The growth in sales and profit of top 15 International Pharmaceutical companies remained under pressure during the year ended December 2005 with stiff generic competition in major markets, slower rate of products launches, higher cost of drug development and marketing. Additional burden of legal expenses and adverse exchange rates in terms of US Dollar also restricted growth rate in 2005. The pharmaceutical policies in certain countries, frequent regulatory interventions, parallel imports, mergers & acquisitions and rigorous price containment measures also placed considerable burden on working.
The aggregate pharmaceutical sales of 15 companies increased marginally by 2.1 per cent to US$ 309 billion from $303 billion in the previous year, thanks to double digit growth in sales by Amgen Inc., Abbott Laboratories and AstraZeneca Plc. The net profit, however, moved up by 7.9 per cent to $75 billion from $ 70 billion. The managements of several pharma giants are optimistic about product pipeline and have projected better earnings for 2006.
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As per the Pharmabiz study, Pfizer maintained its leadership position with pharmaceutical sales of $ 44.3 billion in 2005. sanofi-aventis (Sanofi) and GlaxoSmithKline (GSK) maintained the second and third places with sales of $32,349 million and $ 32,112 million respectively. The sales of Sanofi and GSK, however, declined in dollar terms mainly due to firming up of pound and euro in terms of US dollar during 2005. The sales of Pfizer declined by 4.1 per cent, Sanofi by 5.9 per cent and GSK by 2.5 per cent at constant exchange rates. However, GSK's pharmaceutical sales in terms of British pound improved by 9.1 per cent to £ 18,661 million from £17,100 million and that of Sanofi's sales improved by 8.4 per cent to Euro 27,311 million from Euro 25,199 million.
Gross sales of 15 companies including products from pharmaceutical, consumer health, animal health, medical devices & diagnostic, nutritionals, OTC, and chemicals, segments touched to $ 408 billion during the year 2005 from $ 397 billion in the previous year. The Pharmaceutical segment accounts nearly 76 per cent of the total business during 2005 with sales of $ 309 billion. Thus excluding pharmaceutical sales, other segments contributed around 24 per cent in gross sales.
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The exchange rate fluctuations in the currency have adverse impact while analyzing financial results. One Euro was converted at 1.18 US dollar as at the end of December 2005 as compared to 1.36 US dollar as at the end of December 2004. Similarly, One pound was converted at 1.72 US$ as at the end of December 2005 as compared to 1.93 as at the end of December 2004. Further, one Swiss Franc exchange for 0.76 per dollar on December 31, 2005 as compared to 0.88 dollar year ago. In the study Euros, Pounds and Swiss Francs were converted at constant rates on end of the year 2005 and 2004.
Out of 15 top international pharmaceutical companies, three namely, Amgen Inc, Abbott Laboratories and AstraZeneca Plc achieved double digit growth in pharmaceutical sales during 2005. Amgen recorded highest growth of 20.5 per cent at $ 12,022 million as against $9,977 million in the previous year. Abbott notched up sales growth of 14.7 per cent and its sales touched to $15,105 million from $13,173 million. There was neck-to-neck competition for the world ranking positions. AstraZeneca performed well and its sales increased by 11.8 per cent to $23,950 million and it climbed upto fourth place in 2005 as against sixth place in last year. It overtook Johnson & Johnson (J&J) and Merck & Co whose sales amounted to $ 22,322 million and $ 22,012 million respectively.
J&J, Roche Group, Novartis International AG, Abbott Laboratories, Eli Lilly & Co and Boehringer Ingelheim managed to maintain their pharmaceutical sales ranking during 2005. J&J's pharma sales improved to $22,322 million in 2005 from $22,128 million in the previous year. The company ranked as fifth largest pharma company in the world. Roche and Novartis remained at seventh and eighth spot with pharma sales of $20,728 million and $20,262 million respectively. Wyeth's sales increased to $15,321 million and surpassed the sales of Bristol-Myers Squibb Co (Bristol) of $ 15,254 million in 2005. Wyeth grab ninth place as against tenth in the last year.
USA remained as largest market for the Pharmabiz sample of 15 companies. Out of the aggregate pharmaceutical sales of $309 billion by the 15 companies in 2005, the sales in USA amounted to $ 168 billion. This worked out to 54.4 per cent of aggregate sales as against 55.5 per cent in the last year. The stiff competition by generic products, stringent approval norms and expiration of patents put pressure on overall sales in USA. Pfizer's pharmaceutical sales in USA declined by 11.8 per cent to $23,443 million from $26,583 million.
The sales in the US by Sanofi came down by 5.3 per cent to $ 11,330 million from $11,969 million in the last year and that of GSK by 3.5 per cent to $15,670 million at constant exchange rate, basically due to fluctuation in exchange rates. The sales in Euro and Pound terms for Sanofi and GSK moved up by 8.1 per cent and 9.1 per cent respectively. Sanofi is more aggressive in Europe with sales of $14,372 million. GSK's sales in Europe worked out to $9,528 million in 2005 as against $ 9,853 million in last year.
Amgen Inc. recorded highest growth in sales of 19.5 per cent in US which touched to $ 9,892 million in 2005 from $ 8,279 million in the last year. Abbott's sales in the US went up by 13 per cent to $12,707 million and that of AstraZeneca's moved up by 11.8 per cent to $10,771 million. Novartis also managed to push its US sales by 9.7 per cent to $ 8,085 million. There was substantial decline of 10.4 per cent in US sales of Bayer AG to $3,555 million as against $3,966 million, basically due to exchange rate.
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To overcome competition and patent problem, the 15 companies are spending huge amounts on Research & Development activities. The total R&D expenditure of 15 companies reached at $ 56,942 million during 2005 from $ 55,651 million in the previous year. This R&D expenditure worked out average of 14 per cent of gross sales. Companies like Pfizer, Merck & Co, AstraZeneca and Bayer AG, however, reduced their spending on R&D during the year 2005. Further, the R&D expenditure after conversion of euro, pound and Swiss Franc into US dollar in respect of Sanofi, GSK, Roche Group and Boehringer Ingelheim also came down due to adverse exchange rates.
Pfizer's R&D expenditure declined by 3.1 per cent to $ 7,442 million in 2005 from $ 7,684 million in the last year. Merck reduced its R&D spending to $3,848 million during 2005 under its worldwide restructuring plans. It is planning to close down its basic research center in Terlings Park, UK. AstraZeneca's investment in R&D also came down by 2.5 per cent to $3,379 million from $3,467 million.
Eli Lilly & Co maintained its highest ranking among the 15 companies as highest R&D spender. Its R&D expenditure as per cent of gross sales worked out to 20.7 per cent in 2005 as against 19.4 per cent in the last year. Eli Lilly's R&D expenditure reached at $3,026 million in 2005. Amgen Inc. is the second largest investor in R&D in terms of gross sales. The ratio of R&D spending as gross sales worked out to 18.6 per cent and its R&D expenditure went up to $2,314 million in 2005. Though Merck & Co reduced its R&D spending in 2005, it remains as the third largest R&D spender with a ratio of 17.5 per cent in 2005. Johnson & Johnson incurred R&D expenditure of $6,674 million, a growth of 27.8 per cent, which is highest among the sample of 15 companies.
The slower growth in sales, increasing cost of selling and approvals, litigation charges and currency effect impacted the bottomline growth. The net profit of 15 companies moved only by 7.9 per cent to $75,389 million from $69,877 million in the previous year. However, return on sales i.e. net profit as per cent of sales, improved to 18.5 per cent in 2005 from 17.6 per cent in the last year. The net profit of Wyeth has taken a quantum jump of 196 per cent and touched to $ 3,656 million from $1,234 million in 2004. Similarly, Bayer's net profit zoomed by over 102 per cent to $ 1,889 million from $931 million. Amgen and Boehringer Ingelheim also pushed their net profit by 56 per cent and 46 per cent respectively to $3674 million and $ 1766 million during 2005. J&J, AstrZeneca and Bristol-Myers reported net profit growth in the range of 22 per cent to 28 per cent.
Pfizer, Roche Group and Merck & Co suffered setback on profitability front. Pfizer's net profit declined sharply by 28.8 per cent to $8,085 million in 2005 from 11,361 million in the previous year. Similarly, Merck's net profit dwindled by 20.3 per cent to $4,631 million from $5,813 million. Roche's net profit moved down by 13.2 per cent to $5,095 million from $ 5,870 million due to adverse exchange rate. With the fall in net profit, the earning per share of Pfizer declined to $1.10 from $1.51 and that of Merck came down to $2.10 from $2.61 in the last year. All other companies improved earnings per share during 2005.
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Pfizer's Lipitor, a leading drug for cardiovascular, continues to remain at No 1 brand in the world of pharma market during 2005 with total sales of $12,187 million. Lipitor sales increased by 12.2 per cent from $ 10862 million in the 2004. GSK's Seretide/Advair product for Respiratory therapies also maintained its second largest position with worldwide sales of $ 5,168 million during 2005. The third leading product Norvasc of Pfizer clocked the sales of $4,706 million. The fourth and fifth position captured by Nexium of AstraZeneca and Zocor of Merck & Co with sales of $ 4,633 million and $ 4,382 million respectively. There are total 78 products with sales above $ 1 billion and there sales worked out to $158 billion in 2005 as against $ 148 billion in the last year, a growth of 6.8 per cent.
Among the blockbusters with net sales of over $ 2 billion or more, Aranesp product of Amgen achieved significant sales growth of 32.3 per cent to $3,272 million from $ 2,473 million in the 2004.Seimilarly, AstraZeneca's Seroquel and Amgen's Enbrel recorded growth of 36.2 per cent and 35.4 per cent respectively during the year 2005. Novartis' Gleevec/Glivec for Oncology recorded a growth of 32.8 per cent and its sales reached at $2,170 million in 2005.
Few major products received setback during 2005 due to stiff competition. The sales of Zocor, fifth largest product in the world of Merck, declined by 15.7 per cent to $4,382 million. Further sales of Zoloft of Pfizer also came down by 3.1 per cent to $3,256 million. Bristol's sales of Pravachol decreased by 14.4 per cent to $2,256 million from $2,635 million in the previous year. Pfizer's Celebrex received major jolt and its sales declined by 47.6 per cent to $1,730 million from $ 3,302 million.
The list of Blockbuster products, with sales of $ 1 billion or more, went up sharply during the year 2005 and 15 new products entered the list. Tamiflu product of Roche entered into the blockbuster list with sales of $ 1,184 million in 2005, a significant growth of 306 per cent. Similarly Roche's second product Avastin also entered the list with sales of $1,266 million and recorded sales growth of 108 per cent. Few products like Humira, Mobic and Kaletra of Abbott, Crestor, Symbicort, Zoladex and Arimidex of AstraZeneca, Spiriva and Mobic of Boehringer, Enbrel and Nutrition of Wyeth, Lotrel of Novartis and Copapxone of Sanofi entered the blockbuster list during 2005.
We have not included Takeda Pharmaceutical Company Ltd of Japan in our study due to its year ended during March 2005. The company's sales for the year ended March 2005 reached at $10,444 million. For the nine months ended December 2005 its gross sales amounted to $7,936 million, of which pharmaceutical sales worked out to $7,066 million. The company's four products i.e. Leuprorelin, Lansoprazole, Landesartan and Pioglitazone recorded sales of $ 1,186 million, $2,514 million, $1,264 and $1,505 million respectively during the first nine months of 2005-06. The company's sales in US reached at $3,665 million.