Industry Audit - Pharmaceutical Executive

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Industry Audit
The Company of the Year: Our fifth annual report dives deep into the numbers and comes up with the industry's true top performers.


Pharmaceutical Executive



Bill Trombetta
For the fifth year in a row, Pharm Exec invites Professor Bill Trombetta of St. Joseph's University to analyze the pharma industry's financial performance with a battery of business metrics old and new. The highlights: Two top biotechs race neck-and-neck for first place, Forest delivers another strong performance, and AstraZeneca squeezes past Johnson & Johnson and GlaxoSmithKline into the top four for the first time ever. And the winner is . . .

Company of the Year #1 Amgen

Last year, Genentech and Amgen tied for first place. This year, Amgen pulled ahead based on strong performances in several key metrics. Amgen had outstanding performances in Profit Margin (29.6 percent) and Revenue per Employee (a remarkable $756,098), and placed second in ratios of Enterprise Value to Total Sales, Earnings per Share, and the audit's main measure of innovation—Revenue from Intellectual Assets. One surprise: Though Amgen has almost twice Genentech's sales, Genentech has an Enterprise Value to Sales ratio almost double Amgen's, which may mean investors believe Amgen's portfolio will provide slower growth than Genentech's.






P HARM EXEC 'S FIFTH ANNUAL strategic industry audit analyzes the 2005 financial performance of 16 companies that are publicly traded on stock exchanges and file 10-K reports with the Securities & Exchange Commission (or 20-F reports, in the case of foreign companies). As in past years, the audit goes beyond standard accounting and financial statements, drawing on newer and oftentimes more meaningful metrics, such as sales per employee and percentage of income driven by intellectual capital. Data were gathered primarily from 10-Ks and 20-Fs. In addition, we consulted databases such as http://finance.yahoo.com/, and secondary sources such as Fortune, Forbes, BusinessWeek, In Vivo, and The Wall Street Journal. Non-annual data were collected the first week of April 2006.






METHODOLOGY

Aiming to compare companies' performance, this report omits a few companies that are or appear to be publicly traded, but are not comparable with the rest of the group: extremely diversified firms (such as Procter & Gamble), narrow-focus companies (such as Novo Nordisk), companies that manufacture primarily generics (such as Teva), firms with unconventional ownership structures (like Roche), and companies whose financial reporting doesn't mesh with US standards (like Japanese drug firms).


Overall Rankings


Companies were assigned scores based on their rankings in 13 key metrics: The company that ranked first in a given metric received 16 points, the second-place company 15, and so on.


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