Line between big pharma, big biotech continues to blur

Line between big pharma, big biotech continues to blur

In our last two columns, we looked at both the magnitude of Big Pharma and the converging trends to create the growth of Specialty Pharma particularly in the U.S. market.
We also explored the growth of not only blockbuster drugs (drugs that sell $1 billion or more) but the super-blockbuster drugs (drugs that sell $2 billion or more per year) and the mega-blockbuster drugs (the one drug, Pfizer’s Lipitor for high cholesterol, sells more than $10 billion per year).
Looking at sales of Big Pharma, though, isn’t enough as it doesn’t reveal the full picture. Another perspective on the pharmaceutical industry is the value of companies in the U.S. stock market.
While not reaching the stellar multiples of some companies in the high-tech industry (e.g. companies such as Microsoft and Internet companies like Google, eBay and, the value multiples of companies in this industry are impressive. On average, the valuation of the pharma industry approaches three to five times sales for many companies.
Biotech multiples resemble that of their high-tech cousins with multiple of seven to 10 or more. A June 1 analysis by the biotech publication Genetic Engineering News looked at the market valuation of the top 10 Big Pharma companies over the course of 2004. Let’s take a look at their findings:

The vertiginous drop in Pfizer and Merck’s market valuation has been the subject of a prior column and can mostly be attributed to the market withdrawal of their respective Cox-2 inhibitors. Even with this impact, Pfizer still tops more than $200 billion in valuation. AstraZeneca and Eli Lilly have both faced product withdrawal issues and product labeling restrictions via FDA action.
While Big Biotech has yet to cross over the $100 billion market valuation threshold (which five Big Pharma companies have done), there are now two Big Biotech companies that have surpassed the $70 billion level. This achievement would rank them well within the valuations of the top 10 Big Pharma companies.
Let’s take a look at the leading biotech companies:

The biotech industry itself has been plagued with ups and downs and some of the same product withdrawal issues as Big Pharma. Biogen and Elan were battered by the withdrawal of their new multiple sclerosis drug while Chiron was hammered by its vaccine production facility in the United Kingdom not meeting FDA specs.
The “Pfizer and Merck” of the biotech industry have historically been Amgen and Genentech with Amgen the leader over the years. As Pfizer overtook Merck, Genentech in 2005 has overtaken Amgen on the strength of its product portfolio even though Amgen still outsells Genentech by a hefty margin. More important, the biotech industry now has five companies worth more than $10 billion each, which is a major statement for the industry.
The old measurement of the progress of the biotech industry was lumping together the valuation of the biotech industry and comparing it to the market value of perennial Big Pharma leader Merck (now Pfizer). For many years, the entire value of the industry was less than that of Merck/Pfizer.
It now appears that the biotech industry is coming of age as the top 10 biotech companies alone are worth more than market leader Merck. Together, the approximate 5,000 biotech companies around the world are now approaching $500 billion or more in value. This requires the analogy to utilize perhaps the top three Big Pharma companies: Pfizer, Johnson & Johnson and GlaxoSmithKline.

The Olympics of Biotech

The Olympics of Biotech – the annual BIO meeting – is set to open on Monday in Philadelphia. The expectation is that close to 20,000 people (including yours truly) from more than 60 countries will be there to celebrate and witness the growth of the industry.
BIO 2006 will be held in April 2006. It will be a departure from the normal June horizon due to the simultaneous holding of several major medical meetings in May and June.
Of course, anyone who has been reading this column for a while knows that it will take place in Chicago for the first time. Illinois has a large contingent going and a lot of activities planned for the event to ramp up an expectation of what’s to come in Chicago in 2006. I will bring you news of this event in next week’s column.
See you next week!

Michael S. Rosen is president of Rosen Bioscience Management, a company that provides CEO services including financing, business and corporate development to start-up and early stage life science companies such as Renovar and Immune Cell Therapy. Rosen is also a founder and board member of the Illinois Biotechnology Industry Organization. He can be reached at
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