Pfizer to lose crown to Sanofi as world’s biggest drug maker

Source EP Vantage
Company PfizerAbbott LaboratoriesWyethBayerBristol-Myers SquibbEli LillyJohnson & JohnsonMerck & CoNovartisNovo NordiskRocheSchering-PloughTakedaTeva Pharmaceutical IndustriesMillennium PharmaceuticalsAstraZenecaSanofiGenzymeCephalonAventisGlaxoSmithKlineAlconNycomedCibaBristol-Myers 
Tags Free Content, Analysis, Investments in Infrastructure, Acquisition, Merger, General, Company Strategy
Date October 31, 2011

After nine years as the world’s biggest maker of medicines, Pfizer  is set to cede its crown next year to a company that a decade ago few would have predicted to be leading the pharma league tables –  Sanofi .

Sanofi  is expected to retain the top spot until at least 2016 with  Pfizer  relegated to third place, behind  Novartis , toppled by the loss of mega-blockbuster drug Lipitor, consensus sales forecasts from EvaluatePharmashow. The French drug maker has raced up the rankings over the last decade largely through acquisition, culminating in its $20bn swoop on US biotechnology specialist Genzyme , which assisted in securing pole position (see table below). 

Shifting fortunes

Pfizer ’s $68bn acquisition of Wyeth  in 2009 went a long way to alleviate the pain of the impending loss of Lipitor but the cholesterol-lowering statin is a huge product to replace. Global sales peaked at $13.4bn in 2008 – setting the record for the biggest selling medicine – but the loss of US patent protection in November means sales will shrink to $2bn by 2016, according to  EvaluatePharma.

Still, a couple of recent pipeline successes, including RA pill tofacitinib and Eliquis, the blood thinner partnered with Bristol-Myers Squibb, mean analysts expect Pfizer ’s top line drug sales will start growing again come 2016.

That upturn will help retain the company’s notable position as the only US company in the top five.

Despite buying Schering-Plough for $41bn in 2009, Merck & Co  is seen struggling to expand its drugs business over the next four years, with below average 1% annual sales growth predicted, letting faster growing Europeans  GlaxoSmithKline  and  Roche  climb ahead.

Domestic peer Johnson & Johnson  is seen faring better. The diversified firm, which derives less than half of its revenues from prescription and over-the-counter medicines, is expected to benefit from a series of recent pipeline successes although its drugs arm remains substantially smaller than the five biggest pharma companies.

Novartis  is expected to be  Sanofi 's closest challenger on the pharmaceutical front over the next few years, with strong sales growth from Gilenya and Tasigna offset by the loss of patent protection for Diovan next year. Novartis ' recently completed $48bn acquisition of Alcon  is mostly helping the group's topline sales in areas outside of prescription and OTC drugs.  

Other entrants

A notable entrant to the top ten next year will be Teva. The Israeli generics giant is predicted to post strong 7% annual sales growth over the period with both copycat and branded drug segments expanding. This has been achieved largely through an aggressive acquisition policy that has seen the company strike five multi-billion dollar deals in the last seven years; an ambitious target to grow revenues to $31bn by 2015 suggests more are on the way (Teva strives to meet growth targets with Cephalon buy, May 3, 2011).

Takeda  represents the only non-Western contender in the top 15. The Japanese company has also been buying beyond its borders – this year’s $13bn purchase of private European drug company  Nycomed  followed the acquisition of US cancer specialist Millennium Pharmaceuticals for $8.8bn in 2008 (Takeda confirms defensive course in Nycomed buy, May 19, 2011).

Novo Nordisk, meanwhile, stands out with the predicted fastest growing drug sales over the period, 9% a year until 2016. The Danish diabetes specialist is already seeing strong demand for once-daily GLP-1 agonist Victoza – sales are forecast to top $1bn this year, its second full year on the market – while its new long acting insulin, degludec, will hear on regulatory approvals next year. Many analysts believe it has the potential to become a substantial product although the fight for market share will be a tough battle (Novo confirms potential in new insulin but challenges remain, February 2, 2011)

Sanofi  transformation

With analysts projecting annualised sales growth of 4% over the next four years Sanofi  appears easily capable of holding the top spot, barring another wave of mega mergers which cannot be ruled out in this ever consolidating sector. For example Abbott's drugs arm, the impending spin-out of which could prompt the attention of a few of the companies below, would substantially expand any acquirer's top line (Abbott spin off will test market's appetite for R&D, October 20, 2011)

The outlook for Sanofi  is the culmination of a decade of its own mega-merger spree, starting with the merger-of-equals between  Sanofi  and  Synthélabo  in 1999 in a deal worth an estimated $30bn.

That period saw a spate of other huge deals that created some of the other big pharma players around today – the $67bn deal that merged Astra  and  Zeneca ; the $189bn union of GlaxoWellcome  and  SmithKline Beecham ; the creation of Novartis  from the $77bn deal merging  Ciba -Geigy and Sandoz.

When fellow French firm Aventis  – itself a result of the union between  Hoechst  and  Rhône-Poulenc  - became the target of a cross border approach from  NovartisSanofiSynthélabo  stepped in with a $63bn winning bid that created  Sanofi -Aventis in 2004.

The takeover of Genzyme  this year was an aggressive cross-border move that revealed just how much the culture of  Sanofi  has changed in the last few years. The traditionally inward looking French drug maker has, like many of its peers, taken big strides to acquire and license innovation from beyond its own labs in an attempt to revive flagging R&D productivity.

Sales of the US biotech’s enzyme replacement therapies should be enough to keep Sanofi  at the top of the table until at least 2016. The addition of Cerezyme and Myozyme blockbuster products will help to offset the loss of revenues from Plavix, which loses US patent protection next year, and ongoing generic erosion of Lovenox and Taxotere.

World's top 15 pharmaceutical companies by 2016 
  Market Rank    Rx & OTC pharma sales ($bn)   
  2011  2012  2014  2016    2011  2012  2014  2016  CAGR  2011-16 
Sanofi     47.9  51.6  55.4  58.4  4% 
Novartis     49.5  49.9  52.2  54.8  2% 
Pfizer     54.1  49.8  49.7  51.9  (1%) 
GlaxoSmithKline     39.3  41.2  45.6  50.9  5% 
Roche     39.1  44.1  46.3  49.0  5% 
Merck & Co     42.1  41.9  41.4  43.4  1% 
Johnson & Johnson     24.8  26.5  29.4  31.5  5% 
AstraZeneca     32.0  29.2  27.5  25.7  (4%) 
Teva   12  10  10    17.4  20.3  22.5  24.4  7% 
Abbott Laboratories   10    22.5  23.5  23.7  24.3  2% 
Bayer   11  12  11  11    18.9  19.7  21.7  23.4  4% 
Takeda   14  13  12  12    17.0  18.2  18.7  20.2  3% 
Bristol-Myers Squibb  13  16  17  13    17.1  14.2  15.4  18.9  2% 
Novo Nordisk  17  17  15  14    12.3  13.6  16.4  18.9  9% 
Eli Lilly   10  11  14  15    21.5  20.1  17.6  17.9  (4%) 
Source: EvaluatePharma

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