizer's cost of sales declined to $7541 million from $9589 million. However, its selling, informational and administrative cost moved up by almost 12 per cent to $16,903 million from $15,108 million. Currently, its 15 products are number one in their respective therapeutic categories. Its 10 products each achieved more than $1 billion revenue in 2004. Sanofi-Aventis selling and marketing expenses moved up to $10,476 million from $9,437 million and that of Glaxo's increased marginally to $13,604 million from $13,511 million in the last year.
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The pharmaceutical giants have created strong product pipeline with the investment in R&D activities. GSK has promising pipelines in the industry with 148 projects in clinical development. The number of NCEs in the pipeline has increased by 80 per cent to 90 NCEs in 2004. Out of 90 NCEs, 45 are now in Phase II trials and data on at least 15 of these are expected in the current year. Merck & Co is also created strong pipeline into new therapeutic areas. The company is submitting its three vaccines viz., Rotateq, Gardasil and a vaccine for the prevention of zoster, Phase III for FDA approval in 2005. Roche R&D pipeline currently includes 64 new molecular entities and it has increased its project to 60. It has 107 research projects across seven therapeutic areas.
Pfizer's Liptor brand recorded highest sales of $10,862 million during 2004 and its five products are in the list of top 20 products during 2004. Merck's Zocor brand with sales of $5,200 million stood at second position and followed by GlaxoSmithKline's Seretide at $4,741 million, Pfizer's Norvasac at $4,463 and Eli Lilly's Zyprexa at $4,420.
Thus increasing investments in R&D and aggressive marketing efforts assisting the world pharma companies. Various research projects in the pipeline will give necessary boost for the earnings in the coming year. The restructuring and consolidation of activities with the help of mergers and acquisition will be the crucial factor for the future growth. The merger of Pharmacia with Pfizer and that of Aventis with Sanofi has strengthen their position during 2004 and M&A activity is likely to increase in the coming years.