AND THE WINNER IS ... NOVO NORDISK
10: Selling, General & Administrative Expenses
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Novo Nordisk ranked in the top five for each of our eight key metrics. Without a significant merger or acquisition, Novo
Nordisk posted a 33 percent increase in shareholder value. In an increasingly hostile environment for pricing, Novo Nordisk
was able to increase Gross Margin over 7 percent from 2009. It registered the second-highest Enterprise Value to Sales ratio,
with an increase in this most important metric from 2009. Novo Nordisk came in fifth in profitability to sales and first in
asset management, resulting in second place on the Return on Asset metric.
A TEN-YEAR PERSPECTIVE
Increase in Enterprise Value
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Going back to September 2002, when we published the first Pharmaceutical Industry Audit, the bellweather metric was creation
of shareholder value, followed by Enterprise Value to Sales.
11: SG&A to Sales
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Using FactSet's database, Enterprise Value for each firm above was calculated from Dec. 31, 2002, through Dec. 31, 2010. Celgene
comes in with the largest 10-year increase in Enterprise Value, at approximately 1,166 percent. At Dec. 31, 2001, Celgene's
EV was $2.1 billion; by Dec. 31, 2010, Celgene's EV hit $26.6 billion, an increase of $24.5 billion from the end of 2001.
At the other end, Lilly saw EV drop by 52 percent. Most of the major pharmas tracked the macro numbers posted below.
To put this in perspective, the changes over the last 10 years in the major indexes were:
THE FINISHING TOUCHES
And the Winner Is...
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A useful corrective, this year's Industry Audit also demonstrates that big acquisitions aren't necessarily the path toward
a stronger, more innovative organization, and it gives credence to the view that specialization—as opposed to broad therapeutic
and portfolio diversification—is one way to weather a stormy economy. The top four companies in the rankings all received
a vast majority of revenues from within a single disease area: Novo Nordisk with diabetes; Biogen Idec with multiple sclerosis;
Gilead with AIDS; and Celgene with cancer treatments. That doesn't mean diversification isn't a way forward, but it does mean
that that it's not the only way. The next couple of years will be trying for industry, as all eyes turn to innovation coming
out of the pipeline, but those firms capable of leveraging their assets, and squeezing every bit of value out of every resource—and
every administrative dollar on costs—will be rewarded through improved reputation, new investment, and grateful shareholders.
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