The 2013 Pharm Exec Top 50

May 01, 2013

Disruptive market change in the biopharmaceutical industry is a given—but individual company performance is rising to the occasion through efficient deployment of a still considerable inventory of product, process, and knowledge assets. If anything, uncertainty has helped push the Big Pharma players to put their own houses in order, chiefly by slowing the hemorrhage in R&D costs, which has deflected the negatives from the transformation of healthcare as a budget buster—for both households and governments. True to form, Pharm Exec's 2013 ranking of the top 50 pharma companies worldwide finds few variations from last year, with the notable exception being the Rx success of global generic firms as they benefit from innovative portfolio diversification: Teva is nipping at the heels of Eli Lilly, at just one slot short of the top 10, while Ranbaxy joins the Pharma 50 list for the first time. Overall, however, only a relatively small set of companies—BMS, in particular, which drops to 17th in global Rx sales, from 11th last year—have been affected by the rush of patent expiries, contributing disproportionately to the weaker industry sales performance over the past several years.

Another enduring truth is the startling lack of concentrated market power in pharmaceuticals. What has not changed since we began compiling the Pharma 50 in 2000 is the top 10 still comprise less than 50 percent of the global market (their 2012 global share is 42 percent, compared to 43 percent in 2007). Other industries less reputationally vulnerable than pharma see much more concentration at the top; certainly this is true in the payer community, where governments increasingly hold sway. Even in the patent protected market, the core competency of Big Pharma, the top 10 players' share remained at 52 percent in 2012, the same level it was in 2007. The bottom line? For pharma, business is still an intensely competitive game of chance. ­—William Looney, Editor-in-Chief

To identify what's driving the numbers, we examined the top 50 as a group and in comparison to companies outside the top 50. We see five trends shaping current sales performance across the geographies where the pharma group competes:

Figure 1: Performance of US pharma market by company type.
Perhaps most notable is the contraction in the US market—the first in more than 50 years. This contraction comes not only from several patent expiries of billion dollar blockbusters—including Plavix, Seroquel, Lipitor, and Zyprexa—but also from increased scrutiny by payers for reimbursement and regulators for approval. The negative growth is driven by a few companies, each of whom had exposure to over $5 billion in revenue loss due to patent expiration of their major products. In the United States, there were 13 such companies in the five year period of 2008 to 2012: Pfizer, GSK, Takeda, Merck, J&J, BMS, AZ, Novartis, Sanofi, Lilly, Forest, Boehringer-Ingelheim, Eisai, and Roche. Thus, in Figure 1, we see that year-on-year growth for the entire market was negative for the first time.

For the 13 companies, year-on-year performance for 2012 amounted to a close to 10 percent contraction in revenues against 2011. Excluding these companies, we see that US growth performance for the remainder of the top 50 was actually slightly higher compared to last year. The 13 companies thus represent the brunt of the loss to the industry, with the remaining companies in the top 50 performing fairly well. The top line in Figure 1 represents the growth of all other companies with revenue in the United States, comprised of over 600 companies outside of the top 50. The growth in these companies is significantly more than the top 50, and includes companies with extremely varied portfolios, including branded products and generics. In many ways it is not surprising to see such growth, given that they are starting from a smaller base of revenues than the top 50 and that some are posting new revenues from newly launched generics, at the expense of those facing patent expiries.