Pharm Exec is the place where business meets policy. One of our most popular features is our annual look at what we call the Pharma 50 – the 50 top pharmaceutical companies in revenues. Our focus is twofold – on global, not just US revenues, and on revenues specifically from pharmaceuticals: patented, branded and generics.
We think this approach gives a fuller, more rounded insight that tracks where the industry is heading – and how well the science that drives progress in medicine is performing.
Because R&D is a drug company’s largest single expense, our Pharma 50 also compares R&D spending to revenues, and here we see an enduring truth. Despite all the hype about marketing, this is still an industry that puts a high premium on transforming new knowledge into useful products.
This is our 16th year for the Pharma 50. That long time frame gives us a unique window on the pace of industry change.
For example, more than a fifth of the companies on the list in 2009 are gone now, indicating that the trend toward consolidation in the industry is much more than a fad. We also have a smaller group of new players, led by Celgene, which wasn’t even on the list in 2009 but now ranks at 26th. This year, Valeant hits our list for the first time, clocking in at 40th.
The price for entry on the list has also moved up: ten years ago, all 50 companies had baseline revenues of at least $500 million; today, that figure has quadrupled, to $2 billion.
Something new we did this year is to ask the IMS Institute for Healthcare Informatics to provide some interpretive spin on the Pharma 50 list. In a feature profile that accompanies the data, IMS identifies five trends behind this year’s numbers.
The first is a contraction in revenues in the US market, led by patent expirations for blockbuster products that hit some of the biggest companies hardest, depressing revenues overall.
Next, the economic crisis in Europe helped accentuate the US revenue gap, but the impact was less than expected because of the price resiliency of the off-patent branded generics segment in the region.
This was also true of Japan.
In the other key geographic segment – the emerging country markets – revenue growth remained strong, but the benefits tend to accrue to a select number of companies: those that have built a strong local presence with a diversified, needs-appropriate portfolio of product offerings that cover branded, generics and vaccines.
The fifth and final trend impacting Pharma 50 performance was the pause in M&A activity as companies paid attention to the more difficult, and definitely long-term, task of generating organic growth and improved operational efficiencies from existing business.
Placing the right long-term bets around a “science meets medical need and value agenda” is the success factor that ties it all together. Generic leaders like Teva are steadily moving up the ranks through a commitment to process innovation and investments in complex generics that are harder to commoditize. And the fastest run up in the revenue ranks for brand name companies are those with a commitment to building franchises around multiple mid-sized products in the specialty class, which appeal to a well-defined disease segment, with limited competition.
To me, standing tall on the Pharma 50 all comes down to three words: the Market – know it. Differentiate – against the competition. And Commit – full blast, for keeps.
You can read more about this year’s Pharma 50 and the accompanying data charts here.