Despite the National Economic Downturn, the Pharmaceutical Industry Remains Strong

By Fulton, Conchetta White | Diversity Employers, February 2002 | Go to article overview

Despite the National Economic Downturn, the Pharmaceutical Industry Remains Strong


Fulton, Conchetta White, Diversity Employers


Through economic upturns, downturns and subsequent recovery, one industry continues to remain economically viable. The pharmaceutical industry in the year 2000 earned a 17 percent return on both revenues and assets, making it the top performing {industry] and the most profitable. According to the Pharmaceutical Research and Manufacturers of America (PhRMA), the drug industry trade group that represents the country's leading research-based pharmaceutical and biotechnology companies, more than $30 billion {was} invested in the development and discovery of new drugs during time year 2001. Pharmaceutical company stocks have continued to show growth regardless of fluctuations in the nation's economy. This record of steady growth may be attributed to several factors; one of which is the aging population. With the aging of the baby-boomers, estimates indicate that by the year 2030, approximately 70 million Americans will be over the age of 65, requiring much heavier reliance on prescription medications for the treatment of chronic health conditions. Another factor is the research and development and subsequent manufacture of new drugs through the biotechnology process.

Several mergers, takeovers and acquisitions occurred in the year 2000. The largest such deal was the $76 billion buyout of SmithKline Beecham by Glaxo Wellcome resulting in the formation of a new company, GlaxoSmithKline. Other mergers included Pfizer with former rival Warner-Lambert in a $116 billion transaction and Monsanto's purchase by Pharmacia for $31 billion. According to fiscal year-end sales, the top ten pharmaceutical companies for the year 2000 included Novartis, Merck, Pfizer, Johnson & Johnson, Bristol-Myers Squibb, Pharmacia, American Home Products, Abbott Laboratories, Eli Lilly, and Schering-Plough, respectively.

The leader of the pack, the Swiss company Novartis, ended the year 2000 with sales totaling $40.8 billion, a feat which garnered the company the coveted title of the world's top pharmaceutical firm. The company was formed in 1996 following the merger of two smaller Swiss-based companies, Sandoz and Ciba and has a diverse array of products that are responsible for its current status. Approximately two-thirds of the company's revenue comes from the sale of the prescription antihypertensives, Diovan and Lotrel and time immunosuppressant, Neoral. The remaining revenue comes from the sale of contact lenses and eye care products through Novartis Ophthalmics and CIBA Vision and its consumer health unit which includes Gerber baby foods, the cough and cold products Tavist and Theraflu, the laxative Ex-lax and the antacid Maalox. With FDA approval of Visudyne[R], the only drug treatment approved for serious myopia and ocular histoplasmosis early this summer, the ophthalmics division is sure to realize hefty profits in the coming years.

The number two drug company with fiscal year-end sales of $40.4 billion was Merck and Co. One-third of the company's sales were for drugs used to treat chronic conditions such as high cholesterol (Mevacor, Zocor), hypertension (Vasotec, Prinivil) and heart failure. With over 69,000 employees, Merck is not only a pharmaceutical company; its management subsidiary, Merck-Medco, accounts for more than half of its sales.

The third company in line with sales totaling $29.6 billion was Pfizer, Inc. The highest selling drug for this company is of course, the well-publicized anti-impotence drug, Viagra. Top sellers for the company also include the prescription drugs Norvasc for treatment of hypertension and the cholesterol-lowering agent, Lipitor with year-end sales totaling $4.1 billion.

Johnson and Johnson ranked four with sales totaling $29 billion, is not only a pharmaceutical company; it's also an array of healthcare businesses. The company is also the largest medical-device maker in the world, which accounts for 35% of total revenues. Johnson and Johnson, unlike most other companies, is in a very unique situation in that they are not facing patent expirations over the next several years. …

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