r Pharma: Pfizer, GSK, Sanofi-Aventis, J&J, Merck, Novartis, AstraZen, Roche, BMS, Wyeth, Abbott, Lilly r Biotech: Amgen, NovoNordisk, Genentech (Roche), Serono, Biogen-Idec, Genzyme, Chiron, Gilead, MedImm r Industry goal = Blockbuster model 1-2 per year r Product development costs: over $800 MM per product
Merger mania: Pfz-WL-PD-Phca-Upj; Glaxo-Wlc-SK-Bech; Amg-Immun-Tularik-Synergen; MMD-Aven-Sanof-Synth.; Sandos-Ciba-Geigy (Novartis); Yamanouchi-Fujisawa (Astellas)
r Alliances & Licensing for technology, molecules & products (Pharma-Biotech = 383; Bio-Bio = 435 in 2003)
Fig. 1.10. Statistics - Top Co. (Sales & Research)
Source: Pharmaceutical Executive 2005; Med Ad News 2005; Ernst
& Young 2004
billion). About $248 B occurred in the USA, 48% of the WW sales; Europe had 28% of WW sales, $144 B, and Japan was $58 B (11%). This sales growth has been much lower since 2000 (about 5.3%) vs. double digits 11-13% over the 1980s and 1990s. An example of a desirable annual target for growth in sales by a company is about 10%. When a product goes off patent, generic products will be substituted for 55% of the prescriptions for that product within 1 year and will be two-thirds of the sales market share (85% for Blockbuster drugs). Over 4 years (2005-2008), 17 BBs will lose their patent protection. Generic drugs accounted for over $40 billion in worldwide sales ($17.1 B in USA) and 50% of all prescriptions in 2002. Over-the-counter drug sales were $30
billion in 2002. Medical devices is yet another major health cost reaching $143.2 B in 2003 (U.S. $63.2 B), led by Johnson & Johnson with about $15 B [15-23].
Blockbuster (BB) drugs in 2004 included 94 worldwide accounting for $186 B; these 94 products were 33.8% of total sales (Fig. 1.9). The top therapeutic category in 2004 for the top 200 worldwide products was cardiovascular products ($56 B, 14 products), followed closely by central nervous system ($45 B, 17 products), oncology ($26 B, 8 products), infectious diseases ($22 B, 11 products), gastrointestinal diseases ($18 B, 8 products), and respiratory areas ($17 B, 7 products) (Fig. 1.8). The top companies (worldwide) in the marketing of BBs were three European and three U.S. companies; GlaxoSmithKline (GSK, 12 BBs), Pfizer (10 BBs), Sanofi-Aventis (S-A, 9 BBs), Johnson & Johnson (J&J, 8 BBs), Merck (6 BBs), and AstraZeneca (AZ, 6 BBs) (Fig. 1.10). On a smaller but significant scale, the top biotechnology companies were Amgen (5 BBs), NovoNordisk, (2 BBs), Genentech (1 BB), Serono (1 BB), Genzyme (1 BB), and Biogen-Idec (1 BB). Hematological and diabetes products led the biotechnology areas, for example, hematopoiesis (six products, $10.37 B), diabetes (five+, $6.57 B), inflammation (three products, $6.33 B), multiple sclerosis (four products, $5.34 B), cancer (3 products, $4.24), hepatitis/cancer (four products, $3.03), myelopoiesis (three products, $2.92 B), and growth hormones (five products, $1.92). Biological products were significant also for Lilly, Johnson & Johnson, and Roche [17, 18, 23].
The top 10 pharmaceutical companies are listed in the next table (Fig. 1.10); their sales were $240 billion in 2004, 44% of all company sales worldwide. The top 11 leading companies with over $10 billion in worldwide sales were Pfizer at $46 B, GlaxoSmithKline at $31 B, Sanofi-Aventis at $32 B, Johnson & Johnson at $22 B, Merck at $21 B, Novartis at $18
B, Roche at $17.3 B, Bristol-Myers-Squib (BMS) at $15 B, Wyeth at $14 B, Abbott at $14 B, and Lilly at $13 B. The top Japanese companies were Takeda ($6.3 B), Astellas ($6.9 B, Fujisawa-Yamanouchi), and Sankyo ($2.9 B). The most successful biotechnology company was Amgen at $11 B in sales and five BBs, followed by NovoNordisk at $4.85 B, Genentech at $4.6 B (a division of Roche), Serono at $2.5 B, Genzyme at $2.2 B, Biogen-Idec at $2.2 B, and Gilead at $1.2 B. The top biotechnology products (blockbusters = 19) yielded sales of about $34 B WW in 2004.
Collectively, pharmaceutical companies spent $74.8 billion worldwide in 2004 on research and development of products, 19.4% of gross sales (U.S. PhRMA was $38.8 B). The public biotechnology companies spent $16 B on research and development, 34.4% of revenues. The cost of product development in the industry, now at $800 to 900 million per product, has grown substantially over the past several decades; 1970s, $138; 1980s, $350; early 1990s, $500; late 1990s, $800+ millions. These figures were generated by independent research organizations, Boston Consulting Group (BCG) and the Tufts Center for the Study of Drug Development (T-CSDD). Data were real costs from pharmaceutical companies, plus widely accepted economic calculations for after tax cost of R&D and the opportunity costs of capital. Other groups have used different assumptions, including the OTA, both corroborating and challenging the above costs (e.g., average costs of $137 million in 1976, $149 & $173 million in 1987, $293 & $445 million in 1990, all in 2000 U.S. dollars). A low of $110 million for 1991 is suggested by Public Citizen, a consumer group, but their assumptions were very limited and in conflict with Office of Technology Assistance (OTA), BCG, T-CSDD, and others. The cost of postmarketing clinical trials, which are commonly required by the FDA or needed to understand the full use and safety of a product in more traditional settings, adds about another $90-100 million to product development costs [13, 17, 18, 22-25].
A key goal of the each company in the industry is to launch annually at least one new product that will be a blockbuster product within 5 years of its approval. This cost of research for a new product, estimated to be $800-$990 million, necessitates quite large R&D budgets, fosters the need to launch blockbuster products to meet the financial expectations of the investment community, and creates a drive for operational efficiency and synergies in both the research and the sales areas. These three reasons also are three primary reasons for consolidation in the pharmaceutical industry over the past 10 years. Warner-Lambert acquired Parke-Davis, while Upjohn and Pharmacia combined; Pfizer consumed all four companies in a mega merger in the industry. Other merger or acquisitions were Glaxo - BurroughsWelcome - SmithKline - Beecham (now GlaxoSmithKline); Marion - Merrell-Dow (Aventis) -Sanofi - Synthelabo (now Sanofi-Aventis); Sandoz - Ciba Geigy (now Novartis), and Fujisawa-Yamanouchi (now Astellas). Biotechnology companies also are acquiring other biotech companies to achieve the same kind of synergies (e.g.,
Amgen-Synergen-Tularik-Immunex, now Amgen; and Biogen-IDEC. Besides the full incorporation of one company into another, alliances between separate companies are a necessity for successful R&D as well. One company cannot have all the expertise and resources to cover all the basic science areas germaine to their therapeutic areas of interest. Such that, one company will have access to a particular added technology or product, which is shared through alliances and licensing deals. For example, monoclonal antibody expertise is found especially with Abgenix, PDL, and Immunomedix companies, who collaborate with many pharmaceutical and biotechnology companies. In 2003, over 800 such collaborations were signed for the pharma to bio and the bio to bio agreements. Also, in the 2003-2004 time frame, 14 research partnerships were created between pharma and biotechnology companies that could be worth up to $100 to $535 million each if the research and marketing milestones are met [17-22].
Besides success in gross sales and new product approvals, a host of factors are used to measure the success of pharmaceutical companies as represented by the 15 parameters in Fig. 1.11. A trade journal for the industry is Pharmaceutical Executive, which performs an annual assessment for the top company performers using these standard business operating parameters that are heavily focused on financial issues; that is, sales, earnings, profits, revenues, assets, and equity in various combinations. Ratios among these parameters are a key focus (e.g., earnings per share, profits to assets). Just few key nonfinancial factors are incorporated, such as contribution of new products, brand power (the value of a company's name and the product names), and enterprise value (overall company operations, productivity, profitability, reputation, and sales success). Companies are ranked for each parameter, which are then integrated. The top 2003 industry performers in order were GlaxoSmithKline, Merck, and Johnson & Johnson, based on these 15 criteria; they also were in the top five companies in prescription product sales in 2004. In 2003, two relative
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