The New Global Order in the Pharma Industry

By Patricia Van Arnum - DCAT Editorial Director

April 28, 2015

The rankings of the top global pharmaceutical companies and products are undergoing change as mergers and acquisitions, new product launches, and the rise of biologics influence the order of the pharmaceutical industry.

Recent proposed merger and acquisition activity, led by Teva Pharmaceutical's interest in acquiring Mylan, and Mylan's bid to acquire Perrigo, would create new top players in the global pharmaceutical market, already altered by Actavis' acquisition of Allergan, in a deal completed earlier this year. Also, the industry has seen the emergence of Gilead Sciences among the top companies with the successful launch of Sovaldi, the company's hepatitis C drug as well as the positioning of AbbVie's Humira, a biologic, as the industry's top-selling prescription drug.DCAT Value Chain Insights (VCI) looks at the top companies and products from 2014.

A changing pharmaceutical market order
A combination of Teva and Mylan or Mylan and Perrigo would further elevate specialty/generic companies among the top pharmaceutical companies.Table I outlines the rankings of the top 20 pharmaceutical companies as of December 2014. The rankings are based on manufacturers' prices, including prescription and certain over-the-counter data, based on US dollars using quarterly exchange rates and not reflecting transactions completed in 2015. Mylan and Teva are already ranked among the top global pharmaceutical companies, with Teva occupying the number nine position and Mylan the number 20 slot, according to data from IMS. 

Table I: Top 20 Global
Pharmaceutical Companies, 2014
  1. Novartis ($51.307 billion)
  2. Pfizer ($44.929 billion)
  3. Sanofi ($40.037 billion)
  4. Roche ($37.607 billion)
  5. Merck & Co. ($36.550 billion)
  6. Johnson & Johnson ($36.422 billion)
  7. AstraZeneca ($33.313 billion)
  8. GlaxoSmithKline ($31.470 billion)
  9. Teva ($26.001 billion)
  10. Gilead Sciences ($23.673 billion)
  11. Amgen ($20.473 billion)
  12. Eli Lilly and Company ($19.909 billion)
  13. AbbVie ($19.049 billion)
  14. Bayer ($18.347 billion)
  15. Boehringer Ingelheim ($17.650 billion)
  16. Novo Nordisk ($16.831 billion)
  17. Actavis ($15.978 billion)
  18. Takeda ($13.376 billion)
  19. Otsuka ($12.290 billion)
  20. Mylan ($11.980 billion)
Sales and rank are in US$ with quarterly exchange rates and based on data as of December 2014. Sales cover direct and indirect pharmaceutical channel wholesalers and manufacturers. The figures  include prescription and certain over the counter data and represent manufacturers' prices.
Above rankings do not include transactions completed in 2015: Actavis' acquisition of Allergan, announced in 2014, and completed in 2015, and Novartis' three-part transaction with GlaxoSmithKline, announced in 2014 and completed in 2015.

Source: IMS Health MIDAS, December 2014.

A combined Mylan and Teva (not addressing possible divestments) would move further in the rankings among the top 10 companies with a combined company having pro forma 2014 sales of approximately $30 billion. As of April 27, 2015, Mylan had rejected Teva's offer to acquire Mylan, and Mylan is instead pursuing an acquisition of Perrigo, a Dublin, Ireland-headquartered specialty, generic, and over-the-counter company. Mylan formally launched a proposal to acquire Perrigo on April 24, 2015, following the company's announcement earlier in April 2015 that it had made a non-binding proposal to acquire Perrigo, for $28.9 billion, a proposal that Perrigo rejected on April 21, 2015. Under its formal proposal, Mylan issued a Rule 2.5 announcement under Irish Takeover Rules setting forth its legally-binding commitment to commence an offer for the entire issued and to-be-issued share capital of Perrigo. Under the terms of the offer announced, Perrigo shareholders wouldl receive $60 in cash and 2.2 Mylan ordinary shares for each Perrigo ordinary share. If the deal were to proceed, Mylan shareholders would own approximately 61.8% of the outstanding Mylan ordinary shares on a fully diluted basis, and former Perrigo shareholders will own approximately 38.2% of the outstanding Mylan ordinary shares on a fully diluted basis.

In addition to this proposed deal-making, in 2014, the global pharmaceutical market saw the rise of two companies, Gilead Sciences and Actavis, among the top pharmaceutical companies (see Table I). Gilead Sciences moved into the rankings of the top 10 pharmaceutical companies into the number 10 spot in 2014. The ascent of Gilead, which was ranked number 20 in 2013, is primarily to the success of Sovaldi (sofosbuvir), a drug to treat hepatitis C virus (HCV) infection. Sovaldi was one of the industry's top-selling drugs in 2014 with 2014 global sales of $10.28 billion following its approval in the US in December 2013 and in the European Union in January 2014, according to Gilead's reported 2014 results, and further contributing was Harvoni, a combination therapy of sofosbuvir and ledipasvir for treating HCV injection, which had 2014 global sales of nearly $2.13 billion.

In 2015, Actavis is expected to rise from its 2014 ranking of seventeen to among or near the top 10 pharmaceutical companies as a result of its approximately $70.5 billion acquisition of Allergan, a deal which was completed in March 2015. The deal created a combined company with annual pro forma revenues of more than $23 billion anticipated in 2015,which would move Actavis in or near the top 10 companies (see Table I). The combined company has six blockbuster franchises with combined pro forma 2015 revenues of approximately $15 billion expected, including franchises with annual revenues in excess of $3 billion in eye care, neurosciences/central nervous system, and medical aesthetics/dermatology/plastic surgery. The combined company has an expanded commercial presence, which includes approximately 100 countries, with an enhanced presence across Canada, Europe, Southeast Asia, and Latin America and a strong footprint in China and India and R&D funding of approximately $1.7 billion expected in 2015, focused within brands, generics, biologics and over-the-counter portfolios. The combined company has more than 20 innovative products in near- or mid-term development. Its generics pipeline has approximately 230 abbreviated new drug applications pending at the US Food and Drug Administration, including approximately 70 first-to-file applications, as well as nearly 1,000 marketing authorization applications filed outside of the US in 2014.

The acquisition of Allergan by Actavis is the latest in a series of high-profile acquisitions involving Actavis. In July 2014, it closed on the approximate $28 billion acquisition of Forest Laboratories. In October 2012, the generic-drug company Watson Pharmaceuticals Inc. completed its acquisition of Actavis Group; Watson then changed its corporate name to Actavis in January 2013. The combination of Watson and Actavis created the third largest generic-drug company on a global basis at the time and strengthened the company's position in modified release, solid oral dosage, and transdermal products and broadened its portfolio to include semi-solids, liquids, and injectables. In October 2013, Actavis completed its acquisition of Warner Chilcott plc, which capitalized on the complementary specialty pharmaceuticals strengths and market positions of the two organizations, particularly in women's health and urology, as well as in gastroenterology and dermatology. These deals were followed by Actavis' acquisition of Forest Laboratories. Actavis announced the agreement to acquire Forest Laboratories in February 2014 and completed the deal on July 1, 2014 with Forest becoming a subsidiary of Actavis. Also, in November 2014, Actavis completed its $675 million acquisition of the specialty pharmaceutical company, Durata Therapeutics.

Another deal of note in 2014 was a three-part transaction involving the number one pharmaceutical company, Novartis, and another top 10 pharmaceutical company, GlaxoSmithKline (GSK), which was announced in 2014 and which closed earlier this year. Under that deal, Novartis and GSK combined their consumer heatlhcare businesses into a joint venture, GSK divested its oncology products to Novartis in a deal value at more than $16.0 billion, and GSK acquired Novartis' vaccine business (excluding flu) for approximately $7.1 billion. In a related, separate transaction, Novartis sold its animal health business to Eli Lilly for $5.4 billion, a deal that was announced in 2014 and completed earlier this year.

Other recent deals among the large pharmaceutical companies included the sales by Merck & Co. of its consumer healthcare business to Bayer for $14.2 billion, which was completed in October 2014. In a deal completed in late February 2015, Mylan acquired Abbott Laboratories' non-U.S. developed markets specialty and branded generics business for approximately $5.3 billion. Other recent deals included Merck & Co.'s $9.5 billion acquisition of Cubist Pharmaceuticals (a deal that was completed in 2015), Roche's $8.3 billion acquisition of InterMune (completed in 2014), and Merck & Co.'s $3.85 billion acquisition of Idenix Pharmaceuticals (completed in 2014).

Other upcoming deal closings expected in 2015 include AbbVie's proposed acquisition of Pharmacyclics, a pharmaceutical company developing and commercializing small-molecule drugs for treating cancer and immune-mediated diseases, for $21 billion, in a deal that is expected to close in mid 2015. The deal follows AbbVie's efforts last year to acquire the specialty pharmaceutical company, Shire, for nearly $55 billion, a deal in which AbbVie eventually decided not to pursue. AbbVie's proposed acquisition of Shire involved a tax inversion structure by which the New AbbVie was to become a holding company for the combined AbbVie and Shire and to be incorporated in Jersey, the UK, Shire's place of incorporation. Through its incorporation in the UK, the AbbVie board expected the transaction to reduce New AbbVie's effective tax rate to approximately 13% by 2016. A subsequent notice by the US Department of Treasury, however, which signaled a limiting of corporate tax inversions, cast uncertainty as to this practice, so AbbVie decided to terminate the proposed acquisition.

The deal for Pharmacyclics strengthens AbbVie's position in oncology drugs. Pharmacyclics' key product is Imbruvica (ibrutinib) for treating hematologic malignancies. Imbruvica is a Bruton's tyrosine kinase (BTK) inhibitor approved for use in four indications to treat three different types of blood cancers, including chronic lymphocytic leukemia, mantle cell lymphoma, and Waldenstrom's macroglobulinemia. Imbruvica received initial US Food and Drug Administration (FDA) approval in 2013 and received three Breakthrough Therapy designations by the FDA for these indications. (Breakthrough Therapy designations are provided if preliminary clinical evidence indicates the drug may offer a substantial improvement over available therapies for patients with serious or life-threatening diseases). The drug is now is approved in more than 40 countries. In 2014, Pharmacyclics posted revenues of $730 million, compared to $260 million for 2013, primarily due to a $479-million increase in Imbruvica net product revenue in 2014, the first full year of the drug's product sales. In its 2014 earnings release, Pharmacyclics said it expects US net product revenue of Imbruvica to be approximately $1 billion.

Another deal of note thus far in 2015 is Pfizer's proposed $17 billion acquisition of the specialty pharmaceutical company, Hospira, which is expected to close in the second half of 2015. Although not reaching the scale of Pfizer's pursuit of AstraZeneca in 2014, the deal provides a targeted vehicle for Pfizer to grow its global sterile injectables business, including generic sterile injectables, as well as further position Pfizer in biosimilars. The deal provides a growing revenue stream and a platform for growth for Pfizer's Global Established Pharmaceutical (GEP) business by combining Hospira's generic sterile injectables products, including acute care and oncology injectables, with a number of differentiated presentations, with Pfizer's GEP's branded sterile injectables, including anti-infectives, anti-inflammatories, and cytotoxics.

Product positioning
As companies shift positions in the global rankings, so do products, as biologics continued to make inroads among the top-selling drugs in 2014, led by AbbVie's Humira (adalimumab), which was the industry's top-selling drug in 2014 (based on data as of December 2014 and on manufacturers' prices) (see Table II), according to IMS. Since first gaining approval 12 years ago, Humira has been approved in more than 87 countries. It is currently has approval for 11 indications on a global basis. Humira is approved for use in moderate to severe rheumatoid arthritis, ankylosing spondylitis, moderate to severe plaque psoriasis, active and progressive psoriatic arthritis, moderate to severely active Crohn's Disease and moderate to severely active ulcerative colitis. Humira is approved in pediatric patients for use in enthesitis-related arthritis, severe plaque psoriasis, severe Crohn's disease, and active juvenile idiopathic arthritis in patients who have had inadequate response to prior therapy. Humira is AbbVie's top-selling drug. It had 2014 sales of $12.5 billion on a company reported basis, accounting for 63%,of the company's 2014 sales of $19.960 billion.

Sanofi's Lantus (insulin glargine) was the industry's second best-selling drug in 2014 and the top-selling product for Sanofi. Lantus had 2014 sales of EUR 6.344 billion ($7.180 billion) on a company reported basis and now faces patent expiry, effective in February 2015 in the US and in May 2015 in the EU. Sanofi is banking on Toujeo, a next-generation, once-daily basal insulin based on insulin glargine, which is the active ingredient in Lantus. Gilead's Sovaldi, the previously mentioned hepatitis C drug, was also a top-selling drug in 2015 and the top-selling small molecule. Of the top 20-selling pharmaceuticals in 2014, 10 were biologics and 10 were small molecules (see Table II)

Table II. Top 20 Global Pharmaceutical Products, 2014
  1. Humira (adalimumab ) ($11.844 billion); (biologic)
  2. Lantus (insulin glargine) ($10.331 billion); (biologic)
  3. Sovaldi (sofosbuvir) ($9.375 billion); (small molecule)
  4. Abilify (aripiprazole) ($9.285 billion); (small molecule)
  5. Enbrel (etanercept) ($8.707 billion); (biologic)
  6. Seretide (fluticasone/salmeterol) ($8.652 billion); (small molecule)
  7. Crestor (rosuvastin) ($8.473 billion); (small molecule)
  8. Remicade (infliximab) ($8.097 billion); (biologic)
  9. Nexium (esomeprazole ($7.681 billion); (small molecule)
  10. Mabthera (rituximab) ($6.552 billion); (biologic)
  11. Avastin (bevacizumab ($6.070 billion); (biologic)
  12. Lyrica (pregabalin) ($6.002 billion); (small molecule)
  13. Herceptin (trastuzumab) ($5.564 billion); (biologic)
  14. Spiriva (tiotropium bromide) ($5.483 billion); (small molecule)
  15. Januvia (sitagliptin) ($4.991 billion); (small molecule)
  16. Copaxone (glatiramer acetate) ($4.788 billion); (small molecule)
  17. Novorapid (insulin aspart) ($4.718 billion); (biologic)
  18. Neulasta (pegfilgrastim) ($4.627 billion); (biologic)
  19. Symbicort (budesonide/formoterol ($4.535 billion); (small molecule)
  20. Lucentis (ranibizumab) ($4.437 billion); (biologic)
Sales and rank are in US$ with quarterly exchange rates and based on data as of December 2014. Sales cover direct and indirect pharmaceutical channel wholesalers and manufacturers. The figures include prescription and certain over the counter data and represent manufacturers' prices Product names are IMS International Product names. Product names around the world with different names or marketing companies are grouped together. The names generally reflect the name in the country where the product was first launched. A match on two of three criteria (local brand name, marketing corporation, and active ingredient) will be grouped together.

Source: IMS Health MIDAS, December 2014