February 27, 2012 - IMM@BUCT

ASTRAZENECA
IN 2011, PHARMACEUTICAL companies
got a glimpse of their not-too-distant future,
and it isn’t a pretty sight. The level of
annual product sales lost to generic competition
has been rising since 2007, and it
will peak in 2012.
To overcome the resulting slowdown
in sales and earnings growth, major drug
firms have been shifting their businesses
and drastically cutting R&D programs
and staffing. Their challenge is to make
it through this period, replace lost sales
with new products, and expand into new
regional markets.
The global market for pharmaceuticals
is growing 3–6% annually, according to the
market research firm IMS Health . But most
of the growth is occurring in emerging markets
and not the traditional Western ones
where the big drug companies are based.
Although demand in developed markets
will show some incremental growth, it will
be more than offset by the impact of patent
expirations.
BUSINESS
PHARMA SEES THE
START OF THE END
Amid SLOWING GROWTH in 2011, drugmakers
took steps to prepare for the year ahead
ANN M. THAYER , C&EN HOUSTON
WWW.CEN-ONLINE.ORG 28 FEBRUARY 27, 2012
ON THE BUS
AstraZeneca
is counting on
emerging markets,
such as China, as
patents expire in
old ones.
These dynamics were reflected in 2011
sales and earnings results for the world’s
major drug firms. Combined 2011 sales for
the 11 companies C&EN tracks rose 3.2% to
about $490 billion. In contrast, sales grew
by double digits in 2010, although some of
this was attributable to mergers.
But combined figures obscure the fact
that some firms got hit much harder than
others by the patent expirations. Rather
than tens of billions of dollars of lost sales
spread around evenly, AstraZeneca , Eli
Lilly & Co ., Pfizer , and Sanofi are bearing
the brunt. They have lost, or will soon lose,
patent protection on some of the industry’s
biggest-selling products. In 2012, patents
will expire on drugs whose combined annual
sales total more
than $40 billion,
according to IMS
Health.
Among the recent
losses was U.S. patent
protection in
November 2011 on
Pfizer’s cholesterol-lowering drug Lipitor.
During peak years, Lipitor had annual sales
exceeding $12 billion and accounted for
about a quarter of Pfizer’s revenues. The
full effects of the patent loss haven’t yet
been seen, but in the fourth quarter alone
Lipitor sales dropped 24%.
Overall, Pfizer lost about $5 billion in
revenues in 2011 from expiring patents.
The company fought back by reaching its
$4 billion cost-reduction target associated
with the integration of Wyeth, purchased
in late 2009, one year earlier than anticipated.
Pfizer is also considering divesting
its animal health and nutrition businesses,
which would occur between July 2012 and
July 2013 if it decides to move ahead.
Pfizer reduced its sales forecast for 2012
by about $2 billion. It now predicts that
sales will be about 8% lower than in 2011
because of patent expirations and the effects
of currency exchange rates. Looking
ahead, efforts to “fix the innovative core”
will improve the company’s late-stage
portfolio of compounds and lead to successful
launches of novel products, Chief
Executive Officer Ian Read told analysts in
a recent conference call.
BUT CITIGROUP stock analyst John T.
Boris cautioned clients in a recent report
that Pfizer executives may be too optimistic.
“We expect Pfizer to see continued deterioration
of its base business in the U.S.,
with execution risk on the pipeline, and
potential restructuring issues,” he said.
Competition from branded and generic
drug firms could also jeopardize Pfizer’s
growing business in emerging markets
such as China, Brazil, Russia, India, Turkey,
and Mexico, Boris added.
Like Pfizer, many big pharma firms are
betting on emerging regions for growth.
Over the next five years, total spending
on medicines in these markets is expected
Combined figures obscure the fact that
some firms got hit much harder than
others by the patent expirations.