A Window into Pharma's Soul

The simple list can be a clear window into a world. Compiling a list does more than merely collect individual items into an order. It shows the individual entities in relation to each other – sometimes, depending on the list, presenting surprises. And it also can open up ways of thinking about the individuals, the group they make up as whole, the issues they face, or the future to which they point. There is an elemental purity distilled in a list.

Yet too often a list is seen as only the graphic representation of a race, or other competition. This is dangerous, as the biggest might not always be the "winner", and the future might be better imagined by looking at who is currently placed in other key positions.

So now we have the latest Scrip 100 rankings, which take the top 100 companies by 2010's pharmaceutical sales. What can we see from this list of pharmaceutical companies and its window into the global pharmaceutical industry business present and business future?

The top 10 companies primarily oscillate around one central core matter – consolidation. When you look at them in the context of the entire list, they stand out more for being trading companies: buying and selling companies to get into this position, and then to remain there. These firms are nearly all the product of large-scale mergers and acquisitions.

However, with a very challenging growth outlook on the horizon for this group, the top 10 companies are also a rolling referendum on the broken or lost promise of large-scale acquisitions to make companies better. In some ways, one looks at this top 10 group and sees companies locked into a snowball effect of deal begetting deal in order to get financial effects pleasing to anxious shareholders. One wonders if a philosophical crossroads is approaching for a radical new approach.

the next 10

It is the second set of 10 – companies ranked 11 to 20 – where suddenly you start to get a glimpse of movement to a new, albeit still uncertain, future. Let's take stock of the individuals comprising this next 10. They include: a US big pharma company that abandoned the primary-care, go-it-alone model for speciality pharmaceuticals and risk-sharing on broad-population products; a global generics giant with a growing branded product and research arm; one of the world's first and most successful biotech companies; four Japanese companies that continue to expand; a well-known German institution which has refocused itself; a privately held large pharmaceutical company; and a highly focused biopharma company with heavy influence in one major disease category.

There are a few key things to be gleaned from this second group of 10. In part through necessity and in part by strategic course correction, Bristol-Myers Squibb altered its business model. While still not a radical departure from the traditional model, it did shift itself slightly, but meaningfully, from a lower-tier big pharma company shouldering big risks to a different-scale speciality area company actively diversifying risk. Where BMS goes from here will be interesting to watch.

Next is Teva Pharmaceuticals. That Teva continues to climb and is approaching the top 10 is an intriguing signal to the future. Its business model is like nothing else at the top of the industry, with the possible exception of Novartis. How Teva moves forward with its mix and model of more branded products, innovative product development, and its core global generics expertise is a sign of how companies might have to adapt to the world market structural shifts.

Also in this group is Amgen. The ascent of Amgen, a pioneer biotechnology company, to this level in the list shows the maturation of the biotech segment of the industry. Biotech is Big Pharma when it comes to Amgen, as it is a big company with all the big company pressures. It has recently made reductions in its R&D operation, which any company can do to remain flexible, but in this instance the move feels more in line with its Big Pharma peers. Nevertheless, Amgen's focus and its freedom from some Big Pharma cultural mores make its moves to position itself for the future something worth monitoring.

There is also a privately held company in this group, which has dropped six places from last year. Boehringer Ingelheim's size, success and challenges are immensely interesting. When a public company executive bristles about public company shareholder and capital markets pressures, one can point to Boehringer on this list. It is also a challenge for a private company structure to navigate, innovate and meet the challenges brought on by generic entry and erosion to branded sales and intensifying market shifts. Whether it is more agile and successful in response is worth watching.

And then there is Novo Nordisk. Novo Nordisk might be the most instructive of all the potential lessons found in this second 10 group of companies. While once again not radically different from the traditional industry model, Novo Nordisk's highly focused approach is just different enough to signal future directions for others as the company climbs. Its business is and has been focused on diabetes – one of the heavy global health burdens of our time. This is becoming a big, broad market. Are there other big, broad market disease-focused companies in the future?

The list has much more to offer. Within it there are glimpses of how the industry and its markets are changing and how maybe there are changes to meet the future and what it holds.

This story forms part of Scrip Intelligence's new microsite dedicated to its Market Data Section's Pharma League Tables 2011. The ranking by pharmaceuticals sales is found in Table 4: