In this issue of Pharmaceutical Innovation, we look atthree of the biggest pharma companies in the USmarket, in terms of dollar sales: Pfizer, Merck & Co. andGlaxoSmithKline. Although these multinational giantshave commercial interests in the healthcare, consumerproducts and animal health industries, by far theirfastest-growing and most profitable businesses are inthe pharmaceuticals sector.

Pfizer

SummaryPfizer ranked the number one pharmaceutical companyin the US in 2001 with US drug sales of $US16.6 billion,up 14% in from $US14.5 billion in 2000. Pfizer’sperformance throughout the 1990s has been strong withUS sales doubling in the past three years, thanks tostrong franchises (Norvasc, the antidepressant Zoloft,Zithromax, Zyrtec), new product launches, and theacquisition of Warner-Lambert and its blockbusterLipitor brand.

Pfizer has diversified businesses in pharmaceuticals,hospital products, consumer products and animalhealth. Healthcare (pharmaceutical and hospitalproducts) dominates the corporation with 95% of

operating income. With the divestiture of several devicecompanies, pharmaceuticals now represent 81% of thefirm’s sales. The pharmaceutical business remains thecompany’s star business, with its sales consistently thebest performing area for Pfizer, normally by a widemargin over its other businesses. The company’s totalworldwide sales were over $US32 billion in 2001,representing a 10% sales gain over 2000 figures of $US29billion. Pfizer’s US pharmaceutical sales for 2001 totalled$US16.6 billion, up 14% on the prior year. Pro-formasales have more than doubled in the past three years.

In recent years, Pfizer has moved into co-marketing in abig way with Warner-Lambert (for Lipitor), Eisai (forAricept) and Monsanto, now Pharmacia Corporation,(for Celebrex). After working with Warner-Lambert,Pfizer renewed and extended their deal to Lipitor lineextensions and related cardiovascular products. Clearly,Pfizer liked the way this co-marketing deal was workingout and decided to buy the company. This may havestarted a trend, as Pfizer recently announced that it isalso set to acquire Pharmacia [see News & Views in thisissue]. Could Eisai be next?

Pfizer has accelerated its deal activities. In addition todeals that are specific to therapeutic areas, Pfizer hasinitiated a number of agreements with broad-rangingimplications for its future business, such asgenetic/genomic deals with Incyte Genomics and AEATechnology and a proteomics deal with OxfordGlycoSciences.

Pfizer does not just have some of the biggest products inthe business; it has also shown that it can moveaggressively into new markets with great success. Thecompany is still focused on just a few areas and hasmuch room to expand into new markets with newtechnologies. Pfizer appears to be well positioned tointroduce several significant new products over the nearterm. In addition, the company has many innovativedrugs further down its pipeline. Pfizer’s acquisition ofWarner-Lambert fills two gaps in its product lines –cholesterol reduction and anticonvulsants. Animpressive pipeline, and the ability to license-in or co-market late-stage products, assures Pfizer’s continued

August 200246

The Big Three of US PharmaPfizer, Merck & Co. and GlaxoSmithKline

Table 1. Pfizer at a glance

2001 2000 % ($US millions) ($US millions) change

Total 32,259 29,355 10 worldwide sales

Total 7,788 3,726 108 worldwide net income

Worldwide 25,518 22,567 13pharmaceutical sales

US 16,602 14,542 14 pharmaceutical sales

Pharmaceutical Not available 4,100 Not available R&D spending

Call +1 215-741-5201 or write to Pharmaceutical Innovation for additional information 47

success. Thus, Pfizer is well positioned from a newproduct standpoint for many years into the future andthe company is an odds-on favorite to maintain itsposition at the top of the pharmaceutical industry.

Research and developmentPfizer ’s pharmaceutical R&D spending reached$US4.1 billion in 2000, up on the $US3.7 billion spentin 1999. This is five-times the industry average.Annual growth has been strong at over 10% each year.The company’s pharmaceutical R&D represents 18%of pharmaceutical sales.

Pfizer has approximately 65 programs in its research anddevelopment pipeline, spread among 10 therapeuticareas. Two-thirds of the company’s programs areconcentrated in cardiovascular, CNS and oncology.

Merck & Co.

SummaryMerck & Co. was the number 2 company in the USpharmaceutical market in 2000, accounting for 8% ofthe total US drug industry. Its US drug sales were$US12.3 billion, up 29% on 1999 sales of $US9.6 billion.Merck’s total worldwide sales rose from $US40.4 billionin 2000 to $US47.7 billion in 2001. The company’s netincome also rose from $US6.8 billion in 2000 to $US7.3billion in 2001.

Merck divides its businesses into pharmaceuticals and

“other”. North America accounts for 64% of Merck’stotal business, Japan holds 11%, and the rest of theworld takes 25%. As reported in the April 2002 issue ofPharmaceutical Innovation, Merck is planning to divest itspharmacy benefits management subsidiary Merck-Medco. In 2000 Merck’s worldwide pharmaceuticalsbusiness focussed on eight therapeutic areas thataccounted for 100% of its US sales.

We believe that Merck will actively seek late-stagelicensing opportunities/acquisitions in order to bringthe company the sales volume and new products that itneeds to maintain growth. The overall picture of Merckis one of a tightly disciplined and focussed organisation.For its current business as well as for its productdevelopment programs, the company’s strategy is tobuild on its strengths, essentially a low-risk strategy. Thepipeline has some innovative products and Merck alsohas a large number of strategic alliances in place whichkeep it well abreast of developments in the industry;however, they will take years to be commercialised.Recently launched and late-stage development productshave the potential to bring an incremental $US1billion–$US2 billion per year in annual sales to theorganisation. In order for Merck to maintain its historicrate of growth of approximately 15%, it requiresincremental sales of $US1.8 billion per year in the USA.

Merck’s core business is in a good position but isfacing increasing competition. It will not continue to

COMPANY PROFILES

Table 2. Product development programs by phase and therapeutic area*

Therapeutic area** Phase I Phase II Phase III Filed Total

Cardiovascular 2 7 2 11

CNS 9 8 3 20

Endocrinology 3 2 1 6

Infectious disease 1 2 1 4

Metabolism 1 1

Oncology 3 9 3 15

Ophthalmology 1 1

Respiratory 1 1 2

Rheumatology 1 2 3

Other 1 1 2

Total 5 32 20 8 65

*Estimates only; numbers may have changed subsequent to publication.

**A single compound may be in development for several indications.

Table 3. Merck at a glance

2001 2000 % ($US millions) ($US millions) change

Total 47,716 40,363 18.2 worldwide sales

Total worldwide 7,282 6,822 6.7 net income

Worldwide 19,732 18,577 6.2pharmaceutical sales

US Not 12,280 Not pharmaceutical available availablesales

Pharmaceutical 2,456 2,344 4 8.0 R&D spending

The Big Three of US Pharma – Pfizer, Merck & Co. and GlaxoSmithKline

deliver its historic rates of sales growth. Therefore, theorganisation will depend on its late-stage productpipeline in order to remain competitive within theindustry. On balance, it is expected that the corebusiness in cardiovascular products will continue toslow and turn down. Its core business in anti-infectives has already plateaued, but recentlylaunched vaccines and a potent late-stage pipelinecould lead to renewed sales growth. Merck needs toenlarge its new product development program and tocapitalize on its major alliances.

Research and developmentHistorically, Merck has been a premier pharmaceuticalcompany that, until recently, had the largest R&Dpipeline in the industry. However, recent mergers haveresulted in companies with R&D pipelines rivallingMerck’s. Merck’s pharmaceutical R&D program wassupported by a substantial budget of $US2.3 billion in2000 which has grown at double-digit rates over the pastfive years. This was substantial, but well below Pfizer($US4.1 billion) and GlaxoSmithKline ($US3.5 billion),with whom Merck is competing for the top salesposition in the industry. The company’s pharmaceuticalR&D has represented 11% to 12% of pharmaceuticalsales on an annual basis for many years, a percentagethat is well below the industry average of 17%.

Merck has approximately 20 programs within 10therapeutic areas in development, focussed in infectious

disease and rheumatology (table 4). Emphasis is placedon development of drugs in therapeutic areas that formMerck’s current base of business.

GlaxoSmithKline

SummaryGlaxoSmithKline (GSK) is a British company whoseshares are listed on the London Stock Exchange and theNew York Stock Exchange. The company was formed onDecember 27, 2000, by the merger of Glaxo Wellcomeand SmithKline Beecham. GlaxoSmithKline rankednumber 3 in the US market in 2001, with USpharmaceutical sales of $US13.1 billion. The companyrecorded total sales of $US29.5 billion in 2001, up 7.4% indollar terms from sales of $US27.5 billion in 2000.

GSK’s Consumer Healthcare business performance wasaffected by sales decline in the smoking cessation area.The company acquired Block Drug in January 2001,adding approximately $US1 billion to its ConsumerHealthcare business and some well-known brands suchas Sensodyne and Polident. GSK expects to deliver atleast $US2.7 billion in cost savings by 2003 as a result ofboth the merger and the manufacturing restructuringplans already in place.

GSK has been very active in deals – both marketingdeals and technology collaborations. The majority ofmarketing collaborations were undertaken bySmithKline Beecham prior to the merger. GSK (andpredecessor firms) have aggressively pursuedtechnologies via product development collaborationsand in-licensing deals. The pace has increased in recentyears. Early in the 1990s, a typical year would see five or

August 200248

Table 4. Product development programs by phaseand therapeutic area*

Therapeutic area** Phase I Phase II Phase III Filed Total

Cardiovascular 1 1

CNS 1 1

Endocrinology 1 1

Gastroenterology 1 1

Infectious disease 2 2 1 1 6

Metabolism 1 1

Oncology 1 1 2

Respiratory 2 2

Rheumatology 4 4

Other 1 1

Total 4 5 10 1 20

*Estimates only; numbers may have changed subsequent to publication.**A single compound may be in development for several indications.

Table 5. GlaxoSmithKline at a glance

2001 2000 % ($US millions) ($US millions) change

Total 29,504 27,480 7.4 worldwide sales

Total worldwide 8,716 7,640 14.1net income

Worldwide 24,775 23,452 5.6pharmaceutical sales

US 13,131 11,712 12.1pharmaceutical sales

Pharmaceutical Not 3,570 Not R&D spending available available

Call +1 215-741-5201 or write to Pharmaceutical Innovation for additional information 49

so new technology collaborations initiated. By the laterpart of the decade, 30 or more collaborations per yearwas the norm. Looking at product developmentcollaborations by therapeutic area, one sees a sharpdiscrimination. Far and away, the most intense area ofdeal activity has been in infectious disease, whichaccounted for roughly one out of every three of allproduct technology collaborations. No other individualtherapeutic area has accounted for as much as 10% oftechnology deal activity.

Research and developmentGSK ranked number 2 in the US market in pharma R&Din 2000, with $US3.6 billion in spending. The companyhas approximately 67 programs within 11 therapeuticareas in development (table 6). ■

COMPANY PROFILES

Table 6. Product development programs by phase andtherapeutic area*

Therapeutic area** Phase I Phase II PhaseIII Filed Total

Cardiovascular 2 1 1 4

CNS 10 4 1 15

Endocrinology 6 1 1 1 9

Gastroenterology 1 2 3

Hematology 1 1

Infectious disease 5 5 6 2 18

Inflammation 1 1

Oncology 2 2 1 1 6

Respiratory 3 2 2 7

Rheumatology 2 2

Wound 1 1

Total 33 18 12 4 67

*Estimates only; numbers may have changed subsequent to publication.**A single compound may be in development for several indications.