The 15 leading international pharmaceutical companies suffered a major setback during the first nine months period ended September 2014 as the pharmaceutical & vaccines sales of companies like GlaxoSmithKline, Pfizer, Sanofi, Eli Lilly and Merck & Co declined significantly. The aggregate net earnings of 15 companies went down by 10.8 per cent to $68.1 billion from $76.4 billion in the corresponding period of last year. Slower growth in R&D outcome, expiration of patent, competition from generics, adverse foreign exchange rates and government policies impacted overall profit growth.
The total revenue of 15 companies, including pharmaceuticals, vaccines, consumer health, diagnostic, animal health and others declined by 1.3 per cent to $375 billion from $380 billion. Their pharmaceutical & vaccines sales declined by 1.8 per cent to $289 billion in the first nine months of 2014 from $294 billion in the similar period of last year. Sales of vaccines improved slightly to $10.8 billion from $10.7 billion.
Novartis remained on top in pharmaceutical sales which improved by 1.6 per cent to $39,105 million from $38,480 million followed by Pfizer with pharma sales of $33,626 million, Sanofi $29,340 million, Johnson & Johnson (J&J) $24,314 million, Merck & Co $26,672 million and GlaxoSmithKline (GSK) at $22,085 million.
The pharmaceutical sales of Pfizer, Sanofi, Merck, GSK, Eli Lilly & Co, Bristol-Myers Squibb, Novo Nordisk and Bayer declined during the first three quarter ended September 2014. However, pharma sales of Novartis, J&J, AstraZeneca, Teva Pharmaceuticals, AbbVie, Amgen and Baxter International improved during the period under review.
Eli Lilly's pharmaceutical sales declined sharply by 18.8 per cent to $12,781 million from $15,731 million due to lower sales of Cymbalta, a major product, to $1247 million from $ 4,201 million due to loss of US patent exclusivity and that of Zyprexa by 7 per cent to $784 million from $847 million on account of lower prices and the unfavorable impact of foreign exchange rates. GSK's pharma sales declined by 10.4 per cent to $22,085 million from $24,644 million due to lower sales in US with continued price and contracting pressures affecting respiratory sales. Sales of Advair declined by 25 per cent. Bayer's pharma sales moved down by 12.3 per cent to $10,418 million from $11,872 million. The pharma sales of Novartis, AstraZeneca, Teva Pharma, AbbVie, and Baxter improved only by single digit.
These companies successfully controlled selling, marketing and administration expenditures during the 9 months of 2014 and these expenses marginally declined to $111 billion. The raw material cost also marginally up by 0.7 per cent to $121 billion as against $119 billion.
Research & Development expenditure of these companies increased by only 2.6 per cent to $55,223 million from $53,815 million in the corresponding nine months of last year. R&D expenditure of Novartis remained highest among the 15 pharma companies of Pharmabiz sample. Novartis R&D expenditure increased to $7,190 million and that of J&J's increased by almost 2 per cent to $5,859 million. Pfizer's R&D expenditure moved up by 6.5 per cent to $5,184 million from $4,867 million. Similarly, R&D expenditure of AstraZeneca and AbbVie improved by 16.9 per cent and 16.8 per cent respectively to $3,581 million and $2,742 million. Baxter, Novo Nordisk and Bristol-Myers also pushed their R&D expenditure.
The R&D expenditure of Merck, Sanofi, GSK and Bayer declined during the first nine months of 2014. Merck's R&D expenditure declined by 13.6 per cent to $4,897 million from $5668 million and that of GSK's went down by 12.8 per cent to $4,013 million from $ 4,603 million. Sanofi's R&D expenditure declined by 7.5 per cent to $4,405 million from $4,764 million.
The net profit before tax of these 15 companies increased by 3.9 per cent to $86,192 million from $82,959 million. However, higher provision for tax impacted the bottomline of these companies and profit after tax provision declined by 10.8 per cent to $68,145 million from $76,412 million. Pfizer's net profit declined sharply by over 59 per cent to $7,907 million basically due to amount received from disposition of its Animal Health business in the last period. GSK's net profit declined by over 41 per cent to $2,933 million from $5,033 million due to lower sales.
Roche and Abbott Laboratories are not included in this study. Roche has not provided details about expenditure and profits for nine months period. Roche's pharmaceutical sales amounted to $28,341 billion for the first nine months of 2014 as against $29,994 million in the last period. Abbot's pharma sales were only $2,196 million for period under review.
The outlook for the year 2014 seems to be gloomy as very limited outcome from R&D investment is foreseen in near future. Further, expiration of patents and competition from generics will make things difficult for these companies. Cost control measures adopted by several governments and adverse exchange rates may put further pressure on financial working in 2014. Restructuring, cost cutting measures, consolidation through mergers & acquisition and successful launches of new blockbusters may be crucial for future growth.