- Sales, operating profits and expenditure on research and development for the 21 largest corporations rose by double digits in 2019
- Both of the major Swiss players Roche and Novartis show positive development in sales and EBIT
- By early June this year, 242 therapeutics and 161 coronavirus vaccines are in the pipeline
- Covid-19 will barely impact the pipeline for large companies – but it will have a major impact on M&A and processes
The largest pharmaceutical companies in the world picked up speed again in 2019 after a break in growth in the previous year and, in particular, increased their innovation efforts. The 21 companies studied increased their spending on research and development (R&D) by 14.6 per cent – after a decrease of 0.8 per cent in 2018. Almost all of the companies contributed to this growth – 16 of the 21 companies increased their R&D expenditure. The companies also managed to turn the 3.2 per cent decline in the growth in operating profit at the EBIT level from the previous year into the positive again in 2019: They increased EBIT by 11.9 per cent.
The companies also achieved double-digit growth in sales of 12.3 per cent. Takeda, in particular, increased its sales after the Shire acquisition from EUR 15.6 billion to EUR 25.8 billion. However, even without the Shire takeover, the sales growth of the top pharmaceutical companies was double-digit at 10.1 per cent thanks to the market launch of new active substances. These are the results of an analysis of the key financial figures for the financial years 2017, 2018 and 2019 for the 21 largest pharmaceutical companies in the world prepared by the auditing and consulting firm EY. 49 per cent of these 21 companies have their headquarters in the United States, 42 per cent in Europe and nine per cent in Japan.
Strong industry heavyweights from Switzerland
EY's survey also includes two heavyweights from Switzerland, Roche and Novartis. Roche also took the lead in 2019 in terms of total sales, blockbuster drug sales, EBIT and R&D spending. "In 2019, the year before coronavirus, the pharmaceutical industry developed positively in Switzerland and worldwide," says Jürg Zürcher, Partner and Biotech Sector Leader at EY in Switzerland. "A number of large acquisitions have had a significant impact on the figures – above all the takeover of Shire by Takeda. Overall, the industry has focused on strengthening research and development. The companies are currently demonstrating their innovative strength and flexibility in the coronavirus crisis."
Zürcher adds: "Compared to the big bio-tech companies that are already strong in research, big pharma has been under a lot of pressure to innovate. In 2019, the top pharmaceutical companies met this challenge in all areas: They have continued their internal efforts, made acquisitions and entered into alliances."
Pipeline with numerous therapeutics and vaccines against Covid-19
The life science industry has positioned itself as an innovator. A state of affairs that is currently benefiting from the coronavirus crisis. According to EY research, the entire industry quickly produced 161 vaccine candidates and 242 therapeutic drug candidates and developed or has already launched over 700 tests. However, the numbers are changing almost daily and there is no guarantee of a safe and effective vaccine or active substance. A lot of development money will be invested in the search free of charge – 97 percent of the currently tested vaccines will not see the light of day.
The main focus is once more on oncology – a shift due to coronavirus?
In 2019, the top pharmaceutical companies focused mainly on cancer drugs, as in the past. 2,586 active substances were in clinical development. By comparison: At the same time, 605 substances active against infectious diseases were in clinical studies.
However, companies also generate the largest sales in oncology. Last year they increased revenue in this area by a fifth to 174 billion euros – also driven by large blockbuster drugs with sales of at least one billion US dollars. In infectious diseases, on the other hand, they generated “only” 46 billion euros in sales – an increase of 5.1 per cent compared to 2018.
"Against the background of the current coronavirus crisis, it can be expected that the topics of infections and antibiotic resistance will become more of a focus," says EY expert Jürg Zürcher. "However, the large companies will not stop their long-term programmes and will not shift their main activity to Covid-19." The reason: Pandemics cannot be planned as a business factor – because one does not know when and in what form they occur.
Coronavirus crisis slows M&A activity
Covid-19 is already having an effect: Many mergers and acquisitions have been suspended. “The companies are instead waiting to see how things look after the summer break. At the moment there is too much uncertainty and, therefore, a lot of disagreement about the price on both the buyer's and seller's side," says Zürcher. In the long term, he expects the pharmaceutical industry to benefit from learning effects from the current crisis: “The companies are currently learning a lot about their processes. That will have a lasting effect."
Jürg Zürcher also expects data handling to change: "The future lies in collecting enough data. On the one hand, processes can be coordinated better. On the other hand, patients can also be helped in a more targeted and effective manner."
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