the novasecta european midpharma report 2016 · 2020-06-04 · the novasecta european midpharma...

The Novasecta European MidPharma Report 2016

I N S I G HTS

© Novasecta ltd 2018 www.novasecta.com Tel: +44-(0)-20-3384-3850 01

Working closely with such companies for over a decade has provided us with a unique perspective and a substantial body of practical insight into how pharmaceutical and biotech companies of all sizes can survive and thrive.

European MidPharmas are a class of companies that Novasecta has been working with intensively since its foundation. These R&D-based pharmaceutical companies with annual revenues of €50m to €5bn are tremendously diverse, just like the European countries in which they are based. Working closely with such companies for over a decade has provided us with a unique perspective and a substantial body of practical insight into how pharmaceutical and biotech companies of all sizes can survive and thrive.

Introduction

In our second annual European MidPharma Report we explore the nature and evolution of European-headquartered mid-sized pharmaceutical companies, and examine pertinent trends and topics of the last year. Through this we aim to provide our readers with non-standard and thought-provoking insights into the highly diverse global pharma/biotech industry.

We segment the pharmaceutical sector across three dimensions: ownership, scale, and R&D intensity. For ownership, the preponderance of families and foundations rather than stock markets or venture funds sets European MidPharmas apart in the global pharma/biotech community.

© Novasecta ltd 2018 www.novasecta.com Tel: +44-(0)-20-3384-3850

We therefore segment them in terms of ‘pure’ listed, i.e. publicly-traded companies with no majority shareholder, listed privately-controlled, i.e. publicly-traded companies with a majority shareholder, and private, i.e. companies that are wholly owned by families or foundations or funds. We combine the ownership dimension with revenue, which we classify €50m-€5bn as “mid-sized” and R&D intensity, which we classify in terms of R&D investment as a proportion of revenue:

European MidPharmas are highly diverse in ownership, scale and R&D intensity

40 MidPharmas have both R&D and revenue data available for 2015 (or 2014 if not available), so appear on this chart. 5 companies are excluded from this chart as R&D spend >40% of revenue: Galapagos (61, 214%), Genmab (152, 43%), Medivir (70, 42%), MorphoSys (106, 74%) and Vectura (72, 62%). 20 companies are excluded from this chart due to insufficient disclosed data (Acino, AMco, Angelini, Debiopharm, Desitin, Dompé, Ferrer, Ferring, Galderma, Helsinn, HRA, Italfarmaco, Menarini, MundiPharma, Norgine, Pharmstandard, ProStrakan, Riemser, Sigma-Tau and Zambon).

The one characteristic of European MidPharmas to note compared to last year is resilience. None of the 65 companies we profiled in our last annual report was taken over or dissolved in 2015. Since the end of 2015 a notable exception to this “rule” has been Meda, but this took a highly unusual 92% premium on its share price for it to be sold to Mylan early in 2016.

There is something about the scale and ownership of the European MidPharmas that confers sustainability, a valuable characteristic to have in an industry with long time horizons that has to operate in an uncertain and volatile economic environment.

We believe that corporate sustainability can be a force for good in the industry: the focus on being excellent in a particular area as a way to succeed and prosper is one we see a lot of in European MidPharmas, and indeed some of their larger peers that have entire or substantial private shareholdings such as Novo Nordisk, Boehringer Ingelheim and Roche. We therefore believe that combining the attitude of patient long-term

02

I N S I G HTS


40%

30%

20%

10%

0%0 1 2 3 4 5 6

R&D

Spen

d 20

15 (%

Rev

enue

)

Revenue 2015 (€bn)

Listed MidPharmas

Listed Privately-Controlled MidPharmas

Private MidPharmas

UCB

Servier

Grifols

Stada

Octapharma

Pierre Fabre

Lundbeck

Meda

Actelion

ChiesiGrunenthal

LEO IpsenMerz

Indivior

Orion

Vifor

KrkaGedeon Richter

RecordatiStadaKedrionRovi

Allergy Therapeutics

Geurbet Almirall

Sobi ALK AbelloLFB

Biotest

Orexo

PharmaMar

Bavarian NordicCosmo Pharma

BTGStallergenes

Skyepharma

Evotec

Hikma

Shire

capital that is a characteristic of privately controlled companies with a bias towards financial discipline that is a characteristic of pure listed companies is a sound approach for success in pharma/biotech companies.

In the remainder of this report, we explore and contrast MidPharma companies’ performance with each other and with their Big Pharma peers across a variety of business drivers:

• Revenue Growth• Profitability• R&D Intensity• R&D Externalisation• M&A Activity• Partnering Activity • We finish the report with our proprietary ranking of MidPharmas based

on R&D, Business Development and Commercial Reach performance, with a comparison to last year’s ranking.

Revenue Growth

In revenue terms, MidPharmas’ revenues of €50m-€5bn sit them squarely between small Biotech on one side and established Big Pharma on the other. Comparing the growth of the various types of MidPharma with their Big Pharma peers yields interesting insights:

MidPharmas are growing revenue faster than their Big Pharma peers

27 MidPharmas excluded due to insufficient data (Acino, AMCo, Angelini, BTG, Debiopharm, Desitin, Dompé, Esteve, Ferrer, Ferring, Galderma, Grünenthal, Helsinn, HRA, Indivior, Italfarmaco, Kedrion, Krka, Menarini, MundiPharma, Pharmstandard, Pierre Fabre, ProStrakan, Riemser, Sigma-Tau, Vectura and Zambon). The Big Pharma population is made up of 20 global pharmaceutical firms with revenue >€5bn (Amgen, AstraZeneca, Bayer, Baxter, Biogen, Boehringer Ingelheim, Bristol-Myers Squibb, Eli Lilly, Fresenius, GlaxoSmithKline, J&J Pharmaceuticals, Merck & Co, Merck Serono, Mylan, Novartis, Novo Nordisk, Pfizer, Roche, Sanofi-Aventis and Teva).


I N S I G HTS


30%

25%

20%

15%

10%

5%

0%

-5%

-10%

-15%

2.8%

Biogen

Mylan

Galapagos

Medivir

GenmabOrexo

Octapharma

ServierLundbeck

Biotest8.1%

5.4% 5.3%

Reve

nue

CAG

R 20

11 -

2015

Big Pharmas

Listed MidPharmas


Private MidPharmas

Median


Notably, all MidPharma ownership segments are beating Big Pharma in median four-year top-line growth. This is in contrast to our 2015 report, where Big Pharma was topped only by listed, non-privately-controlled MidPharmas. This year, it appears privately-controlled MidPharmas have ‘stepped it up a notch’. Some prominent examples of privately-controlled companies having increased their 4-year growth rate by growing their revenue significantly in the last financial year include Ipsen (14% growth) and Octapharma (18%).

Profitability

So MidPharmas are growing revenue faster than Big Pharmas, but are they more successful where it really matters – profitability?

MidPharmas tend to be less profitable than Big Pharmas

29 MidPharmas excluded due to insufficient data (Acino, AMCo, Angelini, BTG, Chiesi, Debiopharm, Desitin, Dompé, Esteve, Ferrer, Ferring, Galderma, Grünenthal, Helsinn, HRA, Italfarmaco, Kedrion, Menarini, MundiPharma, Norgine, Pharmstandard, Pharmstandard, Pierre Fabre, ProStrakan, Riemser, Servier, Sigma-Tau, Vectura, and Zambon). Galapagos (-148%) is not included on this chart as proportional EBIT <–50%.

Examining earnings before interest and tax (EBIT) for the companies that publish this figure shows that MidPharmas as a whole are holding on to less of their hard-earned revenue than Big Pharmas. Listed, privately-controlled MidPharmas in particular seem to be taking a hit on profitability, although our data points may be too few to draw any definitive conclusions on this group.

We believe that Big Pharmas’ relatively high profitability compared to its smaller MidPharma peers is where the financial discipline of stock markets is most apparent. For the financial markets Big Pharmas are “safe haven” stocks with relatively high and reliable dividends: CEOs of such companies have been aggressively protecting dividends, executing share buy-backs and sustaining major cost-cutting initiatives to reinforce this. These

I N S I G HTS


70%

50%

30%

10%

-10%

-30%

-50%

20.4%

Gilead

Novo Nordisk

Baxter

Biogen

Orexo

Cosmo Pharma

Genmab

OctapharmaMerz

LFB

StallergenesBiotest

Recordati

16.7%

10.2%15.2%

EBIT

as

a Pe

rcen

tage

of R

even

ue 2

015

Big Pharmas

Listed MidPharmas


Private MidPharmas

Median


activities are the hallmarks of financial discipline and are less apparent so far in European MidPharmas. The interesting question is how such activities create long-term value: cutting R&D in particular provides short-term profitability benefits with the risk of long-term damage. And the almost desperate quest for acquisitions to boost earnings and provide synergy cost benefits that characterised some Big Pharmas last year demonstrates that short-term profitability is not all that is required to create long-term value.

For MidPharmas, achieving the level of profitability of their larger peers is an issue that needs to be confronted. There are undoubtedly economies and cost-saving opportunities that come from both scale and financial-market discipline. For example we observe that listed companies are typically more amenable to shedding headcount than their privately held counterparts as a way of reducing costs. And as we observe below in exploring R&D intensity, the relatively poor profitability of MidPharmas in not typically caused by high R&D investment, which might be an argument for tolerating it in the short-term. The risk for many MidPharmas is that insufficient cost discipline creates complacency, which stunts R&D and commercial progress. That said the contrasting risk in listed Big Pharma is that the constant cycle of M&A and synergy-cost-cutting will harm the focus and sustained investment in R&D that brought much of their success and can sustain them in future. As ever the optimum position is one of balance: maintaining cost discipline while investing for the long-term.

R&D Intensity

For R&D intensity, we consider each company’s R&D spend as a percentage of revenue. We find this to be a highly instructive proxy of the corporate business model – to what extent are companies looking to grow organically through R&D, or looking to buy their way to growth?

As we showed in our initial graphic showing the ownership, scale and R&D intensity of all MidPharmas, the proportion of revenue that MidPharmas invest in R&D is highly variable. There do however appear to be two clusters: those that show a significant commitment to R&D, investing 15-25% of revenue sustainably, and those that invest 5-15% of revenue in R&D for whom R&D is perhaps more an investment necessity for Life Cycle Management and commercial success than a source for future earnings and growth.

A further measure of R&D intensity is the extent to which R&D investment grows year on year. We have always seen R&D investment growth to be a reasonable indicator of company health: those that increase investment in R&D year on year have either been succeeding at it (later stages of drug development cost more than early stages) or have confidence in its ability to create value for the organisation. In that spirit we explore the four-year R&D investment growth rates for the various company segments:

I N S I G HTS


Listed big and mid-sized pharma companies have typicallygrown R&D investment by more than their privately controlled peers

29 MidPharmas excluded due to insufficient data (Acino, AMCo, Angelini, BTG, Debiopharm, Desitin, Dompé, Esteve, Ferrer, Ferring, Galderma, Grünenthal, Guerbet, Helsinn, HRA, Indivior, Italfarmaco, Kedrion, Meda, Menarini, MundiPharma, Norgine, Pharmstandard, Pierre Fabre, ProStrakan, Riemser, Sigma-Tau, Vectura, and Zambon).

Last year, we observed that ‘pure’ listed MidPharmas were growing R&D by approximately the same amount as Big Pharmas, with privately-controlled MidPharmas lagging behind. This year, we observe a fairly similar phenomenon in terms of ‘pure’ listed MidPharmas and Big Pharmas being quite similar. Taking a look at the other two MidPharma segments, however, we see that listed, privately-controlled MidPharmas are exhibiting remarkable volatility in investment in R&D. This really demonstrates the plethora of different business models that pharmaceutical companies can employ.

Fully private MidPharmas, on the other hand, are for the most part hovering just above zero growth in R&D investment (similar to last year), with two notable exceptions: Chiesi and Octapharma. Chiesi in particular evidently has big plans for growth, as demonstrated by its growing investment in R&D. Looking at its impressive revenue growth over the last several years, it appears that it is well on its way to accomplishing this.

For most of the privately held or controlled MidPharmas, the combination of not growing R&D investment while not sustaining a profitability level that matches its listed counterparts is a cause for concern. Is R&D investment being cut or held back because it is the “easiest” way to cut costs and increase short-term profitability, particularly if such investments are the external sort, such as progressing drugs through clinical trials? Or is there genuine concern that R&D will not deliver, with the corresponding reduction in funds to this vital activity for sustainable success?


I N S I G HTS


40%

35%

30%

25%

20%

15%

10%

5%

0%

-5%

-10%

-15%

-20%

5.4%

Mylan

Biogen

Baxter Vifor

Medivir

Cosmo Pharma

Grifols

Octapharma

Servier

Chiesi

Ipsen

BiotestRovi

Lundbeck

Almirall

8.1%

4.7%

1.4%Reve

nue

CAG

R 20

11 -

2015

Big Pharmas

Listed MidPharmas


Private MidPharmas

Median

The perennial question of “is my R&D worth it” never goes away, and it is not easily answered. The better question is “how can I get more from R&D”, and the answers to that seem to be broadly consistent across all company types. We summarised our angle on this topic in our white paper “Manage R&D to Create Value” in which we emphasise such essentials as the need for focus, the benefits of flexibility and diverse sources of innovation, and the need for strong leadership and governance.

We showed last year that historical R&D spend is strongly correlated with future revenue across all pharma segments. This year, inspired by the above conclusion, we take this analysis one step further and explore whether past R&D drives future profitability.

Historical R&D investment has been more correlated withcurrent profitability for Big Pharmas than it has been for MidPharmas

31 MidPharmas excluded due to insufficient data (Acino, AMCo, Angelini, BTG, Debiopharm, Desitin, Dompé, Esteve, Ferrer, Ferring, Galderma, Grünenthal, Helsinn, HRA, Indivior, Italfarmaco, Kedrion, LFB, Meda, Menarini, MundiPharma, Norgine, PharmaMar, Pharmstandard, Pierre Fabre, ProStrakan, Riemser, Servier, Sigma-Tau, Vectura, and Zambon).


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0 50 100 200 250 300 300250

R² = 41%

Ipsen

ActelionMidPharmas

150

Mea

n An

nual

EBI

T 20

14 -

2015

(€m

)

Mean Annual R&D Spend 2011 - 2015 (€m)

600

500

400

300

200

100

0

-100

0 1000 2000 4000 5000 6000 80007000

R² = 67%

Rocha

BigPharmas

3000

Mea

n An

nual

EBI

T 20

14 -

2015

(€m

)

Mean Annual R&D Spend 2011 - 2015 (€m)

20,000

15,000

10,000

5,000

0

Novartis


Interestingly, the answer to whether past R&D means current profit appears to be a fairly strong ‘yes’ for Big Pharmas, where higher levels of R&D investment over the last four years have been correlated (R2 = 67%) with higher levels of EBIT in 2015. Admittedly correlation is not cause and effect, but even so it is encouraging that those that invest more in R&D are being rewarded with higher profitability than those that invest less. However with MidPharmas the correlation is less clear: while most of those that have invested more in R&D have achieved higher EBIT levels, there are more companies that have kept R&D spend low while sustaining profitability. Perhaps the size of the Big Pharmas means that a more predictable EBIT and R&D spend proportion of revenue can be set, without fear of too much volatility. MidPharmas, on the other hand, may be more susceptible to market forces due to their smaller size and strong exposure to a limited number of geographies, meaning that EBIT has been influenced more by other factors than by R&D alone.

R&D Externalisation

New this year, we decided to report on R&D business models. One proxy measure for this is the number of R&D-focused employees that an organisation has, as when normalised for R&D investment. This indicates how intensive internal R&D activities are, compared to external. It is no secret that the industry has been moving towards more “virtualised” R&D – using external contractors and partners is generally considered (rightly or wrongly) to be faster than internal activity, and certainly enables more flexibility in R&D. We therefore explored how our different pharmaceutical segments are balancing internal versus external R&D:

MidPharmas externalise less of their R&D than Big Pharmas

28 MidPharmas have both R&D spend and R&D heads data available for 2015 (or 2014 if not available) so appear on this chart. Evotec (47.2) is not included on this chart as proportional R&D heads >15. 36 MidPharmas excluded due to insufficient data (Acino, Allergy Therapeutics, Almirall, AMCo, Angelini, Bavarian Nordic, BTG, Debiopharm, Desitin, Dompé, Ferrer, Ferring, Galderma, Grifols, Grünenthal, Helsinn, HRA, Indivior, Italfarmaco, Krka, Medivir, Menarini, Merz, MundiPharma, Norgine, Octapharma, Orion, PharmaMar, ProStrakan, Recordati, Riemser, Shire, Sigma-Tau, Sobi, Vifor and Zambon).

I N S I G HTS


14

12

10

8

6

4

2

0

3.8

Stada

Gedeon Richter Stada

Guerbet

Biotest Kedrion

LFB

Novo NordiskValeant

Novartis

2015

R&D

Hea

ds p

er €

1m R

&D S

pend

Big Pharmas

Listed MidPharmas


Private MidPharmas

Median

3.2

2.4

3.9

MidPharmas as a whole therefore have more proportional R&D heads than their Big Pharma counterparts, with a huge amount of variability seen amongst them. Companies such as Stada, Gedeon Richter and Rovi have significant internal R&D staffing, while others such as Biotest and Kedrion appear to rely much more heavily on external providers for their R&D needs. Part of this variation in companies is location – for instance, labour costs for Gedeon Richter, a Hungarian company, are much lower than in the much larger Western European countries where their peers are headquartered.

Big Pharma, on the other hand, shows far less scatter, settling at around 2.4 R&D heads per €1m spend on average. Part of the difference between MidPharmas and Big Pharmas is due to the latter conducting more and larger Phase III trials, which are generally outsourced more significantly than earlier pre-clinical and discovery activities.

Paradoxically, Valeant, the well-known supporter of super-externalised R&D that prefers to acquire companies and products rather than invest in pharmaceutical R&D, sits at the top of our Big Pharma list in terms of R&D heads per €1m of R&D investment. However this is more a feature of its very low R&D investment as a proportion of revenue (3%), with its avoidance of costs that are often external like clinical trials. And its business model is not one that pharma companies are now rushing to replicate. The other Big Pharma with a relatively high number of R&D heads per €1m of R&D investment is the more successful Novo Nordisk, that over the years has rocketed from being a classic MidPharma to one of the top 10 pharma companies by value in the world. Its focus and belief in its own capabilities is a lesson to Big Pharma and MidPharma alike. Reducing internal R&D to increase external R&D investment is not the only solution to R&D productivity issues.

We next examined the trend in R&D externalisation over time for MidPharmas:

MidPharmas are slowly decreasing internal R&D headcount

R&D head data was taken annually, when available. For each year, the number of R&D heads was divided by R&D spend, and then the median was calculated. At the time of publication, 2015 had too few data points to be conclusive, so was not used.


I N S I G HTS


2011 201420132012Rela

tive

Med

ian

R&D

Hea

ds p

er €

1m R

&D S

pend

(201

1 =

100%

)

105%

100%

95%

90%

85%

80%


From 2011-2014, the median number of R&D heads in MidPharmas has declined by approximately 15%, demonstrating that there is scope to increase productivity and flexibility by externalising effectively. Indeed, MidPharmas are following the Big Pharma trend towards externalisation, although they continue to lag behind Big Pharma in absolute terms.

Our sense is that externalisation in R&D is a positive and necessary trend: the issue is its speed and nature. There is no doubt that some of the aggressive R&D cost-cutting in Big Pharma in the last years has caused significant disruption to the R&D activities of those companies. The more gradual approach typically taken by MidPharmas may mean that external opportunities are missed, but it also means that internal activities can be capitalised on more effectively, and the knowledge that created past successes is retained.

M&A Activity

As we mentioned earlier, the 65 MidPharmas we track have been very resilient in terms of not being acquired or dissolved in 2015. But a longer time horizon recognises that some MidPharmas have indeed been acquired over time, remember Altana, Serono, Solvay, and Organon for example. The “being acquired” phenomenon has been most prominent at the larger end of the MidPharma scale, where the next wave of growth becomes harder for private companies that are not as amenable to leverage as their listed Big Pharma peers.

At the other end of the M&A wave are the MidPharma acquirers: many MidPharmas have grown through selective acquisition or merger, with examples including acquirers UCB (e.g. Schwarz, Celltech), Shire (e.g. TKT, Viropharma, Dyax), and Nycomed (e.g. Altana, though combination was later acquired by Takeda). More recently the announcement of the merger between the UK’s SkyePharma and Vectura, indicate that consolidation for scaling up is a strategy that is still alive and well for MidPharmas.

A curious trend has overcome the MidPharma sector over the last ten years: while the number of M&A deals being completed has been declining since the peaks of 2006-2008, the aggregate value of deals done has shown a sharp increase in the last two years. Perhaps the declining volume is a by-product of a reluctance to purchase when the price of assets, and therefore the companies that hold them, has been increasing. However the increase in deal value suggests that some companies are prepared to take on the substantial risk of M&A. Either way, M&A is here to stay as a mechanism for MidPharmas to grow:

I N S I G HTS



M&A deals involving MidPharmas are becoming bigger but less plentiful

Source: Analysis of GlobalData data. Criteria searched for were mergers, majority acquisitions, and complete acquisitions involving the 65 MidPharmas. Deal Value is headline value of deal including contingent payments if any.

Taking a more detailed look at the nature of M&A deals at the MidPharma company level, a major change that we see from last year is that pure listed MidPharmas are doing substantially (over 2x) bigger deals than their privately held and controlled counterparts, often through back-loading. This focus on back-loaded deals (paying in “biodollars”) is a likely contributor to the rising deal values seen above for MidPharmas as a whole.

The other interesting feature of this analysis is that the pure private MidPharmas are doing significantly fewer deals than their counterparts that have access to the capital markets. M&A is essentially where the ‘rubber meets the road’ for ownership model: remember whose capital is being spent on it, your family/foundation or the more anonymous capital market?

Private MidPharmas use M&A less than their listed counterparts

Source: Analysis of GlobalData data. Criteria searched for was M&A and asset transactions that have been announced/completed/filing/planned in 1st January 2013 – 28th April 2016.

Partnering Activity

Now we turn our sights from M&A to licensing. Judging by deal flow, this seems to be the domain of privately-controlled companies – private MidPharmas are closing the most licensing deals, and privately-controlled listed MidPharmas are doing the biggest deals by far. Partly this is a

I N S I G HTS


Deal Value

Deal Number

Year

€m

Num

ber o

f dea

ls

2005 2014 201520132011 201220102008 200920072006

35

30

25

20

15

10

5

0

1200

1000

800

600

400

200

0

Company Type

Listed MidPharmas (n=29)

Listed Privately-Controlled MidPharmas (n=9)

Private MidPharmas (n=27)

2.7

2.4

1.4

1,506

365

598

66

84

20

Average DealsPer Company

Average DealValue (US $m)

Average UpfrontPayment (US $m)


consequence of all pharma companies recognising that innovation and products should be sought from outside the company as well as from internally, and that if this is not to be done through M&A it has to be through partnering and more specifically some kind of licensing arrangement.

The notable large size of upfront payments in deals by the listed privately-controlled MidPharmas is one that we first reported last year, and it has grown to be even more sizeable this year, with the average upfront payment involving listed privately-controlled MidPharmas increasing by a third. The tendency towards this segment of MidPharmas signing licensing deals almost an order of magnitude larger than their peers reinforces our observation related to M&A: ownership structures can substantially impact the chosen business models of pharma companies.

Private MidPharmas prefer licensing to M&A

Source: Analysis of GlobalData data. Criteria searched for was licensing deals that have been announced/completed/filing/planned in 1st January 2013 – 28th April 2016.

MidPharma Performance Ranking

To get a sense of the growth and development of the individual companies in the MidPharma sector, we rank them on three fundamental attributes that we believe provide long-term strength: focus on R&D, attention to partnerships, and global commercial reach. We take public-domain data on proxies for each of these attributes and rank the companies based on the combination of all three.

Our caveats from last year still apply: the ranking does not fit every business model as the R&D measure favours R&D-based companies, the partnership measure does not favour those that have taken a selective and sensitive M&A approach to bringing in assets and capabilities, and the commercial measure typically favours the larger companies that have had time to develop broader commercial reach.

This year we have also compared each company’s ranking with last year’s, with some interesting developments. The top 10 companies have all retained their positions in the top 10 this year, comprising a diverse mix of MidPharmas with all ownership models: private (3), listed privately-controlled (3) and pure listed (4). The highest climber in this year’s ranking is Pierre Fabre, moving up ten places to a tie for 22nd propelled by an increase in deal-making following a new corporate strategy and R&D transformation. Through an increased commercial reach (it now markets products in all five major regions), Shire has gained six places and is now tied for 10th place in our ranking.

I N S I G HTS


Company Type

Listed MidPharmas (n=29)

Listed Privately-Controlled MidPharmas (n=9)

Private MidPharmas (n=27)

2.4

2.2

3.0

286

231

109

16

120

23

Average DealsPer Company

Average DealValue (US $m)

Average UpfrontPayment (US $m)


All in all the ranking does broadly fit our qualitative view that the stronger companies are those that are focused on what they are good at, believe in R&D, and take a strategic approach to partnerships. But of course being ranked high does not make a company immune to getting even better.

Novasecta’s European MidPharma Ranking 2016

20 MidPharmas excluded due to insufficient data (Acino, AMCo, Angelini, Debiopharm, Desitin, Dompé, Ferrer, Ferring, Galderma, Helsinn, HRA, Italfarmaco, Menarini, MundiPharma, Norgine, Pharmstandard, ProStrakan, Riemser, Sigma-Tau and Zambon). 9 MidPharmas excluded due to lack of own marketed products (Cosmo Pharma, Evotec, Galapagos, Genmab, Guerbet, Medivir, MorphoSys, Orexo and SkyePharma) – these companies have enormously different business models and cannot be compared to companies with a direct sales approach. Three more companies are excluded this year than last year (29 compared to 26). For revenue data, the mean from 2013-2015 was used except for BTG, Esteve, Grünenthal, Pierre Fabre and Vectura, where only 2013 and 2014 data was available; Kedrion, where only 2014 data was available; and Indivior, where only 2015 data was available. For R&D spend data, the mean from 2013-2015 was used except for BTG, Esteve, Grünenthal, Meda, Pierre Fabre and Vectura, where only 2013 and 2014 data was available; Kedrion, where only 2014 data was available; and Indivior, where only 2015 data was available. The number of partnership deals in the last three years were counted using MedTrack. This includes product/technology acquisitions, commercialisation and distribution deals, joint ventures, licensing, manufacturing and supply deals, R&D collaborations and options agreements, but not M&A. The number of regions with marketed products were counted using GlobalData for the commercial ranking. Regions used are Canada/US, EU/EEA, Japan, BRICS (Brazil, Russia, India, China, South Africa), Rest of World. In a tie, companies are listed in alphabetical order.

I N S I G HTS

CompanyRankR&D Ranking

(R&D Spend/ €1mRevenue)

BD Ranking(Partnership Deals/

€1m Revenue)

Commercial Ranking(Number of regions

with marketedproducts)

Favourable

Legend

Unfavourable

Listed Privately-Controlled

Private

Listed

UCB

Grünenthal

Actelion

Bavarian Nordic

Ipsen

LEO

Servier

Sobi

Stallergenes

Biotest

Lundbeck

PharmaMar

Shire

Vectura

Chiesi

Orion

Vifor

ALK

BTG

LFB

Meda

Almirall

Hikma

Indivior

Merz

Pierre Fabre

Recordati

Stada

Esteve

Gedeon Richter

Grifols

Kedrion

Octapharma

Rovi

Krka

Allergy Therapeutics

1

2

3=

3=

3=

3=

3=

3=

3=

10=

10=

10=

10=

10=

15=

15=

15=

18=

18=

18=

18=

22=

22=

22=

22=

22=

22=

22=

29=

29=

31=

31=

31=

31=

35

36



Conclusions

The European MidPharma sector represents a highly interesting microcosm of the global pharma/biotech industry, with lessons for companies of all shapes and sizes.

Firstly, our report this year demonstrates again the enormous variation in MidPharma business models, with vast differences between companies’ ownership structures, R&D intensity, profitability, M&A and licensing activities. This diversity is encouraging: if every pharma company took the same approach as each other there would be a worrying “group-think” concerning the right thing to do, with all the downsides of risk aversion and regression to the mean. So though there is no “right” business model for pharma/biotech, and in the European MidPharmas there are patterns of success that can and should be applied to improve performance in pharma/biotech companies of all sizes.

Secondly, we’ve really seen this year that MidPharmas are, as a whole, successful in what they do. We were encouraged to see that MidPharmas are growing revenue faster than Big Pharmas, and we look forward to keeping an eye on this in the future. However our new analysis of profitability this year demonstrates that for whatever reason MidPharmas have some way to go on improving cost discipline, as the mostly listed Big Pharmas are beating MidPharmas across the board in profitability.

In today’s uncertain political and economic times the pharma/biotech industry remains an essential one for the world’s health and the world economy. Within the European MidPharma companies that we have explored in this report there are important precedents and lessons for the global pharma/biotech community. The value of focus, flexibility and strong partnerships exemplified by some MidPharmas and some larger and smaller companies has never been more apparent. So at Novasecta we continue to be committed to helping pharma/biotech companies be better and create more value for the patients they ultimately serve and for the owners who provide the funds for them to do so.

I N S I G HTS


the novasecta european midpharma report 2016 · 2020-06-04 · the novasecta european midpharma...

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