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Market Research Report

Big Pharma Diversification Strategies

Published by Datamonitor Healthcare Product code 633134
Published Content info 123 Pages
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Big Pharma Diversification Strategies
Published: March 4, 2018 Content info: 123 Pages
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About this report:

Pressures ranging from continually declining revenues as a result of generics and impending biosimilars launches, to slow R&D productivity and market access restrictions could cause the Big Pharma peer set to evaluate business opportunities beyond pharmaceuticals. A large majority, approximately 77%, of Big Pharma's total annual revenues between 2013 and 2017 were from prescription drugs, and more than half of Big Pharma's M&A activities, as well as its divestments, focused on pharmaceuticals as well.

Using a measurement called indicative profit potential (IPP), Datamonitor Healthcare has determined that remaining focused on pharmaceuticals is still the most profitable strategy, although there is no direct correlation between the level of pharmaceutical focus, based on revenue proportion, and operating margin. Still, multiple challenges, including the continuing generic erosion of sales and impending biosimilars launches, could force Big Pharma to evaluate diversified markets as a way to offset losses and grow other businesses. For instance, M&As in the area of diagnostics have been seen to be growing.

There are a broad range of diversification, or non-diversification, strategies currently employed by the Big Pharma peer set, ranging from the more focused, as demonstrated by Bristol-Myers Squibb and Pfizer, to intermediately focused companies, including Eli Lilly and GlaxoSmithKline, to extremely diversified firms such as Johnson & Johnson. The best option for diversification might be a mixture of both strategies, including a focus on pharmaceuticals alongside expansions into markets such as devices and diagnostics. Indeed, the devices and diagnostics sector has the second-highest IPP following prescription pharmaceuticals, potentially making it the most attractive option if a diversification strategy were to be pursued. Meanwhile, markets such as pharmaceutical wholesalers and animal health are found to be the least attractive into which the peer set could diversify.

Table of Contents
Product Code: DMKC0190040

Table of Contents

OVERVIEW

INTRODUCTION

  • Datamonitor Healthcare insights and recommendations
  • Bibliography

DIVERSIFICATION ANALYSIS BY REVENUE

  • Datamonitor Healthcare insights and recommendations
  • Prescription drug revenue makes up the majority of Big Pharma sales
  • Biologics are taking away share from small molecules
  • Bibliography

DIVERSIFICATION ANALYSIS BY M&A AND DIVESTMENT ACTIVITY

  • Datamonitor Healthcare insights and recommendations
  • Many factors contribute to a decline in M&A and divestments following a two-year increase
  • Deal values followed a similar trajectory to volume
  • More acquisitions and fewer divestments of non-pharma-focused businesses over time
  • Prescription pharma markets are the mainstay in M&As and divestments
  • Roche, Johnson & Johnson, and AstraZeneca: active acquirers in their focused and diversified visions
  • Merck & Co and Novartis divested several diversified assets
  • Developed markets are where Big Pharma does virtually all acquisitions
  • Bibliography

DIVERSIFICATION OPTIONS AND PROFITABILITY

  • Datamonitor Healthcare insights and recommendations
  • Focused, intermediate, and diversified strategies have each paid off
  • If diversifying, the best option could be devices and diagnostics

DIVERSIFICATION CASE STUDIES

  • Pharma-focused case studies
  • Diversified case study
  • Intermediate case studies
  • Bibliography

HEALTHCARE LANDSCAPE OVERVIEW

  • Prescription branded pharmaceuticals market
  • Devices and diagnostics market
  • Health insurance market
  • Over-the-counter/consumer health market
  • Generics market
  • Retail pharmacy market
  • Hospitals market
  • Pharmacy benefit management market
  • Pharmaceutical wholesaler market
  • Animal health market
  • Bibliography

APPENDIX

  • Scope
  • Methodology

LIST OF FIGURES

  • Figure 1: Big Pharma prescription and total revenues are rebounding following decline, 2013-17
  • Figure 2: In the forecast period, Big Pharma prescription revenues will show growth, 2018-26
  • Figure 3: Pharma-focus model drives Big Pharma revenues, 2013-17
  • Figure 4: Pharma revenue proportion forecasted to remain steady, 2018-26
  • Figure 5: Forecasted biosimilars growth is strong among prescription pharmaceuticals, 2012-16 and 2017-21
  • Figure 6: Big Pharma total revenues by business area, 2013-17
  • Figure 7: From focused to diversified: how the Big Pharma peer set ranks, 2017 revenues
  • Figure 8: The majority of Big Pharma companies stay above the 60% threshold of pharmaceutical revenue to total revenue, 2013-17
  • Figure 9: Big Pharma M&A and divestment volume, 2013-17
  • Figure 10: Big Pharma M&A and divestment value, 2013-17
  • Figure 11: Volume of billion-dollar Big Pharma M&As and divestments, 2013-17
  • Figure 12: Big Pharma's annual proportion of prescription pharma versus non-prescription pharma M&As and divestments, 2013-17
  • Figure 13: Five-year aggregate proportions of Big Pharma M&As and divestments, by business type, 2013-17
  • Figure 14: Big Pharma M&As by business focus, 2013-17
  • Figure 15: Big Pharma divestments by business focus, 2013-17
  • Figure 16: With a few exceptions, most Big Pharma companies made more M&As than divestments, 2013-17
  • Figure 17: Roche led Big Pharma M&A volume, 2013-17
  • Figure 18: Teva led in Big Pharma acquisition dollars spent, 2013-17
  • Figure 19: The majority of the Big Pharma peer set's M&A activity is in pharmaceutical markets, 2013-17
  • Figure 20: Five-year aggregate Big Pharma M&A volume proportion, by business focus, 2013-17
  • Figure 21: Merck & Co and Novartis led in Big Pharma divestments, 2013-17
  • Figure 22: Most Big Pharma divestments are focused on pharmaceuticals, 2013-17
  • Figure 23: Five-year aggregate Big Pharma divestment volume, by business focus, 2013-17
  • Figure 24: Developed markets overshadow emerging markets in Big Pharma M&A volume, 2013-17
  • Figure 25: North America leads Big Pharma M&A by region, 2013-17
  • Figure 26: The proportion of Big Pharma M&A in emerging markets is decreasing, 2013-17
  • Figure 27: Big Pharma divestments by geographic region, 2013-17
  • Figure 28: Few Big Pharma companies are geographically diversified in M&A, 2013-17
  • Figure 29: US-based companies are highly sought-after acquisition targets, 2013-17
  • Figure 30: Big Pharma M&A volume by region and business focus, 2013-17
  • Figure 31: Various focused and non-focused strategies pay off: no correlation between Big Pharma's prescription focus and operating margin, 2017
  • Figure 32: Healthcare market overview by indicative profit potential
  • Figure 33: Biologics are increasing as a share of Bristol-Myers Squibb's revenues, 2013-17
  • Figure 34: Pfizer's vaccines sales are growing, 2013-17
  • Figure 35: The devices market is important to Johnson & Johnson's revenues, 2013-17
  • Figure 36: Eli Lilly's total revenues versus pharmaceutical revenues, 2013-17
  • Figure 37: Eli Lilly's revenue share shifts toward biologics, 2013-17
  • Figure 38: GlaxoSmithKline sees a drop in both pharma sales and their proportion of total revenues, 2013-17
  • Figure 39: GlaxoSmithKline's business focus by sales proportion, 2013-17

LIST OF TABLES

  • Table 1: Roche's diagnostics acquisitions, 2013-17
  • Table 2: Top Big Pharma consumer health/OTC divestments, 2013-17
  • Table 3: Bristol-Myers Squibb's "string of pearls" externalization (select deals), 2007-12
  • Table 4: Getting more focused: Pfizer's key divestments and acquisitions, 2013-17
  • Table 5: Johnson & Johnson's devices deal-making strategy: acquisitions and divestments, 2013-17
  • Table 6: Eli Lilly/Elanco's growth in animal health through M&A, 2013-17
  • Table 7: GlaxoSmithKline's vaccines M&As, 2013-17
  • Table 8: Global branded prescription pharmaceuticals market, 2016
  • Table 9: Big Pharma revenues, operating profit, and operating margin, 2016
  • Table 10: Indicative profit potential for the global branded prescription pharmaceuticals market, 2016
  • Table 11: Global devices and diagnostics market, 2016
  • Table 12: Total revenues, operating profit, and operating margin of the leading devices and diagnostics companies, 2016
  • Table 13: Indicative profit potential for the global devices and diagnostics market, 2016
  • Table 14: US health insurance market, 2016
  • Table 15: Total revenues, operating profit, and operating margin of the leading health insurance companies, 2016
  • Table 16: Indicative profit potential for the US health insurance market, 2016
  • Table 17: Global over-the-counter/consumer health market, 2016
  • Table 18: Total revenues, operating profit, and operating margin of the leading over-the-counter/consumer health companies, 2016
  • Table 19: Indicative profit potential for the global OTC/consumer health market, 2016
  • Table 20: Global generics market, 2016
  • Table 21: Total revenues, operating profit, and operating margin of the leading generics companies, 2016
  • Table 22: Indicative profit potential for the global generics market, 2016
  • Table 23: Global retail pharmacy market, 2016
  • Table 24: Total revenues, operating profit, and operating margin of the leading retail pharmacy companies, 2016
  • Table 25: Indicative profit potential for the retail pharmacy market, 2016
  • Table 26: US hospitals market, 2016
  • Table 27: Total revenues, operating profit, and operating margin of the leading US hospitals, 2016
  • Table 28: Indicative profit potential for the US hospitals market, 2016
  • Table 29: Pharmacy benefit management market, 2016
  • Table 30: Total revenues, operating profit, and operating margin of the leading PBM companies, 2016
  • Table 31: Indicative profit potential for the PBM market, 2016
  • Table 32: Pharmaceutical wholesaler market, 2016
  • Table 33: Total revenues, operating profit, and operating margin of the leading pharmaceutical wholesaler companies, 2016
  • Table 34: Indicative profit potential for the pharmaceutical wholesaler market, 2016
  • Table 35: Global animal health market, 2016
  • Table 36: Total revenues, operating profit, and operating margin of the leading animal health companies, 2016
  • Table 37: Indicative profit potential for the global animal health market, 2016
  • Table 38: Average 2017 exchange rates
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