Table Of contents
EXECUTIVE SUMMARY
Introduction
Strategic scoping and focus
Key findings
The pharmaceutical industry is facing a number of challenges driving it towards diversification
Diversification business models used by the pharmaceutical industry
Synergies exist between different sectors
Innovation-driven diversification has the highest profit potential
De-risking-driven diversification strategy – putting growth before profit
The level of prescription focus varies greatly among the top 10 pharma companies
Prescription pharma-focused deals remain the mainstay of M&A
M&A activity among the top 10 companies is indicative of their overall strategy and sector presence
Emerging markets account for an increasing proportion of M&A deals
Emerging market deals focus on generics and consumer health targets
Divestment deals focus on manufacturing facilities
Related reports
HISTORICAL M&A AND DIVESTMENT ANALYSIS 2007–11
Intensity of M&A activity among the top 10 pharma companies peaked in 2009
Sanofi was the most voracious acquirer during 2007–11
The level of prescription focus varies greatly among the top 10 pharma companies
Prescription pharma-focused deals remain the mainstay of M&A
M&A activity among the top 10 companies is indicative of their overall strategy and sector presence
Divestment deals focus on manufacturing facilities
Geographic focus shifts towards emerging markets
Emerging markets account for an increasing proportion of M&A deals
Emerging market deals focus on generics and consumer health targets
Emerging market growth is a key strategic priority for Big Pharma
PHARMACEUTICAL DIVERSIFICATION STRATEGY OVERVIEW AND SECTOR DISCUSSION
The pharmaceutical industry is facing a number of challenges driving it towards diversification
Revenue lost due to patent expiries not replenished by core portfolio sales
Increasing pressure from payers is dampening growth rates
Diversification business models used by the pharmaceutical industry
Synergies exist between different sectors
Significant overlap between diversification strategies is seen
Integration versus spin-outs
Innovation-driven diversification has the highest profit potential
Small molecules sector is contracting, but still holds growth opportunities
Monoclonal antibodies are the fastest-growing prescription drug segment
Diversifying into vaccines enables innovative portfolio expansion and de-risking
Medical device and diagnostics and pharmaceutical tie-ups have created limited synergies to date
Companion diagnostics enable faster clinical development and favor reimbursement approval
Emerging therapies offer new opportunities for pharma, but lack of progress reduces interest
Parallel move into animal health can provide synergies with minimal costs
Providing disease management solutions rather than simply treatments will become the norm
De-risking-driven diversification strategy – putting growth before profit
The generics sector has attracted Big Pharma despite low profitability
Biosimilars offer a more profitable and higher-risk option compared to generics
Pharmaceutical – consumer health/over-the-counter tie-ups
Emerging markets growth a key driver for diversification into prescription and consumer health products
PHARMACEUTICAL DIVERSIFICATION COMPANY CASE STUDIES
The level of prescription focus varies greatly among the top 10 pharma companies
Pfizer
Pfizer is a moderately diversified company, but is increasing its prescription pharmaceutical focus
Lipitor patent expiry dampens outlook
Strategy – continued diversification in therapy area and sector
Novartis
Novartis is one of the fastest growing Big Pharma companies
Generic erosion reduces sales growth, but Novartis still outperforms the peer set
Novartis is following a strategy of focused diversification
Sanofi
Sanofi is a moderately diversified pharma company
Patent expiry of key products reduces sales growth
Diversification is a strategic priority
Merck & Co.
Merck & Co.’s prescription focus is reduced by Schering-Plough acquisition
Blockbuster-driven model and patent expiry of key products are major drivers for Schering-Plough acquisition
Broader R&D portfolio for future growth while non-prescription segments minimize risks
Roche
Innovation-driven diversification champion
Innovative focus hinges on synergies between pharmaceuticals and diagnostics
AstraZeneca
AstraZeneca’s high prescription focus generates strong profit margins, but outlook remains negative
Strong prescription product focus retained, but with greater molecule type and therapy area diversification
GlaxoSmithKline
Vaccines and consumer health sectors diversify GlaxoSmithKline within and outside prescription pharmaceuticals
Diversification strategy is used to address short-term pipeline and revenue gaps
Emerging markets expansion is a strategic priority
Johnson & Johnson
(Untitled sub-section)
Diversified business balances risk
Eli Lilly
Animal health sales expected to offset decline in prescription pharmaceutical sales
Diversification strategy used to counter sales decline
Abbott Laboratories
Diversified healthcare offering key to growth against flat pharma sales
M&A a key strategic and diversification tool
Innovative pharmaceutical unit to be separated from the diversified company
BIBLIOGRAPHY
Publications and online articles
Datamonitor reports and products
APPENDIX
Exchange rates used in this report
Methodology
List Of Tables
Table: Operating margins for selected prescription and non-prescription sectors
Table: M&A and divestment deals made by top 10 pharma companies, by sector (%), 2007–11
Table: Prescription drug sales as a proportion of total sales, top 10 pharma companies (%), 2004–11
Table: M&A and divestment deals made by top 10 pharma companies, by sector (%), 2007–11
Table: Operating margins for selected prescription and non-prescription sectors
Table: Key acquisitions of companies in the vaccines sector by top 10 pharma companies, 2007–11
Table: Key medical device company acquisitions by top 10 pharma companies, 2007–11
Table: Key diagnostic acquisitions by top 10 pharma companies, 2007–11
Table: Examples of human to animal crossover
Table: Generics company acquisitions in the developed markets by top 10 pharma companies, 2007–11
Table: Key consumer healthcare company acquisitions in the developed markets by top 10 pharma companies, 2007–11
Table: Top 10 pharma M&A deals in the emerging markets within the generics and consumer health sectors, 2008–11
Table: Pfizer – total revenue, by segment ($m), 2011
Table: Novartis – total revenue, by segment ($m), 2011
Table: Sandoz deals targeting biosimilars, 2005–09
Table: Sanofi – total revenue, by segment ($m), 2011
Table: Merck & Co. – total revenue, by segment ($m), 2011
Table: Roche – total revenue, by segment ($m), 2011
Table: Roche: acquisitions in the diagnostics sector, 2007–11
Table: AstraZeneca – total revenue, by segment ($m), 2011
Table: GlaxoSmithKline – total revenue, by segment ($m), 2011
Table: Johnson & Johnson – total revenue, by segment ($m), 2011
Table: Key acquisitions made by Johnson & Johnson, 2007–11
Table: Eli Lilly – total revenue, by segment ($m), 2011
Table: Abbott – total revenue, by segment ($m), 2011
Table: Currency exchange rates, 2011
List Of Figures
Figure: A number of factors are driving pharma companies towards increased diversification
Figure: Three types of diversification strategy exist in the pharmaceutical industry
Figure: Choice of sector entry depends on type of diversification strategy
Figure: The small molecules sector of the market has a number of synergies with other sectors in which pharma companies are engaged
Figure: Drivers and resistors of innovation-driven diversification
Figure: Correlation between top 10 pharma companies' branded pharmaceuticals focus and operating margin, 2011
Figure: Drivers and resistors of a de-risking-driven diversification strategy
Figure: Prescription focus of the top 10 pharma companies, 2011
Figure: Top 10 pharma companies' prescription focus, 2004–11
Figure: Diversification strategies employed by top 10 pharma companies
Figure: Top 10 pharma companies' M&A deals, by sector, 2007–11
Figure: Top 10 pharma companies' M&A deals, by sector and company, 2007–11
Figure: Top 10 pharma companies' M&A deals, by geography, 2007–11
Figure: Top 10 pharma companies' M&A deals, by sector and by geography, 2007–11
Figure: Commercial synergies of prescription and non-prescription pharma units in emerging markets
Figure: Top 10 pharma companies' divestment deals, by sector, 2007–11
Figure: Top 10 pharma M&A and divestment deals, 2007–11
Figure: Top 10 pharma company M&A deals, by company, 2007–11
Figure: Prescription focus of the top 10 pharma companies, 2011
Figure: Top 10 pharma companies' prescription focus, 2004–11
Figure: Top 10 pharma companies' M&A deals, by sector, 2007–11
Figure: Top 10 pharma companies' M&A deals, by sector and company, 2007–11
Figure: Top 10 pharma companies' divestment deals, by sector, 2007–11
Figure: Top 10 pharma companies' M&A deals, by geography, 2007–11
Figure: Top 10 pharma M&A deals, by country, 2007–11
Figure: Top 10 pharma companies' M&A deals, by sector and by geography, 2007–11
Figure: Rest of world sales versus sales from the seven major markets for the top 10 pharma companies, 2011
Figure: Top 10 pharma companies' M&A deals, by geographic region split by company, 2007–11
Figure: Top 10 pharma companies' sales growth, by geography, 2011–16
Figure: A number of factors are driving pharma companies towards increased diversification
Figure: Difference in global combined sales for launch, core, expiring, and generic prescription products ($bn), 2011–16
Figure: A range of pricing and reimbursement pressures negatively impact pharma in developed markets
Figure: Three types of diversification strategy exist in the pharmaceutical industry
Figure: Choice of sector entry depends on type of diversification strategy
Figure: The healthcare landscape
Figure: Factors driving pharma companies to diversify beyond small molecules vary by sector
Figure: The small molecules sector of the market has a number of synergies with other sectors in which pharma companies are engaged
Figure: Diversification strategies employed by top 10 pharma companies
Figure: Drivers and resistors of innovation-driven diversification
Figure: Correlation between top 10 pharma companies' branded pharmaceuticals focus and operating margin
Figure: Difference in combined global prescription sales for the leading branded pharma companies, by molecule type ($bn), 2011–16
Figure: Drivers and resistors of a de-risking-driven diversification strategy
Figure: Difference in combined prescription sales for the leading branded pharma companies, by geography ($bn), 2011–16
Figure: Commercial synergies of prescription and non-prescription pharma units in emerging markets
Figure: Prescription focus of the top 10 pharma companies, 2011
Figure: Diversification strategies employed by top 10 pharma companies
Figure: Pfizer’s prescription focus and operating margin, 2004–11
Figure: Pfizer’s M&A deals reflect its new therapeutic focus
Figure: Pfizer launch/core/expiry configuration and the impact of the Wyeth acquisition
Figure: Novartis's prescription focus and operating margin, 2004–11
Figure: Novartis is following a strategy of focused diversification
Figure: Sandoz’s corporate structure, demonstrating diverse growth opportunities
Figure: Novartis’s business units work synergistically to grow sales in emerging markets
Figure: Sanofi's prescription focus and operating margin, 2004–11
Figure: M&A is a key tool in Sanofi’s diversification strategy
Figure: Sanofi molecule type focus ($m), 2009–15
Figure: Merck & Co. prescription focus and operating margin, 2004–11
Figure: Merck & Co. re-enters non-pharma sectors through Schering-Plough acquisition
Figure: Roche's prescription focus and operating margin, 2004–11
Figure: Roche’s acquisitions focus on innovation and disease management potential
Figure: Roche sales by primary care versus specialty care, 2004–16
Figure: AstraZeneca's prescription focus and operating margin, 2004–11
Figure: AstraZeneca is diversifying its product portfolio and geographic presence through M&A activity
Figure: AstraZeneca’s prescription pharmaceutical sales, by geographic region (%), 2004–16
Figure: GlaxoSmithKline's prescription focus and operating margin, 2004–11
Figure: GlaxoSmithKline’s acquisitions reflect its diversification strategy
Figure: GlaxoSmithKline’s key acquisitions and portfolio collaborations in the emerging markets
Figure: Johnson & Johnson's prescription focus and operating margin, 2004–11
Figure: Johnson & Johnson ’s corporate structure
Figure: Johnson & Johnson's strategic opportunities for growth
Figure: Eli Lilly's prescription focus and operating margin, 2004–11
Figure: Eli Lilly remains prescription-focused, but is diversifying its prescription portfolio
Figure: Abbott's prescription focus and operating margin, 2004–11
Figure: Abbott uses M&A as a means to achieve greater product and geographical diversification
Figure: Abbott’s prescription pharmaceutical sales, by geographic region ($m), 2004–16
Figure: Abbott’s new corporate structure – separation into two companies