Leading global Big Pharma companies of 2005

Leading global Big Pharma companies of 2005

I always look forward to writing this particular article with great anticipation! Why, you say? It is part of an annual ritual that I have followed with eagerness as I grew up in the pharmaceutical industry, initiating in my 10 years at Pfizer (way before Pfizer was the juggernaut it is today). At Pfizer, we were all anxious to see the annual company ranking results to see how our company fared against our competition: had we moved up or down in the rankings! It was a source of great pride or angst! If your company had moved up in the rankings, you could gloat over the sales reps (known as “detailmen”) in your territory. As I was the only American sales rep not only in Bogota, but all of Colombia, it was another differentiating factor (I was known as “el gringo de Pfizer” – the gringo from Pfizer) for me.
I was reminded of this ritual during a very recent trip to Brazil where I spent a week taking a group of exec MBA students from the Lake Forest Graduate School of Management to classes at the Sao Paulo School of Business.
The Brazilian pharmaceutical market, with sales of over $8.5 billion annually, is within the top 10 pharmaceutical markets in the world, and depending on the year, vies with Mexico for the top spot as the leading pharmaceutical market in Latin America. Brazil, which is the size of continental U.S., has 180 million people, and unlike the U.S. is oil independent! Brazil weaned itself off foreign oil by combining its own oil production with innovative use of ethanol (derived from improved biotech strains of sugar cane), and creating local cars that can switch from normal gas to ethanol-based gas easily.
As luck would have it during my Brazil trip, the local Pfizer headquarters was half a block from the Sao Paulo School of Business, and the Pfizer logo repeatedly stared me in the face. My luck must have been very strong as it turns out that the local president of Pfizer’s operations was an old friend and colleague who was retiring from Pfizer the week that I was there, after 31 years with the company. In fact, he and I started at Pfizer the same year (wow, I was really feeling old).
As I toured Pfizer Brazil’s offices, we were reminiscing of the old days when Pfizer’s offices in most Latin American countries were usually located 45 minutes to an hour from city centers and were pretty utilitarian. This Pfizer office in Sao Paulo, in contrast, was magnificent (I have a feeling this magnificence was fueled by the success of Viagra in Brazil). My friend and I had not seen each other in 12 years when he was general manager for Pfizer in Colombia and I had been general manager for Monsanto’s Andean business (also living in Bogota once again). This jolt to the past reminded me of my annual quest to know company rankings to see how my company was doing.
When I arrived back, going through my mail, I perused the latest edition (May 2006) of Pharmaceutical Executive, and there staring me in the face were the pharmaceutical company rankings for 2005: fate! So here goes:

Leading Pharma Companies in the World ($ Billions)

2005Rank 2004Rank Company/Country 2005 Global Pharma Sales ($ B) %Growth
1 1 Pfizer (U.S.) $44.3 <4%>
2 2 GlaxoSmithKline (U.K.) $34.0 +8%
3 3 Sanofi-Aventis (France) $32.3 <5%>
4 7 Novartis (Swiss) $25.0 +16%
5 6 Astra-Zeneca (U.K.) $24.0 +12%
6 4 Johnson & Johnson (U.S.) $22.3 +1%
7 5 Merck (U.S.) $22.0 +2%
8 N/A Roche* (Swiss + Chugai) $15.7 N/A
9 9 Wyeth (U.S.) $15.3 +10%
10 8 Bristol-Myers Squibb $15.3 <1%>
11 11 Eli Lilly (U.S.) $14.7 +12%
12 10 Abbott Labs (U.S.) $14.0 +16%
13 13 Amgen (U.S.) $12.0 +13%
14 14 Boehringer Ingelheim $10.8 +2%
15 15 Takeda (Japan) $8.5 +3%
16 N/A Astellas (Japan)** $8.0 N/A
17 16 Schering-Plough (U.S.) $7.6 +18%
18 18 Bayer (Germany)*** $7.6 +18%
19 N/A Daiichi Sankyo**** $7.3 N/A
20 17 Schering AG (Germany) $6.3 +3%
21 22 Genentech (U.S.) $5.5 +46%
22 25 Novo Nordisk (Denmark) $5.4 +1%
23 19 Eisai (Japan) $4.8 <5%>
24 20 Teva (Israel) $4.7 +10%
25 21 Merck KGaA (Germany) $4.6 +21%
26 24 Otsuka (Japan) $3.3 <11%>
27 29 Forest Labs (U.S.) $3.2 +19%
28 26 Baxter International (U.S.) $3.0 +11%
29 31 Akzo Nobel (Netherlands) $2.9 +21%
30 32 Altana (Germany) $2.8 +27%

Source: Pharmaceutical Executive, May 2006
* includes sales from acquisition of Japanese company Chugai but does not include sales from majority-owned position in Genentech
** merger of Yamanouchi and Fujisawa to become Astellas
*** does not include recently-announced acquisition of Schering AG
**** merger in September, 2005 of Daiichi and Sankyo
By the way, as a manner of comparison, let’s take a look at the rankings of the pharmaceutical industry back in 1975, courtesy of Pfizer CEO Hank McKinnell’s book A Call to Action, published last year.

  1. Roche
  2. Hoechst/Roussel (now part of Sanofi-Aventis)
  3. Merck
  4. Ciba-Geigy (now part of Novartis)
  5. Eli Lilly
  6. American Home Products (now Wyeth)
  7. Warner-Lanbert (now part of Pfizer)
  8. Sandoz (now part of Novartis)
  9. Pfizer
  10. Boehringer Ingelheim

Some observations, as always:

  • The sales reflected above only include Pharma (drug) sales; it does NOT include other sales that a company may have such as veterinary, medical devices, chemical, diagnostics, etc.
  • Mergers and acquisitions continue to be a main theme as companies jockey for position, geographic distribution, and new products. The latest this year is the Bayer acquisition of Schering AG for nearly $20 billion, stimulated by Merck KG’s initial hostile acquisition offer for this company. Other acquisitions also took place during the year which we will analyze in a separate article.
  • American companies represent 12 of the top 30 companies (with combined sales of $179.2 billion), with Europe also having 12 companies (with combined sales of $171.4 billion), the Japanese with 5 companies (combined sales of $31.9) and Israeli with 1 company (Teva – the largest generic company in the world)
  • Two American biotech companies figure within the top 30 companies, Amgen and Genentech, with Amgen close to breaking into the top 10 companies although its growth is slowing down; Genentech continues to move up in the ranks and actually finished the year with a market cap higher than Amgen’s – approaching $100 billion
  • The Japanese companies continue to globalize due to the weakness of their own home market and increased penetration by foreign companies there. This globalization is happening by waves of mergers with other Japanese companies (as opposed to acquisition of U.S. or European companies).
  • The Midwest had 3 companies in the top 30 companies, Eli Lilly, Abbott Labs and Baxter; however none of them ended the year in the top 10 companies.
  • Companies that seem to be targets for future acquisition activity are: Schering-Plough, Merck KGaA, as well as other Japanese companies struggling in their home and international markets. Belgium has two medium-sized companies, Solvay and UCB that might possibly make a good choice for one strong Belgium company, while there are also possibilities for further consolidation in Germany. Remember also that Novartis acquired an important chunk of Roche last year – both are located in Basel, Switzerland.

Research and development continues to drive pharmaceutical activity (and budgets). Let’s take a look at what the big companies spent in R&D last year:
Leading Pharma R&D Budgets

2005 Rank Company Pharma R&D Spend ($ B) % of Sales
1 Pfizer $7.4 16.7%
2 Johnson & Johnson $6.3 28.3%
3 GlaxoSmithKline $5.7 16.8%
4 AstraZeneca $5.4 22.5%
5 Sanofi-Aventis $4.8 14.9%
6 Novartis $4.5 18.0%
7 Roche (includes Chugai) $4.2 26.8%
8 Merck $3.8 17.3%
9 Eli Lilly $3.0 20.4%
10 Amgen $2.3 19.2%
11 Schering-Plough $1.9 25.0%
12 Abbott Labs $1.8 12.9%
13 Takeda $1.3 15.3%
14 Wyeth $1.3 8.5%
15 Genentech $1.3 23.6%
16 Astellas $1.3 16.3%
17 Daiichi-Sankyo $1.3 17.8%
18 Schering AG $1.2 19.0%
19 Boehringer Ingelheim $1.1 10.2%
20 Bayer $1.1 14.5%
21 Novo Nordisk $0.8 14.8%
22 Eisai $0.7 14.6%
23 Merck KGaA $0.7 15.2%
24 UCB (Belgium) $0.6 25%
25 Serono (Switzerland) $0.6 25.6%
26 Baxter International $0.5 16.7%
27 Akzo Nobel $0.5 17.2%
28 Genzyme (U.S.) $0.5 20.8%
29 Altana (Germany) $0.5 17.9%
30 Mitsubishi $0.5 26.3%

Source: Pharmaceutical Executive, May 2006
Pharmaceutical R&D as a percent of sales is one of the highest of any industry and generally oscillates between 15-16%of sales with some companies spending as high as 27% (Roche) of sales and the lowest 8.5% (Wyeth).
Here in the Midwest, Abbott Labs at about 13% of sales is on the low side while Eli Lilly is aggressively investing (20% of sales); Baxter, at about 17% of sales, is just slightly above the average for the industry.
Note that, on average, 50% of a Big Pharma’s R&D budget is being spent on the development of in-licensed drugs (from smaller companies), with some companies spending as much as 75-80% of their R&D budget on in-licensed drugs. This huge investment is due to the lack of innovation in their own internal R&D efforts, requiring these companies to actively search for new products from smaller companies (as well as drive further M&A activities).
In the next column, we will look at sales of the leading products and the top M&A transactions during 2005, but the above list gives you a good feel about how the major companies performed.
Pfizer, as king of the hill, seems to be struggling. My friend told me that it in spite of its worldwide dominance of the pharmaceutical world, it had lost the intimacy and collegiality of the old days, when everyone knew everyone else. Did Pfizer bite off more than it could chew by making two very large acquisitions in a span of 5 years? Yes, it has increased sales, and yes, it has downsized operations around the world after the acquisitions, but is it truly focused?
Evidence that it is not has surfaced in the last few months as Pfizer has put up its consumer products division on the block for sale. Pfizer also faces imminent generic competition for a number of its blockbusters, which could greatly diminish sales quickly. Hopefully, Pfizer will use its large cash horde to acquire additional products for its pipeline.
See you soon!

Michael S. Rosen is senior vice president of new business development for Science & Technology Group, which builds bio-parks across the U.S. and currently has bio-parks completed or under development in Cambridge, Baltimore, Chicago, Cleveland, and Denver. Rosen is also a founder and board member of the Illinois Biotechnology Industry Organization. He can be reached at rosenmichaels@aol.com

The opinions expressed herein or statements made in the above column are solely those of the author and do not necessarily reflect the views of The Wisconsin Technology Network, LLC. (WTN). WTN, LLC, accepts no legal liability or responsibility for any claims made or opinions expressed herein.