Drug company

The drug company is the economic sector which gathers the research activities, of manufacture and marketing of the Médicament S for medicine human or veterinary. It is one of the most profitable and important industries economically, in the world.

Strategic analysis

January 2005

The sector has known for three years of the rather low stock exchange performances, it reaches in January 2005, a historically low level -- PER of 15,5 compared with 34,9 in 1998 for the DJ Stoxx Health --, in the average of the market, which is unusual for this sector. During last six-month period 2004, some bad news on certain drugs depressed the market: Merck & Co. Inc. (Vioxx), AstraZeneca (Iressa), Pfizer (Celebrex), Eli Lilly (Staterra).

However this historical fall of stock exchange valorization is above all due, with the concern of the investors, in answer to two serious phenomena:

the trend fall of the innovation of the various research laboratories since 1999, out of 1092 new drugs launched in five years on the market, none brought a real therapeutic innovation.
the competition, increasingly important, of the generic medicines, supported by the policies of reduction of the costs of health, carried out in the various developed countries. The market of the credits should grow annually of 9% to reach 75 billion euros in 2008 (100 billion dollars).

However, certain analysts consider this fall exaggerated, because not taking enough the potential of the sector counts some:

of many products is currently in the portefeuiiles research services and of development;
the requirements in drugs are important, because of the ageing of the population and of a broader access to the departments of health in many countries;
the great groups work on a rationalization and a better control of their expenses marketing, which is the principal station their operational expenditure and represents on average more than 30% of their turnover;
at the time of the two next years, the sector, after Sanofi-Aventis, should know new movements of capital intensive concentration, around Novartis, of AstraZeneca and GlaxoSmithKline. An operation of acquisition or fusion, allows in the majority of the cases, the rationalization and economies of scale.

The important components, specific to this sector and currently sought by the investors working on the market of the drug company, are:

a true expertise on key markets (diabetes, cardiovascular diseases, cancers and vaccines);
the number of products at strong potential being in the wallet of research (" blockbusters ", drugs of mass whose sales are higher than 750 million euros, is a billion dollar);
detention, in the wallet:

of very specialized products, with difficulty copiables,
of products addressing to the old customers rich countries and really helping them to improve their general health (hypertension, bronchitis, asthma, diabetes, cancer…) and thus their survival;
of new products having the capacity to become drugs of mass;

capacity to generate over several years a growth of the earnings per share with two digits.

April 2007

All the large laboratories raised their forecasts of results (Merck, Johnson & Johnson, Abbott, Bristol Myers Squibb, Eli Lilly, Shire, Roche, Sanofi-Aventis) primarily thanks to the US market which represented half of the world growth in 2006, against a third in 2005, with 300 billion dollars of turnover, that is to say 47% of the world sales. This dash is to be put primarily at the credit of the American system of health, Medicare which allows a better access to the drugs for the elderly and the handicapped people.

New promising molecules will go up in power in 2007, like Gardasil (Merck& Co) or Sutent (Pfizer), but the rationalizations of the commercial and administrative costs, initialized in 2006, in answer to the attacks of manufacturing credits on the molecules entered the public domain, also will improve the profit margins in 2007. These rationalizations are accompanied by the removal of thousands of stations (Pfizer, AstraZenaca) and by the reorganization of the wallets of research and development (Rock, Novartis). Some seek the way of the external growth as AstraZeneca which has just repurchased for 15 billion dollars, MedImmune, a company of biotechnic American.

For the future, the sector of the biotechnology, which did not represent in 2006, that 7% of the market of the drug company, should provide the best growth potential.

See too

List of the pharmaceutical companies
Pharmacology

External bond

drug company - Canadian Encyclopedia

Random links: