FirstWord Lists: Leading industry players in 2017 – Novartis rises to the top

According to consensus forecasts compiled by FirstWord, by 2017 Novartis will command a significant lead as the world's largest prescription pharmaceutical manufacturer with sales of around $60 billion.

The Swiss company's scale will in part reflect its diversification into various sub-segments of the prescription pharma market, including the generics, vaccines and ophthalmology markets.

Nevertheless, innovative branded pharmaceuticals will remain an integral element of the Novartis growth engine, with the Afinitor, Gilenya and Tasigna franchises each expected to deliver absolute annual sales growth in excess of $1 billion over the period 2012-17. Novartis has demonstrated one of the highest R&D productivity rates over the past decade and a succession of launches over the past five years appear well placed to drive growth at the drugmaker. See ViewPoints: The importance of R&D momentum - Novartis talks up pipeline.

CEO Joseph Jimenez recently spoke about the need to redefine the blockbuster and at Novartis the concept of a broader portfolio of smaller products has won out over Big Pharma's historical allegiance to multi-billion dollar 'mega brands.' As such, Novartis will become increasingly less dependent on a single product franchise than any of its Big Pharma rivals over the next five years. See FirstWord Lists – Big Pharma's Blockbuster dependency rates.

Ranked in terms of absolute revenue expansion over the period 2012-17, Novartis is forecast to be the third largest growing player (+$7.2 billion), with Sanofi and Roche contributing higher levels of growth (at +$8.8 billion and +$7.7 billion, respectively). For Sanofi, its diabetes franchise Lantus – positioned as the industry's fastest growing product in 2012 (see FirstWord Lists: The 20 biggest growing pharma products in 2012 - Sanofi's Lantus leads the way) – will remain its leading growth driver through to 2017, supported by a raft of new launches, such as Aubagio and Lemtrada, according to analyst forecasts.

Revenue expansion for Roche will continue to be driven by its oncology portfolio, with Perjeta, Avastin and Kadcyla positioned as key individual growth drivers. The presence of the newer launches Perjeta and Kadcyla reflects consensus sentiment that Roche will successfully 'reboot' its oncology franchise, while notable growth forecasts for Avastin and Rituxan highlights the longevity of these biologic products and also reflects the limited impact that analysts expect biosimilar competition to have over the next five years.

Encouragingly, just three of the 10 companies profiled are expected to record a net annual decline in revenues over 2012-17 – and of these, both Merck & Co. and Pfizer are expected to demonstrate top-line sales growth towards the end of this period (the early part of this forecast window will see both US pharma giants experience continued top-line contraction as a result of exposure to generic competition). Thus AstraZeneca is the only company anticipated to deliver a sustained decline in sales over the period 2012-17, highlighting both the significance of recent management changes at the company and the high level of anticipation for Pascal Soriot’s strategy presentation, which is due to be unveiled by the CEO at the end of March.

One interesting dynamic is that if the list of players is ranked by absolute sales growth over 2012-17, the more diversified companies generally rise to the top (and those with a sharper focus on prescription pharma sales only are positioned at the bottom). This brief analysis clearly does not converge on the underlying profitability of the various business units these companies operate, and it is pertinent to note that the strategic rationale for divesting non-core units appears to be gaining currency among some companies. Nevertheless, diversification – in terms of top-line revenues at least – will continue to provide welcome insulation for Big Pharma. Sentiment suggests that the industry is beginning its climb out of the ravine that it toppled into via the patent cliff, with the launch of innovative of new products – consensus forecasts suggest, however, that the ascent will be a slow one.

For further analysis of the Top 10 Pharma Companies in 2017 see FirstWord Dossier's latest report

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