Top Ten Pharma Financials 2011

Global Top 10 Pharmaceutical Companies Report: Industry, Financial and SWOT Analysis
Reference Code: DBHC0392 Publication Date: November 2010
Global Top 10 Pharmaceutical Companies

Datamonitor. This brief is a licensed product and is not to be photocopied
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Table of Contents
TABLE OF CONTENTS
Executive Summary Industry analysis Industry definition Research highlights Top 10 companies landscape Market Value Market Share Market Forecast Market Segmentation: Product Market Segmentation: Geographic Five Forces Analysis Summary Buyer power Supplier power New entrants Substitutes Rivalry Top 10 Companies Landscape Overview Revenue analysis Financial performance analysis Company Reports Pfizer F. Hoffmann-La Roche Novartis GlaxoSmithKline Sanofi-Aventis AstraZeneca Abbott Laboratories Merck & Co. Eli Lilly and Company 7 7 7 7 8 9 10 11 12 13 14 14 15 16 17 18 19 20 20 24 26 31 31 37 45 53 61 70 80 86 92

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Bristol-Myers Squibb Company Five-Year Financial Information Pfizer F. Hoffman-La Roche Novartis GlaxoSmithKline Sanofi-Aventis AstraZeneca Abbott Laboratories Merck & Co. Eli Lilly and Company Bristol-Myers Squibb Company Appendix 101 106 106 109 112 115 118 121 124 127 130 133 136

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FIGURES
Figure 1: Figure 2: Figure 3: Figure 4: Figure 5: Figure 6: Figure 7: Figure 8: Figure 9: Global pharmaceuticals market ($ billion), 200509 Global Pharmaceuticals Market Share: % Share, by Value, 2009 Global pharmaceuticals market forecast ($ billion), 200914 Global pharmaceuticals market segmentation: product (% share), 2009 Global pharmaceuticals market segmentation: geography (% share), 2009 Forces driving competition in the global pharmaceuticals market, 2009 Drivers of buyer power in the global pharmaceuticals market, 2009 Drivers of supplier power in the global pharmaceuticals market, 2009 9 10 11 12 13 14 15 16
Factors influencing the likelihood of new entrants in the global pharmaceuticals
market, 2009 17 Figure 10: 2009 Figure 11: Figure 12: Figure 13: Figure 14: Figure 15: Factors influencing the threat of substitutes in the global pharmaceuticals market, 18 Drivers of degree of rivalry in the global pharmaceuticals market, 2009 Revenues of global top 10 pharmaceutical companies ($m), FY2009 Revenue growth of the global top 10 pharmaceutical companies, FY200709 Operating performance analysis, FY2009 Net profit analysis, FY2009 19 21 25 27 28

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TABLES
Table 1: Table 2: Table 3: Table 4: Table 5: Table 6: Table 7: Table 8: Table 9: Table 10: Table 11: Table 12: Table 13: Table 14: Table 15: Table 16: Table 17: Table 18: Table 19: Table 20: Table 21: Table 22: Table 23: Table 24: Table 25: Global pharmaceutical market ($ billion), 200509 Global Pharmaceuticals Market Share: % Share, by Value, 2009 Global pharmaceuticals market forecast ($ billion), 200914 Global pharmaceuticals market segmentation: product (% share), 2009 Global pharmaceuticals market segmentation: geography (% share), 2009 Revenues and sales of global top 10 pharmaceutical companies ($m), FY2009 Revenue growth of global top 10 pharmaceutical companies, FY200709 Key financials of the global top 10 pharmaceutical companies, FY2009 Key industry-specific ratios, FY2009 Pfizer: financial and operational highlights, 200509 ($m) Pfizer: key industry-specific ratios, 200509 F. Hoffman-La Roche: financial and operational highlights, 200509 ($m) F. Hoffman-La Roche: key industry-specific ratios, 200509 Novartis: financial and operational highlights, 200509 ($m) Novartis: key industry-specific ratios, 200509 GlaxoSmithKline: financial and operational highlights, 200509 ($m) GlaxoSmithKline: key industry-specific ratios, 200509 Sanofi-Aventis: financial and operational highlights, 200509 ($m) Sanofi-Aventis: key industry-specific ratios, 200509 AstraZeneca: financial and operational highlights, 200509 ($m) AstraZeneca: key industry-specific ratios, 200509 Abbott Laboratories: financial and operational highlights, 200509 ($m) Abbott Laboratories: key industry-specific ratios, 200509 Merck & Co.: financial and operational highlights, 200509 ($m) Merck & Co.: key industry-specific ratios, 200509 9 10 11 12 13 21 24 26 29 106 108 109 111 112 114 115 117 118 120 121 123 124 126 127 129

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Table 26: Table 27: Table 28: Table 29:
Eli Lilly and Company: financial and operational highlights, 200509 ($m) Eli Lilly and Company: key industry-specific ratios, 200509 Bristol-Myers Squibb Company: financial and operational highlights, 200509 ($m) Bristol-Myers Squibb Company: key industry-specific ratios, 200509
130 132 133 135

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Executive Summary
EXECUTIVE SUMMARY Industry analysis

Having displayed fluctuating growth rates over 200509, the global pharmaceuticals market is expected to stabilize over the years out to 2014. The global pharmaceuticals market generated total revenues of $644.2 billion in 2009, representing a compound annual growth rate (CAGR) of 4.3% for the period spanning 200509. In comparison, the European and Asia Pacific markets grew with CAGRs of 4.1% and 6.3% over the same period, respectively, to reach respective values of $187.3 billion and $124.3 billion in 2009. Cardiovascular sales proved the most lucrative for the global pharmaceuticals market in 2009, generating total revenues of $127.8 billion, equivalent to 19.8% of the market's overall value. In comparison, central nervous system sales generated revenues of $119 billion in 2009, equating to 18.5% of the market's aggregate revenues. The performance of the market is forecast to decelerate, with an anticipated CAGR of 3.3% for the five-year period 2009 14, which is expected to drive the market to a value of $758.6 billion by the end of 2014. Comparatively, the European and Asia Pacific markets will grow with CAGRs of 3.1% and 4.2%, respectively, over the same period, to reach respective values of $218.5 billion and $152.9 billion in 2014.
Industry definition
The pharmaceuticals market consists of ethical drugs only and does not include consumer healthcare or animal healthcare. Market values have been calculated at ex-factory prices (the value at which manufacturers sell the drugs to distributors). Any currency conversions used in the production of this report have been calculated at constant annual average exchange rates. The global definition comprises the Americas, Asia Pacific and Europe.
Research highlights
The global pharmaceuticals market generated total revenues of $644.2 billion in 2009, representing a CAGR of 4.3% for the period spanning 200509. Cardiovascular sales proved the most lucrative for the global pharmaceuticals market in 2009, generating total revenues of $127.8 billion, equivalent to 19.8% of the market's overall value. The performance of the market is forecast to decelerate, with an anticipated CAGR of 3.3% for the five-year period 200914, which is expected to drive the market to a value of $758.6 billion by the end of 2014.

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Executive Summary
Top 10 companies landscape

The global leading pharmaceutical companies have diversified their businesses into other related business segments such as biopharma, vaccines, generics, consumer healthcare, medical devices and diagnostics, mainly due to the impending patent cliff and intense competition from generic manufacturers. A slowdown in population growth and decreasing reimbursement levels in developed countries have forced Big Pharma companies to further increase their footprint in emerging markets. Although the global top 10 pharmaceutical companies are headquartered in developed nations, their revenues from pharmerging markets such as Brazil, Russia, India, China, Mexico, East European countries, Turkey and South Africa are increasing significantly. The $68 billion acquisition of Wyeth enabled Pfizer to maintain its leadership position in 2009. Pfizer was followed by Swissbased healthcare groups F. Hoffmann-La Roche (Roche) and Novartis, which each had more than $40 billion. The European majors GlaxoSmithKline and Sanofi-Aventis followed close behind. With revenues of more than $30 billion, AstraZeneca and Abbott Laboratories (Abbott) were ranked sixth and seventh, respectively. Although Merck & Co., with a total turnover of $27 billion, was in eighth position, the company could move further up in the list from 2010 onwards with consolidated revenues from its merged entity Schering-Plough. Eli Lilly and Company (Eli Lilly), replacing Wyeth due to the merger with Pfizer, recorded revenues of more than $21 billion. Bristol-Myers Squibb completes the list of global top 10 pharmaceutical companies with total revenues of $18 billion.

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Market Value
MARKET VALUE
The global pharmaceuticals market grew by 3% in 2009 to reach a value of $644.2 billion. The CAGR of the market in the period 200509 was 4.3%.
Table 1: Year 2005 2006 2007 2008 2009
Global pharmaceutical market ($ billion), 200509 $ billion 545.3 571.5 601.4 625.6 644.2 Growth (%) NA 4.8% 5.2% 4.0% 3.0% 4.3%
DATAMONITOR
CAGR, 200509 Source: Datamonitor
Figure 1:
Global pharmaceuticals market ($ billion), 200509
700
7.0%
600
6.0%
500
5.0%
Growth (%)
$ billion
400
4.0%
300
3.0%
200
2.0%
100
1.0%
0 2005 2006 2007 Year $ billion % Growth 2008 2009
0.0%
Source: Datamonitor
DATAMONITOR

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Market Share
MARKET SHARE
Pfizer accounts for 7.5% of the global pharmaceuticals market's value. GlaxoSmithKline Plc accounts for a further 6.9% of the market's value. Table 2: Company Pfizer Inc. GlaxoSmithKline Plc AstraZeneca PLC Merck & Co., Inc Other Total Source: Datamonitor Global Pharmaceuticals Market Share: % Share, by Value, 2009 % Share 7.5% 6.9% 4.9% 3.7% 77.0% 100.0%
DATAMONITOR
Figure 2:
Global Pharmaceuticals Market Share: % Share, by Value, 2009
Pfizer Inc. 7.5% GlaxoSmithKline Plc 6.9% AstraZeneca PLC 4.9% Merck & Co., Inc 3.7%
Other 77.0%
Source: Datamonitor
DATAMONITOR

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Market Forecast
MARKET FORECAST
In 2014, the global pharmaceuticals market is forecast to have a value of $758.6 billion, an increase of 17.8% since 2009. The CAGR of the market over 200914 is predicted to be 3.3%. Table 3: Year 2009 2010 2011 2012 2013 2014 CAGR, 200914 Source: Datamonitor Global pharmaceuticals market forecast ($ billion), 200914 $ billion 644.2 667.9 690.0 712.5 735.3 748.6 Growth (%) 3.0% 3.7% 3.3% 3.3% 3.2% 3.2% 3.3%
DATAMONITOR
Figure 3:
780
Global pharmaceuticals market forecast ($ billion), 200914

4.0%
760
3.5%
740
3.0%
720 Value ($ billion) 2.5% 700 2.0% 680 1.5% 660 1.0% Growth rate (%)
640
620
0.5%
600 2009 2010 2011 Year Industry output Growth rate 2012 2013 2014
0.0%
Source: Datamonitor
DATAMONITOR

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Market Segmentation: Product
MARKET SEGMENTATION: PRODUCT

Cardiovascular sales generated 19.8% of the global pharmaceuticals market's overall revenues. Sales of central nervous system generated 18.5% of the market's aggregate revenues. Table 4: Category Other therapeutic purposes Cardiovascular Central nervous system Alimentary/metabolism Respiratory Oncology Total Source: Datamonitor Global pharmaceuticals market segmentation: product (% share), 2009 Share (%) 32.3% 19.8% 18.5% 14.6% 8.4% 6.4% 100.0
DATAMONITOR
Figure 4:
Global pharmaceuticals market segmentation: product (% share), 2009
Respiratory 8.4%
Oncology 6.4% Other therapeutic purposes 32.3%
Alimentary/Metabolism 14.6%
Central Nervous System 18.5%
Cardiovascular 19.8%
Source: Datamonitor
DATAMONITOR

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Market Segmentation: Geographic
MARKET SEGMENTATION: GEOGRAPHIC

The Americas lead the global pharmaceuticals market, accounting for 51.6% of the market's value. Europe accounts for 29.1% of the market value. Table 5: Geography Americas Europe Asia Pacific Total Source: Datamonitor Global pharmaceuticals market segmentation: geography (% share), 2009 Share (%) 51.6% 29.1% 19.3% 100.0%
DATAMONITOR
Figure 5:
Global pharmaceuticals market segmentation: geography (% share), 2009
Asia-Pacific, 19.3%
Americas, 51.6%
Europe, 29.1%
Source: Datamonitor
DATAMONITOR

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Five Forces Analysis
FIVE FORCES ANALYSIS Summary
Figure 6:
Forces driving competition in the global pharmaceuticals market, 2009
Source: Datamonitor
DATAMONITOR
The key buyers of prescription drugs in the pharmaceutical market are end users, including institutions like hospitals, clinics, or private and national health services. Individuals can also be considered to be buyers, although it is usually health practitioners who decide to prescribe certain drugs to their patients. In order to succeed in this highly competitive market, players must ensure a high level of customer service as well as meeting pricing and regulatory pressures. The process of producing a novel drug is extremely costly to players, and involves a high level of intellectual knowledge, as well as expensive marketing strategies. New entrants may be enticed by growing revenues, although the presence of large international incumbents such as Pfizer and GlaxoSmithKline can prove off-putting, especially as they keep their drug sourcing and development plans under wraps. Substitute products are few and far between. Alternative therapies have become popular in recent times, but are heavily scrutinized by the medical profession. Generic substitute products have developed over time, but these are more of a threat to over-the-counter (OTC) medicines rather than prescriptive medicines.

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Buyer power
Figure 7:
Drivers of buyer power in the global pharmaceuticals market, 2009
Source: Datamonitor
DATAMONITOR
Over recent years, the hospital segment has experienced a reduced share in market sales, with other sources such as pharmacies taking a larger share. This reduces buyer power as pharmaceutical companies are supplying to different sources. Many drugs are unavailable without prescription, and pharmaceutical companies market their products largely at physicians, meaning individual consumers have little control over what pharmaceuticals are at their disposal. There are often multiple drug treatments available for a given medical condition. This means that buyer power is reduced further as the manufacturer can differentiate its product from others by demonstrating the genuine clinical benefits of its branded and patented product. However, generic equivalents of branded drugs do exist, meaning that there is increased differentiation of prescription drugs, which serves to increase buyer power. Additionally, end users may be given a choice of the treatment medicine (although in many cases there is only one drug for the specific illness) and so buyer power is enhanced to some extent. Switching costs can often be considerably high, for example if patients take legal action to secure a drug treatment that the health service had not previously intended to offer them. Overall, buyer power is considered as moderate.

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Supplier power
Figure 8: Drivers of supplier power in the global pharmaceuticals market, 2009
Source: Datamonitor
DATAMONITOR
The main suppliers to the pharmaceutical industry are manufacturers who provide active pharmaceutical ingredients (API). Pharmaceutical companies need APIs in their development of drugs, and as such market players are in a weaker position. Most large multinational pharmaceutical companies have major investments in fine chemical manufacturing, providing them with a degree of self-sufficiency. However, due to pharmaceutical companies requiring a wide range of chemicals, power remains with the supplier. It is unlikely that suppliers would forward integrate into the pharmaceutical market, but their capabilities in chemical synthesis make them ideal candidates for forward integration into the manufacture of generic drugs. Over recent years, larger pharmaceutical companies have turned to producing their own chemicals in a bid to enhance profits. However, smaller companies lack the resources required to do this and remain reliant on API manufacturers. APIs are supplied on a contractual basis. Pharmaceutical companies are likely to risk high switching costs if they consider taking their business elsewhere. This serves to increase supplier power further. In turn, pharmaceutical companies employ sourcing managers to minimize costs in the purchase of APIs and mitigate supplier power. The development of new therapeutic agents requires the sourcing of newer APIs, for which chemical manufacturers can charge pharmaceutical companies high prices. If the novel drug successfully reaches the market, the supplier of the API can make a large amount of money. Supplier power with respect to the pharmaceutical market is considered to be strong.

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New entrants
Figure 9:
Factors influencing the likelihood of new entrants in the global pharmaceuticals market, 2009
Source: Datamonitor
DATAMONITOR
Developing a novel prescription drug entails huge costs, and vigorous and extensive clinical trials are required to satisfy the safety protocols of regulatory bodies. A high level of proprietary knowledge is required to compete successfully in this market, as established companies usually keep their drug discovery processes very secretive. These factors can serve to dissuade new entrants. Additionally, the process of developing a new drug is fraught with problems and is a risk to financiers. Players may yield poor revenues due to leading incumbents such as Pfizer, GlaxoSmithKline, Merck & Co. and AstraZeneca and the development of substitute therapies, which are considered to be a weak threat to prescription pharmaceuticals. However, patents for new drugs protect the interests of the developer, allowing the recouping of development expenses, and ensuring profitability. In addition, market growth is enticing new entrants. The most realistic prospects for companies entering the market lie within the pharmaceutical manufacturing sector, either producing branded drugs under license from the developer or generic drugs for which patents do not apply or have expired. The threat of new entrants to the global pharmaceutical market is moderate.

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Substitutes
Figure 10:
Factors influencing the threat of substitutes in the global pharmaceuticals market, 2009
Source: Datamonitor
DATAMONITOR
There is a weak threat of substitutes to the pharmaceutical market. While generic substitutes of branded drugs do exist, there are very few viable substitutes for ethical pharmaceuticals overall. Recently, there has been growth in the popularity of holistic/alternative therapies which prove cheaper than some drugs. The medical community heavily disputes the benefits of these alternatives, claiming them to lack the rigorous clinical testing required of all pharmaceutical products. Additionally, unlike their pharmaceutical counterparts, these alternative therapies are claimed not to target specific medical problems. OTC medicines face the largest threat from alternative therapies, as it is the individual consumer who purchases alternative therapies, whereas the price of most ethical drugs is heavily subsidized by either the state or health insurers.

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Rivalry
Figure 11:
Drivers of degree of rivalry in the global pharmaceuticals market, 2009
Source: Datamonitor
DATAMONITOR
The key players in the pharmaceutical market are usually large multinational companies who own a high level of capital investment. Large companies are likely to keep their leading position for this reason, as new entrants are less likely to have the same degree of capital investment. The global market is relatively fragmented, with four major companies sharing just under 25% of the total market value. Rivalry is intensified further by the high fixed and exit costs from suppliers. The market is highly competitive for a number of reasons. Firstly, the development costs for prescription drugs are high. Secondly, there are often other drugs competing for a market share of a given therapeutic area. Furthermore, there are no switching costs for practitioners. Good market growth serves to ease rivalry to some extent, but key players must invest in marketing and sales operations in order to maximize their revenues. Overall, the pharmaceutical market displays a strong level of rivalry.

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Top 10 Companies Landscape
TOP 10 COMPANIES LANDSCAPE Overview

The global pharmaceuticals markets growth is decelerating mainly due to the slowdown in prescription drug consumption in many developed countries. The impending patent cliff, loss of market exclusivity and availability of cheaper generic versions are the main reasons for branded prescription pharmaceuticals declining sales. Generic competition coupled with the dry R&D pipeline has forced Big Pharma companies to pursue multi-billion dollar mergers among its peers to prevent the decreasing sales and profitability and to tackle the drought in drug development success. Recent consolidations among pharma and biotech companies have blurred the distinction between the two industries. As a result, many of the pharma majors now have a significant presence in the biopharmaceuticals segment. For instance, Pfizer, in an attempt to offset sales decline from the genericization of its largest-selling drug Lipitor (atorvastatin), acquired its rival Wyeth for $68 billion in 2009. Similarly, the Roche group took full control over its biotech subsidiary Genentech and Abbott acquired Solvays pharmaceutical business. As generic competition is intensifying, more such mega mergers are expected in the coming years. Companies with a presence in diversified pharmaceutical segments (pharma, biopharma and vaccines) and with more than 50% of their total revenues from prescription pharma/biopharma were considered for the purposes of this report. Johnson & Johnson, a diversified healthcare company, was not included in the current list of top 10 pharmaceutical companies, as it did not begin as a pharmaceutical player, having diversified into the pharmaceutical business segment via the acquisitions of Alza and Centocor. Moreover, Johnson & Johnson derived only 36.4% ($22.5 billion) of its total revenues from prescription pharmaceutical sales in 2009. The leading pharmaceutical companies are all headquartered in developed nations. They rank among the worlds largest transnational corporations and rely on large R&D and administrative budgets to dominate the market and earn huge profits. Multi-billion dollar consolidations among Big Pharma companies have led to the domination of a few multinational players. Five out of top 10 companies are headquartered in Western Europe while the remaining companies are based in the US, the worlds largest pharmaceutical market. In 2009, Pfizer was the leading pharmaceutical player with revenues of more than $50 billion, followed by Swiss-based healthcare groups Roche and Novartis which each had revenues of more than $40 billion. The other European majors GlaxoSmithKline and Sanofi-Aventis came close to their Swiss rivals. With revenues of more than $30 billion, AstraZeneca and Abbott were ranked sixth and seventh, respectively. Merck & Co., with total turnover of $27 billion, was in eighth position in 2009, although the company could move further up in the list from 2010 onwards with consolidated revenues from its merged entity Schering-Plough. Eli Lilly, replacing Wyeth in the list, recorded revenues of more than $21 billion. Finally, Bristol-Myers Squibb, due its divestment of its non-core businesses, completes the list with revenues of $18 billion. When considering the companies prescription pharmaceutical sales in 2009, Pfizer led the pack with sales of more than $45 billion, while Sanofi-Aventis and Novartis recorded sales of more than $38 billion. GlaxoSmithKline ($37 billion) and Roche ($36 billion) stood fourth and fifth, respectively. Abbott, although standing seventh in terms of total revenues, generated the smallest amount of prescription pharmaceutical sales at $16 billion.

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Table 6:
Ranking
Revenues and sales of global top 10 pharmaceutical companies ($m), FY2009

Company name Total revenues ($m) Prescription Country pharmaceutical sales ($m) 45,448 US 35,933 Switzerland 38,455 Switzerland 37,000 UK 38,773 France 31,905 UK 16,486 US 25,192 US 19,940 US 17,902 US
1 2 3 4 5 6 7 8 9 10
Pfizer F. Hoffman-La Roche Novartis GlaxoSmithKline Sanofi-Aventis AstraZeneca Abbott Laboratories Merck & Co. Eli Lily and Company Bristol-Myers Squibb
50,009.0 47,244.1 45,103.0 44,422.3 42,883.5 32,804.0 30,764.7 27,428.3 21,836.0 18,808.0
* Currency conversions calculated using FY2009 annual average exchange rates.
Source: Company Reports, PharmaVitae
DATAMONITOR
Figure 12:
Revenues of global top 10 pharmaceutical companies ($m), FY2009
60,000 54,000 48,000 42,000 Turnover ($ m) 36,000 30,000 24,000 18,000 12,000 6,000 0 Sanofi-Aventis AstraZeneca Novartis Merck & Co. Roche Abbott Eli Lily Pfizer GSK BMS
Source: Datamonitor
DATAMONITOR

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Pfizer
Pfizer achieved and has sustained its status as the global pharmaceutical industrys largest player via three significant acquisitions, namely Warner-Lambert in 2000, Pharmacia in 2003 and Wyeth in 2009. The Warner-Lambert acquisition in particular provided Pfizer with exclusive access to the Lipitor franchise (atorvastatin), the worlds biggest selling pharmaceutical brand. Furthermore, the 2009 acquisition of Wyeth has enhanced Pfizers animal health offering in addition to Pfizers re-entry into the consumer healthcare segment.
F. Hoffmann-La Roche
Swiss-based Roche is the leading player in the global oncology market. Originally founded in 1896, Roche has grown through non-integrative mergers, whereby merged partners retain a significant degree of corporate independence. Two large-scale mergers, namely those with Genentech and Chugai, have shaped Roches biopharmaceutical focus. Roche also has a significant presence in the diagnostic market.
Novartis
Novartis was established in 1996 through the merger of Ciba-Geigy (Switzerland) and Sandoz (Germany). It currently comprises four main divisions: branded prescription pharmaceuticals, vaccines and diagnostics (created in 2006 via the acquisition of Chiron), generic prescription pharmaceuticals (Sandoz) and consumer healthcare. In January 2010, Novartis confirmed the acquisition of a controlling 77% stake in leading global ophthalmic player Alcon.
GlaxoSmithKline
The merger of UK-based Glaxo Wellcome and SmithKline Beecham created GlaxoSmithKline in 2000. GlaxoSmithKline is the worlds leading company in respiratory and infectious disease therapies and also in the global consumer healthcare market. In 2001, GlaxoSmithKline introduced its novel Centers in Excellence for Drug Discovery (CEDD) structure to improve its R&D output.
Sanofi-Aventis
Sanofi-Aventis was created in April 2004 when Sanofi-Synthlabo completed the $65 billion-acquisition of Aventis. The France-based pharmaceutical major focuses on the marketing and development of prescription pharmaceuticals (both branded and generic), vaccines and animal health products.
AstraZeneca
AstraZeneca was formed through the merger of Astra (Sweden) and Zeneca Group (UK) in 1999. Since 2003, AstraZeneca has made a number of acquisitions, including the US biotech MedImmune for $15.6 billion in 2007. Through the acquisitions of MedImmune and Cambridge Antibody Technology (CAT), AstraZeneca has bolstered its focus on biologics.
Abbott Laboratories

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Abbott is a global, broad-based healthcare company with commercial interests spanning pharmaceutical, diagnostic and nutritional markets. The company has shaped much of its recent corporate development through mergers and acquisitions of cardiovascular-specialist Kos Pharmaceuticals, the pharmaceutical business of Solvay, US early/late-stage development company Facet Biotech and Indian pharma giant Piramal Healthcare solutions.
Merck & Co.

Founded in 1891, Merck has a global presence in human pharmaceuticals, vaccines, and the consumer and animal health sectors. The November 2009 merger with Schering-Plough is expected to enable Merck to reclaim its leading position as one of the top five pharmaceutical companies in the world.
Eli Lilly and Company

Eli Lilly is the leading player in the global diabetes market. It became a near pure-play pharmaceutical company following the divestment of its nine medical device and diagnostics businesses during 199495. The company gained a significant presence in monoclonal antibodies (MAbs) income from Erbitux and a number of candidates in clinical development through the acquisition of ImClone Systems in November 2008.
Bristol-Myers Squibb
Bristol-Myers Squibb was created through the merger of Bristol-Myers and Squibb in 1989, which was the worlds second largest pharmaceutical company with leading positions in pharmaceuticals, consumer products, medical devices and nutritionals. Recently, Bristol-Myers Squibb has developed a strict biopharmaceutical focus through non-core divestments, the final piece of the jigsaw being the initial public offering of its Mead Johnson nutritionals division in 2009.

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Revenue analysis
Table 7:
Company name
Revenue growth of global top 10 pharmaceutical companies, FY200709

Revenues ($m) 2007 2008 48,296.0 44,245.1 42,584.0 38,133.5 40,189.1 31,601.0 29,527.6 23,850.3 20,371.9 17,715.0 2009 50,009.0 47,244.1 45,103.0 44,422.3 42,883.5 32,804.0 30,764.7 27,428.3 21,836.0 18,808.0 2% 3% 8% 12% 3% 5% 9% 6% 8% 10% CAGR (200709)
Pfizer F. Hoffmann-La Roche Novartis GlaxoSmithKline Sanofi-Aventis AstraZeneca Abbott Laboratories Merck & Co. Eli Lilly and Company Bristol-Myers Squibb
48,418.0 44,681.0 38,947.0 35,571.7 40,733.0 29,559.0 25,914.2 24,197.7 18,633.5 15,617.0
Source: Datamonitor
DATAMONITOR
As discussed above, the leading global pharmaceutical companies have diversified their businesses, moving from generic competition-prone small molecule drugs into difficult-to-copy biopharma products and consumer healthcare, to offset the falling top-line growth mainly due to the loss of market exclusivity and ensuing generic competition. GlaxoSmithKline, with a strong presence in consumer healthcare, recorded the highest three-year compound annual growth rate (CAGR) of 12% among its peers. In absolute revenue terms, however, the largest UK pharmaceutical company moved down to fourth rank in 2009 from the previous years second place. Bristol-Myers Squibb came second with a CAGR of 10% over 200709. Bristol-Myers Squibbs US counterparts Abbott (9%) and Eli Lilly (8%) followed it closely. Pfizer, despite being the leading revenue generator in absolute terms ($50 billion), recorded the least growth (2%) during the historical three-year period.

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Figure 13:
Revenue growth of the global top 10 pharmaceutical companies, FY200709
Source: Datamonitor
DATAMONITOR

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Financial performance analysis
Table 8:
Company name Pfizer
Key financials of the global top 10 pharmaceutical companies, FY2009

Operating profit ($m) 10,827.0 11,339.3 9,982.0 13,193.0 8,878.2 11,543.0 6,235.7 2,387.3 5,357.8 4,803.0 Operating profit margin (%) 21.7% 24.0% 22.1% 29.7% 20.7% 35.2% 20.3% 8.7% 24.5% 25.5% Net profit ($m) 8,635.0 7,189.5 8,400.0 8,661.2 7,342.7 7,467.0 5,745.8 12,901.3 4,328.8 10,612.0 Net profit margin (%) 17.3% 16.6% 18.7% 20.0% 18.5% 22.8% 18.7% 47.5% 19.8% 63.1%
F. Hoffmann-La Roche Novartis GlaxoSmithKline Sanofi-Aventis AstraZeneca Abbott Laboratories Merck & Co. Eli Lilly and Company Bristol-Myers Squibb
Source: Datamonitor
DATAMONITOR

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Operating profit analysis

Figure 14: Operating performance analysis, FY2009
14,000 12,000 10,000 8,000
40% 35% 30% Operating profit margin (%) 25% 20%
Operating profit ($ m)
6,000 15% 4,000 2,000 0 Sanofi-Aventis Novartis Pfizer AstraZeneca Roche Merck & Co. Abbott Eli Lilly BMS GSK 10% 5% 0%
Operating profit ($ m) Operating profit margin (%)

Source: Datamonitor
DATAMONITOR
Operating margin is a measurement of what proportion of a company's revenue remains after paying for variable costs of production such as wages, raw materials, and so on. A healthy operating margin is required for a company to be able to pay for its fixed costs, such as interest on debt. Although their revenue growth has been modest, all the leading pharmaceutical companies except Merck & Co. (8.7%) managed to record a double digit operating margin in FY2009 mainly due to savings in the operating costs and restructuring the workforce. AstraZeneca, the second largest pharma company in the UK, recorded the highest operating margin of 35.2% during the year in analysis.

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Net profit analysis

Figure 15: Net profit analysis, FY2009
14,000 12,000 10,000 Net profit ($ m) 8,000 6,000 4,000 2,000 0 Sanofi-Aventis Novartis Pfizer AstraZeneca Roche Merck & Co. Abbott Eli Lilly BMS GSK
70% 60% 50% Net profit margin (%) 40% 30% 20% 10% 0%
Net profit ($ m)
Source: Datamonitor
Net profit margin (%)

DATAMONITOR
The net profit margin indicates how much profit a company makes for every $100 it generates in revenue. Bristol-Myers Squibb registered the highest net profit margin of 63.1% in FY2009, primarily by recording the proceedings from non-core business divestments. A higher net profit margin indicates a more profitable company that has better control over its costs compared to its competitors. On the other hand, a low net profit margin such as that recorded by Roche (16.6%) suggests the need for optimizing capital structure.

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Ratio analysis
Table 9:
Company name Pfizer
Key industry-specific ratios, FY2009

Current ratio 1.66 1.74 1.73 1.45 1.93 1.35 1.79 1.80 1.90 2.21 Return on assets (%) 5.33% 10.33% 9.67% 13.4% 6.93% 14.66% 12.12% 16.20% 15.28% 35.08% Debt/equity ratio 0.54 5.76 0.24 1.62 0.18 0.54 0.71 0.27 0.70 0.43 Inventory turnover 1.06 2.55 2.10 1.82 1.96 3.41 4.37 1.74 1.59 3.23
F. Hoffmann-La Roche Novartis GlaxoSmithKline Sanofi-Aventis AstraZeneca Abbott Laboratories Merck & Co. Eli Lilly and Company Bristol-Myers Squibb Company
Source: Datamonitor
DATAMONITOR
Current ratio
Current ratio indicates a company's ability to meet short-term debt obligations. If the current assets of a company are more than twice the current liabilities, then that company is generally considered to have good short-term financial strength. This implies that in the short term, Bristol-Myers Squibb, which recorded a current ratio of 2.21 in FY2009, is financially strong when compared to the other leading players in the industry. In contrast, AstraZeneca and GlaxoSmithKline, the UK-based players, with their respective current ratios of 1.35 and 1.45, may face difficulties in meeting their short-term obligations.
Return on assets (ROA)

ROA demonstrates management efficiency in a company using its assets to generate earnings. A higher ROA indicates the effectiveness of the company to generate profits from the assets employed. Bristol-Myers Squibb recorded the highest ROA of 35.08% in FY2009, thanks to its non-core business divestments. This implies that the company is better at deploying its assets into profit. In contrast, Sanofi-Aventis recorded the lowest ROA of 5.33% in FY2009 among the top players in the industry, mainly due its aggressive inorganic growth strategy. A weak ROA indicates the need for effectively utilizing the assets of the company to generate income.
Debt equity ratio (D/E Ratio)

D/E ratio is a measure of a company's financial leverage. It indicates what proportion of equity and debt the company is using to finance its assets. GlaxoSmithKline had the highest D/E ratio of 5.76 in FY2009. A high D/E ratio generally means that a company has been financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense. In comparison, Sanofi-Aventis was low in debt and financing its operations mainly from internal accruals with a low D/E ratio of 0.18 in FY2009.

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Inventory turnover ratio

Inventory turnover ratio shows how many times a company's inventory is sold and replaced over a period. Pfizer recorded the lowest inventory turnover ratio of 1.06 in FY2009, implying poor sales and, therefore, excess inventory. As inventories are the least liquid form of asset, a high inventory turnover ratio is generally positive. However, Abbotts high inventory turnover ratio of 4.37 compared to the industry average could mean losing sales because of inadequate stock on hand.

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COMPANY REPORTS Pfizer

Company overview
Pfizer is the world's largest biopharmaceutical company. Its portfolio includes human and animal biologics, small molecule medicines, vaccines, and nutritional and consumer products. The company operates in more than 150 countries. It is headquartered in New York City, New York, and employed 116,500 people as of December 31, 2009. Pfizer completed the $68 billion acquisition of Wyeth in October 2009. Pfizer recorded revenues of $50,009m during the financial year ended December 2009 (FY2009), an increase of 3.5% over FY2008. The operating profit of the company was $13,996m during FY2009, a decrease of 2.8% over FY2008. The net profit was $8,635m in FY2009, an increase of 6.6% over FY2008.
Business description
Effective with the acquisition of Wyeth, Pfizer reorganized its businesses into the two segments: biopharmaceutical and diversified. The biopharmaceutical segment consists of Pfizer's primary care, specialty care, oncology, established products and emerging markets customer-focused units. The segment also includes products that prevent and treat cardiovascular and metabolic diseases, central nervous system disorders, arthritis and pain, infectious and respiratory diseases, urogenital conditions, cancer, eye diseases and endocrine disorders, among others. The diversified products segment includes animal health products (including vaccines, parasiticides and anti-infectives), consumer healthcare products (including over-the-counter healthcare products such as pain management therapies), cough/cold/allergy remedies, dietary supplements, personal care items, nutrition products and Capsugel, its gelatin capsule products and services business. The company's global R&D facilities support both the BioTherapeutics and PharmaTherapeutics R&D organizations. It operates the majority of R&D organizations in North America and the UK. The global manufacturing division of Pfizer operates plants in 81 locations around the world, manufacturing products for the animal health, consumer healthcare, emerging markets, established products, nutrition, primary care, oncology and specialty/vaccines units.

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SWOT analysis Strengths

Largest industry player
Following its acquisition of Wyeth in 2009, Pfizer has enhanced its position as the industrys largest prescription pharmaceutical manufacturer, a status which confers a range of competitive benefits relating to economies of scale. Furthermore, despite significant re-structuring over the past few years, Pfizer remains the strongest industry player in terms of sales and marketing capability. Scale growth via large-scale M&A activity has also enhanced the companys ability to implement restructuring programs designed to reduce costs and drive profitability, while maintaining a steady increase in R&D expenditure. Big Pharma M&A champion
Pfizer has also developed a reputation as the M&A champion within Big Pharma, having used a succession of large-scale acquisitions since 2000 (Warner-Lambert, Pharmacia and Wyeth) to establish and maintain its position as the industrys leading player. Crucially, analysis of the Wyeth acquisition demonstrates that Pfizers strategic rationale for continued M&A activity has evolved significantly since the purchase of Pharmacia in 2003 (emergence of diversification-centric strategy), while initial reports suggest that integration is proceeding successfully. Sales and marketing capabilities
Despite making significant cutbacks to the number of its sales representatives in recent years, Pfizer retains a notable sales and marketing infrastructure that is beneficial regarding sales growth for newer products and mature brands that face increasingly competitive pressures such as generic competition. The most visible illustration of Pfizers sales and marketing capability is the significant revenue stream recorded by Pfizer attributable to third-party products marketed under license in selected geographic markets. In short, Pfizer remains a marketing partner of choice for many medium and smaller sized prescription pharmaceutical players.
Weaknesses
Maturity of blockbuster portfolio
The key weakness of Pfizer is the maturity of its blockbuster portfolio; of the company's nine established blockbuster products in 2009 (which accounted for around 56% of total prescription pharmaceutical sales), only one product the neuropathic pain therapy Lyrica (pregabalin) is forecast to deliver a positive sales growth contribution through to 2015 (Datamonitor, PharmaVitae Profile: Pfizer, Inc., June 2010, CSHC1454). All eight other products, Lipitor included, will deliver net negative sales growth, primarily due to generic exposure.

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Over-dependency on Lipitor franchise
Furthermore, Pfizers blockbuster portfolio is dominated by the Lipitor franchise which generated global sales of $11.4 billion in 2009, accountable for approximately 25% of Pfizers total prescription pharmaceutical sales. With Lipitor patent expiry set to occur in mid-2011, exposure of this one product to generic competition will have a significant impact on the overall performance of the company.
Opportunities
Diversification of prescription pharmaceutical business
Although the acquisition of Wyeth is not expected to radically transform Pfizers sales growth outlook through to 2015, it has already had a profound impact on diversifying the companys long-term prescription pharmaceutical offering, most prominently in terms of molecule type and therapy area focus. The acquisition of Wyeth has both provided Pfizer with immediate access to a number of established biologic and vaccine products that are forecast to contribute sustained sales growth through to 2015 (most prominently the therapeutic protein anti-inflammatory product Enbrel and the vaccine product Prevnar/Prevnar-13) and enhanced the companys resources and capability for future expansion in these market segments. Approximately 25% of Pfizers forecast 2015 prescription pharmaceutical sales will be derived from non-small molecule products (Datamonitor, PharmaVitae Profile: Pfizer, Inc., June 2010, CSHC1454), while biologics and vaccines are accountable for around 27% of Pfizers current R&D pipeline (from Phase I through to registration products). Tied very closely to diversification by molecule type, Pfizers therapy area focus will broaden significantly as a result of the Wyeth acquisition, as illustrated by Figure 8. Most notably, Pfizers presence in the infectious diseases and immunology & inflammation segments will increase. Potentially enhanced presence in global generics market/emerging markets
As part of its recent restructuring, Pfizer has established two independent business units focused on established products and emerging markets, designed to offer significant sales growth opportunity and further shape the broader strategy of diversification being implemented at the company. There would also appear to be a favorable crossover opportunity; branching these two units also tied to Pfizers willingness to significantly enhance its generic pharmaceutical offering. Like a number of other Big Pharma players, Pfizer has already sought to enhance its emerging markets presence through collaboration with local players to source branded generic products. Furthermore, as evidenced by Pfizers recent moves to acquire the German generics manufacturer Ratiopharm (Pfizer was outbid for the company by Teva), the company also appears to be open to a strategy of enhanced generics presence in established markets. Increased presence in non-prescription pharmaceutical markets
Pfizers non-prescription pharmaceutical businesses have been notably enhanced by the acquisition of Wyeth. Pfizer has returned to the consumer healthcare/over-the-counter markets via its latest M&A play, having previously sold its consumer healthcare business to Johnson & Johnson in 2006. The acquisition of Wyeth has also enhanced its existing animal health offering and provided access to Wyeths nutritionals and Capsugel business units.

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Expansion of Pfizers non-core offering is another key element of its overall diversification strategy, designed to protect its operating margin from the more volatile growth prospects associated with its prescription pharmaceutical business. Although segments such as consumer healthcare typically provide lower margins they lack a comparable competitor threat to that of generic erosion. As a result, increased diversification will have a positive impact on Pfizers non-prescription revenue growth performance over the period 200915, forecast at an impressive compound annual growth rate (CAGR) of 8.5% when adjusted using full year pro-forma Pfizer/Wyeth sales for 2009, compared to a CAGR of 1.8% for the prescription pharmaceutical business alone. This will drive an M&A-adjusted forecast sales CAGR of 3.6% for Pfizers total revenues over the period 200915 (Datamonitor, PharmaVitae Profile: Pfizer, Inc., June 2010, CSHC1454). A significant increase in total revenues will also provide Pfizer with greater leverage to expand its operating margin. Cost savings as viable means to drive profit growth
Despite a less than impressive forecast performance for Pfizers prescription pharmaceutical business (when adjusted for M&A impact), Pfizer is expected to continue using cost savings as a viable means for driving profit growth. Forecast operating profit growth will be driven by both synergies stemming from the Wyeth acquisition expected to reach $4 billion by the end of 2012 and cost containment issues initiated at both companies prior to the acquisition. These are expected to deliver additional annual savings of $3 billion by the end of 2012.
Threats
Exposure to patent expiries
Pfizers expiry portfolio is forecast to contribute an absolute sales decline of -$3.0 billion over the period 200915, with sales expected to decline from approximately $32 billion in 2009 to $29 billion in 2015. This forecast performance for the expiry portfolio is, however, positively distorted by the full inclusion of Wyeth sales from 2010 only. When measured over the period 201015, the expiry portfolio is forecast to contribute an absolute sales decline of -$13.4 billion, with Lipitor forecast to act as the key sales growth resistor with a sales decline of -$7.7 billion over 200915 (Datamonitor, PharmaVitae Profile: Pfizer, Inc., June 2010, CSHC1454). It is Pfizers expiry portfolio those products that have lost patent exclusivity or are forecast to do so by 2015 that will most prominently shape the companys sales growth performance. Within the expiry portfolio, Lipitor will act as a focal point for generic erosion, with US patent expiry in mid-2011 set to be the key trigger in exposing this brand to significantly cheaper, non-branded competition. With global sales of $11.4 billion in 2009, Lipitor continues to account for about 25% of Pfizers total prescription pharmaceutical sales. Looking beyond the significant negative impact centered on this one brand is necessary, however, to illustrate that Pfizers forecast negative growth performance through to 2015 is not a one-product story; of Pfizers nine established blockbuster products in 2009 (which account for approximately 56% of total prescription pharmaceutical sales), only one product the neuropathic pain therapy Lyrica (pregabalin) is forecast to deliver a positive sales growth contribution through to 2015 (Datamonitor, PharmaVitae Profile: Pfizer, Inc., June 2010, CSHC1454). All eight other products Lipitor included will deliver net negative sales growth, primarily due to generic exposure. The breadth of Pfizers "generic hit" illustrates why the company has once again turned to large-scale M&A as a means to drive strategic diversification.

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Difficulties in achieving organic sales growth due to M&A-driven expansion
Datamonitor believes that Pfizer will undertake further large-scale M&A activity, an outlook driven by a number of factors, the most pertinent of which is that Pfizer will face a continued requirement for portfolio replenishment as more products become exposed to generic competition. Pfizers own R&D operations, supplemented by any external collaborations, will find it difficult to keep pace with historical expansion via M&A. In other words, the company will find it increasingly hard to expand via organic means. In addition, diversification and cost-control do not appear to be flash in the pan strategic options that will fade from the pharmaceutical corporate handbook over the next few years. Instead, they would actually appear to be central to Big Pharma strategy for many years to come.
Recent developments
In February 2009, Pfizer terminated Phase III development programs for the investigational compounds esreboxetine for fibromyalgia and PD 332,334 for generalized anxiety disorder (GAD) mainly due to the lack of commercial viability. Pfizer enhanced its generic product portfolio in March 2009 by obtaining marketing rights to 39 generic solid oral dose products in the US, 20 in Europe, and 11 in France from Aurobindo Pharma, an India-based generic manufacturer. Bausch & Lomb and Pfizer signed a five-year agreement to co-promote Pfizers Xalatan (latanoprost ophthalmic solution) and Bausch & Lombs Alrex (loteprednol etabonate ophthalmic suspension 0.2%), Lotemax (loteprednol etabonate ophthalmic suspension 0.5%), Zylet (loteprednol etabonate 0.5% and tobramycin 0.3% ophthalmic suspension), and also Bausch & Lombs investigational anti-infective eye drop, besifloxacin ophthalmic suspension, 0.6%. In April 2009, Pfizer discontinued one of the SUN 1107 Phase III studies of Sutent (sunitinib malate) in advanced breast cancer due to the lack of statistically significant results. Later in the same month, Pfizer made a tender offer to increase its indirect stake in Pfizer Limited in India to 75% from the current level of 41.23% for approximately $136m. Pfizer licensed from the Wisconsin Alumni Research Foundation human embryonic stem (hES) cell patents for the development of new drug therapies in May 2009. Later in the same month, Pfizer Animal Health received EC approval to market its swine vaccine, Improvac, across the EU. In June 2009, Pfizer discontinued the SUN 1094 Phase III study that evaluated Sutent plus paclitaxel versus bevacizumab plus paclitaxel for the first-line treatment of patients with advanced breast cancer, as the independent data monitoring committee found that treatment with sunitinib in combination with paclitaxel would be unable to meet the primary endpoint of superior progression-free survival compared to the combination of bevacizumab and paclitaxel. Pfizer completed its $68 billion acquisition of Wyeth in October 2009 following the receipt of regulatory approval from all government authorities required by the merger agreement and approval by Wyeth shareholders. The company obtained US Food and Drug Administration (FDA) approval for Revatio (sildenafil) Injection, an intravenous formulation of Revatio, and for Geodon (ziprasidone HCI) Capsules for maintenance treatment of bipolar I disorder as an adjunct to lithium or valproate in adults, in November 2009. In the following month, the European Commission granted European marketing authorization for Pfizer's pneumococcal conjugate vaccine, Prevenar 13 (Pneumococcal Polysaccharide Conjugate Vaccine [13-valent, adsorbed]). Furthermore, the FDA approved Spiriva HandiHaler (tiotropium Global Top 10 Pharmaceutical Companies
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bromide inhalation powder) for the reduction of exacerbations in patients with chronic obstructive pulmonary disease (COPD). Towards the end of 2009, Pfizer discontinued A4021016 (also known as ADVIGO 1016), a Phase III trial examining the effects of investigational compound figitumumab (CP-751,871) as a first-line treatment in patients with advanced nonadenocarcinoma non-small cell lung cancer (NSCLC) due to the study meeting predefined boundaries for early termination. In January 2010, the European Commission approved Revatio solution for injection for patients who are currently prescribed oral Revatio and who are temporarily unable to take oral medicine, but are otherwise clinically and hemodynamically stable. The FDA granted approval for Prevnar 13 (Pneumococcal 13-valent Conjugate Vaccine [Diphtheria CRM197 Protein]), in February 2010. A month later, Pfizer discontinued the Phase III trial examining the effects of investigational compound figitumumab (CP-751,871) in combination with erlotinib as a second-/third-line treatment in patients with previously treated advanced non-adenocarcinoma NSCLC. The company announced its decision to discontinue the development of the product based on the independent committee's recommendation. In April 2010, Pfizer discontinued the SUN 1170 Phase III open-label study of Sutent (sunitinib malate) in advanced hepatocellular carcinoma, or liver cancer, following on a higher incidence of serious adverse events in the sunitinib arm compared to the sorafenib arm. Two months later, Pfizer announced its intention to discontinue commercial availability of Mylotarg (gemtuzumab ozogamicin for Injection) in the US. Samsung Medical Center and Pfizer formed a research partnership in July 2010 to jointly analyze tumors from Korean patients to generate gene expression profiles that may ultimately direct therapies and enhance clinical outcomes in the patients with liver cancer. Towards the end of the month, the FDA approved higher-dose Aricept (donepezil HCl) 23mg tablet for the treatment of moderate-to-severe Alzheimers disease. In the following month, the FDA approved the use of a prefilled dual-chamber syringe for administration of Xyntha antihemophilic factor (recombinant) plasma/albumin-free to hemophilia A patients. Towards the end of August 2010, the World Health Organization (WHO) granted prequalification to Prevenar 13* for active immunization of infants and children from six weeks through five years of age against invasive disease, pneumonia and otitis media caused by the 13 pneumococcal serotypes contained in the vaccine. WHO prequalification allows for the procurement of Prevenar 13 by United Nations agencies, including the United Nations Children's Fund (UNICEF), governments and other organizations for use in national immunization programs.

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F. Hoffmann-La Roche
Company overview
Roche is one of the leading research-focused healthcare groups in the world. It is engaged in the discovery, development and commercialization of innovative diagnostic and therapeutic products. The group completed the acquisition of Genentech, its biotechnology subsidiary, in December 2009. The group is headquartered in Basel, Switzerland and employed 81,507 people as of December 31, 2009. Roche recorded revenues* of CHF51,151m ($47,244.1m**) during FY2009, an increase of 7.4% over FY2008. The operating profit of the group was CHF12,277m ($11,339.3m**) during FY2009, an decrease of 11.8% over FY2008. The net profit was CHF7,784m ($7,189.5m**) in FY2009, a decrease of 13.2% over FY2008. * Revenues = net sales + other revenues. ** Calculated using FY2009 annual average exchange rate of CHF1 = $0.92362.
The Roche group operates in two reportable divisions: pharmaceuticals and diagnostics. Roche's pharmaceuticals division consists of Roche Pharmaceuticals, represented in over 150 countries, the wholly owned Genentech in the US and a majority shareholding in Chugai in Japan. The group has several marketed products in therapeutic areas such as oncology, respiratory diseases, metabolic diseases, bone diseases, central nervous system diseases, infectious diseases, cardiovascular diseases, inflammatory and autoimmune diseases, transplantation, ophthalmology, virology, and renal anemia. The division currently operates six major biotech manufacturing facilities worldwide, including those at Roche Pharmaceuticals' Basel and Penzberg sites, Genentech's plants in South San Francisco, Vacaville and Oceanside, and Chugai's Utsunomiya facility. Roche's diagnostics division leads in the area of in vitro diagnostics. Its products are used to test blood and other body fluids and tissues to obtain information for the diagnosis, prevention and treatment of disease. This division offers a portfolio of products and services ranging from blood glucose monitoring products and point-of-care testing devices to highthroughput laboratory systems for hospitals and instruments for genetic research. Under this division, the group serves various business areas of diagnostics including professional diagnostics, diabetes care, centralized diagnostics, molecular diagnostics, near patient testing and applied science. Roche Diagnostics has R&D facilities in Europe and the US, augmented by a network of alliances and partnerships giving it broad access to key new technologies. Roche's prescription products include: Anaprox for the management of pain, fever and inflammation; CellCept for the treatment of HIV infection; Rituxan/MabThera for the treatment of certain types of lymphoma; Zenapax for the prevention of acute rejection; and Herceptin for the treatment of cancer. The group's diagnostic products include: Accu-Chek 360 Degree Diabetes Management System; Accu-Chek CAMIT Pro Software; Accu-Chek Compact Plus System; E 170 module for MODULAR ANALYTICS; Genome Sequencer 20 System; and LightCycler 480 System Omnilink software solution. Roche also maintains licensing and other collaborative agreements with a number of companies worldwide including Sigma-Aldrich, Sangamo BioSciences, ThromboGenics, BioInvent International, BioDiscovery, Amgen, Genzyme, GlaxoSmithKline, Abbott, Bayer, Hitachi and Johnson & Johnson. Global Top 10 Pharmaceutical Companies
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Exclusive access to MAb portfolio via ownership of Genentech
Via its merger with Genentech in 1990 and subsequent 100% acquisition in March 2009, Roche acquired exclusive access to the future market-leading player in oncology monoclonal antibody (MAb) development and simultaneously "locked out" its Big Pharma rivals from this segment. Three Genentech-sourced MAb products in particular the cancer therapies MabThera/Rituxan, Herceptin and Avastin, known as "the big three" accounted for three quarters of Roches prescription pharmaceutical sales growth over 200309 and are forecast to generate over $8 billion in sales growth out to 2015 (Datamonitor, PharmaVitae Profile: F. Hoffmann-La Roche Ltd, July 2010, CSHC1457). By 2015 sales from the big three are forecast to provide over half of Roches total prescription pharmaceutical sales (54.0%). Industry-leading player in global oncology market
By "locking in" access to the Genentech MAb portfolio, Roche has been able to establish an industry-leading position in the lucrative global oncology market, where sales growth has been driven by a combination of Roches innovative product offering and high levels of unmet patient need. In establishing this position, Roche simultaneously shifted its attentions away from more competitive segments such as the central nervous system market. Roches therapeutic position also mirrors its focus on secondary/specialty care at the expense of investment in the primary care market, where the competitive threat of branded and generic competition is currently much greater. Minimal exposure to patent expiry across key brands within prescription pharmaceutical portfolio
One of the key factors that will drive sustained sales growth for Roche over 200915 is the companys lack of exposure to patent expiry and subsequent generic erosion (just two products, CellCept and Boniva/Bonviva, are expected to suffer significant generic sales erosion upon expiry), a characteristic partly driven by the high proportion of revenues that Roche generates from its MAb portfolio. In contrast, exposure to generic competition as exemplified by the patent cliff that is expected to impact the industry over 201012 will act as the main barrier to sales growth across the rest of the Big Pharma peer set. Robust financial performance
Supporting its sustained sales growth performance, Roche also benefits greatly from a robust financial standing, with underlying operating profit having grown steadily in recent years. Furthermore, forecasts suggest that the company will be able to marginalize growth in core operating expenditure over 200915 further, thereby significantly enhancing this element of the business (Datamonitor, PharmaVitae Profile: F. Hoffmann-La Roche Ltd, July 2010, CSHC1457).

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Weaknesses
Potential to become over-reliant on three key oncology MAbs; the recent Avastin adjuvant trial failure is a concern
The companys big three oncology MAbs will be responsible for shaping Roches total global prescription pharmaceutical sales performance over the coming six years, with combined sales in 2015 for these three products expected to account for over half of Roches total prescription pharmaceutical sales (54.0%). While it is hard to identify any real weaknesses in Roches current business model (given its strong forecast sales performance), such a heavy reliance on three products has inadvertently positioned Roche closer in line with the Big Pharma business model from which it has traditionally been keen to distance itself (that being a narrow product-to-revenue base ratio). At the 2009 American Society of Clinical Oncology meeting (ASCO, Orlando June 2009), data from a large randomized Phase III trial showed that the addition of Avastin to oxaliplatin-based chemotherapy did not significantly prolong diseasefree survival in patients with Stage II/III cancer, thus raising concerns over the MAbs suitability as an adjuvant therapy. While Datamonitor still expects Avastin to perform strongly over the forecast period, such negative clinical trial data are a reminder of the risk involved when a company is heavily reliant on one product, with sales of Avastin in 2015 expected to account for almost a quarter (24.0%) of the companys total prescription pharmaceutical sales.
Opportunities
Potential for streamlining opportunities via acquisition of Genentech in increasingly difficult economic climate
After acquiring the remaining shares of Genentech, Roche announced that it aimed to streamline operations, cutting down on areas of overlap to reduce costs and refocus both companies, a common move in the industry at the moment. Since this announcement, many observers have voiced concerns that the science-focused, less-structured Genentech environment will be crushed by full sublimation into the highly-structured Roche architecture. So far, however, Genentech's approach has proved hugely successful and, as a result, Datamonitor believes that Roche will not damage the structure which has provided it with such strong sales growth. Indeed, Roche has insisted from the first that it will retain the Genentech research structure, resisting full integration into the Roche research establishment. Moreover, Roche announced plans to move its research facilities to the Genentech San Francisco site from its current New Jersey base (rather than vice versa). Streamlining efforts, then, are instead expected to be realized in manufacturing and sales force. Continued movement towards concept of personalized medicine
Roche operates a twin-pillared structure comprising its prescription pharmaceuticals and diagnostics divisions. As a result, the company is well positioned to exploit related sub-markets along the healthcare provision chain, from predisposition testing and prevention to diagnosis, therapy and treatment monitoring. This business model is unique within the pharmaceutical industry and allows Roche to take maximum advantage of synergies between its pharmaceutical and diagnostics divisions. Movement back into high-value segments of primary care market

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Datamonitor forecasts R1583 (taspoglutide) to be Roches biggest launch product, with the Phase III type 2 diabetes therapy expected to bring in a significant +$1,031m in sales growth from a relatively late launch date of 2012 (Datamonitor, PharmaVitae Profile: F. Hoffmann-La Roche Ltd, July 2010, CSHC1457). The drug, which Roche in-licensed from French pharmaceutical firm Ipsen, is the first human once-weekly glucagon-like peptide-1 (GLP-1) analog. In October 2009, Roche disclosed the results of a Phase III clinical study using R1583 (T-Emerge 2) which showed that the primary endpoint was met. Superiority compared to Eli Lilly's Byetta (exenatide) was also demonstrated. As such, R1583 is a highly anticipated launch product, with the convenience of once-weekly dosing one of the key drivers to a strong sales uptake upon launch. Meanwhile, R1658 (dalcetrapib) being developed for hyperlipidemia is an intriguing product for a number of reasons. As a CETP inhibitor it resides in the same drug class as Pfizers terminated torcetrapib project, which the US pharma giant had earmarked as a successor and potential combination product for Lipitor, a facet which potentially attaches significant revenues to Roches product. The Swiss company has been coy on the progress of its own compound (particularly in light of Pfizers setback), but announced that a global Phase III clinical trial had been initiated in April 2008. The development of both R1583 and R1658 demonstrates that Roche is not averse to implementing a flexible approach to future strategy; having distanced itself from the small molecule, primary care sector, the launch of these two candidates would represent a bullish move back into a highly competitive realm. Cardiovascular and CNS small molecule expiries may free-up payer resources to expand MAb purchasing
When analyzing the sales performance of small molecule drugs in the cardiovascular and CNS markets over 200814, a significant drop in sales is evident from 2011 onwards (PharmaVitae Explorer). Sales of the global CV and CNS small molecule markets (from the Big Pharma, Mid Pharma, Japan Pharma and Biotech peer sets) are forecast to peak at $177.9 billion in 2011, with sales collapsing by -$17.4 billion out to 2015 (a CAGR of -3.4%). This decline is due to patent expiries of key blockbuster drugs: big sales declines are forecast to come from Pfizers Lipitor and Sanofi-Aventis/Bristol-Myers Squibb Plavix in cardiovascular and Eli Lillys Zyprexa and Wyeths Effexor in CNS, for example. Due to the anticipated generic entry into these markets (thus making cheaper therapies available), possible payer resources could be freed up for the more expensive MAb therapies (which are primarily positioned in the oncology and immunology & inflammation therapy areas) in which Roche has an active interest.
Threats
Weak sales growth performance in Japanese market despite Chugai merger
The merger with Nippon Roche in October 2002 instigated a period of expansion for Chugai, as Roches marketed products and promising pipeline projects were absorbed into Chugais portfolio. However, Chugai reported a slight decline in sales over 200506, attributable to the National Institutes of Health (NIH) price revisions implemented in April 2006, which saw its portfolio experience an overall -7.2% price-reduction, greater than the -6.7% industry average. The company reported a decline in sales over 200708, attributable to falling sales of Tamiflu and NeoRecormon, continued impact of the NIH price revisions and the termination of the marketing collaboration in Japan between Chugai and Sanofi-Aventis. Chugai is, however, projected overall top-line expansion over 200915, with Japanese revenues set to rise by +$1,063m at a CAGR of 3.6% (Datamonitor, PharmaVitae Profile: F. Hoffmann-La Roche Ltd, July 2010, CSHC1457). Significantly, the relationship with Chugai granted Roche access to the MAb Actemra. The Castlemans disease and rheumatoid arthritis Global Top 10 Pharmaceutical Companies
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therapy is anticipated to be a significant growth driver (particularly for the latter indication), despite a delayed launch in the US.

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Launch of biosimilars for MAb therapies is a long-term threat
The ongoing discussions regarding healthcare reform, particularly in the lucrative US market, is significant to Roche. With expensive MAb therapies a prime target of the reform, and the ongoing drive for an appropriate regulatory framework for the approval of biosimilar MAbs, this could pose a threat to the forecast growth rate of the MAb market segment and in particular Roches key MAb therapies Avastin, Herceptin and Rituxan. Despite the unlikely near-term introduction of biosimilar MAbs in the seven major markets (the US, Japan, France, Germany, Italy, Spain and the UK)., with sales from these geographic regions generating around 85% of the global MAb market in 2008 (Datamonitor, Monoclonal Antibodies: 2009 update, November 2009, DMHC2579), the long-term threat of biosimilar MAbs cannot be overlooked beyond 2015. As the largest pharmaceutical market in the world, many players see the potential US biosimilars market as the real prize. However, the US has been moving towards the establishment of a biosimilars approval pathway with some reluctance, hindered by the strong lobbying power of the branded biotech sector. With the Obama administration in place, however, and greater Democrat control in the Senate and House, a biosimilars approval pathway is now something of an inevitability. Datamonitor anticipates legislation to be passed by the end of 2010 at the latest. Demonstrating biosimilarity sufficiently to allay fears and drive uptake remains one of the major issues that manufacturers must contend with. In principle, this is relatively easily done for the simpler and more well characterized biologics, such as insulin and growth hormone, but conveying this comparability to key stakeholders may not be as straightforward. It is the larger and more complex biologics, such as MAbs, that present the real challenge. Given that these biologics tend to be the most lucrative and therefore attractive prospect for biosimilar erosion, biosimilars manufacturers must develop sufficiently sophisticated development processes if they wish to capture this potential (Datamonitor, Biosimilars series: Forecast Analysis, June 2009, DMHC2477).
Recent developments
In January 2009, the EC approved Roches RoActemra (tocilizumab, known as Actemra outside of the EU) to treat patients with rheumatoid arthritis. In the following month, it also approved MabThera (rituximab) in combination with chemotherapy for use in patients with previously untreated chronic lymphocytic leukemia (CLL). Towards the end of March 2009, Roche completed the full acquisition of Genentech for $46.8 billion after a long battle to gain full control over its biotech subsidiary. The group had commenced a cash tender offer in February 2009 for all outstanding publicly held shares of Genentech at $86.50 per share, which was rejected by Genentechs public shareholders. As a result, Roche first increased its offer price for Genentech shares to $93 in March 2009 then to $95 per share, to which the Genentech board finally agreed. In July 2009, Roche acquired innovatis, a privately held provider of automated cell analysis solutions based in Bielefeld, Germany, for E15m. The acquisition was expected to strengthen Roche's position as a complete solution provider in the cell analysis research market.

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The FDA granted marketing approval in August 2009 for Roche's Avastin (bevacizumab) plus interferon alpha for the treatment of metastatic renal cell carcinoma, the most common type of kidney cancer. In the following month, Roche received CE Mark certification for the cobas 8000 modular analyzer series for the commercial distribution of the first analyzers in Europe as well as in all countries recognizing the CE Mark in Europe, the Middle East, Africa, Latin America and Asia Pacific. Roche received European marketing authorizations for: MabThera (rituximab) for use in patients with relapsed or refractory CLL in September 2009; for Herceptin (trastuzumab) in combination with chemotherapy for use in patients with HER2positive metastatic stomach (gastric) cancer in January 2010; and for Xeloda (capecitabine) in combination with oxaliplatin (a combination known as Xelox) for the adjuvant (post-surgery) treatment of patients with early colon cancer, in March 2010. The FDA granted marketing approval for Roche's Actemra (tocilizumab) for the treatment of moderately to severely active rheumatoid arthritis, in January 2010. In the following month, Roche received FDA marketing approval for Rituxan/MabThera plus fludarabine and cyclophosphamide chemotherapy for people with either first-line or relapsed/refractory CD20-positive CLL. Meanwhile, the group also faced some development setbacks. The Committee for Medicinal Products for Human Use (CHMP) issued a negative opinion in November 2009 relating to the approval of Avastin (bevacizumab) alone or in combination with irinotecan chemotherapy for the treatment of relapsed or progressive glioblastoma (GBM), the most aggressive type of primary malignant brain cancer. Towards the end of March 2010, the EC granted marketing approval for Roches Xeloda (capecitabine) in combination with oxaliplatin (a combination known as Xelox) for the adjuvant (post-surgery) treatment of patients with early colon cancer. In the following month, Roche, in an attempt to expand its position in the growing insulin delivery systems market, acquired Medingo, a majority-owned subsidiary of the Elron group, by paying an upfront payment of $160m. In May 2010, Roche and Biogen Idec suspended ocrelizumab treatment of patients in the rheumatoid arthritis program, based on the recommendation of the independent data and safety monitoring board which concluded that the treatment's safety risk outweighed the benefits. Roche submitted a Biologics License Application (BLA) to the US Food and Drug Administration (FDA) in July 2010 for trastuzumab-DM1 (T-DM1) in people with advanced HER2-positive breast cancer who have previously received multiple HER2-targeted medicines and chemotherapies. Ventana Medical Systems, a member of the Roche group, acquired BioImagene, a US-based private company providing digital pathology laboratory, for approximately $100m in August 2010. The acquisition is expected to further strengthen Roches position in tissue-based cancer diagnostics and research.

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Novartis
Company overview
Novartis is a Big Pharma company which has a strong presence in diverse pharmaceutical segments. It is engaged in the research, development, manufacture and marketing of branded drugs, generic pharmaceutical products, preventive vaccines, diagnostic tools and consumer health products. The company operates in more than 140 countries across the globe. It is headquartered in Basel, Switzerland, and employed 99,834 people as of December 31, 2009. The company recorded revenues* of $45,103m during FY2009, an increase of 5.9% over FY2008. The operating profit of the company was $9,982m during FY2009, an increase of 11.4% over FY2008. The net profit was $8,454m in FY2009, an increase of 2.7% over FY2008. * Revenues = net sales + other revenues.
Novartis operates through four business divisions: pharmaceuticals, vaccines and diagnostics, Sandoz, and consumer health. The pharmaceuticals division researches, develops, manufactures, distributes and sells branded pharmaceuticals in the therapeutic areas of cardiovascular and metabolism, oncology, neuroscience and ophthalmics, respiratory, immunology and infectious diseases. The pharmaceuticals division is organized into global business franchises for the marketing of various products. The company also operates a business unit within its pharmaceuticals division, Novartis Oncology, which globally develops and markets oncology products. The vaccines and diagnostics division focuses on the research, development, manufacture and marketing of preventive vaccine treatments and diagnostic tools. The division was formed in 2006 following the acquisition of a stake in Chiron. The division has two activities: Novartis Vaccines and Chiron. Novartis Vaccines' major products include influenza, meningococcal, pediatric and travel vaccines. Chiron develops blood screening tools that protect the blood supply. Sandoz, Novartis's generic pharmaceuticals business division, develops, produces and markets drugs along with pharmaceutical and biotechnological active substances. The division focuses on retail generics, anti-infectives and biopharmaceuticals. In retail generics, Sandoz develops and manufactures active ingredients and finished dosage forms of pharmaceuticals no longer covered by patents and supplying active ingredients to third parties. Under anti-infectives, it develops and manufactures off-patent active pharmaceutical ingredients and intermediates for use by retail generics and for sale to third-party customers. In biopharmaceuticals, it develops and manufactures protein or biotechnology-based products no longer protected by patents (known as biosimilars or follow-on biologics). The consumer health division operates through three business units: over-the-counter (OTC) medicines, animal health and CIBA Vision. The OTC business unit offers OTC self-medications. The animal health business unit offers veterinary products for farm and companion animals. The CIBA Vision business unit markets contact lenses and lens care products.

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Diversified prescription pharmaceutical offering
Integral to Novartis delivering a sales growth performance well above the Big Pharma average is the companys heavily diversified prescription pharmaceutical offering. In 2009, branded pharmaceuticals accounted for 74% of total prescription pharmaceutical sales ($28.5 billion), Sandoz for 19% ($7.5 billion) and vaccines for 7% ($2.4 billion). Within Big Pharma no other company has such a diversified offering in terms of prescription pharmaceutical focus. Novartis is seeking to diversify its prescription pharmaceutical offering further via the proposed acquisition of ophthalmics specialist Alcon, due to be completed later in 2010. Reinforcing the importance of both the Sandoz and vaccine units is the level of sales growth forecast to be contributed from these businesses; although branded pharmaceuticals accounted for 74% of sales in 2009, this portfolio will contribute about 50% of absolute sales growth over 200915 (+$5.2 billion). In comparison, the notably smaller vaccine and Sandoz units will contribute approximately 28% (+$2.9 billion) and about 24% (+$2.3 billion) of absolute growth, respectively, over the same period (Datamonitor, PharmaVitae Profile: Novartis, June 2010, CSHC1461). Second largest global generics player
Having invested early (in relation to its Big Pharma peers) to develop a generics business, Novartis now boasts ownership of the industrys second largest player, with Sandoz expected to play a critical role in Novartiss overall performance through to 2015. The central theme of diversification which dominates macro-level strategy at Novartis has also been implemented at Sandoz and is reflected in the M&A activity that has underpinned rapid growth for the company since 2003. Indeed, acquisitions have not been solely designed to expand scale and allow Sandoz to compete more aggressively in the segment for US-market first to file Abbreviated New Drug Application (ANDA) generic launches typically the most lucrative segment of the global generics market where Teva is the dominant player but expand geographic and therapeutic positioning, in addition to enhancing Sandozs status as the pre-eminent player in the emerging market for biosimilar products. By 2015, Sandoz sales are forecast to reach $9.8 billion, equal to a 200915 compound annual growth rate (CAGR) of 4.6% (Datamonitor, PharmaVitae Profile: Novartis, June 2010, CSHC1461). Although this is a markedly slower performance than that for 2003-09, it represents only organic sales growth with further M&A activity likely to boost Sandoz revenue growth over this period. Branded portfolio populated by numerous best in class therapies
Novartiss branded portfolio includes a number of products that hold the status of best-in-class therapy within their respective indication settings. The most notable example of competitive advantage over rival treatment options is demonstrated by Glivec/Gleevec which revolutionized the chronic myeloid leukemia (CML) and gastrointestinal stromal tumor (GIST) markets when launched in 2001. Glivec/Gleevec has erected significant barriers to entry for would be competitors (including Novartiss own (and superior) Tasigna product) and is forecast to remain the dominant product in both indication settings until patent expiry in 2015. Other products in Novartiss portfolio demonstrate similar market

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credentials; Lucentis as the best in class therapy for age related macular degeneration, Exjade in chronic iron overload and Tekturna/Rasilez as the first new hypertension agent to be launched in a decade. Furthermore, Novartiss pipeline suggests the continued roll-out of innovative, potentially first in class products including QMF149 (once-daily asthma/chronic obstructive pulmonary disease therapy) and Gilenia (oral therapy for multiple sclerosis).
Weaknesses
Minimal presence in branded biologics segment
A weakness that could be leveled at Novartis is the companys less than impressive penetration of the branded biologics market, the fastest growing segment (in terms of molecule type) of the branded pharmaceutical sector. Branded biologics accounted for just 4.1% of total prescription sales in 2009, with this margin expected to increase marginally to 5.8% by 2014 (Datamonitor, PharmaVitae Profile: Novartis, June 2010, CSHC1461). One could argue, however, that Novartis has been less necessitated to invest in this segment due to its continued success in developing novel small molecule products, coupled with its own strategy of diversification which has positioned generics and vaccines at the fore in terms of product type diversity. Furthermore, where the company has entered the MAb market it has collaborated with the industry leader Roche/Genentech (gaining access to Lucentis and Xolair) while simultaneously avoiding the increasingly over-crowded and high competitive oncology and I&I MAb segments. One could further argue the company is looking further ahead than many of its rivals as it seeks to gain a dominant foothold in the market for follow-on biosimilar products. Failure to gain significant share of high-value diabetes market via Galvus launch
A notable setback incurred by Novartis in recent years has been the failure of its type 2 diabetes treatment Galvus (vildagliptin). The drug should have been first-in-class of the dipeptidyl peptidase-IV (DPP-IV) inhibitors but has ended up second-in-class and associated with considerable safety concerns, insofar that it looks increasingly unlikely to be approved in the key US market. The drug was launched in the five major EU markets (France, Germany, Italy, Spain and the UK) markets in April 2008 following lengthy discussions with the European Medicines Agency (EMA). However, in the US, the US Food and Drug Administration (FDA) has issued an approvable letter requesting additional clinical data in patients with renal impairment. The additional trial will mean the drug cannot be resubmitted to the FDA until at least 2010, and led the CEO of Novartis, Daniel Vasella to admit that the drug may never receive marketing approval in the US. Failure of Galvus represents a major missed opportunity for Novartis not only to drive revenue growth but diversify its Prescription offering in terms of disease area.
Opportunities
Potentially significant share gain in branded respiratory and multiple sclerosis markets by 2015
Novartiss new launch portfolio is characterized by a number of potential blockbuster products that are also expected to diversify the companys branded offering in terms of therapy area focus: Gilenia; anticipated to be one of the first orally-

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prescribed multiple sclerosis therapies; and QMF149 and QVA149; both of which are expected to help shift the treatment paradigm for asthma and chronic obstructive pulmonary disorder (COPD).

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Enhanced status as leading player in emergent biosimilars market
Having received approval for three biosimilar products, Sandoz is positioned as the most advanced player within this emerging market place and Novartis will seek to press home this advantage over the next few years as patent expiration for more lucrative biosimilar products moves closer. One means by which Sandoz is seeking to enhance its biosimilars leadership position is via collaboration with external players. Unlike many of its competitors, Sandoz has also actively sought to develop alliances with biotechnology firms in order to source expertise and technologies. In July 2006, Sandoz signed an exclusive collaboration agreement with Momenta Pharmaceuticals, which specializes in the characterization of complex pharmaceuticals, to develop complex generics and follow-on biopharmaceuticals. Sandoz and Momenta plan to jointly develop, manufacture and commercialize four drug candidates in the collaboration, including generic Lovenox (enoxaparin sodium) and generic Copaxone (glatiramer acetate), as well as two undisclosed protein therapeutics. Further M&A to drive diversification strategy
Current Datamonitor sales forecasts for Novartis reflect only organic growth, although these will be updated to reflect the future integration of Alcon once this acquisition is completed. Based on historical precedence, future M&A activity is likely to be centered on the Sandoz business. There remains potential for Sandoz to undertake further M&A activity as a means to bolster its standing both in terms of geographic presence (emerging markets in particular) and the type of generic product it is able to manufacture. Certainly M&A activity with regard to enhancing biosimilar development and market standing can also not be ruled out, particularly as a number of Big Pharma companies such as AstraZeneca, Merck & Co. and Pfizer have indicated they will be looking to enter this arena and represent potentially strong competitors. Within the branded prescription market Novartis remains a potentially willing participant in M&A activity assuming the right opportunity presents itself, although large scale deals are likely to be compromised in the short to medium term by the pending Alcon acquisition.
Threats
Exposure of key products to patent expiry over 200915
Novartiss expiry portfolio is forecast to deliver an absolute decline in sales of -$5 billion over 200915 with Diovan, CoDiovan and Zometa positioned as the main sales growth resistors (due to patent expiry for these products during this period). The combined absolute sales decline for these three products (-$4.9 billion) is equal to 97% of the net expiry portfolio decline forecast for 200915 (Datamonitor, PharmaVitae Profile: Novartis, June 2010, CSHC1461). The net sales growth performance of the expiry portfolio is positively impacted by the presence of Glivec/Gleevec which is forecast to lose exclusivity in late 2015. Despite its inclusion, the negative impact associated with patent expiry will only have a material effect on Glivec/Gleevec sales from 2016 onwards; therefore over the period 200915 the Glivec/Gleevec franchise is forecast to contribute absolute sales growth of +$1.5 billion. Exclusion of Glivec/Gleevec would therefore increase the absolute net sales decline from the expiry portfolio to -$6.5 billion.

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Failure of launch portfolio to deliver commercial gains
Novartis is in possession of a robust launch portfolio that is forecast by Datamonitor to contribute significant global sales of $8.3 billion in 2015 (Datamonitor, PharmaVitae Profile: Novartis, June 2010, CSHC1461). Since launch products are typically associated with the uncertainty of regulatory review and uptake in the market, sales may ultimately differ from forecast. This relatively high level of reliance upon launch sales therefore represents a threat to Novartiss outlook. Long-term threat of over-diversification/Strategically compromised by Alcon acquisition
Novartiss diversification strategy represents a robust maneuver that will allow the company to insulate its revenues from the threat of generic competition. However, the severe levels of generic erosion that are forecast over the next few years are a symptom of Big Pharmas obsession with blockbuster-driven growth strategies first introduced in the mid-to-late 1990s, and the intensity of future generic erosion will potentially decline in-line with this trend. By virtue of this generic threat, Big Pharma has been forced to reassess its strategic outlook with diversification into other segments of the market an obvious route. Novartiss rapid introduction of a diversification strategy will drive continued growth in the short to medium term, however, the company must be conscious that it does not distance the core focus of its operations too far from the higher-margin branded prescription market, particularly as in relation to many Big Pharma competitors it remains a stronger player in this market. There would appear to be clear synergies between Alcon and Novartiss own ophthalmics division and an opportunity to exploit Alcons high margin business. Furthermore, the current time scale for the second component of this deal is likely to coincide with patent expiry for the Diovan/Co-Diovan franchises, thereby Novartiss diversification strategy will be seen to have a provided a significant buffer against the resultant decline in sales that will occur once generic valsartan enters the market. There is a growing view, however, that Novartis may have moved too quickly in furthering its diversification strategy. Not only is Alcon now considerably cheaper than it was when the two-step deal was first announced due to the global financial crisis but Novartis has locked itself into this deal and compromised both its strategic and financial flexibility (i.e. in relation to other potential M&A activity) in the process.
Recent developments
In January 2009, Novartis launched Extavia, a drug for multiple sclerosis in Europe. In the following month, the company obtained final approval for marketing its third biosimilar, filgrastim, for the treatment of neutropenia. Between March 2009 and April 2009, the FDA granted US marketing approvals for: Afinitor (everolimus) tablets for the use to treat patients with advanced renal cell carcinoma; Ixiaro vaccine for the prevention of Japanese Encephalitis (JE); Coartem (artemether 20mg/lumefantrine 120mg), an artemisinin-based combination treatment (ACT) for malaria; and also for Exforge HCT, the high blood pressure treatment to combine three medications in a single pill. In May 2009, the EU approved Glivec (imatinib) as first post-surgery therapy to reduce risk of cancer returning in patients with aggressive gastrointestinal tumors. In the same month, the company received FDA approval to market Prevacid 24HR as the first OTC proton pump inhibitor for the treatment of frequent heartburn.

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Towards the end of the month, Novartis entered the Japan vaccines market through an agreement with Takeda Pharmaceutical Company for the distribution of the Novartis Vaxem-Hib vaccine for the prevention of infection caused by Haemophilus influenzae type B. Novartis's Reclast (zoledronic acid 5mg) Injection received the US marketing approval in June 2009 as a therapy to prevent postmenopausal osteoporosis, while the company's Rasilez (aliskiren), a new type of high blood pressure medicine, received Japanese marketing approval. During August 2009, the EC granted marketing approval for Afinitor (everolimus) tablets for the treatment of patients with advanced renal cell carcinoma whose disease progressed on or after treatment with vascular endothelial growth factor (VEGF)-targeted therapy, and also for Xolair (omalizumab) as add-on therapy for severe persistent allergic asthma in children age six to 11 years. Sandoz launched tacrolimus capsules, a generic equivalent of Prograf, in the US. In addition, Extavia (interferon beta-1b) received US marketing approval as the first in a new planned portfolio of multiple sclerosis medicines from Novartis to help patients manage the disease. Valturna, a single-pill combination of valsartan and aliskiren, received FDA approval in September 2009 to treat high blood pressure in the US. Towards the end of the month, Sandoz completed its $1.3 billion acquisition of EBEWE Pharma's specialty generic injectables business which has bolstered Sandoz's portfolio of generic oncology injectables. In October 2009, Sandoz launched its recombinant human growth hormone somatropin in Japan, the first ever biosimilar launched in the country. Towards the end of the month, Ilaris (canakinumab) received marketing approval in the EU to treat adults and children as young as four years old with cryopyrin-associated periodic syndrome (CAPS), a rare life-long autoinflammatory disease with debilitating symptoms and few treatment options. In order to expand its human vaccines presence in China, Novartis reached an agreement in November 2009 to acquire an 85% stake in Zhejiang Tianyuan Bio-Pharmaceutical Co. Later in the same month, Celtura, Novartis's adjuvanted cell culture-based influenza A(H1N1) 2009 monovalent vaccine, received approval in Switzerland. In December 2009, Onbrez Breezhaler (QAB149 or indacaterol) received European marketing approval as a new oncedaily maintenance bronchodilator treatment of airflow obstruction in adult patients with COPD. Later in the same month, Novartis signed an agreement to acquire the privately held US biopharmaceutical company Corthera for $120m. Through this proposed acquisition, Novartis is expected to gain exclusive worldwide rights to a Phase III drug relaxin, a recombinant version of a naturally occurring human peptide as a potential treatment option for patients with acute decompensated heart failure. In January 2010, Novartis announced its intention to gain full ownership of Alcon by first completing the April 2008 agreement with Nestl to acquire a 77% majority stake in Alcon and subsequently entering into an all-share direct merger with Alcon for the remaining 23% minority stake. The full control over Alcon is expected to strengthen Novartis's portfolio and provide greater access to the fast-growing global eye care sector. Later in the same month, Novartis launched Fanapt (iloperidone), a twice-daily, oral antipsychotic tablets in the US for the acute treatment of schizophrenia in adults. Novartiss Menveo, a vaccine to prevent meningococcal disease, received marketing approvals in the US and the EU in February 2010 and March 2010, respectively.

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In April 2010, the companys Zortress (everolimus) received US marketing approval to prevent organ rejection in adult kidney transplant recipients. Later in the same month, Diovan was granted marketing approval for a new indication, the treatment of children and adolescents with high blood pressure in the EU. Sandoz signed an agreement to acquire Oriel Therapeutics, gaining rights to portfolio of respiratory products targeting asthma and COPD. Novartiss Tasigna (nilotinib) became the first new therapeutic option for newly diagnosed patients in June 2010, with the FDA approval for the treatment of adult patients with newly diagnosed Philadelphia chromosome-positive chronic myeloid leukemia in chronic phase. In the following month, Rasilez, a first-in-class direct renin inhibitor for high blood pressure, received marketing approval in China. Towards the end of July 2010, Sandoz received US marketing approval for the generic version of Sanofi-Aventiss Lovenox.

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GlaxoSmithKline
Company overview
GlaxoSmithKline is one of the world's leading research-based pharmaceutical and healthcare companies. It is engaged in the discovery, development, manufacturing and marketing of pharmaceutical and consumer health-related products. The company primarily operates in 120 countries and its products are sold in more than 150 countries. GlaxoSmithKline is headquartered in Brentford, the UK, and employed 99,913 people as of December 31, 2009. GlaxoSmithKline recorded revenues of 28,368m ($44,422.3m*) during FY2009, an increase of 16.5% over FY2008. The operating profit of the company was 8,425m ($13,193m*) during FY2009, an increase of 18% over FY2008. The net profit was 5,669m ($8,877.3m*) in FY2009, an increase of 20.3% over FY2008. * Calculated using the FY2009 annual average exchange rate of 1 = $1.56593.
GlaxoSmithKline operates through two business segments: pharmaceuticals (prescription pharmaceuticals and vaccines) and consumer healthcare (over-the-counter [OTC] medicines, oral healthcare and nutritional healthcare). The pharmaceuticals segment offer products for eight main therapeutic areas: respiratory, central nervous system (CNS), antivirals, metabolic, vaccines, cardiovascular and urogenital, antibacterials, and oncology and emesis. For respiratory therapy, GlaxoSmithKline offers: Seretide/Advair, a bronchodilator and an anti-inflammatory inhaler; Flixotide/Flovent and Becotide/Beclovent, inhaled steroids for the treatment of inflammation associated with asthma and chronic obstructive pulmonary disease (COPD); Serevent, a bronchodilator to treat asthma and COPD; Ventolin, to treat bronchospasm and Flixonase/Fionase and Beconase, for the treatment of perennial and seasonal rhinitis. The company markets the following products in the CNS therapy area: Seroxat/Paxil and Paxil CR, for the treatment of major depressive disorder; Wellbutrin, an anti-depressant; Imigran/Imitrex, for the treatment of migraine and cluster headache; Lamictal, for the treatment of epilepsy and bipolar disorder; and Requip, for Parkinson's disease and restless legs syndrome (RLS). GlaxoSmithKline's major products in the anti-virals area include: Combivir, Ziagen, Trizivir, Epzicom/Kivexa and Lexiva/Telzir for HIV treatment; Zeffix, for the treatment of hepatitis B; and Valtrex, for episodic genital herpes. GlaxoSmithKline offers the following products in the metabolic therapy area: Avandia, an insulin-sensitizing agent; Avandamet, an insulin resistance that decreases glucose production; Avandaryl, an insulin resistance and pancreatic insulin production stimulant; and Bonviva/Boniva, for the treatment of osteoporosis. The company markets about 30 vaccines across the globe. Its major vaccines include Infanrix, a vaccine against diphtheria, tetanus and pertussis; Infanrix penta/Pediarix, for protection against hepatitis B and polio; Infanrix hexa, for the protection against Haemophilus influenzae type B; Boostrix, for protection against pertussis; Fluviral, a seasonal flu vaccine; Priorix, a measles, mumps and rubella vaccine; Typherix, a vaccine for typhoid fever; Varilrix, a vaccine against varicella or chicken pox; Priorix-Tetra, for the prevention of measles, mumps, rubella and varicella (MMRV); and Mencevax, to prevent meningitis and Rotarix, for pediatric immunization. GlaxoSmithKline's hepatitis vaccines include Havrix for protection against hepatitis A; Engerix-B for

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protection against hepatitis B; Twinrix, a combined hepatitis A and B vaccine; and FENDrix, for the prevention of hepatitis B in patients with renal insufficiency including high-risk groups such as pre-hemodialysis and hemodialysis patients. In the cardiovascular and urogenital therapy area, GlaxoSmithKline offers Coreg, for treating patients with mild, moderate and severe heart failure, heart attack or hypertension; Levitra, for male erectile dysfunction; Avodart, for benign prostatic hyperplasia; Arixtra, for the prophylaxis of deep vein thrombosis; Fraxiparine, for prophylaxis of thromboembolic disorders; and Integrilin, for the prevention of early myocardial infarction. In anti-bacterials and anti-malarials, the company markets Augmentin, for respiratory tract infections; Augmentin ES-600, to treat children with recurrent or persistent middle ear infections; Augmentin XR, for pneumonia or acute bacterial sinusitis; Ceftin/Zinnat, an oral antibiotic; and Malarone, an oral anti-malarial. GlaxoSmithKline offers the following products for oncology: Zofran, to prevent nausea and vomiting associated with chemotherapy and radiotherapy for cancer; Hycamtin, treatment for ovarian, cervical and small cell lung cancer; Bexxar, for patients with CD20 follicular, non-Hodgkin's lymphoma; and Arranon (nelarabine), for patients with Tcell acute lymphoblastic leukemia and T-cell lymphoblastic lymphoma. GlaxoSmithKline also markets Betnovate and Cutivate, anti-inflammatory steroid products; Relafen, a non-steroidal anti-inflammatory drug, and Zantac, for the treatment of peptic ulcer disease and gastric acid related disorders. GlaxoSmithKline's consumer healthcare segment markets OTC medicines, oral healthcare and nutritional healthcare products. The company's principal OTC medicines include Panadol, a paracetamol/acetaminophen analgesic; smoking control products including Nicorette, NicoDerm, NiQuitin CQ and Nicabate; Tums, a calcium-based antacid; Citrucel, a therapeutic bulk fiber laxative; Contac, for the treatment of colds; and Abtei, a vitamin, mineral and herbal supplement; Abreva, for the treatment of cold sores; and FiberChoice, daily fiber supplements. GlaxoSmithKline offers a range of oral care products such as toothpastes and mouthwashes under the Aquafresh, Odol, Sensodyne and Macleans brand names, and toothbrushes under the Aquafresh and Dr Best brands. In addition, denture care products are available principally under the Polident, Poligrip and Corega brand names. Under nutritional healthcare products, the company offers Lucozade, energy and sports drinks; Ribena, a blackcurrant juice-based drink, and Horlicks, a milk-based malted food and chocolate drink.

Strong sales and marketing infrastructure/global presence positions GlaxoSmithKline as a marketing partner of choice
GlaxoSmithKline is one of the industrys most prominent prescription pharmaceutical companies and benefits from an arguably unparalleled global footprint. Looking ahead, this status should accelerate the companys planned strategic expansion in emerging/rest of world (RoW) markets. Furthermore, it will continue to enable GlaxoSmithKline to attract inlicensing, co-development and other research collaborations, particularly in the areas of infectious diseases/vaccines and central nervous system (CNS) disorders where GlaxoSmithKline is viewed as having an industry-leading presence. The company has increasingly used externalization strategies to strong effect in recent years, in order to support its internal R&D capabilities. The recently announced (April 2009) collaboration with Pfizer to create a spun-out HIV/AIDS specialist company is another example, in this instance GlaxoSmithKline leveraging its strong historical legacy in HIV-drug development to significant effect.

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Leading global player in infectious diseases market and third leading player in high growth vaccines market
Despite anticipated therapy area diversification through to 2015, the infectious diseases portfolio will remain the bedrock of GlaxoSmithKlines overall prescription pharmaceutical offering in the foreseeable future (with potential enhancement via the Pfizer HIV/AIDS collaboration detailed above). In particular, the companys strong heritage in vaccine development will come to the fore over 200915 with continued revenue expansion forecast for this sub-segment of its infectious disease (ID) portfolio (excluding downward negative sales trends for Influenza sales which spiked aggressively in 2009/2010 due to the global H1N1 influenza pandemic). Prominent role in global CNS market
GlaxoSmithKline has a strong historical legacy in the central nervous system (CNS) arena via successful products franchises such as Seroxat/Paxil (paroxetine; depression), Lamictal (lamotrigine; epilepsy) and Imigran/Imitrex (sumatriptan; migraine). Despite the high levels of genericization that have occurred across numerous key CNS disease segments (including each of those for the aforementioned GlaxoSmithKline brands), CNS remains a therapy area that continues to be shaped by high levels of unmet patient need. As a result, high levels of investment in developmental CNS products remain uninterrupted and GlaxoSmithKline continues to focus on this area with a robust late-stage pipeline that includes almorexant (insomnia), Solzira (gabapentin enacarbil; restless leg syndrome) and retigabine (epilepsy). Also of note, each of these projects are being co-developed with external partners (Actelion, Human Genome Systems and Valeant, respectively), indicating GlaxoSmithKlines status as a partner of choice in the CNS sphere.
Weaknesses
Maturation of prescription pharmaceutical portfolio in recent years
For a company the size of GlaxoSmithKline, its late-stage R&D pipeline delivered limited sales growth over the period 200208 (a trend which stretches back a further two years to the date of the Glaxo Wellcome and SmithKline Beecham merger). As a result, the companys portfolio of marketed products has been allowed to mature rapidly, leading to a sustained period of generic exposure across numerous key brands. This in turn has dictated that GlaxoSmithKline has become increasingly reliant on a number of individual product franchises most notably Seretide/Advair that will also become exposed to generic competition in the short to medium term. Poor record in new drug launches between 2000 and 2006/07
GlaxoSmithKlines launch portfolio delivered an absolute change in sales of only +$3.7 billion over the period 200008 (see above, also), a limited contribution given the size of the company and the scale of its R&D operations. Furthermore, most of the leading sales growth drivers within the launch portfolio were not sourced internally but either acquired (Lovaza; Reliant and Arixtra; Sanofi-Aventis) or in-licensed/co-developed with external partners (Epzicom/Kivexa in-licensed from Shire, Bonviva/Boniva co-developed with Roche, Agenerase/Lexiva in-licensed from Vertex and Cervarix developed using technology in-licensed from MedImmune). Failure of post-merger R&D pipeline to deliver initial anticipated commercial expectations

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Although GlaxoSmithKlines launch portfolio/late-stage R&D pipeline is forecast to contribute significant sales growth over the period 200915, the delivery of commercial impact from the companys Centres of Excellence in Drug Discovery (CEDD)-driven pipeline has been a long time coming. Regardless of the feasibility of whether GlaxoSmithKline was ever in a position to deliver on its ambitious early stage targets for its R&D pipeline (at its 2003 R&D open day), delays in bringing a sufficient number of new products to the market increased the underlying maturation of GlaxoSmithKlines marketed portfolio over the period 200208, which in turn led to an over-dependency by the company on select blockbuster brands. With these products moving towards patent expiry, delay in the CEDD pipeline to deliver new products to the market will continue to cost GlaxoSmithKline additional sales growth for some time.
Opportunities
Strong anticipated launch portfolio performance for 200915 with potential for long-term sustainable growth
In contrast to the performance delivered over 200208 (see Weaknesses, above), GlaxoSmithKlines CEDD-driven R&D pipeline is forecast to contribute significant revenue growth over the period 200915 (aggregate 2015 global sales from new launch products are forecast at $8.5 billion). Advancement of the late-stage R&D pipeline will allow GlaxoSmithKline to pull itself further away from the barren spell of new drug launches that afflicted the company shortly after its creation in 2000. Furthermore, such is the breadth of GlaxoSmithKlines late-stage pipeline total revenue growth attached to the launch portfolio has been de-risked and the company sits in a robust position to counter a number of setbacks to Phase III products should they occur. Continued development/investment for vaccine business
GlaxoSmithKline is the third largest player in the global vaccines market (2009 sales of $5.8 billion) and benefits from decades of experience in this segment. Europe remains the core market for GlaxoSmithKlines vaccine business with significant potential for expansion of US vaccine sales through to 2015, in addition to potential synergies between GlaxoSmithKlines vaccine division and its strategy of expansion in emerging/rest of world markets (see below). Of the five core global vaccine players the others being Merck & Co., Sanofi Pasteur (Sanofi-Aventis), Wyeth (now part of Pfizer) and Novartis GlaxoSmithKline has the broadest vaccine portfolio. Furthermore, additional diversification looks set to occur through to 2015 by virtue of minimum overlap between the companys late-stage vaccine pipeline and existing portfolio In the current climate, influenza represents an important element of the global vaccine marketplace. GlaxoSmithKline is the only company with an influenza portfolio that has historically combined both seasonal and pandemic vaccines. In addition it markets the influenza antiviral product Relenza (zanamivir). Expanded presence in emerging markets
Prescription pharmaceutical sales growth in RoW markets is anticipated to be strong over the period 200915, measured at a forecast compound annual growth rate (CAGR) of 6.6% with revenues expected to reach $15.3 billion by 2015 (Datamonitor, PharmaVitae Profile: GlaxoSmithKline, June 2010, CSHC1456). An expanded presence in emerging markets is a key strategic objective of GlaxoSmithKline, as demonstrated by a number of acquisitions and licensing agreements made by the company over the past two years:

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The acquisition of a number of businesses from Bristol-Myers Squibb in Pakistan, Egypt and the Middle East. An agreement with Dr Reddys to develop and market prescription pharmaceutical products across India and a number of other emerging markets in Africa, the Middle East and Latin America.
An agreement with Shenzhen Neptunus to develop influenza vaccines in China. The acquisition of selected products from UCB for sale in a number of African, Middle East, Asia Pacific and Latin American markets.
The formation of a strategic relationship with South African-based Aspen Pharmaceuticals focused on subSaharan African markets.
The acquisition of local generics player Laboratorios Phoenix, thereby positioning GlaxoSmithKline as the third largest player in the Argentinean prescription pharmaceutical market.
The agreement to enter a strategic alliance with Dong-A Pharmaceuticals, a Korean based pharmaceutical company.
Continued investment in biologics
An important but arguably more long-term element of GlaxoSmithKlines diversification strategy is the companys continued investment in the development of biologic pharmaceutical products (defined by Datamonitor as either monoclonal antibody (MAb) or therapeutic protein products). Biologics and MAbs in particular have acted as the fastest growing segment of the pharmaceutical industry (when broken apart by molecule type) in recent years and have therefore attracted significant investment from many players. GlaxoSmithKlines biologics investment to date has focused primarily on MAb development and the company has also recently signed an agreement to co-market denosumab in selected territories for post menopausal osteoporosis with Amgen.
Threats
Underestimated generic exposure to Seretide/Advair franchise
At present, Datamonitor expects a delayed entrance for generic Seretide/Advair both in Europe (where patent exclusivity for the combination product has already expired in most markets) and the US (where patent expiry will occur in 2010, due primarily to further patent exclusivity covering the Diskus dry powder inhaler, the lack of a clear regulatory pathway (in the US) for a combination inhaled product and the costs associated with developing a novel inhaler that in turn would significantly compromise the ability of generic alternative to compete on price. Crucially, this delay would also allow GlaxoSmithKline to potentially launch its follow-up to Seretide/Advair (Beyond Advair) prior to the availability of a substitutable generic alternative and therefore should earlier than expected generic competition for Seretide/Advair reach the market it would have a noticeable effect on GlaxoSmithKlines overall performance. Risk of attrition to late-stage R&D pipeline
As always there is an inherent risk of attrition associated with late-stage R&D pipelines, whether such potential setbacks are caused by efficacy and/or safety shortfalls in the development phase or whether the product in question fails to gain Global Top 10 Pharmaceutical Companies
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regulatory clearance. In the case of GlaxoSmithKline where the launch portfolio is forecast to deliver a critical +$8.5 billion sales growth through to 2015 (Datamonitor, PharmaVitae Profile: GlaxoSmithKline, June 2010, CSHC1456) such risks cannot be easily overlooked. In the companys favor, however, is the breadth of its late-stage R&D pipeline and the distribution of revenues across a wide product base.

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Lure of M&A could dilute impact of emerging diversification strategy
Datamonitor is confident that GlaxoSmithKline has turned a corner and is moving clear of the challenges that it has faced since 2000. Most tangibly, the company will soon begin to deliver much-promised sales growth from its R&D pipeline, however, the new strategic objectives outlined in 2008 will play an equal role in driving GlaxoSmithKlines performance through to (and beyond) 2015. In contrast to these more specific diversification strategies, a number of Big Pharma players have once again sought to address commercial and operational deficiencies by way of large scale M&A activity (PfizerWyeth and Merck & Co.-Schering-Plough being the key deals in 2009). As such, GlaxoSmithKline now faces a period of limited revenue growth through which it will have to abstain from the consolidation trend if it is to maximize long-term benefits from the diversification strategy it has already begun to implement. Given that its acquisitions to date (Reliant, Stiefel, Genelabs and the selected Bristol-Myers Squibb emerging market business opportunities) have been small-scale bolt on purchases, the opportunity for GlaxoSmithKline to partake in large scale M&A remains intact and their will no doubt be some shareholder pressure on the company to follow the lead of its peers in light of limited revenue growth, particularly given the emergence of Merck & Co./Schering-Plough as a similar scale player to GlaxoSmithKline and Sanofi-Aventis (within the second tier of Big Pharma behind Pfizer/Wyeth).
Recent developments
GlaxoSmithKline acquired Genelabs Technologies, a global biopharmaceutical and diagnostics company, in January 2009. Later in the same month, the company entered into an agreement with UCB to acquire its current marketed products, including Keppra, Xyzal and Zyrtec, across certain territories in Africa, the Middle East, Asia Pacific and Latin America, for E515m (483m). In March 2009, the company received EC authorization for Synflorix, a pediatric pneumococcal vaccine to protect against life-threatening diseases such as meningitis and bacteremic pneumonia, and middle ear infections. GlaxoSmithKline divested full commercial rights to Wellbutrin XL in the US to Biovail International Laboratories SRL for $510m in May 2009. In the following month, GlaxoSmithKline forged an alliance with Dr. Reddy's Laboratories, an Indiabased generic company, to develop and market selected products across a number of emerging markets, excluding India. The company expanded its presence in the Middle East in July 2009 by acquiring the branded generics business of BristolMyers Squibb in Lebanon, Jordan, Syria, Libya and Yemen for $23.2m. GlaxoSmithKline completed the acquisition of Stiefel Laboratories, a privately held specialist dermatology company, for $3.6 billion in July 2009. GlaxoSmithKline combined its existing prescription dermatological products with Stiefel's and the new specialist global business started operating under the Stiefel identity within the GlaxoSmithKline group. In October 2009, GlaxoSmithKline and Jiangsu Walvax Biotech Company formed a joint venture to develop and manufacture pediatric vaccines for use in China. Later in the same month, Cervarix, GlaxoSmithKline's cervical cancer vaccine, received marketing approvals in Japan and the US. Furthermore, the company's Votrient (pazopanib) obtained FDA approval to treat patients with advanced renal cell carcinoma. GlaxoSmithKline received the third US marketing approval in the same month, as its Arzerra was approved by the FDA for the use in patients with chronic lymphocytic leukemia. In the following month, GlaxoSmithKline's supplemental Biologics License Application (sBLA) for its Global Top 10 Pharmaceutical Companies
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unadjuvanted influenza A (H1N1) pandemic vaccine was approved. The approval of the sBLA, which was filed as a strain change supplement to GlaxoSmithKline's FluLaval seasonal flu vaccine, allows the company to manufacture a flu vaccine for use in adults to prevent influenza caused by the 2009 pandemic H1N1 influenza A strain. In November 2009, Pfizer and GlaxoSmithKline jointly established ViiV Healthcare, a specialist HIV company. The European Commission granted marketing authorizations in March 2010 for GlaxoSmithKline's Revolade (eltrombopag) for the oral treatment of thrombocytopenia in adults with the blood disorder chronic immune thrombocytopenic purpura; and Duodart, a fixed-dose combination of dutasteride (0.5mg), and tamsulosin (0.4mg) for the treatment of moderate-to-severe symptoms of benign prostatic hyperplasia (BPH) and reduction in the risk of acute urinary retention and surgery in patients with moderate-to-severe symptoms of BPH. The European Commission also granted conditional marketing authorizations for Arzerra (ofatumumab) for the treatment of refractory chronic lymphocytic leukemia in April 2010, and for Votrient (pazopanib) for the first-line treatment of advanced renal cell carcinoma and for patients who have received prior cytokine therapy for advanced disease, in June 2010. In May 2010, GlaxoSmithKline forged a strategic alliance with Dong-A Pharmaceuticals, the leading pharmaceutical and OTC company in South Korea, by acquiring a 9.9% minority equity shareholding for 73.9m. GlaxoSmithKline continued its growth strategy by acquiring Laboratorios Phoenix, a leading Argentine pharmaceutical business, for approximately $253m in June 2010. Later in the same month, the FDA provided marketing approval to GlaxoSmithKlines Jalyn, a single-capsule combination of dutasteride (0.5mg) and tamsulosin (0.4mg) to treat symptomatic BPH in men with an enlarged prostate. Towards the end of June 2010, GlaxoSmithKline obtained commercialization rights to Medivirs cold sore treatment Xerclear (acyclovir and hydrocortisone) for OTC use in key global markets. In the following month, Aptuit acquired operations at GlaxoSmithKlines Medicines Research Centre in Verona, Italy. In August 2010, the EC granted marketing authorization to amend the license for GlaxoSmithKlines cervical cancer vaccine, Cervarix.

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Sanofi-Aventis
Company overview
Sanofi-Aventis, Europe's second largest pharmaceutical player, is a global provider of pharmaceuticals, human vaccines and animal health products. The group operates in more than 100 countries. It is headquartered in Paris, France, and employed 104,867 people as of December 2009. Sanofi-Aventis recorded revenues of 30,749m ($42,883.5m*) during FY2009, an increase of 6.7% over FY2008. The operating profit of the group was 6,366m ($8,878.2m*) during FY2009, an increase of 44.9% over FY2008. The net profit of the group was 5,265m ($7,342.7m*) in FY2009, an increase of 36.7% over FY2008. * Calculated using the FY2009 annual average exchange rate of 1 = $1.39463.
Sanofi-Aventis is a global provider of prescription drugs, over-the-counter (OTC) drugs, combined OTC and prescription drugs (OTX), generics, vaccines and animal health products. The group's primary geographic markets are the US and Europe. The group operates through two business segments: pharmaceuticals and vaccines. The pharmaceuticals segment specializes in six therapeutic areas: thrombosis, cardiovascular, diabetes, oncology, central nervous system and internal medicine. In the therapy area of thrombosis, the group's major products include Lovenox (enoxaparin sodium) and Plavix (clopidogrel). The group's cardiovascular medicines include Multaq, a new anti-arrhythmic agent launched in the US and a few other markets in 2009, and two major hypertension treatments: Aprovel/CoAprovel and Tritace. Within the therapy area of diabetes, Sanofi-Aventis offers products such as Lantus (insulin glargine) and Amaryl (glimepiride). The group's product portfolio in the oncology therapy area includes Taxotere (docetaxel) and Eloxatine (oxaliplatin). Sanofi-Aventis's central nervous system therapeutic area products are Stilnox (zolpidem), Copaxone (glatiramer acetate) and Depakine (sodium valproate). The group's principal products in the area of internal medicine are in the fields of respiratory/allergy (Allegra and Nasacort), urology (Xatral) and osteoporosis (Actonel). The remainder of Sanofi-Aventis's pharmaceutical portfolio comprises a wide range of prescription drugs, OTC products and generics. The group's vaccine business offers products in five areas: pediatric combination vaccines providing protection against diseases such as pertussis, diphtheria, tetanus, and Haemophilus influenzae type B infections; influenza vaccines such as Fluzone and Vaxigrip, used for seasonal campaigns; adult and adolescent booster vaccines protecting against pertussis, tetanus, diphtheria and polio; meningitis vaccines; and travel and endemic vaccines, which include a range of products against hepatitis A, typhoid, rabies, yellow fever, Japanese encephalitis, cholera, measles, mumps, rubella and venoms.

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Possession of market-leading insulin Lantus
Sanofi-Aventis is a dominant player in the diabetes market via its Lantus (insulin glargine) franchise. Global sales of Lantus were recorded at $4.3 billion in 2009, reflecting impressive year-on-year growth of 25.7%. With Lantus established as the industrys biggest selling insulin, Sanofi-Aventis has challenged the dominance of Novo Nordisk in this market. The success of Lantus despite the competitive threat from Novo Nordisks similar long-acting insulin offering, Levemir (insulin detemir), has been facilitated by a number of factors, not least Sanofi-Aventiss success in launching its product ahead of Novos would-be competitor. Lantus had been rolled out in major markets by the end of 2003, thereby allowing the product to become established on the market prior to the launch of Novo Nordisks Levemir in 2004 (US launch occurring in 2006). This commercial advantage was particularly important in the EU where Novo Nordisk has a considerably more pronounced market presence. The success of Lantus is also related to the fact that it provides 24-hour basal insulin coverage with a once-daily administered dose, which means that it can be administered before the patient goes to bed and lasts throughout the night and the entire next day. Datamonitor forecasts that the Lantus franchise will act as a key sales growth driver for SanofiAventis over 200915, delivering an increase in sales of +$2.0 billion (Datamonitor, PharmaVitae Profile: Sanofi-Aventis, June 2010, CSHC1455). This does not, however, assume any impact to forecasts following the emergence of claims linking Lantus to an increased cancer risk in mid-2009. If a link were to be determined, Lantus forecasts would be negatively impacted. Robust vaccines business and joint venture with Merck
Sanofi-Aventiss vaccine business Sanofi Pasteur vies with GlaxoSmithKline and Merck & Co. as the industrys leading vaccine companies. In recognition of this, Sanofi Pasteur and Merck & Co have developed a joint venture Sanofi Pasteur MSD from which Sanofi-Aventis reports non-consolidated revenues generated in Western Europe. Based on a combination of consolidated Sanofi Pasteur sales and non-consolidated joint-venture revenues, Sanofi-Aventis reported that it was the market leading vaccines player in 2008. Sanofi Pasteur represents an integral element of Sanofi-Aventiss diversified operating model which will become increasingly important in light of the companys strategic objectives to promote diversity across its business. Datamonitor forecasts that consolidated vaccine revenues will increase by +$2.4 billion over the period 200915 (Datamonitor, PharmaVitae Profile: Sanofi-Aventis, June 2010, CSHC1455), driven by growth in both established and emerging markets. As efforts to contain public sector pharmaceutical spending continue to intensify in established markets, vaccines are easily positional as being the most cost effective form of intervention in the relevant disease areas. This has increased the flexibility in pricing of vaccines which also benefit from limited exposure to generic competition. Furthermore, there is significant unmet demand for vaccines in emerging markets. A key strength of Sanofi Pasteur is the breadth of its vaccine portfolio and pipeline which covers all segments of the market. In particular the company has a strong standing in the influenza market and is dominant (alongside GlaxoSmithKline) in the Global Top 10 Pharmaceutical Companies
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market for pediatric combination vaccines. Indeed, sales growth for the vaccines portfolio since the acquisition of Aventis by Sanofi-Synthlabo in 2004 has been strongly driven by the launch of Menactra (a first-in-class quadrivalent meningococcal conjugate vaccine), Adacel (an adolescent booster) and the influenza vaccine portfolio. Sanofi Pasteur has also sought to strengthen its offering via M&A activity, most notably via its acquisition of UK-based Acambis in September 2008 and Shantha Biotechnics in July 2009. Datamonitor anticipates that further acquisitions in the vaccines market are likely. Positioned as industry-leading antithrombotics player via Lovenox and Plavix franchises
Sanofi-Aventis is currently positioned as the leading player in the global antithrombotics market by virtue of its Lovenox and Plavix product franchises. Lovenox is the global leader within the anticoagulant segment, and Plavix is the leading antiplatelet product, which together account for approximately two-thirds of the total antithrombotics market. Sanofi-Aventis has continued to enforce the position of each product via the accumulation of clinical data via post launch studies.
Weaknesses
Key blockbuster brands already exposed to generic competition
Like many of the Big Pharma players, Sanofi-Aventiss sales growth performance over 200915 will be adversely impacted by the exposure of key blockbuster brands to patent expiry and generic competition. Furthermore, the company is already experiencing the initial downward drag on revenues caused by emerging generic competition to certain brands, most notably insomnia offering Stilnox/Ambien (zolpidem), which lost US patent exclusivity in 2007, and allergic rhinitis drug Allegra/Telfast (fexofenadine), which lost patent protection in 2006. However, it is the emergence of generic competition to Plavix in the EU, some years earlier than Sanofi-Aventis had anticipated, that continues to prove particularly damaging to top-line revenues. By launching a clopidogrel generic product with a slight variation (the generic uses a different salt, clopidogrel besylate instead of bisulphate), Swiss company Acino (backed by Sandoz) circumvented patent exclusivity to launch a viable generic competitor in Germany in July 2008. Sanofi-Aventis appealed to the German Higher Administrative Court requesting a temporary suspension of the drug approval. However, the Court dismissed this appeal in August 2008. A German Higher Administrative Court dismissed a further appeal in September 2008. In May 2009, the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) issued positive opinions recommending the approval of generic clopidogrel products developed by Acino, Teva and Pharmathen. In July 2009, further positive recommendations were given to Krka, Mylan, HCS, Qualimed, Tad Pharma and Norpharm Regulatory Services. Disappointing sales performance from new launch product, Multaq
Sanofi-Aventis has developed the oral class III anti-arrhythmic agent, Multaq (dronedarone), a calcium, potassium and sodium channel blocker with anti-adrenergic properties, for the potential treatment and prevention of atrial fibrillation (AF). Following a non-approvable letter from the US Food and Drug Administration (FDA) and the withdrawal of a Marketing Authorization Application (MAA) in 2006, the company resubmitted its registration documents in the US and Europe in June 2008 using results from the ATHENA study. In March 2009, an FDA advisory committee recommended the drug for

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approval, and in July 2009 Multaq received FDA approval. On November 30, 2009, the EC granted marketing authorization for Multaq and in January 2010, Germany was the first country to launch Multaq in the EU. Multaq achieved sales of $35m in its first year, which, Sanofi-Aventis has indicated, is on track with expectations (SanofiAventis annual results 2009, press release, February 10, 2010). There is some concern, however, that the largely flat quarter-on-quarter sales performance achieved by the product is an indication that its sales potential may not be as great as Sanofi-Aventis had anticipated. In November 2009, the company initiated RealiseAF, a major new registry designed to improve the understanding of the cardiovascular risk profile of atrial fibrillation patients and characterize their cardiovascular outcomes. This registry is targeted to include over 10,000 patients worldwide with atrial fibrillation.
Opportunities
Enhanced presence in generics market via Zentiva/Kendrick/Medley acquisitions
Sanofi-Aventis completed its protracted acquisition of Czech-based Zentiva in February 2008, and its acquisition of Mexican generics company Laboratorios Kendrick, and Brazilian generics giant Medley in Q1 2009. The moves are expected by Sanofi to promote it to the position of eleventh largest player in the global generics market (it previously was ranked as 23rd largest player by virtue of the Winthrop generics business). At this stage it would appear that Sanofi-Aventis is not seeking to compete directly with the leading generics players such as Teva and Sandoz and is less occupied with expanding its generics footprint in the established US and the five major EU markets (France, Germany, Italy, Spain and the UK) markets. Rather an increased generics presence is tied directly to continued diversification at the geographic level and the goal of increased revenue growth from emerging markets. With this in mind, Zentiva appears to be a positive acquisition for Sanofi-Aventis, providing the French company with an established generics platform and access to the Eastern European markets. Chattem acquisition provides US platform for Rx-OTC switch
The acquisition of Chattem in Q1 2010 strengthens Sanofi-Aventiss position in the world's consumer healthcare arena, and particularly in the US market. The company has also specified that Chattem will act as a platform for the conversion of Sanofi Aventiss prescription medicines to over-the-counter products. The first conversion is expected to be Allegra (fexofenadine hydrochloride), an antihistamine to relieve seasonal allergy symptoms, in the US market. Further bolt-on acquisitions to expand vaccine, biologics, generics and OTC capabilities
Sanofi-Aventis has made a number of other small, bolt on acquisitions in recent months. In line with the companys strategy of continued diversification, Datamonitor anticipates that Sanofi-Aventis is likely to undertake further transactions of this type. The company is also likely to utilize small-to-medium scale M&A activity and/or collaborative agreements to bolster its R&D capabilities in areas where it has minimal specialty; biologics being a notable area for such activity given the concession by Sanofi-Aventis that it had missed the boat on developing biologics in February 2009. Given the likelihood that Sanofi-Aventis focuses future M&A on smaller scale targets, it stands to reason that the company is less likely to enter into another mega-merger in the short to medium term, thereby avoiding the raft of large scale M&A

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prompted by Pfizers acquisition of Wyeth and Merck & Cos acquisition of Schering-Plough. Indeed, recently installed CEO Chris Viehbacher has distanced the company from such activity and questioned its impact on productivity. Given the evidence, Pfizer-Warner Lambert (1999), Glaxo Wellcome-SmithKline Beecham (2000), Pfizer-Pharmacia (2003) and Sanofi-Synthlabo-Aventis (2004) in terms of innovation as measured by new blockbuster launches, the view of Mr. Viehbacher is a sensible one. Indeed, cost containment has been the driver to both Pfizer-Wyeth and Merck & Co.Schering Plough, and while this is important, if Sanofi-Aventis can avoid pressure to follow such an avenue, its current strategy should shape a much more flexible and potentially innovative company in the long term.

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Increased sales growth from RoW/emerging markets
Central to Sanofi-Aventiss current strategy is the goal of increased growth from RoW and, in particular, emerging markets. Closely tied to this strategy is further diversification of the companys healthcare offering beyond branded prescription pharmaceuticals to expand its presence in generics and OTC products and build upon its industry-leading position in vaccines (see below). Sanofi-Aventis is well positioned in a number of the fastest growing emerging markets (i.e. the BRIC countries) and also possesses a significant base business that it is confident of integrating into a bespoke territorial sales and marketing strategy in order to maximize competitive performance. Growth in these markets is, however, expected to be largely inorganic over the forecast period, with further bolt-on acquisitions anticipated.
Threats
Claims of link between Lantus and increased cancer risk
In 2009, four registry studies were published investigating a possible relationship between insulin analogues, in particular Lantus, and the risk of cancer. The studies were published on the Diabetologia website on June 26, 2009. The results of the four studies were largely inconsistent; in two studies (Scottish Diabetes Research Network Epidemiology Group and Jonasson et al.) an association between breast cancer was found in a group of patients taking insulin glargine as monotherapy, but not in another group of patients using insulin glargine together with other types of insulin. For other cancers, no association was found. In these two studies dose-dependency was not evaluated. The third study (Hemkens et al.) reported a dose-dependent association between use of insulin glargine and malignancies. However, no information is available on the types of cancer found in this study. In the fourth study (Currie et al.), no association between cancer (either breast, colorectal, pancreatic or prostate cancer) and the use of insulin glargine, or any other insulin, was found. The EMA has issued a statement which asserts that on the basis of the currently available data, the relationship between Lantus and cancer cannot be confirmed nor excluded. The Agency's CHMP will therefore perform a detailed assessment of the studies' results and any other relevant information. This review will also address issues, such as dose-response effects, the implications of the relatively short duration of the studies and influence of other factors on the risk of breast cancer and other cancers (e.g. age, body mass index (BMI), menopausal status, parity, socioeconomic status). Further information is expected once the CHMP has concluded its review. At present Datamonitor has not impacted Lantus sales forecasts until further data regarding the validity of these claims is available. If a link can be determined, Lantus forecasts would be significantly negatively impacted. In September 2009, Sanofi announced that it was to implement a scientific plan that will encompass state-of-the-art preclinical and clinical programs involving human insulin and insulin glargine. Preclinical studies will assess the differential effects of insulin glargine, its metabolites and other insulins in various models. The clinical development plan is based on several rigorous epidemiological studies, designed and implemented with the support of international experts and institutions, that will be conducted across Europe and North America. The plan is structured to yield short-term and longerterm results.

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Launch of generic/biosimilar Lovenox
A major commercial threat to Sanofi-Aventis revenue growth aspirations is the likely launch of a generic/biosimilar Lovenox competitor in the US market over the next few years (with a launch potentially occurring as early as 2010). Sandoz launched the generic Lovenox in July 2010. Lovenox has no outstanding patent exclusivity and the delay of generic competition is attributable to the complexity of the products manufacture, which has rendered it difficult for generic players to demonstrate pharmaceutical equivalence. The Sandoz/Momenta partnership launched the first biosimilar Lovenox product. The two companies first filed an Abbreviated New Drug Application (ANDA) with the FDA in August 2005 for a version of enoxaparin. In November 2007, the FDA issued a non-approvable letter as the application was deemed not to address the potential for immunogenicity of the product. In April 2008, the FDA provided further guidance on the ANDA and requested additional data from in vitro and in vivo animal tests, and other information. In September 2008, Momenta and Sandoz submitted an amendment to the ANDA which the companies believe to be a complete response to the FDA, addressing the potential for immunogenicity of the product. This response from Sandoz/Momenta coincided with a September ruling from the US District Court of Appeals that Sanofi-Aventis had been unsuccessful in petitioning for a rehearing in relation to patent exclusivity for enoxaparin. A final mandate was issued in October 2008, officially rendering the Lovenox patents unenforceable, thereby triggering the start of the 180-day marketing exclusivity period on generic Lovenox. That exclusivity period is now believed to have expired.
Recent developments
In February 2009, Sanofi-Aventis acquired Zentiva, a Czech generic pharmaceutical manufacturer, for $1.96 billion in order to enhance its presence in the growing Central and Eastern European (CEE) markets, Turkey and Russia. Furthermore, in February 2009, the FDA granted US marketing approval for Apidra SoloSTAR (insulin glulisine [rDNA origin] injection), a prefilled disposable pen containing rapid-acting insulin analog Apidra, to improve glycemic control in adults and children (four years and older) with type 1 diabetes or adults with type 2 diabetes. Moreover, the EC granted marketing authorization for the first intradermal microinjection influenza vaccine, INTANZA/IDflu. Sanofi-Aventis acquired Laboratorios Kendrick, a generic company in Mexico, in April 2009 to accelerate its growth in the generic market in the country and to further extend the range of its pharmaceutical portfolio. During the same month, Sanofi-Aventis continued to enhance its generic portfolio by signing an agreement to acquire Medley, the third largest pharmaceutical company and number one generic company in Brazil. This move was expected to reinforce SanofiAventis's leading position (12% of market share) in Brazil. In the same month, the group signed a binding agreement for the acquisition of BiPar Sciences, a privately held US biopharmaceutical company, to strengthen its oncology R&D portfolio. In May 2009, Sanofi Pasteur received the first order from the US Department of Health and Human Services to begin production of a new influenza A (H1N1) vaccine. In the following month, Sanofi-Aventis purchased from Pfizer the Diabel manufacturing plant in Frankfurt-Hochst, Germany, one of the largest state-of-the-art insulin manufacturing plants in the world, for E30m.

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The group acquired ShanH, a company that controls the vaccines company Shantha Biotechnics (Shantha), based in Hyderabad, India, in July 2009. The acquisition was intended to strengthen its vaccines position in India. In the same month, Sanofi Pasteur launched Multaq (dronedarone), an anti-arrhythmic drug indicated to reduce the risk of cardiovascular hospitalization in patients with paroxysmal or persistent atrial fibrillation or atrial flutter in the US. In August 2009, Health Canada approved Multaq (dronedarone) for the treatment of atrial fibrillation. In the following month, Sanofi-Aventis discontinued the Phase III trial of aflibercept in metastatic pancreatic cancer. Later in September, the FDA approved Sanofi Pasteur's supplemental Biologics License Application (sBLA) for licensure of its influenza A (H1N1) 2009 monovalent vaccine. Sanofi-Aventis also acquired Merck's 50% interest in Merial, an animal health company, for a cash consideration of $4 billion in order to enhance its position in the animal health market. In addition, ClikSTAR, a new reusable insulin pen for use with Lantus and Apidra, was approved in the EU and Canada. In October 2009, Sanofi-Aventis and Merrimack, a US biotechnology company, entered into an exclusive global collaboration and licensing agreement on MM-121, a human monoclonal antibody (MAb) designed to block signaling of the ErbB3 (also known as HER3) receptor, for the management of solid malignancies. In the same month, the group acquired Fovea Pharmaceutical (Fovea), a privately held French research and development biopharmaceutical company focused on ocular disease, for E370m (approximately $516m). Later, Sanofi-Aventis and Wellstat Therapeutics entered a worldwide license agreement for PN2034, a novel first-in-class oral insulin sensitizer for the treatment of type 2 diabetes. In addition, the group and Micromet signed a global collaboration and license agreement to develop a BiTE antibody against an antigen present at the surface of carcinoma cells. In November 2009, Panenza, Sanofi Pasteur's influenza A (H1N1) 2009 vaccine, was approved in France. During the same month, Multaq was approved in the EU for patients with atrial fibrillation. In the same month, the group acquired Laboratoire Oenobiol (Oenobiol), a provider of nutritional, health and beauty supplements in France, to expand its presence in the French market. Sanofi-Aventis and Alopexx Pharmaceuticals, the American biotechnology company, signed a collaboration agreement and option for a license on a human MAb for the prevention and treatment of infections originating in the bacterium that causes plague and other serious infections in December 2009. In the same month, Sanofi Pasteur obtained license from Syntiron to develop and commercialize its prophylactic vaccine against Staphylococcus infections. Later in the same year, SanofiAventis entered into a definitive agreement to acquire Chattem, a manufacturer and marketer of branded consumer healthcare products, for approximately $1.9 billion. In addition, the FDA approved Sanofi Pasteur's sBLA for licensure of Fluzone high-dose (influenza virus vaccine) for people 65 years of age and older. In January 2010, Sanofi Pasteur entered into an agreement with KaloBios Pharmaceuticals for the development of a Humaneered antibody for the prevention and treatment of pseudomonas aeruginosa infections. In the same month, the group signed agreements with Minsheng Pharmaceutical to establish a new consumer healthcare joint venture in China. In the following month, Sanofi Pasteur strengthened its commitment to research in France through partnership with AVIESAN. Sanofi-Aventis exercised its option to combine Merial with Intervet/Schering-Plough, Merck's animal health business, to create a global leader in animal health in March 2010. In the same month, the group completed the acquisition of Chattem to strengthen its position in the US consumer healthcare market. In the same month, the EC approved DuoPlavin/DuoCover, a dual antiplatelet combination tablet. In addition, Sanofi-Aventis and AgaMatrix entered into an agreement for the development, supply and commercialization of blood glucose monitoring solutions.

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In April 2010, Sanofi-Aventis settled the US patent infringement suits related to generic versions of Eloxatin (oxaliplatin) with certain defendants involved in the litigation. In the following month, Sanofi-Aventis launched a public tender for acquiring 100% of the outstanding shares of Nepentes, a Poland-based manufacturer of pharmaceuticals and dermocosmetics. Towards the end of May 2010, Sanofi-Aventis and Nichi-Iko signed an agreement to establish a 51/49% joint venture, Sanofi-Aventis Nichi-Iko, in order to develop a generics business in Japan. In the following month, Sanofi-Aventis signed an agreement to acquire TargeGen, a US-based private developer of small molecule inhibitors for the treatment of certain forms of leukemia, lymphoma and other hematological malignancies and blood disorders, for an upfront payment of $75m. In July 2010, Sanofi-Aventis commenced the US commercial launch of Jevtana (cabazitaxel) injection.

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AstraZeneca
Company overview
AstraZeneca is the second largest pharmaceutical company in the UK. Nevertheless, it has a strong presence in the US and retains a significant presence in Sweden as a legacy of Astra. The company is headquartered in London and employed about 62,700 people as of December 31, 2009. AstraZeneca recorded revenues of $32,804m during FY2009, an increase of 3.8% over FY2008. The operating profit of the company was $11,543m during FY2009, an increase of 26.2% over FY2008. The net profit was $7,544m in FY2009, an increase of 23.1% over FY2008.
AstraZeneca is focused on the discovery, development, manufacturing and marketing of prescription pharmaceuticals and biological products for therapy areas including cardiovascular, gastrointestinal, infection, neuroscience, oncology, and respiratory and inflammation. The company operates in over 100 countries worldwide. AstraZeneca operates in the pharmaceuticals segment, and generates revenues through selling its products in seven major therapeutic areas: gastrointestinal, cardiovascular, neuroscience, oncology, respiratory and inflammation, infection, and others. AstraZeneca's gastrointestinal products include Prilosec (omeprazole; Losec outside the US) and Nexium (esomeprazole), both used for the treatment of acid related diseases; and Entocort, a locally acting corticosteroid for the treatment of irritable bowel syndrome. The company's cardiovascular products include: Crestor (rosuvastatin), a member of the class of products known as statins; Atacand, an angiotensin II antagonist for the first-line treatment of hypertension and symptomatic heart failure; Seloken/Toprol-XL (metoprolol succinate), for 24-hour control of blood pressure and for use in heart failure and angina; Plendil (felodipine), a calcium antagonist for the treatment of hypertension and angina; and Zestril (lisinopril dihydrate), an ACE inhibitor, used for the treatment of a range of cardiovascular diseases including hypertension. AstraZeneca's neuroscience products include: Seroquel (quetiapine fumarate), an atypical anti-psychotic drug used in a broad range of symptoms of schizophrenia and manic episodes in bipolar disorder; Zomig (zolmitriptan), used for the treatment of migraine; Naropin (ropivacaine), a long-acting local anesthetic; Diprivan (propofol), an intravenous anesthetic used in the induction and maintenance of anesthesia, light sedation for diagnostic procedures and for intensive care sedation; and Xylocaine (lidocaine) a local anesthetic. The company's oncology products include: Arimidex (anastrozole), an aromatase inhibitor; Faslodex (fulvestrant), an estrogen receptor antagonist; Casodex (bicalutamide) used in anti-androgen therapy for the treatment of prostate cancer; Zoladex (goserelin acetate implant), a luteinising-hormone releasing hormone (LHRH) agonist; Iressa (gefitinib), an epidermal growth factor receptor and Nolvadex (tamoxifen citrate), used in the treatment of breast cancer.

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The company's respiratory and inflammation products include Symbicort, Pulmicort, Oxis and Accolate used in asthma treatment; and Rhinocort (budesonide), a nasal steroid treatment for allergic rhinitis. The company's infection products include Merrem/Meronem (meropenem), an intravenous carbapenem antibiotic for the treatment of serious, hospitalacquired infections. The company's other division includes results of AstraZeneca's subsidiaries, Aptium Oncology and Astra Tech. Aptium Oncology has evolved over the past 20 years from a general healthcare company offering a range of services, to an oncology company that focuses on developing and managing out-patient cancer centers. Astra Tech is engaged in the research, development, manufacture and marketing of medical devices and implants for use in healthcare, primarily in urology, surgery and odontology. With the acquisition of MedImmune, AstraZeneca entered the biologics and vaccines markets and included biotechnology products in its portfolio. The companys principal manufacturing facilities are in the UK, Sweden, the US, Australia, France, Italy, Japan and Puerto Rico. Bulk drug production is concentrated in the UK, Sweden and France. Manufacturing operations for biological products take place at facilities in the US, the UK and the Netherlands. The company's sales and marketing teams are in 100 countries. The company has a worldwide sales and marketing network. In the majority of key markets such as the US, Europe and Japan, the company sells through wholly owned local marketing companies. In other markets, it sells through distributors or local representative offices.

Crestor franchise
Crestor (rosuvastatin) will continue to be the star performer in AstraZenecas prescription pharmaceutical portfolio over 200915, delivering an absolute increase in sales of +$7.1 billion (Datamonitor, PharmaVitae Profile: AstraZeneca, June 2010, CSHC1458). Although a late entrant to the statin market, Crestor has continued to demonstrate strong sales growth since its launch, owing to its potency (a facet underscored by its status as a third generation statin). Therefore, its strong growth trajectory has continued despite the genericization of older statin blockbusters, such as Merck & Co.s Zocor (simvastatin). Indeed, Crestor has been the only statin to record continued growth since the loss of patent exclusivity for Zocor. Crestors strong sales growth performance has been supported by a series of post launch trials (known as GALAXY), with recent findings from the JUPITER (Justification for the Use of statins in Primary prevention: an Intervention Trial Evaluating Rosuvastatin) study anticipated by Datamonitor to drive continued strong revenue expansion through to patent expiration in 2016. In the study of patients with a low low-density lipoprotein (LDL) cholesterol level but elevated C-reactive protein (CRP) levels, Crestor was found to significantly reduce a composite primary end-point of non-fatal myocardial infarction (MI), nonfatal stroke, hospitalization for unstable angina, revascularization, and confirmed death from cardiovascular causes by 44% compared with placebo. Such was the strength of this finding that the planned four-year study was stopped after 1.9 years.

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Current primary prevention guidelines endorse statin therapy in patients with established cardiovascular disease, diabetes and those with dyslipidemia. However, half of all heart attacks and strokes occur in apparently healthy men and women with average or low LDL-C levels. Crestors potential preventative role in this patient population therefore offers significant expansion of the statin market and while some product inter-changeability is likely to occur, AstraZenecas statin will be best positioned to assume market share. Indeed, in February 2010 the US Food and Drug Administration (FDA) confirmed the approval of Crestor for the reduction of the risk of stroke, MI and arterial revascularization procedures in individuals without clinically evident coronary heart disease but with an increased risk of cardiovascular disease (CVD) based on age (men greater than or equal to 50 and women greater than or equal to 60), high-sensitivity CRP (hsCRP) greater than or equal to 2 mg/L, and the presence of at least one additional CVD risk factor, such as hypertension, low high-density lipoprotein cholesterol (HDL-C), smoking, or a family history of premature coronary heart disease. Partly driven by this new approval, Datamonitor expects franchise growth to continue unabated when Pfizers rival Lipitor (atorvastatin) loses patent exclusivity in 2011. Strong track record in cost control
AstraZeneca has the 'purest' blockbuster-driven growth model in the industry. Such an operating market is not without its flaws, and AstraZeneca will be faced with a number of difficulties over 200814 as a result of its blockbuster dependency (see Weaknesses and Threats). However, over the period 200208, this model has served the company well. All but one of the companys blockbuster products delivered robust sales growth over 200208, the exception being Prilosec/Losec (which lost patent exclusivity in late 2002). Together, these products delivered an absolute change in sales of +$23.3 billion over 200208, acting as the primary driver of AstraZenecas significant increase in scale over the same period. The blockbuster model implemented by AstraZeneca also had a very positive effect on operating performance over 2002 08, primarily by allowing the company to rigidly control its costs of goods sold (COGS) expenditure. COGS spending increased at a compound annual growth rate (CAGR) of 6.5% over 200208, providing significant impetus for an operating profit CAGR of 14.7% over the same period, while total revenues increased at a CAGR of 10.0%. AstraZeneca will be unable to sustain the use of such a model in the long term, a consequence of significant erosion to revenues generated by existing blockbuster franchises, coupled with the inability of its late-stage R&D pipeline to sufficiently replenish the companys blockbuster portfolio. As a result, the company is forecast to record a sustained period of revenue decline from 2011 through to 2014 as generic competition intensifies, which will have a negative consequence on its future profit growth outlook. In the meantime, however, AstraZenecas blockbuster growth model provides an inverted economy of scale, by allowing the company to restructure its cost base via a considerable reduction in staff numbers. Initially announced in 2007, the company plans to shed 15,000 global staff by 2013, with a notable focus on sales and marketing personnel, who will become more expendable as sales of key blockbuster brands are eroded by generic competition. Although current forecasts do not anticipate AstraZeneca to record a positive operating performance over 200814 (forecasts in this report indicate an operating profit CAGR of -0.4%), this nonetheless represents a very robust performance in light of significant downward pressure on revenues.
Weaknesses
Over dependence on small molecules

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In 2009, around 95% of total prescription pharmaceutical sales were derived from small molecule technology. AstraZenecas resulting low commercial exposure to both biologics and vaccines (plus its lack of a significant nonprescription business) means that the company has become overly dependent on patents as a barrier to entry for competitor products. Furthermore, the companys requirement for R&D-driven product renewals remains very high, as a result of its historical dependence on small molecule drug technology.
Exposed to cross-class generic substitution
A notable weakness of AstraZenecas blockbuster model is the risk of cross-class therapeutic substitution, facilitated by the genericization of branded peer products and supported by ongoing cost control policies in both the US and many European markets. This adverse trend is already in evidence with regard to Nexium in the US market, where AstraZenecas sales have declined steadily since 2007 due to the availability of numerous generic PPIs. Therefore, branded sales of Nexium are forecast to decline steadily before patent exclusivity expires in 2014. Cross-class therapeutic substitution also remains a potential barrier to sales growth for AstraZenecas flagship Crestor franchise, which competes in the increasingly competitive statin market. To date, Crestor has continued to record robust sales growth despite the availability of notable generic statins, particularly simvastatin (Merck & Co.s Zocor) which has been available in the US market since 2006. However, when Pfizers market leader Lipitor (atorvastatin) loses its US patent exclusivity in 2011, there will be an opportunity for healthcare providers to encourage the use of generic atorvastatin as a much cheaper alternative to Crestor. Datamonitor expects this dynamic to slow sales growth for AstraZenecas statin, although Crestor is expected to continue gaining market share through to patent expiry, a trend that will be driven significantly by its approval in February 2010 for preventative use in patients demonstrating elevated levels of CRP and one other risk factor, a significant expansion of use beyond the typical high-cholesterol patient base. Recent history of pipeline failures
AstraZenecas ability to bring new high value products to the market has been challenged in recent years by a number of late-stage R&D pipeline failures. The most significant of these being Exanta (ximelagatran), a direct thrombin inhibitor developed for the prevention of venous thromboembolic events (VTE) and the treatment of atrial fibrillation (AF). As a potential successor to warfarin, Exanta had notable revenue potential but was withdrawn from all markets in 2006 (having been launched in selected EU states since 2005 but never approved by the FDA). Other notable setbacks include: Galida (tesaglitazar), a potential type 2 diabetes treatment that was terminated in Phase III clinical studies in 2006; NXY-059 (disufenton sodium), a stroke therapy being developed in collaboration with Renovis that was dropped during Phase III in 2006; and AGI-1067 (succinobucol), a potential treatment for atherosclerosis that AstraZeneca chose to abandon in 2007. As a result, full development rights were returned to AtherGenics, AstraZenecas development partner. In addition, Iressa had been expected to generate much higher revenues than it has achieved to date. It was effectively withdrawn from the US market when post launch studies demonstrated no significant survival benefits, and has up to now generated the majority of its revenues in niche non-small cell lung cancer (NSCLC) indications, primarily in Asian markets. Given these setbacks, AstraZeneca produced little in the way of new product launches over the period 200109. Excluding those brands integrated into its portfolio via the acquisition of MedImmune, the company introduced just four new products of note to the market during this period: Crestor (rosuvastatin; dyslipidemia), Iressa (gefitinib; NSCLC), Faslodex Global Top 10 Pharmaceutical Companies
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(fulvestrant; breast cancer) and most recently Onglyza (saxagliptin), the only new product launch since that of Crestor in 2003. Together, these four products contributed a net change in sales of +$5.3 billion over 200109, however, the Crestor franchise accounted for around 85% of this growth. Over-dependent on Crestor to drive core growth
AstraZenecas failure to bring new products to the market since the launch of Crestor will have an increasingly visible impact on the companys future commercial performance through to 2015. This will particularly be the case given AstraZenecas close alignment to a blockbuster growth model. Had AstraZeneca been successful in bringing to the market a number of additional products with significant revenue growth potential, then its dependence on older blockbuster franchises that are moving closer to patent expiry would have diminished. In reality, however, the company remains heavily indebted to these older franchises, and once exposure to generic competition intensifies As a result, around 80% of AstraZenecas core (that is, non-launch and non-expiry products) portfolio sales in 2009 were derived from Crestor. With the launch portfolio carrying an inherent level of risk associated with late-stage clinical setbacks and the expiry portfolio characterized by its exposure to generic competition, it is the core portfolio that offers the most secure revenue base. While Crestor is undoubtedly a star performer in the making, its sales growth alone will be insufficient to transform the fortunes of AstraZeneca, given its predicament regarding its particularly high exposure to the patent cliff.
Opportunities
Diversification into biologics and vaccines via MedImmune
MedImmune now forms the crux of AstraZenecas biologics division and has been merged with the operations of Cambridge Antibody Technology (CAT), a UK-based biotech company that was acquired by AstraZeneca in 2006 at a cost of $1.1 billion. The marriage of MedImmune and CAT has allowed AstraZeneca to combine CATs expertise in target identification and biologic research with similar capabilities at MedImmune, alongside the US companys biologics manufacturing capability and its presence in vaccine development. AstraZeneca has been bold in its biologic and vaccinemarket aspirations, announcing at the time of acquisition that it expected 25% of all new pipeline developments by 2010 to be biologic products or vaccines. In its 2008 annual report, AstraZeneca confirmed that it had 30 biologic projects in its R&D pipeline which, excluding the aforementioned Numax development, are positioned across preclinical, Phase I and Phase II testing. Cost restructuring strategy
To offset an anticipated decline in revenue, AstraZeneca has sought to reduce costs via significant restructuring strategies. Between 2007 and 2009, the company made around 12,600 job reductions with annualized benefits of $1.6 billion by the end of 2009, rising to an anticipated $2.4 billion by the end of 2010. In early 2010, the company announced a further 10,400 reductions over the next four years, with an additional annual benefit of $1.9 billion forecast for year-end 2014, with approximately half of these benefits realized by 2011. AstraZenecas close historical adherence to a blockbuster-driven growth model should provide an increased ability to reduce costs, particularly with regard to selling, general and administrative (S,G&A) expenditure. It is interesting to note that AstraZenecas ability to reduce S,G&A expenditure is expected to remain undiminished over 200814, lending weight to the notion that its historical blockbuster model will allow notable cost reductions. On the other hand, however, AstraZenecas Global Top 10 Pharmaceutical Companies
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demonstrated reduction in its COGS ratio over 200208 (a percentage point reduction of 4.5%, likely driven by COGS efficiencies linked to its largest and most established blockbuster products), will be compromised over 200814. An increase in the COGS ratio (-1.5 percentage points) will be partially driven by new launch products, as will the necessity for AstraZeneca to increase its R&D expenditure (-2.2 percentage points). Based on current forecasts, AstraZeneca is not expected to retain consistent operating profit growth beyond 2011, however, a forecast operating profit CAGR of -0.4% for the period 200814 (or a percentage point change of -1.3 in terms of operating margin) in light of significant generic exposure represents both a robust performance and a platform that the company can seek to build on via potential secondary cost containment initiatives and revenue growth opportunities such as in-licensing and co-development agreements. Potential blockbusters in late-stage pipeline
AstraZeneca has a number of products in its late-stage R&D pipeline that are forecast to contribute significant revenue growth over 200915 and beyond, of which the two most prominent are Brilinta (being developed for the treatment of arterial thrombosis and acute coronary syndromes [ACS]) and Onglyza (developed for type 2 diabetes). The commercial outlook for Brilinta is very much dependent on the ability of AstraZeneca to demonstrate sufficiently superior efficacy and a similar safety profile to the market leading anti-platelet agent Plavix (clopidogrel; marketed by Sanofi-Aventis and Bristol-Myers Squibb). This is a particularly important determining factor given that Plavix is due to lose US patent exclusivity in 2011, an event that will facilitate the potential therapeutic substitution of newer branded antiplatelets with generic clopidogrel. Commercial outlook for the product has improved significantly following publication of the results from the PLATO trial. The drug appeared to demonstrate an advantage that trumped clopidogrels non-procedurerelated bleeding advantage, namely an improvement in mortality (Wallentin et al., 2009). Combined with elements of the PLATO trial design, AstraZeneca is now effectively in a position to push Brilinta as a viable replacement for Plavix (clopidogrel) in the wide variety of circumstances associated with ACS hospital admission (Datamonitor, Commercial Insight: Antithrombotics, December 2009, DMHC2538). Onglyza is an oral DPP-IV inhibitor being co-developed by AstraZeneca and Bristol-Myers Squibb for the once-daily treatment of type 2 diabetes. It has very recently been approved by the FDA and is shortly expected to gain marketing clearance in the EU. A continued increase in the prevalence of type 2 diabetes will play an integral role in driving a forecast robust sales growth performance for the franchise, as will the diminished competitive threat of generically available thiazolidinedione products (caused by safety concerns relating to GlaxoSmithKlines Avandia (rosiglitazone) franchise). Current forecast revenues for AstraZeneca derived from the Onglyza franchise stand at $945m for 2014 (Datamonitor, PharmaVitae Profile: AstraZeneca, June 2010, CSHC1458). Collaborations to boost near- and medium-term sales forecasts
With AstraZenecas strategic goal of biologic and vaccine re-alignment meaning that the company now faces a balancing act between making long-term strides in biologic R&D while maintaining momentum for R&D projects that will potentially have a commercial impact in the short to medium term, it is unsurprising that the company has sought to use externalization strategies. Onglyza is a key example of this strategy, and will be co-marketed by AstraZeneca with Bristol-Myers Squibb. The two companies are also developing dapagliflozin, an orally active sodium glucose cotransporter type 2 (SGLT-2) inhibitor that is Global Top 10 Pharmaceutical Companies
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also indicated for type 2 diabetes, which is currently in Phase III development, and is part of the co-development agreement between AstraZeneca and Bristol-Myers Squibb that covers Onglyza. AstraZeneca is also seeking to enhance two of its core product franchises via external co-developments. It signed an agreement with Abbott in 2006 to co-develop and co-market a fixed-dose combination product comprising Crestor and Trilipix (choline fenofibrate) for the treatment of lipid disorders in the US market. The combination product, which has been given the brand name Certriad, targets LDL cholesterol, HDL cholesterol and triglycerides. AstraZeneca and Abbott submitted a New Drug Application (NDA) for Certriad as a treatment for mixed dyslipidemia in June 2009 with an initial US launch anticipated in 2010. Certriad is forecast to generate annual sales of $390m for AstraZeneca by 2014. In 2006, AstraZeneca signed a deal with Pozen to develop Vimovo (previously PN-400), a fixed-dose combination of esomeprazole and naproxen. Vimovo is being developed for the treatment of pain and inflammation associated with osteoarthritis, rheumatoid arthritis and ankylosing spondylitis in patients at risk of developing non-steroidal anti-inflammatory drug (NSAID)-associated gastric ulcers. An NDA for the product was submitted in June 2009. Annual sales of $189m are forecast for 2014 (Datamonitor, PharmaVitae Profile: AstraZeneca, June 2010, CSHC1458). Given the anticipated decline in AstraZenecas prescription pharmaceutical sales from 2011 onwards, the company can be expected to use external partnerships to bolster its internal R&D engine. Indeed, in August 2009 the company announced that it will co-develop and co-market the anti-infective ceftaroline (currently in Phase III clinical trials) with Forest Laboratories in global markets (excluding the US, Canada and Japan).
Threats
Very high exposure to generic competition
AstraZenecas forecast prescription sales growth performance over 200915, a meager CAGR of 0.5%, will be predominantly shaped by the companys very high exposure to generic competition during the same period. AstraZeneca faces the highest level of material exposure to the patent cliff, with around 81% of total 2009 sales derived from products that have either already lost patent exclusivity or are forecast to do so by 2015 (Datamonitor, PharmaVitae Profile: AstraZeneca, June 2010, CSHC1458). This compares to an average expiry-exposure ratio of around 61% across the remainder of the Big Pharma peer set. AstraZenecas historical and forecast sales growth performances have and will be heavily shaped by a limited number of key products, most notably the 10 blockbuster franchises (Crestor, Nexium, Symbicort, Seroquel, Arimidex, Zoladex, Seloken/Toprol XL, Synagis, Atacand and Pulmicort), which generated around 78% of total prescription pharmaceutical sales in 2009. All but one of these products contributed robust sales growth over 200309, but only one franchise, the statin therapy Crestor, is forecast to maintain a positive sales growth performance through to 2015. Each of the other nine 2009 blockbusters is forecast to record a decline in sales over this period as a result of exposure to generic competition. No margin for failure in late-stage R&D pipeline
Given the level of generic erosion faced by AstraZeneca over the period 200915, the companys requirement for R&Ddriven product renewal remains very high. Indeed, it is imperative that the late-stage pipeline successfully delivers a number of high revenue products to commercialization; in this respect the performances of Brilinta, Onglyza, Certriad, Numax and dapagliflozin in particular should be viewed as critical given the forecast sales attached to these products

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through to 2015 (a combined +$4.9 billion). As it stands, AstraZeneca can ill-afford any form of sustained delay or setback to these products. Lack of strategic maneuverability stemming from MedImmune acquisition
The acquisition cost AstraZeneca $15.6 billion, a substantial multiple of MedImmune's 2006 global revenues, recorded at $1.2 billion (primarily generated by Synagis). Limited revenue growth from MedImmune forecast for the period 200814 will be partially offset by synergy benefits that AstraZeneca hopes to extract (an anticipated annual figure of $1.4 billion from 2010); in addition, the acquisition clearly holds long-term potential for AstraZeneca. Nevertheless, it remains an expensive purchase. Furthermore, the acquisition could cost AstraZeneca the ability to implement future strategic moves, such as other large scale M&A activity, given that a significant level of debt was raised by the company to fund the purchase. In 2009, AstraZenecas debt to equity ratio stood at 0.54, significantly higher than the majority of other Big Pharma players. With this in mind, and discounting the possibility of a mega-merger with a Big Pharma competitor, it would appear that AstraZenecas maneuverability to implement further large-scale strategic redirection has been compromised. However, such moves may become increasing necessary given the challenges faced by AstraZeneca over the next few years. Crestor patent case
There is a small but significant risk to Crestor sales deriving from an ongoing patent challenge by several generic companies that have cited inequitable conduct. The challenge relates to a reissued main patent for Crestor in the US, applied for by Shionogi in 1998. It appears that the Japanese company failed to inform the US patent office of a similar patent already issued in Europe, which has opened up a potential challenge on the grounds of inequitable conduct. As it appears that Shionogi acted in good faith, there is strong consensus that AstraZeneca will successfully dismiss these claims, and current Datamonitor's forecasts for Crestor anticipate patent exclusivity through to 2016. It is worth considering here the adverse impact that any negative sentiment relating to Crestor would have on AstraZenecas forecast performance and market value. With 2009 global sales of $4.5 billion, Crestor is the companys third largest prescription pharmaceutical franchise (behind Nexium and Seroquel). However, as discussed above, it is forecast to act as AstraZenecas leading sales growth contributor by a significant margin over the period 200915, delivering absolute sales growth of +$7.1 billion. Demonstrating the importance of this contribution, the exclusion of Crestor from the analysis of AstraZenecas portfolio results in a forecast sales CAGR of -4.1% for the company over the period 200915 (Datamonitor, PharmaVitae Profile: AstraZeneca, June 2010, CSHC1458). Another consideration is the long-term strategic planning that will be necessary for AstraZeneca if the company is to successfully circumvent patent expiry for Crestor in 2017. As a proportion of total prescription pharmaceutical revenues, Crestor sales are forecast to increase from 14.1% in 2009 to 35.3% in 2014 (Datamonitor, PharmaVitae Profile: AstraZeneca, June 2010, CSHC1458). AstraZeneca will have to bolster its portfolio significantly if it is to avoid the scale of the patent hit facing Pfizer in 2011 when Lipitor expires.
Recent developments
In March 2009, the FDA approved AstraZeneca's Symbicort (budesonide/formoterol fumarate dihydrate) 160/4.5mcg for the twice-daily maintenance treatment of airflow obstruction in patients with chronic obstructive pulmonary disease (COPD), including chronic bronchitis and emphysema. In the following month, the FDA requested additional information on the

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company's Symbicort pressurized metered dose inhaler (pMDI) for the long-term maintenance treatment of asthma in pediatric patients ages six to 11 years. During June 2009, AstraZeneca obtained the non-exclusive right to co-promote Abbott's Trilipix in the US, excluding Puerto Rico. Together, the companies submitted an NDA to the FDA for an investigational compound for the treatment of mixed dyslipidemia, a combination of two or more lipid abnormalities including high LDL cholesterol, high triglycerides and low HDL-cholesterol. The compound contains the active ingredients of Crestor and Trilipix, which will be marketed as Certriad. AstraZeneca received the EC's marketing authorization in July 2009 for the oral cancer drug Iressa for the treatment of adults with locally advanced or metastatic NSCLC with activating mutations of EGFR-TK (epidermal growth factor receptortyrosine kinase) across all lines of therapy. Later in the same month, AstraZeneca terminated the license agreement with MAP Pharmaceuticals regarding Unit Dose Budesonide (UDB), a Phase III investigational treatment for pediatric asthma. As a result, AstraZeneca recorded impairment charges of $44m. The FDA approved Onglyza (saxagliptin) for the treatment of type 2 diabetes mellitus in adults, in August 2009. Later in August 2009, AstraZeneca and Astellas Pharma agreed to co-promote AstraZeneca's Symbicort Turbuhaler for the treatment of bronchial asthma in Japan. In addition, AstraZeneca and Forest Laboratories agreed to collaborate to codevelop and commercialize ceftaroline, Forest's late-stage, next-generation cephalosporin being investigated for the treatment of complicated skin and skin structure infections and community-acquired bacterial pneumonia in all markets outside of the US, Canada and Japan. AstraZeneca in-licensed Nektar Therapeutics' NKTR-118 and NKTR-119 programs, for an upfront payment of $125m, in September 2009. Towards the end of the month, Seroquel XR (quetiapine fumarate extended-release tablets) and Seroquel (quetiapine fumarate) were approved under the European Mutual Recognition Procedure for the prevention of recurrence of bipolar disorder in patients whose manic, mixed or depressive episode has responded to quetiapine treatment. Following this new indication, Seroquel and Seroquel XR are the only agents approved in the EU to treat all phases of bipolar disorder: acute depressive episodes, acute manic episodes and maintenance treatment to prevent recurrence of any mood event in bipolar disorder. Additionally, Onglyza (saxagliptin) received marketing authorization in the 27 countries of the EU as a once-daily 5mg oral tablet dose in adult patients with type 2 diabetes mellitus to improve glycemic control. During October 2009, Crestor received an additional indication in the US in children aged 1017 years with heterozygous familial hypercholesterolemia when diet therapy fails to reduce elevated cholesterol. Symbicort Turbuhaler (budesonide/formoterol) received Japanese marketing approval for the maintenance treatment of bronchial asthma in patients aged 16 and over when a combination therapy of an inhaled steroid and a long-acting beta-2 agonist is necessary. In the same month, AstraZeneca withdrew the regulatory submissions for the use of Zactima 100mg in combination with chemotherapy in patients with advanced NSCLC from the FDA and the European Medicines Agency. The decision to withdraw these submissions was based on an updated analysis that demonstrated no overall survival advantage when vandetanib was added to chemotherapy as well as preliminary feedback from regulatory agencies that the current package with progression-free survival (PFS) as the primary endpoint may not be sufficient for approval. AstraZeneca submitted an NDA to the FDA in November 2009 for Brilinta (ticagrelor), an investigational oral anti-platelet treatment for the reduction of major adverse cardiac events in patients with acute coronary syndrome (ACS). In the same month, AstraZeneca in-licensed Targacept's TC-5214, a late-stage investigational product for major depressive disorder. Global Top 10 Pharmaceutical Companies
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In December 2009, the FDA approved Seroquel as a monotherapy and for the acute treatment of manic episodes associated with bipolar I disorder in children and adolescents (1017 years of age), both as monotherapy and as an adjunct to lithium or divalproex; and Seroquel XR as adjunctive (add-on) treatment to antidepressants in adults with major depressive disorder. AstraZeneca signed agreements in December 2009 to acquire Novexel, a private infection research company in France, for $350m, and to collaborate with Forest Laboratories on the future co-development and commercialization of two late-stage antibiotic development programs; ceftazidime/NXL-104 (CAZ104) and ceftaroline/NXL-104 (CEF104). In February 2010, AstraZeneca's blockbuster Crestor franchise received a further boost as the FDA approved the drug for the reduction of risk of stroke, heart attack and arterial revascularization procedures in individuals without clinically evident coronary heart disease but with an increased risk of cardiovascular disease based on age (men 50 and women 60), highsensitivity C-reactive protein (hsCRP) 2mg/L, and the presence of at least one additional cardiovascular risk factor, such as hypertension, low HDL-C, smoking, or a family history of premature coronary heart disease. Also in February 2010, AstraZeneca in-licensed Rigel Pharmaceuticals' late-stage product candidate fostamatinib disodium (R788), for rheumatoid arthritis and additional indications. AstraZeneca signed a license and supply agreement with Torrent Pharmaceuticals in March 2010. Torrent agreed to supply to AstraZeneca a portfolio of generic medicines for which Torrent already has licenses in a range of countries. Under the terms of the agreement, AstraZeneca agreed to purchase from Torrent the licenses and market authorizations for 18 products in nine countries. The FDA issued a Complete Response Letter to AstraZeneca and Abbott in March 2010 for the Certriad NDA, requesting additional information. In April 2010, the FDA granted US marketing approval for Vimovo (naproxen and esomeprazole magnesium) delayedrelease tablets, co-developed by Pozen and AstraZeneca, for the relief of signs and symptoms of osteoarthritis, rheumatoid arthritis, and ankylosing spondylitis, and to decrease the risk of developing gastric ulcers in patients at risk of developing NSAID-associated gastric ulcers. In May 2010, AstraZeneca settled patent litigation with Teva Pharmaceuticals USA regarding Tevas proposed generic version of AstraZenecas Entocort EC (budesonide) capsules. Under the terms of the settlement agreement, AstraZeneca granted Teva a license to enter the US market with its generic version of oral budesonide on February 15, 2012.

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Abbott Laboratories
Company overview
Abbott is engaged in the discovery, development, manufacture, and sale of pharmaceuticals and medical products. The company sells its products in more than 130 countries. It is headquartered in Abbott Park, Illinois, and employs about 83,000 people. Abbott recorded revenues of $30,764.7m during FY2009, an increase of 4.2% over FY2008. The operating profit of the company was $6,235.7m during FY2009, an increase of 9.5% over FY2008. The net profit was $5,745.8m in FY2009, an increase of 17.7% over FY2008.
Abbott primarily operates in five segments: pharmaceutical products, diagnostic products, nutritional products, vascular products and 'other' products. The other products segment comprises businesses related to blood glucose monitoring meters, test strips, and data management software and accessories. The pharmaceutical products segment manufactures, markets, and sells a range of adult and pediatric pharmaceuticals. Its major products include Humira, TriCor, TriLipix, Simcor, Niaspan, Synthroid, Meridia, Reductil, Zemplar, Prevacid, Lupron, Kaletra, Aluvia, and Norvir. The segment markets its products worldwide and sells its products directly to wholesalers, government agencies, healthcare facilities, and independent retailers from Abbott-owned distribution centers and public warehouses. Certain products are co-marketed or co-promoted with other companies. The diagnostic segment is engaged in the manufacturing, marketing, and selling of diagnostic systems and tests to blood banks, hospitals, commercial laboratories, physicians' offices, alternate-care testing sites, and plasma protein therapeutic companies. Abbott's principal products include Architect, Axsym, Imx, Commander, Abbott Prism, Architect C8000 and C16000, m2000, Vysis and Cell-Dyn. Under a distribution agreement with Celera Group, the diagnostic products segment also distributes certain Celera molecular diagnostic products, including the Viroseq HIV genotyping system and products used for the detection of mutations in the CFTR gene which cause cystic fibrosis. The diagnostic products segment markets and sells its products directly to hospitals, laboratories, clinics, and physicians' offices from Abbott-owned distribution centers and public warehouses. The nutritional products segment manufactures, markets, and sells a range of pediatric and adult nutritional products. Its major products include products under the Similac and Isomil brands, Alimentum, Jevity, Glucerna 1.2 Cal, Oxepa and Nepro. These products are sold directly to consumers, often on the recommendation or prescription of physicians or other healthcare professionals, and to healthcare facilities and government agencies. It also sells its products to retailers, wholesalers, and third-party distributors from Abbott-owned distribution centers or third-party distributors. The vascular products segment manufactures, markets, and sells a line of coronary, endovascular, and vessel closure devices. Its principal products include Xience V, Multi-Link Vision, Multi-Link Mini Vision, StarClose and Perclose vessel closure devices, Acculink/Accunet and Xact/Emboshield. Abbott markets and sells its products to hospitals from Abbottowned distribution centers and public warehouses.

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The 'other' products segment offers blood glucose monitoring meters, test strips, data management software and accessories for people with diabetes. The company markets and sells its products to wholesalers, government agencies, healthcare facilities, mail order pharmacies, and independent retailers from Abbott-owned distribution centers and public warehouses across the world. It also markets and distributes its products through distributors. Blood glucose monitoring meters are also marketed and sold over-the-counter to consumers.

Major presence in the lucrative autoimmune disorder segment
Abbott's key strength lies with the market penetration of Humira, its anti-TNF monoclonal antibody (MAb) used for the treatment of various autoimmune disorders. Since its launch at the start of 2003, Humira has enjoyed rapid uptake as the first fully human MAb approved for rheumatoid arthritis and the comprehensive range of other autoimmune indications. Specifically, Humira is now also approved for psoriatic arthritis (PsA), ankylosing spondylitis (AS), Crohn's disease (CD), psoriasis, ulcerative colitis (UC), ankylosing spondylitis (AS) and juvenile rheumatoid arthritis (JRA), a comprehensive range of autoimmune disorder approvals. Humira's recent uptake has been impressive in all geographies, except for Japan, where the drug is being launched by Eisai. Over 200607, Abbott reported impressive annual sales growth of 49.9%, with global sales rising to more than $3 billion in 2007 ($5.5 billion in 2009). Presently, Humira is in direct competition for market share with the other anti-TNF biologics, Enbrel (etanercept) and Remicade (infliximab). Humira boasts fully human sequencing over the less favorable chimeric sequencing of Remicade and requires dosing every other week compared to Remicade's two-hour intravenous infusion every 8 weeks. Humira is also available in a convenient subcutaneous delivery pen, which was granted US Food and Drug Administration (FDA) approval in June 2006. This, along with its favorable dosing regime, gives Abbott's offering a significant competitive advantage over other options in the lucrative anti-TNF space and could make it the long-term therapy of choice. To this end, Datamonitor expects Abbott's flagship biologic to record impressive growth over the forecast window, with sales expected to rise to $7.8 billion by 2015 (Datamonitor, PharmaVitae Profile: Abbott Laboratories, May 2010, CSHC1465). Well diversified dyslipidemia portfolio
Abbott has undertaken a dual-class assault on the lucrative US dyslipidemia market. In TriCor, the company has the market-leading offering in the fibrate drug class, a position that it upholds despite sizable generic litigation. The company's lifecycle management efforts have proved highly successful to this end and, although branded generics exist, the use of Elan's nanocrystal technology in the latest TriCor formulation has meant that Abbott's fenofibrate remained a blockbuster medication in 2007. Abbott has continued in its efforts to sustain its market-leading position in the fibrate market by bringing out another new formulation of fenofibrate, TRILIPIX (fenofibric acid), which it submitted to the FDA at the end of 2007. The company is also developing a combination of this latest fenofibrate with Crestor, one of the leading statin medications, in collaboration with AstraZeneca. This combination drug will diversify Abbott's dyslipidemia offering and given the success,

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albeit somewhat controversial, of Zetia/Vytorin, a fixed-dose combination (FDC) of TRILIPIX and Crestor could be a key strategic launch for Abbott as it looks to protect its franchise from generic substitution. Complementing Abbott's market-leading fibrate offering is a lucrative franchise gained through its 2006 acquisition of Kos Pharmaceuticals, based around an extended-release formulation of nicotinic acid (niacin). Niacin is effective in reducing total cholesterol, low-density lipoprotein cholesterol (LDL-C), Apo (apolipoprotein) B, and triglyceride levels and increasing high-density lipoprotein cholesterol (HDL-C) in patients with primary hypercholesterolemia and mixed dyslipidemia. Following the approval of Simcor, this franchise now consists of three products, the other two being Niaspan and Advicor. In its first year as an Abbott product, Niaspan generated sales of $658m ($855m in 2009), while the FDC of Niaspan with lovastatin, Advicor, generated sales of $101m. Looking ahead, Abbott will position Simcor ahead of Advicor as the flagship FDC offering within its nicotinic acid franchise, using compliance benefits of the new combination drug as the principal means of driving uptake. Uptake of Simcor will take place at the expense of Advicor, sales of which are expected to decline accordingly. Successful employment of M&A growth strategy broadening focus across multiple healthcare segments
Having seen its historical performance shaped by the acquisition of Knoll Pharmaceuticals (which equipped Abbott with the license for Humira), Abbott remains focused on M&A in order to drive growth across all healthcare segments in which the company operates. Faced with heightened market pressures, Abbott has stepped up its relentless approach towards M&A in recent years. The most recent deals by Abbott include Solvay, Facet Biotech and Indian pharma giant Piramal Healthcare solutions, all of which tie in well with Abbotts geographical growth strategy as well as going some way to remedy its under strength pipeline.
Weaknesses
Understrength pipeline, with fewer late-stage programs than any other Big Pharma company
Although Abbott's launch portfolio is forecast to add significant sales to its Rx pharma revenue stream by 2013: a significant proportion of its new launches are being targeted at markets in which Abbott already holds significant presence. To this end, the company's late-stage pipeline will predominately serve to sustain rather than build on the company's existing Rx portfolio. None of the company's seven new launches will address indications not currently covered by Abbott's broad marketed portfolio, with three launches, Simcor, TRILIPIX and TRILIPIX/Crestor, serving to replenish its dyslipidemia franchise, Vicodin CR set to revitalize Abbott's existing Vicodin offering, Flutiform building on the position of Azmacort, another Kos-derived asthma treatment, and Numax replacing Synagis for the treatment of human respiratory syncytial virus. ABT-874 is the only agent offering a novel mechanism of action over existing therapeutics, and is being developed for markets already covered by Abbott's leading growth driver, Humira. Although Abbott is pursuing significant growth within the lucrative vascular intervention market, the company's need to expand its prescription pharma opportunities outside of its current field of focus is apparent. Early-stage development programs in the oncology and central nervous system (CNS) areas will help to offset the restricted positioning of its late-stage pipeline and potentially secure long-term growth beyond its current therapeutic focus. Rising dependency on Humira

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Although Humira's success has been a fundamental driver of Abbott's impressive historical growth performance, the company is becoming increasingly reliant on its flagship biologic, which accounted for more than a quarter of its total prescription pharmaceutical revenues in 2009. Although Humira continues to exhibit impressive uptake across its full spectrum of approved autoimmune disorders, competition within the I&I space is set to intensify following a number of new product launches. Although it is expected to continue growing out to 2015, a slowdown in Humira sales would orchestrate similar movements at Abbott's top line. Furthermore, Humira is also at the center of a patent infringement row, which could impact future earnings of the franchise, as well as past earnings. High exposure to generic erosion
In 2009, Abbott generated $6.5 billion in sales (39.6% of total prescription sales) from products that are facing and are set to face some form of direct generic competition over the forecast window. In the near term, Depakote, Biaxin and Prevacid will face significant generic erosion, while in the long term the company can expect lost exclusivity for Zemplar and Reductil to weaken its expiry sales stance further. Abbott's ability to defend against a likely generic onslaught may now be severely limited after the US government launched legal action against the firm claiming unlawful generic defense strategies. Given this, and its vulnerable intellectual property stance, Abbott will either need to invest in late-stage licensing opportunities, or even perhaps M&A, in order to sustain its market share in areas where it does not have adequate follow-on potential.
Opportunities
Penetration of emerging markets through acquisitions of Solvay and Piramal Healthcare Business
The acquisition of Piramal Healthcares domestic formulation business will propel Abbotts long-term growth strategy outside of the US, which has already been significantly strengthened by the acquisition of Solvay. This Indian deal represents the second in the space of a week for Abbott after it forged a partnership with Zydus Cadila. Abbott expects the Indian drug market will more than double by 2015 and the acquisition of Piramal Healthcare offers Abbott a direct route of tapping into this commercial potential. In 2009, IMS reported total sales of $368m for Piramal, of which more than 95% came from domestic product sales in India (MIDAS, IMS Health, April 2010). Abbott expects product sales from its latest acquisition to rise to $500m in FY2011. Collaboration with AstraZeneca could reinforce Abbotts position in the US dyslipidemia market
One of Abbott's shining lights in the coming years could be its collaboration with AstraZeneca, whose Crestor (rosuvastatin) is one of the gold standard statins for the treatment of high cholesterol, generating global sales of $4.5 billion in 2009. As well as collaborating with AstraZeneca on a new combination therapy of TRILIPIX and Crestor (brand name Certriad), Abbott has also begun co-promotion of Crestor monotherapy in the US, the terms of which have not been disclosed. While the statin market will be increasingly dominated by generics when the market leader Lipitor loses patent protection, Crestor is in a strong position following the release of JUPITER trial data, which showed that rosuvastatin may decrease the relative risk of heart attack and stroke in patients without hyperlipidemia. Abbott's marketing presence in the US will be beneficial to AstraZeneca, which will look to boost its US presence before Lipitor goes generic. US sales of Crestor are

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forecast to increase to approximately $3.5 billion by 2014, and although the exact promotional terms of the collaboration with AstraZeneca are unclear, Abbott will likely add significant royalties from its sales of the product. In addition to its promotional efforts with the monotherapy, the collaboration has also supplied Abbott a potentially lucrative new fixed-dose combination drug, Certriad, which combines Crestor with Abbott's recently launched fibrate, TRILIPIX. Phase III data showed that Certriad produced significant improvements in HDL and triglycerides compared to rosuvastatin alone, and greater improvements in LDL compared to TRILIPIX alone. Based on these results, it appears that combining statin and fibrate has an augmenting effect on the efficacy of each agent. Certriad's lipid profile is impressive enough to capture the attention of physicians and could be highly lucrative given the success of other combination therapies such as Schering-Plough/Merck & Co.'s controversial Vytorin (ezetimibe/simvastatin). The strategic importance of Certriad, which is forecast to generate sales of $310m in 2014 (based on a 50:50 split between Abbott and AstraZeneca), is further enhanced as it will undoubtedly add a further layer of protection against generic fibrate for Abbott's dyslipidemia portfolio. In all, it looks like both Abbott and AstraZeneca will reap benefits from their collaboration.
Threats
Ongoing litigation relating to Humiras patent validity
Ongoing litigation proceedings from Abbotts Big Pharma rivals questioning Abbotts patent position on Humira pose a significant financial threat, with Abbott having already lost a case to Johnson & Johnson in June 2009 in which a federal jury awarded Johnson & Johnson damages of $1.67 billion, the biggest patent verdict in US history. Bayer has also staked a claim to the prized Humira pot by claiming Abbotts patent infringe on their more generalized TNF-inhibitor patent (that filed by Johnson & Johnson referred specifically to fully human MAbs targeted against the TNF alpha signaling receptor). Given Abbotts growing dependency on Humira, the successful defense of its intellectual property position in these ongoing lawsuits is crucial. Abbott will face a significant reduction in the earnings contribution from Humira if it fails to do so. Increasing competition in the autoimmune disorder market
while its uptake remains rapid across all approved uses, Humira will come under increased threat both from other technologically advanced anti-TNF biologics and also from biologics operating along different mechanisms of action within the autoimmune disease space. To this end, Abbott's impressive growth expectations for Humira will not be as straightforward as the company would hope. Notable long-term threats across the infectious and immune disorders (I&I) space come in the form of UCB's lower-priced anti-TNF MAb Cimzia, two offerings from Johnson & Johnson in the form of the fully human anti-TNF golimumab and the anti-IL-12/23 ustekinumab (the same target as Abbott's Phase III ABT-874), Bristol-Myers Squibb's fusion protein Orencia (abatacept) and Genentech's Rituxan (rituximab) and fully human follow-on ocrelizumab. Abbott will need to sustain its strong promotional effort if it is to maintain the current growth trend seen by Humira, since many of these rival compounds have shown similarly strong clinical results and will, given the marketing power at the disposal of these new launches (Johnson & Johnson/Centocor have a particularly strong foothold in the market), pose a significant threat to Abbott's position.
Recent developments

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Abbott acquired Ibis Biosciences, a subsidiary of ISIS, for approximately $175m in January 2009 to expand its molecular diagnostic research capabilities and market opportunities. In the following month, the company also purchased Advanced Medical Optics (AMO), a provider of advanced refractive technologies, for approximately $2.8 billion. During March 2009, the company launched Voyager Nc coronary dilatation catheter, a next-generation balloon dilatation catheter with high-pressure capability designed to optimize the treatment of patients with coronary artery disease during angioplasty procedures. Two months later, Abbott introduced two new products for the treatment of peripheral artery disease. In June 2009, Abbott launched a Next-Generation Embolic Protection System. In the following month, Abbott collaborated with GlaxoSmithKline for a molecular diagnostic test to select candidate patients for future cancer immunotherapy. In the same month, the company also voluntarily recalled POWERSAIL, its coronary dilatation catheters. During August 2009, Abbott entered into a partnership with Velcera to bring new pain medication for dogs to the market. The company also collaborated with Pfizer on companion diagnostic test to select patient candidates for novel investigational non-small cell lung cancer therapy. In September 2009, the company received its European approval for once-daily dosing of Kaletra (lopinavir/ritonavir) tablet and the FDA approval for first fully automated blood screening test for HIV-1/HIV-2. Abbott completed the acquisition Visiogen, expanding its vision care portfolio in October 2009. In the following month, the company acquired Evalve one of the leaders in Minimally Invasive Cardiac Valve Repair Technology. During November 2009, the company entered into an agreement to acquire Novel Investigational Biologic to treat chronic pain. During January 2010, the company's product XIENCE V was approved in Japan and the company received the European Regulatory approval for new ovarian cancer diagnostic test. In the following month, Abbott and Pierre Fabre entered into collaboration to research and develop novel treatments for cancer. Later in February 2010, the company completed the acquisition of Solvay Pharmaceuticals for $6.2 billion. In March 2010, Abbott enhanced its pharmaceutical pipeline with the acquisition of Facet Biotech. The company received the FDA approval for its new Cataract Multifocal Intraocular Lens. Abbott purchased STARLIMS Technologies one of the leaders in laboratory information management systems. In the following month, Abbott completed the acquisition of Facet Biotech Towards the end of April 2010, the FDA-approved once-daily dosing of Kaletra for adult patients with HIV who have previously taken antiretroviral therapy. In the following month, Abbott opened its Asia Pacific Nutrition Research & Development Center in Singapore. Further in May 2010, Abbott licensed from Zydus Cadila of India a portfolio of pharmaceutical products to commercialize in 15 emerging markets. Abbott poised to become the leading pharmaceutical company in India via the May 2010 acquisition of Piramal's Healthcare Solutions business (Domestic Formulations), a leading company in the Indian branded generics market, for an up-front payment of $2.12 billion.

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Merck & Co.

Company overview
Merck is a research-driven Big Pharma company. The company is engaged in the research, manufacturing and marketing of drugs and pharmaceuticals. The company's products include therapeutic and preventive agents, and vaccines. The company completed its merger with Schering-Plough in November 2009. Merck & Co. is headquartered in Whitehouse Station, New Jersey, and employed about 100,000 people as of December 31, 2009. Merck recorded revenues of $27,428.3m during FY2009, an increase of 15% over FY2008. The operating profit of the company was $15,291.8m during FY2009, an increase of 54% over 2008. The net profit was $12,901.3m in FY2009, an increase of 65.2% over 2008.
Merck & Cos products include therapeutic and preventive agents, and vaccines generally sold by prescription for the treatment of human disorders and animal health supplies. The company manages its operations on a product basis and its products are comprised of one segment: pharmaceutical. This segment includes human health pharmaceutical and vaccine products marketed either directly by the company or through joint ventures. Human health pharmaceutical products consist of prescription therapeutic and preventive agents for the treatment of human disorders. Merck & Co. sells its human health pharmaceutical products primarily to drug wholesalers and retailers, hospitals, government agencies and managed healthcare providers such as health maintenance organizations, pharmacy benefit managers and other institutions. Merck & Co's vaccine product portfolio comprises preventive pediatric, adolescent and adult vaccines, primarily administered at physician offices. The company sells these human health vaccines primarily to physicians, wholesalers, physician distributors and government entities. The majority of pediatric and adolescent vaccines are sold to the US Centers for Disease Control and Prevention Vaccines for Children program, which is funded by the US government. The company's clinical pipeline includes candidates in multiple disease areas, including anemia, atherosclerosis, cancer, diabetes, heart disease, hypertension, infectious diseases, inflammatory/autoimmune diseases, migraine,
neurodegenerative diseases, ophthalmics, osteoporosis, psychiatric diseases, respiratory disease and women's health. The company also has animal health operations that discover, develop, manufacture and market animal health products, including vaccines. Additionally, Merck & Co has consumer healthcare operations that develop, manufacture and market over-the-counter (OTC), footcare and suncare products in the US and Canada.

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Impressive recent record of R&D productivity, gaining approval for more than 10 new therapeutics since 2006
Over the past few years, Merck & Co. has been prolific regarding New Drug Application (NDA) regulatory submissions and subsequent product launches. New drug approvals since 2005 are ProQuad (2005), RotaTeq (2006), Zostavax (2006), Gardasil (2006), Januvia (2006), Zolinza (2006), Janumet (2007) and Isentress (2007). In addition, Fosamax Plus D (2005) and Emend IV (2008) have been approved. Given the barriers to sales growth faced by Merck & Co. in recent years, primarily the loss of patent expiry for Zocor and the withdrawal of, coupled with the company's exposure to generic competition anticipated out to 2013, the ability of Merck & Co. to deliver products from its late-stage R&D pipeline will remain crucial. Furthermore, in recent years Merck & Co. has continued to demonstrate an ability to deliver first to market launches, thereby enhancing a potential competitive advantage over other would-be-market entrants, with this trait exemplified by the Gardasil, Januvia/Janumet and Isentress franchises in particular. Pre-eminent position in the vaccine market alongside Sanofi Pasteur
Merck & Co.'s strong demonstration of late-stage R&D pipeline productivity has also proven crucial in enhancing the company's ever-important vaccines portfolio. ProQuad, RotaTeq and Zostavax all represent key vaccine launches over the past few years, although in terms of revenue yield Gardasil is the stand-out product. Given the commercial potential of Gardasil, as demonstrated by blockbuster revenues recorded in its second year on the market, this product is one that threatens to revolutionize the global vaccine market, thereby enhancing Merck & Co.'s status as a leading player in this technology area. Completion of Schering Plough mega merger elevates Merck back into the top three prescription pharma players
The addition of Schering-Plough will broaden the scope of Merck & Co.'s commercial portfolio with leading franchises in key therapeutic areas, including cardiovascular, respiratory, oncology, neuroscience, infectious disease, immunology and women's health. Merck & Co. is primarily a small molecule company, generating over 80% of 2008 sales from the traditional molecule type. The rest of Merck's pharmaceutical sales are generated from its vaccine operations. Merging with Schering-Plough will bring a portfolio that includes both MAbs (Remicade and its follow-on Simponi, if the company retains rights) and therapeutic proteins (Puregon and Peg Intron). Merck & Co. is expected to reduce its dependence on a single market, as Schering-Plough generates about 70% of its revenue outside of the US, including more than $2 billion in annual revenue from emerging markets. The combined manufacturing operations of Merck and Schering-Plough will considerably increase manufacturing capabilities, adding more capacity to support anticipated growth in biologics and sterile medicines. Pipeline greatly enhanced by Schering-Plough merger
The addition of Schering-Ploughs pipeline has enhanced the R&D efforts and pipeline of the combined entity. Merck and Schering-Plough together have high-potential early-, mid- and late-stage pipeline candidates. The merger has doubled the number of potential medicines Merck & Co. has in Phase III development, bringing the total to 18. The large portion of Global Top 10 Pharmaceutical Companies
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Merck & Co.'s pipeline faces generic competition from 2015, meaning the company has an urgent need to bolster its pipeline to fend of generic erosion of its profit margins. Schering-Plough has a complementary respiratory portfolio and expertise to help address this particular patent loss, along with several others.
Weaknesses
Flagship brands including Fosamax exposed to generic competition
Merck & Co. is a leading proponent of the blockbuster-centric growth strategy that has characterized the Big Pharma peer set in recent years. In 2008, the company's individual blockbuster product franchises such as: Singulair ($4.6 billion), Cozaar/Hyzaar ($3.6 billion), Fosamax ($1.1 billion), Januvia ($1.9 billion), Gardasil ($1.1 billion), ProQuad/MMRII/Varivax ($1.4 billion), Vytorin ($1.2 billion) and Zetia ($1.1 billion). Together, Merck & Co.'s blockbuster products accounted for 61% of total prescription pharmaceutical sales in 2008, generating combined revenues of $15.8 billion. Having recently witnessed the generic-driven demise of blockbuster therapeutics Zocor and Fosamax, Merck will be further subjected to the impact of patent expiries as Cozaar/Hyzaar and Singulair lose market exclusivity. Singulairs 2012 patent expiry will initiate a sharp decline in sales, notably in the US market. The overall loss in annual sales for Singulair will be $3.3 billion, making it Mercks biggest growth resistor for the forecast period. The companys popular angiotensin receptor blocker (ARB), Cozaar/Hyzaar, lost patent protection in 2009 and is braced for a sharp decline in the near-term. Overall, annual sales of Mercks leading anti-hypertensive are forecast to fall $2.8 billion between 2009 and 2015 (Datamonitor, PharmaVitae Profile: Merck & Co., June 2010, CSHC1460). The collective impact of these two patent expiries is significant, effectively forcing Merck to look at M&A as a way to reinforce its long-term operating performance.
Opportunities
Significant synergies created by recent mega merger, supplementing ongoing internal restructuring
Significant synergies are expected from the merger of Merck and Schering-Plough, notably through the companies' Zetia/Vytorin joint venture but also in the respiratory and infectious disease therapeutic segments. Similarly, with Merck at risk from sizable generic erosion, Schering-Plough has only a limited expiry threat on the horizon and this will help to soften the blow of Merck's blockbuster patent expiries. Diversification will come in terms of geography, with Schering-Plough boosting Merck's ex-US revenue stream through lucrative brands such as Remicade and PegIntron, and also in terms of therapeutic exposure, with Merck set to gain a significant stronghold in women's health following the merger. A much broader pipeline following the merger should also prove highly beneficial as Merck is facing a relatively dry patch, after having launched seven new drugs over 200608. These strategic factors combined with the economic benefits associated with much higher revenues makes the deal a strong overall fit for Merck. Furthermore, after combining Merck's own restructuring efforts with cost saving initiatives taking place at Schering-Plough, as well as with the additional cost saving opportunities resulting from the merger, Merck can expect to see a significant earnings boost following the merger. Broad late-stage pipeline ready to drive expansion into a number of new disease segments

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In addition to its enhanced presence in the vaccines market, which will position infectious diseases as Merck & Co.'s lead therapy area of focus by 2013, the company has made pronounced moves into the high growth diabetes and oncology markets via its recently launched Januvia/Janumet and Gardasil franchises. Over the course of 200915, an increased presence in these therapy areas will mirror a gradual migration away from the cardiovascular and respiratory markets where Merck & Co. has long competed but which have become increasingly competitive both in terms of me-too branded and generic competition. The company is demonstrating a growing focus on building a cutting-edge biopharmaceutical platform via its acquisitions of Abmaxis, GlycoFi and, most notably, RNA interference specialist Sirna Therapeutics. Nevertheless, while Merck will see little gain from these in the near term, it will continue to capitalize on its leading vaccine portfolio, through which it will gain much needed protection from the generic threat set to undermine its small molecule medications.
Threats
Drug development setbacks and failure to gain approval
Merck's late-stage pipeline has been blunted in recent months by US regulatory setbacks impacting the MK-0524A and MK-0524B compounds, in addition to the termination of a number of other compounds such as taranabant (MK-0364) for obesity. The potential for further setbacks of this type remains a commercial threat to Merck & Co. and this threat will extend to drug development programs inherited from Schering-Plough. Given the overwhelming importance of ScheringPlough's pipeline to the long-term value that Merck will hope to extract from the merger, unforeseen clinical and regulatory failures remain critical threats moving forward. Important programs that may yet be hit with development issues include Saphiris (schizophrenia), boceprivir (hepatitis C) and TRA. Merck will hope to emulate the wave of drug development success stories between 2006 and 2008 and inspire similar levels of success with its handling of Schering-Plough's pipeline, which, in the long-term, could contribute peak annual sales in excess of $5 billion. Loss of anti-TNF franchise after arbitration from Johnson & Johnson
Johnson & Johnson's agreement with Schering-Plough could be a hurdle for the successful completion of the merger, as Merck & Co. must come to an agreement with Johnson & Johnson over the future of Schering-Plough's current licensing agreement for Remicade (infliximab), a rheumatoid arthritis drug. Remicade generated 16% of Schering-Plough's sales in 2008, and was also Johnson & Johnson's top-selling drug. Under the standing agreement, Johnson & Johnson will gain full rights to Remicade, as well as another drug, golimumab, which is pending approval in Europe, if Schering-Plough is sold. To avoid this potential loss of blockbuster product sales, Merck & Co. proposed a reverse merger deal. In which, ScheringPlough will technically acquire Merck & Co., and the combined entity will retain the name Merck & Co. This may attract either a potential law suit by Johnson & Johnson or a counterbid which is uncharacteristic of Johnson & Johnson. If this happens, the combined entity will face significant revenue loss.
Recent developments
In January 2009, the FDA sent the second Complete Response Letter to Merck & Co., regarding the Gardasil supplemental Biologics Licensing Application (sBLA), requesting additional data from the 48-month study. In the following month, Merck & Co. signed an agreement with Insmed to purchase Insmed's portfolio of follow-on biologic therapeutic candidates and its commercial manufacturing facilities located in Boulder, Colorado, for $130m in cash. The purchase would help Merck & Co. to enter the follow-on biologics market. Global Top 10 Pharmaceutical Companies
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In June 2009, Merck & Co. and AstraZeneca formed a collaboration to research a novel combination anticancer regimen composed of two investigational compounds, MK-2206 from Merck and AZD6244 from AstraZeneca. Both companies agreed to evaluate co-administration of the compounds in a Phase I clinical trial for the treatment of solid cancer tumors and also to share all development costs jointly. In the following month, Merck & Co. in-licensed Portola Pharmaceuticals' betrixaban, an investigational oral Factor Xa inhibitor anticoagulant currently in Phase II clinical development for the prevention of stroke in patients with atrial fibrillation. Merck & Co. received a favorable verdict in the Singulair patent infringement suit against Teva in August 2009. The US court issued an injunction blocking the approval of Teva's generic versions until the August 2012 expiration of the patent. In September 2009, Merck & Co. commenced the international (ex-US) launch of Saflutan (tafluprost) for the reduction of elevated intraocular pressure. In the same month, the Wellcome Trust and Merck & Co. created the MSD Wellcome Trust Hilleman Laboratories, a non-profit R&D joint venture to focus on developing affordable vaccines to prevent diseases that commonly affect low-income countries. Merck & Co. completed the divestment of its stake in Merial, an animal health joint venture, to its partner Sanofi-Aventis, for $4 billion in September 2009. Towards the end of the month, Merck & Co., and Qiagen, a molecular diagnostic company, initiated a collaboration to increase access to human papillomavirus vaccination and human papillomavirus DNA testing in some of the most resource-poor areas of the world. Merck & Co. obtained the US marketing rights to CSL Biotherapies' Afluria (influenza virus vaccine), for the 2010/112015/16 flu seasons. In October 2009, the company's Gardasil received FDA approval for use in males aged nine to 26 years for the prevention of genital warts caused by human papillomavirus types 6 and 11. Merck & Co. and Schering-Plough completed their merger in November 2009. As per the terms of the agreement, Schering-Plough changed its name to Merck. Schering-Plough shareholders received 0.5767 shares of the newly combined company and $10.50 in cash for each share of Schering-Plough. Each Merck common share automatically became a common share of the newly combined company. The combined entity has a diversified portfolio of prescription medicines, vaccines and animal and consumer health products, and a late-stage pipeline with more than 20 candidates in a variety of therapeutic categories. In December 2009, the FDA granted marketing approval for the company's Zegerid OTC (omeprazole 20mg/sodium bicarbonate 1,100mg capsules), for OTC treatment of frequent heartburn. In the same month, Merck & Co. signed an agreement to acquire the biologics business of the Avecia group, a privately owned provider of contract development and manufacturing services in the fields of microbial-derived biopharmaceuticals and oligonucleotide medicines. Elonva (corifollitropin alfa injection) received European marketing approval in January 2010 for controlled ovarian stimulation in combination with a GnRH antagonist for the development of multiple follicles in women participating in an assisted reproductive technology program. In March 2010, AstraZeneca announced its decision to exercise the option to obtain Merck's interest in AstraZeneca's nonproton pump inhibitor (non-PPI) products: Atacand, Lexxel, Plendil and Entocort, plus certain products currently in clinical development, for a payment of $647m in 2010. As a result of this decision, AstraZeneca will have an option to acquire Merck's interest in the PPI products, including Nexium, in 2012, or later, under certain circumstances.

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Also in March 2010, Sanofi-Aventis exercised its option to combine Merial with Intervet/Schering-Plough, Merck & Co's animal health business. The new joint venture will be equally owned by Merck & Co. and Sanofi-Aventis. Two months later, Merck & Co. and Glenmark Pharmaceuticals reached an agreement to settle their patent litigation involving Glenmark's challenge to Merck's patent covering Zetia (ezetimibe). Under the agreement, Glenmark will be able to launch its generic version of Zetia on December 12, 2016 or earlier under certain circumstances, ahead of the April 25, 2017 expiration of Merck's patent exclusivity for Zetia.
The FDA granted marketing approvals in June 2010 for GlaxoSmithKline/Merck & Cos Staxyn (vardenafil HCI), an orally disintegrating tablet indicated for the treatment of erectile dysfunction (ED), and for Mercks Dulera (mometasone furoate and formoterol fumarate dihydrate) Inhalation Aerosol, a new fixed-dose combination asthma treatment for patients 12 years of age and older. Later in June 2010, Merck expanded its business in South Africa by forming a strategic collaboration with Adcock Ingram, a publicly held South African company, to co-promote and distribute a number of established Mercks products in the country.

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Company overview
Eli Lilly primary focuses in the therapeutics areas of neuroscience, endocrinology, oncology, cardiovascular and animal health. The company markets products in approximately 143 countries. The company is headquartered in Indianapolis, Indiana, and employed 39,377 people as of March 2010. Eli Lilly recorded revenues of $21,836m during FY2009, an increase of 7.2% over FY2008. The increase was mainly due to higher sales of Alimta, Cymbalta, Humalog, Zyprexa and Erbitux. The operating profit of the company was $5,587.3m during FY2009, as compared to the operating loss of $1,281.5m in FY2008. The net profit of the company was $4,328.8m in FY2009, as compared to the net loss of $2,071.9m in FY2008.
Eli Lilly offers its products primarily in four therapy areas: central nervous system and related diseases; endocrine diseases, including diabetes, obesity, and musculoskeletal disorders; cancer; and cardiovascular diseases. The neurosciences division accounts for nearly 40% of the company's revenues. It primarily relies on the sales of Zyprexa, Prozac, Strattera, Cymbalta, Symbyax and Zyprexa Relprevv. Eli Lilly has a strong diabetes portfolio. The company's most successful endocrine product is Humulin (human insulin), produced through recombinant DNA technology. Similar to this is Humalog, a rapid-acting injectable human insulin analog of recombinant DNA origin. Byetta is for the treatment of type 2 diabetes. Also of note is Evista, a selective estrogen receptor modulator product for the prevention and treatment of osteoporosis in postmenopausal women. In addition, it offers Forteo for the treatment of osteoporosis in postmenopausal women and men, and Humatrope for the treatment of human growth hormone deficiency and certain pediatric growth conditions. The company's products in the cardiovascular therapy area include: Cialis for the treatment of erectile dysfunction; Effient for the reduction of thrombotic cardiovascular events (including stent thrombosis) in patients with acute coronary syndrome; ReoPro for use as an adjunct to percutaneous coronary intervention; and Xigris for the treatment of adults with severe sepsis at high risk of death. The company's oncology therapy includes Gemzar, indicated for the treatment of pancreatic cancer, metastatic breast cancer, non-small cell lung cancer, and advanced or recurrent ovarian cancer; and in the European Union for the treatment of bladder cancer; and Erbitux, indicated both as a single agent and with another chemotherapy agent for the treatment of certain types of colorectal cancers, and as a single agent or in combination with radiation therapy for the treatment of certain types of head and neck cancers. Also in this therapy area is Alimta, indicated for the first-line treatment, in combination with another agent, of non-small cell lung cancer for patients with non-squamous histology; for the second-line treatment of non-small cell lung cancer; and in combination with another agent, for the treatment of malignant pleural mesothelioma. The other pharmaceuticals category includes anti-infectives, primarily Vancocin and Ceclor, and other miscellaneous pharmaceutical products and services. Eli Lilly's Elanco Animal Health division markets products worldwide primarily to cattle, poultry, and swine producers. The division's current product lines concentrate on four therapeutic classes: anti-bacterials, parasiticides, anti-coccidials and

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productivity enhancers. Its products include Rumensin, Tylan, Posilac, Coban, Apralan, Apralan, Surmax and Pulmotil. It also offers two products for dogs: Comfortis, a chewable tablet that kills fleas and prevents flea infestations on dogs, and Reconcile, for treatment of canine separation anxiety in conjunction with behavior modification training.

Cymbalta, Alimta and Cialis are positioned as robust near-term sales drivers
Several of Eli Lillys key near-term growth drivers have been on the market for a number of years and are associated with clear prescription trends. Furthermore, sales of the products are set to benefit from development for additional indications. Cymbalta is forecast to provide $928m sales growth over 200912, before facing genericization. It is an antidepressant in serotonin and noradrenergic reuptake inhibitor (SNRI) class, within which fewer generic alternatives are available. Increasing sales of the product are expected to be driven by greater use for both existing approved and expanded indications. Cymbalta was approved for major depressive disorder (MDD) and diabetic peripheral neuropathic pain (DPNP) in the US in 2004. More recently, approval was gained for generalized anxiety disorder (GAD) in February 2007 and for fibromyalgia in the US in May 2008. A supplemental New Drug Application (sNDA) for chronic pain was re-submitted in the US in the first half of 2009. A US Food and Drug Administration (FDA) Advisory Committee is expected to discuss the application in H2 2010, with an approval decision following shortly afterwards. The availability of generic copies of SNRI class rival Effexor XR in the US from July 2010 remains a concern, although Cymbalta is somewhat differentiated by its mechanism of action and more favorable side effect profile. In terms of direct generics, Cymbalta is expected to remain patent protected in the EU until 2012 and US until December 2013 (assuming a pediatric extension is granted). Cancer treatment Alimta is forecast to generate gains of $1.5 billion over 200914, driven by strong uptake in existing indications and further label expansion (Datamonitor, PharmaVitae Profile: Eli Lilly and Company, July 2010, CSHC1463). Launched for the treatment of MPM, Alimta was subsequently approved for non-small cell lung cancer (NSCLC). Generic competition is not anticipated in major markets until December 2015. Cialis was co-developed, but full rights were subsequently gained through the acquisition of ICOS. It is forecast to provide further uplift of $109m overall across 2009 15. A once-daily formulation was launched in the US in January 2008 and, through partners, it is also in development for extended indications. As such, the future of these key products appears well defined. Leading position in the diabetes market
Eli Lilly is one of the dominant players in the global diabetes market. There is a high degree of physician loyalty in this therapy area, with individual patients often taking several different treatments daily. As such, the company is well placed to introduce new products and drive uptake by bundling with current high sellers. Actos was initially co-marketed with Takeda in the US, EU and a number of RoW territories, although Takeda opted to regain full US rights in April 2006. This was offset by the growth of Byetta, which launched in 2005 and is co-marketed with Amylin in the US. Byetta sales growth through 2008 and 2009 was disappointing due to competition from oral dose alternatives and side effect concerns. Looking forward, Bydureon was filed as planned in the US in May 2009, with an EU submission anticipated in Q2 2010. While Byetta requires twice-daily injections, the longer-acting version is required only once-weekly. Sales of Bydureon are expected to benefit from Eli Lillys presence in diabetes and physicians experience with Byetta. This is particularly

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important given the forecast role of Bydureon as a key growth driver for the company (including collaboration/other revenue). With a strong position in diabetes, Eli Lilly represents an attractive partner, helping to secure in-licensing deals. Most recently, Eli Lilly agreed to co-develop Macrogenicss novel anti-CD3 MAb, teplizumab, which is currently in Phase II/III development and set to launch in 2014. Increasing geographic and therapeutic diversification
In 2003, Eli Lilly was highly reliant upon both the US market and the central nervous system (CNS) therapy area. This related largely to the success of Zyprexa; the US accounts for a disproportionately high share of global antidepressant and antipsychotic drug sales. Across 200309, the companys therapeutic focus diversified somewhat due to the rise of new launches in the oncology and genitourinary (GE) therapy areas. The growth of these products, in addition to the inferior performance of Zyprexa in the US, also drove a shift in geographic focus towards the five major EU markets (France, Germany, Italy, Spain and the UK) and Rest of World regions. Looking beyond 2009, these trends are set to continue, strengthening Eli Lillys strategic positioning. With a more balanced geographic spread, it will be better placed to exploit the areas offering the greatest prospects for growth. Furthermore, with a lower proportion of sales derived from the US, the company will be less exposed to the high rates of generic erosion associated with this market. A broader therapeutic reach has also significantly improved Eli Lillys standing. Through Alimta and, more recently, Erbitux, the company is set to derive an increasing proportion of sales from oncology. This will be further supplemented by new launches in 2013 and beyond, particularly those brought in by ImClone. Synergies will allow Eli Lilly to maximize returns and in-licensing opportunities will be facilitated by a greater commercial presence. Significant capabilities in biologics
Small molecule drugs have historically accounted for the bulk of Eli Lillys prescription pharmaceutical sales, in part due to a core focus on CNS disorders. However, the company has maintained a relatively consistent share of sales from therapeutic proteins through its presence in diabetes. Over recent years, Eli Lilly has invested heavily in increasing its biologics capabilities. This has included building a number of new biotech facilities, and the acquisitions of AME in 2003 and ImClone Systems in 2008. ImClone brought Eli Lilly Erbitux and a number of other MAbs in clinical development. Further biologic products have been in-licensed, including dirucotide from BioMS Medical and teplizumab from MacroGenics. Following disappointing Phase III results, development of dirucotide was discontinued in July 2009. Biologics are forecast to account for just over a third of the company's total pharmaceutical revenue in 2015 (Datamonitor, PharmaVitae Profile: Eli Lilly and Company, July 2010, CSHC1463), and this is set to rise further beyond this time due to the generic erosion of key small molecule drugs against the input from new biologic launches.
Weaknesses
High dependence on sales of Zyprexa and Cymbalta
Zyprexas success is unarguably a strength in terms of the magnitude of sales it has achieved. Generating $4.9 billion in 2009, it accounted for 24.7% of Eli Lillys total prescription pharmaceutical sales and is the companys largest product by a considerable degree. However, the company is therefore highly reliant upon its performance and any significant deviation from forecast sales will have a material impact on the outlook of the company as a whole. This is also the case for Global Top 10 Pharmaceutical Companies
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Cymbalta, for which sales of $3.1 billion in 2009 are forecast to rise to $4 billion in 2012. (Datamonitor, PharmaVitae Profile: Eli Lilly and Company, July 2010, CSHC1463).

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Looming Year Z and Y patent expiries
The absence of further major expiries has facilitated Eli Lillys recovery following the genericization of Prozac from 2001, or Year X. However, the impending loss of US patent protection for Zyprexa in 2011 is known as Year Y, and several additional key products are due to face generic competition in the years immediately thereafter (Year Z). Indeed, generic copies of Cymbalta and Evista are expected to launch in the US across 201314, if not before. The ensuing loss of sales will therefore exacerbate the challenge posed by Zyprexa. Datamonitor considers this sequential boom and bust cycle of small molecule drugs to be typical of that afflicting other Big Pharma companies. While small molecule drugs face a sharp loss of sales following patent expiry, biologic products are somewhat insulated from generic erosion. As such, Eli Lillys strategic moves to increase the proportion of sales derived from biologics will strengthen its position beyond 2015. Insufficient presence in certain therapy areas to market products alone
In order to invest significantly in its pipeline yet also maximize returns from existing products, Eli Lilly has chosen to employ a number of marketing partners. Boehringer Ingelheim was taken on to commercialize Cymbalta for the treatment of stress SUI in regions outside of Japan. Rights to this indication were, however, repurchased by Eli Lilly in December 2005 after the US sNDA was withdrawn. Boehringer Ingelheim also co-promoted of Cymbalta/Xeristar for depression in countries outside of the US and Japan, however, these remaining rights were bought back in Q1 2010. In other areas, Eli Lilly signed an agreement with Sanofi-Aventis in March 2008 to co-market Cialis to US urologists. Further Phase III trials for benign prostatic hyperplasia (BPH) commenced in 2009. In addition, Cialis approved for the treatment of pulmonary arterial hypertension (PAH) in the US, EU and Japan across 2009, as Adcirca. US rights to this indication were out-licensed to United Therapeutics Corporation and Japanese rights to Nippon Shinyaku. Datamonitor considers the use of co-promotion as a cost-effective means of increasing a products impact in the market to be prudent. It does, however, highlight Eli Lillys insufficient presence in these areas and, as such, the company will not benefit from synergies in the way that a company with a greater focus on urology or hypertension perhaps might.
Opportunities
Further expansion of oncology franchise
Until the launch of Alimta in 2004, Eli Lillys oncology portfolio consisted primarily of Gemzar. Global sales of the drug reached $1.7 billion in 2008, up from $1.0 billion in 2003. Following launch for pancreatic cancer in 1996, it subsequently gained approval for settings across NSCLC, breast cancer and ovarian cancer. Sales have subsequently suffered following the arrival of EU generics from Q1 2009 and patent protection is set to end in the US in November 2010. Although sales of Gemzar are therefore forecast to decline, further cancer treatment Alimta will be the companys second largest growth driver over 200915. In keeping with Datamonitors views that oncology represented an opportunity for Eli Lilly, it acquired ImClone Systems at the end of 2008. A number of ImClone pipeline products are in development, with IMC-11F8 and IMC1121B forecast to launch from 2013 and 2014, respectively. Further scope exists to build upon this firm foundation in oncology. The companys expanded presence in the therapy area will help to maximize sales beyond 2015 and would facilitate the in-licensing of additional products. Upside to 'launch' product forecasts

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Better-than-forecast sales across Eli Lillys product portfolio would lift the companys outlook. Although scope exists for a number of already marketed products to exceed forecast sales, Datamonitor considers the potential for upward revision to be greatest with new launches. Additional new products could launch prior to the end of 2015, making some contribution to growth over the period. Sales of Alzheimer's disease candidates solanezumab (LY-2062430) and semagacestat (LY450139) could exceed the level currently forecast, raising the companys outlook. Recent attempts by other companies to develop disease-modifying treatments for Alzheimer's disease have been unsuccessful, with Dimebon, Flurizan and Alzhemed failing to meet primary endpoints in Phase III, while bapineuzumab failed to meet even Phase II targets (although development is ongoing). Unmet needs are, however, such that first full year sales of $500m are considered possible (Datamonitor, Pipeline and Commercial Insight: Alzheimer's Disease, March 2008, DMHC2376). In other areas, Datamonitor has omitted sales for Arxxant (ruboxistaurin) across 200915. An Approvable Letter for diabetic retinopathy was received from the FDA in August 2006 requesting further clinical trials. However, Eli Lilly believed that this would take up to five years and also withdrew its application for this indication in the EU. Phase III trials for macular edema are ongoing and due to be completed in 2010. Successful approval for this indication could lift sales from 2011. Similarly, Datamonitor has not included sales for enzastaurin, which could launch in 2014 (Datamonitor, PharmaVitae Profile: Eli Lilly and Company, July 2010, CSHC1463). Internalize in-licensed products through M&A
Eli Lilly has a history of acquiring its collaboration partners, which account for four of its last six acquisitions. Eli Lilly originally worked with AME in developing the sepsis treatment Xigris (drotrecogin alfa), which was first launched in the US in 2001 and EU in 2002, before subsequently acquiring the company in December 2003. Similarly, a collaboration was formed with ICOS in 1998 to develop and market the erectile dysfunction treatment Cialis. The product was launched in 2003, and in October 2006 Eli Lilly made an offer to acquire the company (completed in January 2007). Outside of human pharmaceuticals, Eli Lilly acquired Ivy Animal Health in June 2007 to bolster its Elanco Animal Health division. The companies had been business partners for the previous 10 years. Two of Eli Lillys largest pipeline products are in-licensed and speculation naturally arises regarding the possibility of the company acquiring the licensors. Effient was co-development with Daiichi Sankyo, while Bydureon is being developed with partner Amylin. In addition to Byetta, Amylin has only one other marketed product, Symlin, which is indicated for the treatment of diabetes. As such, it represents a close fit in terms of therapeutic positioning. Carl Icahn (Icahn Capital) account for a significant proportion of shares in Amylin and ultimately aims for it to be sold (www.istockanalyst.com). Considering Eli Lillys recent signing of wider risk-sharing agreements, against the uncertainty still facing Bydureon, Datamonitor does not consider it likely to acquire Amylin at least until US approval is granted. In other areas, BioMS Medical represented a potentially clean play for full rights to multiple sclerosis treatment dirucotide, however, Phase III results for secondary progressive multiple sclerosis disappointed in July 2009 and development was discontinued. The failure highlights the need for sufficient clinical data prior to acquisition of development stage companies, although higher prices are typically required as risk is removed. Further moves into animal health
Total revenue from Eli Lillys Elanco Animal Health business exceeded the $1.0 billion milestone for the first time in 2008. Eli Lilly has maintained investment in this division, acquiring Ivy Animal Health in July 2008 and Monsantos Posilac dairy business in August 2008. Across 200208, Elanco recorded revenue growth at a compound annual growth rate (CAGR) of

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7.9%. While this represented an underperformance compared to Eli Lillys prescription pharmaceutical sales, the situation is set to reverse out to 2014, with Elanco lifting the overall performance. Eli Lilly estimated Elanco to be positioned as the fifth largest global animal health company at the end of 2008 (Eli Lilly investor update, December 2008). In March 2010, Eli Lilly agreed to acquire EU rights to a portfolio of Pfizer Animal Health products including vaccines, parasiticides and feed additives, as well as a manufacturing facility in Sligo, Ireland, which is currently used in the production of animal vaccines. The EU Commission had requested that Pfizer divest the products as a result of its acquisition of Wyeth and Fort Dodge Animal Health subsidiary. As such, Eli Lilly could capitalize on this strong position through further investment in Elanco. Later in March 2010, Eli Lilly was reported to have stated an interest in acquiring assets that may be offered for sale following plans by Sanofi-Aventis and Merck & Co. to combine their animal health units in a joint venture (www.ibj.com). The joint venture would push Elanco into being the fourth largest global animal health business. Pediatric extension for Cymbalta
Cymbalta is forecast to generate global sales of $4.0 billion in 2012 and the loss of sales following patent expiry will be on the scale of that for Zyprexa. Any strategies to delay or slow generic erosion would have a direct benefit on the company as a whole. The US market is expected to account for 74.1% of the products global sales in 2012 (Datamonitor, PharmaVitae Profile: Eli Lilly and Company, July 2010, CSHC1463). Despite launching in the US in 2004, it has not been approved for pediatric use. Phase III trials assessing pediatric use of Cymbalta for depression are ongoing, with final data expected in 2012 (www.clinicaltrials.gov). Other antidepressants, including other SNRI class member Effexor, have been granted pediatric extensions, raising the possibility of US patent expiry being pushed back by six months to December 2013. However, the FDA has issued a number of warnings regarding the association of antidepressant use with suicidal thoughts in children and adolescents. As such, approval may not be given.
Threats
Disappointment with key launch products, Effient and Bydureon
As detailed in the strategic insight section above, Eli Lillys outlook is highly dependent upon the successful commercialization of Zyprexa Relprevv, Effient and Bydureon in particular. Together, the products are forecast to contribute $3.9 billion to total revenue in 2015 (including prescription pharma and collaboration revenue). Recent approvals have gone some way towards de-risking this key group, with both Zyprexa Relprevv and Effient having launched in the US. Zyprexa Relprevv builds upon the success of Zyprexa and enters the established injectable antipsychotics market. As such, Datamonitor considers forecasts sales to be relatively robust. The market for Effient is, however, less clear. Concerns exist regarding the acceptability of side effects in relation to its efficacy. In addition, forecast sales will ultimately also be dictated by the products ability to capture market share against current gold standard Plavix and other potential new entrants such as AstraZenecas Brilinta. In the case of Bydureon, Datamonitor has conservatively assumed that launch will not occur in the EU and US until 2011 and 2012, respectively. As such, the risk of events falling short of expectations is reduced and a favorable FDA decision in October 2010 would result in forecast sales being revised upwards. Earlier than forecast generic erosion
Although Datamonitor has conducted a review of patent protection relating to Eli Lillys products, it is possible that challengers may succeed in launching generic copies earlier than has been assumed. Barr first filed an ANDA for generic

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Evista with Paragraph IV certification, and a 30-month stay was initiated. Teva also filed a patent challenge, but acquired Barr in December 2008. A preliminary injunction was subsequently ordered, preventing Teva from launching its copy of the product until the court made its final ruling. Although formulation patents due expire in 2017 were invalidated, the court upheld method-of-use patents, the last of which run until 2014. Teva may appeal the decision. Datamonitor has forecast US sales of Evista to suffer generic erosion from March 2014, however, if some or all of the method-of-use claims are revoked, generic copies may enter the market at an earlier time. Following an unfavorable court outcome for Eli Lilly, generic copies of Gemzar have been forecast to launch in the US from November 2010. As a result, earlier generic availability is no longer a threat. Patent challenges are ongoing against other key products. Datamonitor considers it unlikely that the compound of matter patents for Cymbalta or Alimta would be invalidated. The US court case relating to generic copies of Alimta is set to take place in November 2010. Generic copies of Strattera have been forecast to launch at risk in the US from late 2010. It remains possible that generics will not become available until a later court date, or in the event of a successful outcome for Eli Lilly, after expiry of use patents relating to the product in 2017. Distraction from unwanted bid interest
The major patent expiries and ensuing revenue shortfall facing Eli Lilly will weigh heavily on the minds of investors. Falls in the companys market capitalization as a result of this negative outlook expose it to a greater risk of being targeted for M&A activity. Indeed, although CEO John Lechleiter appears to be against the idea of a mega-merger, a hostile approach could potentially be made (online.wsj.com). The unwanted interest from a suitor would prove to be a significant distraction from Eli Lillys current strategic aims. In addition, it could also result in shareholders being bought out at a low price compared to the companys longer-term intrinsic value.
Recent developments
In February 2009, the EC granted marketing authorization for Lilly and Daiichi Sankyo's Efient (prasugrel) for the prevention of atherothrombotic events in patients with acute coronary syndrome undergoing percutaneous coronary intervention (PCI). In the following month, the FDA granted US marketing approval for a new indication for Symbyax (olanzapine and fluoxetine HCl capsules), making it the first drug approved for the acute treatment of treatment-resistant depression. Lilly and Medtronic forged an alliance in May 2009 to co-market their products insulin, insulin pump therapy and continuous glucose monitoring for diabetes management. In the following month, Eli Lilly resubmitted its sNDA to the FDA for Cymbalta (duloxetine HCl) for the management of chronic pain. In July 2009, the FDA approved Alimta as a maintenance therapy for locally advanced or metastatic NSCLC, specifically for patients with a non-squamous histology whose disease has not progressed after four cycles of platinum-based first-line chemotherapy; and Effient (prasugrel) tablets for the reduction of thrombotic cardiovascular events (including stent thrombosis) in patients with acute coronary syndrome who are managed with PCI. In the same month, the EC approved Alimta as a monotherapy for maintenance treatment of patients with other than predominantly squamous cell histology in locally advanced or metastatic NSCLC, whose disease has not progressed immediately following platinum-based chemotherapy. In the same year, the FDA approved a new use for Forteo to treat osteoporosis associated with sustained, systemic glucocorticoid therapy in men and women at high risk of fracture.

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The company announced initial results from a Phase III clinical trial for arzoxifene in August 2009. After reviewing the overall clinical profile of arzoxifene in light of currently available treatments, including its own osteoporosis products, Lilly decided not to submit the compound for regulatory review. In October 2009, Lilly sold its Tippecanoe Laboratories manufacturing facility to Evonik Industries. In the following month, the FDA approved Lilly's Cymbalta (duloxetine HCl) for the maintenance treatment of generalized anxiety disorder (GAD) in adults. The FDA approved Zyprexa (olanzapine) in tablet form as an option for the treatment of schizophrenia and manic or mixed episodes associated with bipolar I disorder in adolescents aged 1317 years old, and Zyprexa Relprevv (olanzapine) for treatment of schizophrenia in adults in December 2009. In the same month, Lilly and Incyte collaborated for development and commercialization of oral anti-inflammatory and autoimmune therapies. In the same month, the company entered into a co-promotion agreement with Kowa Pharmaceutical America to commercialize Livalo (pitavastatin) in the US. Lilly and Kowa also entered into a licensing agreement in Latin America. In March 2010, Lilly signed an agreement to acquire the European rights to a portfolio of certain Pfizer Animal Health products. In the same month, Lilly and Acrux entered into an exclusive worldwide license agreement for the potential commercialization of Acrux's experimental underarm testosterone solution (proposed trade name Axiron). Walmart and Lilly teamed up in June 2010 to provide Lilly's Humulin brand of insulin in Walmart pharmacies across the US. In the following month, Lilly completed the acquisition of Alnara Pharmaceuticals, a privately held company developing protein therapeutics for the treatment of metabolic diseases, for an upfront payment of $180m. In August 2010, Lilly halted the development of semagacestat, a gamma secretase inhibitor being studied as a potential treatment for Alzheimer's disease, because preliminary results from two ongoing long-term Phase III studies showed that it did not slow disease progression and was associated with worsening of clinical measures of cognition and the ability to perform activities of daily living.

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Bristol-Myers Squibb Company

Company overview
Bristol-Myers Squibb was formed by the merger of Bristol Myers and Squibb Pharmaceuticals in 1989, a move which at the time created the world's second largest drug company. The company is engaged in the discovery, development, licensing, manufacturing, marketing, distribution and sale of pharmaceutical products on a global basis. The company is headquartered in New York City, New York, and employed 28,000 people as of December 2009. Bristol-Myers Squibb recorded revenues of $18,808m during FY2009, an increase of 6.2% over FY2008. The increase was primarily due to the growth in the sales of Plavix and Abilify. The operating profit of the company was $4,420m during FY2009, an increase of 19.9% over FY2008. The net profit was $11,862m in FY2009, an increase of 90% over FY2008.
Bristol-Myers Squibb, through its divisions and subsidiaries, sells its products worldwide, primarily to wholesalers, retail pharmacies, hospitals, government entities and the medical profession. It manufactures products in the US, Puerto Rico and in eight foreign countries. Bristol-Myers Squibbs pharmaceutical products include chemically synthesized drugs, or small molecules, and an increasing portion of biological products. The primary therapeutic areas that are addressed include: cardiovascular; virology, including human immunodeficiency virus (HIV) infection; oncology; neuroscience; immunoscience and metabolics. The company has entered into a number of agreements with other pharmaceutical companies for its currently marketed products and investigational compounds, including Sanofi-Aventis, Otsuka, Eli Lilly, AstraZeneca, ZymoGenetics and Pfizer.

Continued dominance of Plavix ensures sizable profit margins through to 2011
The ruling to uphold Plavix US market exclusivity was a crucial one in determining the fate of Bristol-Myers Squibb for the next few years. With annual revenues from Bristol-Myers Squibb's Plavix territories set to peak at more than $6 billion, the contribution from Plavix to Bristol-Myers Squibb's earnings position will remain as vital as ever. By driving such a significant proportion of Bristol-Myers Squibb's earnings, the continued dominance of Plavix will give Bristol-Myers Squibb the financial security to focus on its restructuring efforts and help the company deliver on its cost cutting targets and its long-term objective of becoming a leading biopharmaceutical player.

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Core growth expected across infectious disease, oncology and autoimmune markets
In Erbitux (onco), Ixempra (onco), Sprycel (onco), Orencia (I&I), Baraclude (ID) and Atripla (ID), Bristol-Myers Squibb has successfully engineered impressive near-term growth expectations across ID, oncology and I&I therapeutics markets, the success of which will form the foundation for Bristol-Myers Squibb's long-term efforts. In the absence of generic competition, the contribution from these recently rolled-out medications will continue to grow over the six years spanning the forecast window and, through many of these offerings, Bristol-Myers Squibb will greatly enhance its market share in lucrative clinical segments with high levels of unmet need. Expansive collaborative network with companies at all levels of pharma industry spectrum
Bristol-Myers Squibb has a long-standing reputation for collaboration. This covers a range of externalization strategies with companies sat at varying levels of the pharmaceutical spectrum. In-licensing deals have been a particularly successful route of commercial expansion for the company, allowing it to leverage strong promotional positions, particularly that within its key US market. One such example, the deal struck for the antipsychotic Abilify with private Japanese firm Otsuka Pharmaceuticals, gave Bristol-Myers Squibb a robust opportunity to penetrate the CNS market from which it has enjoyed blockbuster revenues since 2006. Bristol-Myers Squibb has also developed strong licensing agreements with start-up companies and institutions, such as its recently launched epothilone B analog, Ixempra, which it licensed from the German Research Centre for Biotechnology. Bristol-Myers Squibb utilized its strong reputation within the oncology segment to gain access to this exciting therapeutic prospect and has continued to explore similar deals that are in keeping with its business strategy. To this end, it also had a licensing agreement for developmental epothilone compounds with Kosan Biosciences, an arrangement that Bristol-Myers Squibb recently decided to solidify through M&A. Bristol-Myers Squibb continuing propensity towards partnerships is a clear strength given the increasing costs and therefore risks associated with development and marketing of new drugs, costs that can be reduced through such collaboration. The most recent alliances forged by Bristol-Myers Squibb include one with Pfizer for the antithrombotic apixaban and another with AstraZeneca for two new antidiabetics, Onglyza (saxagliptin) and dapagliflozin. Datamonitor believes that the sheer weight of parties involved in these deals will propel the development programs towards commercial success provided clinical results support their use. Similarly, the support from two of the largest ethical pharma players in maturing markets will allow Bristol-Myers Squibb to hone its commercial focus on the specialty markets targeted by its biopharmaceutical corporate strategy.
Weaknesses
Dependency on Plavix and Avapro/Avalide
Bristol-Myers Squibb is heavily exposed to the fortunes of its blockbuster medications. The company has twice already felt the impact of blockbuster generic competition after its $2 billion antidiabetic franchise, Glucophage, lost patent protection in 2002 and the statin Pravachol lost US patent protection in 2006. The subsequent generic erosion placed significant pressure on the company's financial position and although the company quickly recovered from these downturns, it remains exposed to the fortunes of its flagship pharmaceutical offerings. At present, more than 40% of Bristol-Myers Squibb's

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pharmaceutical revenues are tied up in bestsellers Plavix and Abilify, two blockbuster offerings that are expected to see significant sales declines over the forecast window. Although Bristol-Myers Squibb is addressing this issue of blockbuster revenue exposure through an impressive biopharmaceutical growth strategy, the company's pharmaceutical revenue stream remains influenced by these flagship offerings.
Opportunities
Emerging presence in biologics
Motivated by the magnitude of its small molecule patent expiry exposure, Bristol-Myers Squibb has made significant strides in the biopharmaceutical segment, investing heavily in its internal R&D capabilities as well as establishing licensing agreements with a range of biotech firms. Although its fast-maturing small molecule portfolio will remain the most dominant source of revenues, Bristol-Myers Squibb will look towards its growing biologic offering in order to propel its presence in disease areas possessing high levels of unmet need. Having already secured market entry for two of its main biologic therapeutics, Erbitux and Orencia, Bristol-Myers Squibb is expected to launch a further two new biologic drugs over the forecast window, a therapeutic protein for organ rejection, belatacept, and a human monoclonal antibody (MAb) for melanoma, ipilimumab. These will help boost biopharmaceutical sales alongside the company's existing biologic offering, which comprises the rheumatoid arthritis fusion protein therapy Orencia and the anti-cancer MAb Erbitux, both of which are expected to show strong growth over the forecast period. Free from the threat of generic competition, Bristol-Myers Squibb's therapeutic protein offering is projected an increase in annual sales of $1.3 billion through greater uptake across the autoimmune disorder segment, while its MAb offering is forecast to secure annual sales growth of $406m between 2008 and 2014 through increased penetration of the increasingly MAb-dominated cancer market. This growth contribution is particularly important considering the generic threat facing Bristol-Myers Squibb's dominant small molecule portfolio. Construction of a new biologic manufacturing facility will support the company's heightened biopharma focus and should, alongside its strong reputation as a collaborator, open further opportunities in biopharmaceutical development. A recent move to acquire biotech developer Medarex will further heighten Bristol-Myers Squibb's biopharmaceutical platform while equipping it with intellectual property for a number of promising biologic candidates. Capital raised from the sale of Mead Johnson can be reinvested in long-term growth opportunities
The company successfully completed its initial public offering (IPO) of Mead Johnson in February 2009, in what was the largest floatation in the US for 10 months. The IPO raised net proceeds of $780m, which Bristol-Myers Squibb will allocate to minority interest. Bristol-Myers Squibb now holds an 83.1% interest in Mead Johnson and will continue to consolidate sales of the nutritionals business for financial reporting purposes. The possibility remains that Bristol-Myers Squibb will sell off its entire stake in Mead Johnson. As with its ConvaTec and Medical Imaging businesses, private equity remains a prospective bidder. With the capital generated by these divestments Bristol-Myers Squibb, will look to reinvest into its R&D platform, which will then act as a springboard for developing long-term sales growth in pharma.

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Threats
Unforeseen regulatory setbacks could dampen pipeline potential
Bristol-Myers Squibb has demonstrated impressive levels of R&D productivity in recent years, launching an array of new medications from a pipeline highly focused towards the high growth oncology and I&I therapeutic segments. The company will look to supplement the near-term growth achieved from these new launches with the roll-out of additional new products. While its replenished portfolio is on track to lift annual sales of its core product set by $1.5 billion by 2015, new product launches are set to inject further annual revenues of $4 billion by 2015, therefore collectively making a vital contribution given the negative expectations for Bristol-Myers Squibb's maturing expiry portfolio. The emphasis on Bristol-Myers Squibb being able to deliver these clinical programs to market is apparent and while its recent record would suggest a positive outcome, any failure to gain approval would be detrimental to its long-term operating profit stance Restructuring efforts have left the door open for hostile acquisition attempts from larger Big Pharma peers
Bristol-Myers Squibb has been working to reduce costs and shed less profitable and non-core businesses. Underlying this effort, the company has recently executed a range of non-pharmaceutical divestments, selling off ConvaTec in 2008 and Medical Imaging in 2007, both to private equity buyers. Bristol-Myers Squibb has also recently separated its nutritionals business unit, Mead Johnson, from its dominant pharmaceutical business, a move which moves Bristol-Myers Squibb move closer to being a company that operates strictly in the realm of pharmaceuticals. Interestingly, the constant threat of generic competition has forced Bristol-Myers Squibb to look at sustaining growth of its more vulnerable pharmaceutical business by divesting its less profitable yet arguably more secure businesses outside of pharma. This increases the possibility of a takeover, with Bristol-Myers Squibbs shelled out business making it the perfect target for some of the larger players within the Big Pharma peer set. AstraZeneca, which is facing up to mega-blockbuster patent expiries of its own, is one such candidate that could step in with a bid for Bristol-Myers Squibb.
Recent developments
Bristol-Myers Squibb continued to form collaborations in January 2009 by signing a worldwide collaboration with ZymoGenetics for PEG-Interferon lambda as a potential treatment for hepatitis C. Mead Johnson Nutrition Company, a subsidiary of Bristol-Myers Squibb, issued its IPO in February 2009. In the following month, Bristol-Myers Squibb formed a global collaboration with Nissan Chemical Industries and Teijin Pharma for the development and commercialization of NTC801, a selective inhibitor of the acetylcholine-activated potassium ion channel (IKACh), for the maintenance of normal sinus rhythm in patients with atrial fibrillation. Bristol-Myers Squibb and Otsuka Pharmaceutical established an oncology collaboration for two Bristol-Myers Squibb products Sprycel (dasatinib) and Ixempra (ixabepilone) in April 2009. In the following month, the FDA granted full approval for Sprycel (dasatinib) for the treatment of adults with chronic myeloid leukemia who are resistant or intolerant to prior therapies including Gleevec.

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During July 2009, the FDA approved Onglyza (saxagliptin) for the treatment of type 2 diabetes mellitus in adults. The company acquired Medarex for approximately $2.4 billion in September 2009. During the same period, Bristol-Myers Squibb sold its over-the-counter (OTC) assets in Asia Pacific (excluding China and Japan) and shares in PT Bristol-Myers Squibb Indonesia Tbk to Taisho Pharmaceutical. In November 2009, Bristol-Myers Squibb announced the split-off its holdings in Mead Johnson Nutrition Company. The FDA approved Abilify (aripiprazole) for the treatment of irritability associated with autistic disorder in pediatric patients (six to 17 years old). In March 2010, Bristol-Myers Squibb obtained exclusive global development and commercialization rights to Allergans AGN-209323, an investigational neuropathic pain medicine, for an upfront payment of $40m. The FDA issued a Complete Response Letter in May 2010 regarding the Biologic License Application for Bristol-Myers Squibbs belatacept in kidney transplantation, requesting the 36-month data from the ongoing Phase III studies to further evaluate the long-term effect of belatacept. .

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FIVE-YEAR FINANCIAL INFORMATION Pfizer

Table 10: Pfizer: financial and operational highlights, 200509 ($m)
Parameters Income statement Total revenue Cost of goods and services Gross profit Operating expense Operating income Net income Balance sheet Total current assets Total assets Total current liabilities Total liabilities Total shareholders equity Cash flow Cash from operating activities
Currency Unit
2009
2008
2007
2006
2005
$ $ $ $ $ $
Million Million Million Million Million Million
50,009.0 (8,888.0) 41,121.0 (30,294.0) 10,827.0 8,635.0
48,296.0 (8,112.0) 40,184.0 (30,490.0) 9,694.0 8,104.0
48,418.0 (11,239.0) 37,179.0 (29,660.0) 9,278.0 8,144.0
48,371.0 (7,640.0) 40,731.0 (28,607.0) 13,028.0 19,337.0
47,405.0 (7,232.0) 40,173.0 (29,373.0) 10,800.0 7,610.0
$ $ $ $ $
Million Million Million Million Million
61,670.0 212,949.0 37,225.0 122,503.0 90,446.0
43,076.0 111,148.0 27,009.0 53,592.0 57,556.0
46,849.0 115,268.0 21,835.0 50,258.0 65,010.0
47,658.0 115,546.0 22,099.0 44,188.0 71,358.0
46,835.0 116,970.0 28,402.0 51,206.0 65,764.0
Million Million Million Million
16,587.0 (31,272.0) 14,481.0 1,978.0
18,238.0 (12,835.0) (6,560.0) 2,122.0
13,353.0 795.0 (12,610.0) 3,406.0
17,594.0 5,101.0 (23,100.0) 1,827.0
14,733.0 (5,072.0) (9,222.0) 2,247.0
Cash from investing activities $ Cash from financing activities Net change in cash Key statistics Total common shares outstanding Year-end share price Market capitalization Enterprise value Number of employees Free cash flow Key ratios P/E ratio EPS EV/EBITDA EV/sales Profitability ratio Gross margin Operating margin Net income margin Resource management Return on equity Return on capital employed Return on assets Financial strength NA NA NA NA NA NA NA $ NA NA NA $ $ $ NA $ $ $
Million Absolute Million Million Absolute Million
8,869.0 17.8 158,134.3 204,879.3 116,500.0 15,382.0
8,863.0 17.3 153,684.4 169,102.4 81,800.0 16,537.0
8,850.0 20.9 184,788.0 194,728.0 86,000.0 11,473.0
8,819.0 22.7 200,455.9 206,823.9 98,000.0 15,544.0
8,784.0 19.7 173,220.5 189,078.5 106,000.0 12,627.0
Absolute Absolute Absolute Absolute
18.3 1.0 13.1 4.1
19.0 0.9 11.4 3.5
22.7 0.9 13.4 4.0
10.4 2.2 11.3 4.3
22.8 0.9 11.5 4.0
% % %
82.2% 21.7% 17.3%
83.2% 20.1% 16.8%
76.8% 19.2% 16.9%
84.2% 26.9% 40.0%
84.7% 22.8% 16.1%
% % %
11.7% 6.2% 5.3%
13.2% 11.5% 7.2%
11.9% 9.9% 7.1%
28.2% 13.9% 16.6%
11.6% 12.2% 6.5%

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Quick ratio Interest coverage ratio Debt to equity ratio Operational efficiency Asset turnover ratio Receivable turnover ratio Inventory turnover ratio Revenue per employee Net income per employee Other Capex to revenues Capex Revenue by division Biopharmaceutical Diversified Corporate/other Revenues by geography US International
NA NA NA
Absolute Absolute Absolute
1.3 NA 0.5
1.4 NA 0.3
1.9 NA 0.2
1.9 NA 0.1
1.5 NA 0.3
NA NA NA $ $
Absolute Absolute Absolute Absolute Absolute
0.3 4.2 1.1 429,261.8 74,120.2
0.4 5.1 1.7 590,415.6 99,070.9
0.4 5.0 2.0 563,000.0 94,697.7
0.4 5.2 1.3 493,581.6 197,316.3
0.4 5.2 1.3 447,217.0 71,792.5
NA $
% Million
2% 1205
4% 1701
4% 1880
4% 2050
4% 2106
$ $ $
Million Million Million
45,448.0 4,189.0 372.0
44,174.0 3,592.0 530.0
44,424.0 3,324.0 670.0
NA NA NA
NA NA NA
$ $
Million Million
21,749.0 28,260.0
20,401.0 27,895.0
21,548.0 25,265.0
NA NA
NA NA
Source: Company-reported information, Datamonitor
DATAMONITOR

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Table 11:
Pfizer: key industry-specific ratios, 200509
Financial ratios Current ratio Quick ratio Net working capital ratio Return on asset Return on equity Net income margin Operating margin (return on sales) Asset turnover ratio Inventory turnover ratio Receivable turnover ratio Debt to equity ratio Interest coverage ratio Dividend per share Earning per share Market to book ratio Price earning ratio Return on capital employed Long-term debt ratio Total debt ratio Dividend yield Dividend payout Enterprise value/EBIT Enterprise value/EBITDA Capex to revenues
2009 1.66 1.32 0.11 5.33% 0.12 17.28% 21.65% 0.31 1.06 4.24 0.54 NA -0.63 0.97 1.75 18.31 0.06 0.25 0.28 -0.04 -0.64 18.92 13.15 2.4%
2008 1.59 1.43 0.14 7.16% 0.13 16.83% 20.07% 0.43 1.68 5.14 0.30 NA -0.96 0.91 2.67 18.96 0.12 0.09 0.21 -0.06 -1.05 17.44 11.44 3.5%
2007 2.15 1.90 0.22 7.06% 0.12 16.91% 19.16% 0.42 1.97 5.03 0.20 NA -0.90 0.92 2.84 22.69 0.10 0.08 0.14 -0.04 -0.98 20.99 13.45 3.9%
2006 2.16 1.88 0.22 16.63% 0.28 40.00% 26.93% 0.42 1.32 5.23 0.11 NA -0.78 2.19 2.81 10.37 0.14 0.06 0.09 -0.03 -0.36 15.88 11.29 4.2%
2005 1.65 1.46 0.16 6.51% 0.12 16.08% 22.78% 0.41 1.32 5.21 0.27 NA -0.63 0.87 2.63 22.76 0.12 0.07 0.20 -0.03 -0.73 17.51 11.55 4.4%
DATAMONITOR

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F. Hoffman-La Roche
Table 12: F. Hoffman-La Roche: financial and operational highlights, 200509 ($m)
Parameters Income statement Total revenue Cost of goods and services Gross profit Operating expense Operating income Net income Balance sheet Total current assets Total assets Total current liabilities Total liabilities Total shareholders equity Cash flow Cash from operating activities Cash from investing activities Cash from financing activities Net change in cash Key statistics Total common shares outstanding Year-end share price Market capitalization Enterprise value Number of employees Free cash flow Key ratios P/E ratio EPS EV/EBITDA EV/sales Profitability ratio Gross margin Operating margin Net income margin Resource management Return on equity Return on capital employed Return on assets Financial strength Quick ratio Interest coverage ratio
Currency
Unit
2009
2008
2007
2006
2005
$ $ $ $ $ $
47,244.1 (13,498.7) 33,745.4 (22,406.1) 11,339.3 7,189.5
44,245.1 (12,617.6) 31,627.5 (19,017.3) 12,860.5 8,283.9
44,681.0 (12,693.3) 31,987.7 (18,624.8) 13,362.9 9,015.5
40,114.7 (12,270.3) 27,844.4 (17,010.3) 10,834.1 7,278.1
34,135.1 (8,562.0) 25,573.2 (17,414.9) 8,158.3 5,470.6
$ $ $ $ $
35,540.0 68,869.7 20,381.5 62,066.3 6,803.4
35,655.4 70,277.3 11,179.5 29,195.6 41,081.7
39,562.3 72,379.5 13,350.0 30,370.5 42,009.0
37,771.4 68,730.3 11,722.6 32,299.0 36,431.3
32,904.9 64,066.9 8,767.0 31,812.2 32,254.7
$ $ $ $
15,587.9 (2,686.8) (13,640.0) 2,255.5
11,246.9 (1,590.5) (8,720.8) 4,539.6
10,832.2 (5,345.9) (4,867.5) 3,468.2
9,540.1 (6,881.0) (3,431.2) 2,964.8
9,213.1 (5,251.7) (2,568.6) 3,905.1
NA $ $ $ NA $
160.0 167.2 26,748.0 65,560.4 81,507.0 12,831.9
160.0 155.8 24,930.4 32,796.8 80,080.0 8,347.7
160.0 196.7 31,477.0 41,702.4 78,604.0 7,582.0
160.0 228.6 36,575.4 48,031.0 74,372.0 6,251.1
160.0 202.5 32,393.2 43,719.6 68,218.0 6,147.6
NA $ NA NA
3.7 44.9 5.8 1.4
3.0 51.8 2.6 0.7
3.5 56.3 3.1 0.9
5.0 45.5 4.4 1.2
5.9 34.2 5.4 1.3
NA NA NA
% % %
71.4% 24.0% 16.6%
71.5% 29.1% 22.6%
71.6% 29.9% 23.6%
69.4% 27.0% 21.1%
74.9% 23.9% 18.6%
NA NA NA
% % %
30.0% 23.4% 10.3%
19.9% 21.8% 11.6%
23.0% 22.6% 12.8%
21.2% 19.0% 11.0%
17.0% 14.8% 8.5%
NA NA
Absolute Absolute
1.5 7.1
2.7 65.1
2.5 51.5
2.8 37.2
3.2 33.5

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Debt to equity ratio Operational efficiency Asset turnover ratio Receivable turnover ratio Inventory turnover ratio Revenue per employee Net income per employee Other Capex to revenues Capex Revenue by division Pharmaceuticals Diagnostics Revenues by geography Europe North America Asia Latin America Africa, Australia and Oceania
NA
Absolute
5.8
0.1
0.2
0.2
0.3
NA NA NA $ $
0.7 5.1 2.5 579,632.3 88,206.6
0.6 4.9 2.3 552,511.1 103,445.9
0.6 5.2 2.3 568,432.2 114,694.6
0.6 5.2 2.5 539,378.6 97,861.1
0.5 4.8 1.8 500,383.3 80,192.9
NA $
% Million
6% 2756.08208
7% 2899.24318
7% 3250.21878
8% 3289.01082
9% 3065.49478
$ $
Million Million
37,816.7 9,427.4
35,198.2 9,046.9
35,873.4 8,807.6
31,867.7 8,247.0
26,271.4 7,863.7
$ $ $ $ $
17,338.2 18,155.6 7,659.6 2,735.8 1,355.0
17,005.7 17,312.3 6,009.1 2,749.6 1,168.4
16,746.2 18,171.3 5,844.7 2,571.4 1,347.6
14,632.9 16,432.1 5,650.7 2,351.5 1,047.4
12,262.9 12,449.5 5,311.7 1,877.7 896.8
DATAMONITOR

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Table 13:
F. Hoffman-La Roche: key industry-specific ratios, 200509
2009 1.74 1.49 0.22 10.33% 0.30 16.64% 24.00% 0.68 2.55 5.06 5.76 7.08 -24.82 44.93 3.93 3.72 0.23 0.69 0.81 -0.15 -0.55 5.78 5.78 5.8%
2008 3.19 2.71 0.35 11.61% 0.20 22.64% 29.07% 0.62 2.29 4.90 0.09 65.07 -22.91 51.77 0.61 3.01 0.22 0.05 0.06 -0.15 -0.44 2.55 2.55 6.6%
2007 2.96 2.54 0.36 12.78% 0.23 23.64% 29.91% 0.63 2.35 5.16 0.15 51.49 -16.91 56.35 0.75 3.49 0.23 0.06 0.11 -0.09 -0.30 3.12 3.12 7.3%
2006 3.22 2.78 0.38 10.96% 0.21 21.12% 27.01% 0.60 2.50 5.21 0.21 37.24 -12.42 45.49 1.00 5.03 0.19 0.10 0.13 -0.05 -0.27 4.43 4.43 8.2%
2005 3.75 3.22 0.38 8.54% 0.17 18.58% 23.90% 0.53 1.84 4.80 0.28 33.46 -9.93 34.19 1.00 5.92 0.15 0.16 0.16 -0.05 -0.29 5.36 5.36 9.0%
DATAMONITOR

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Novartis
Table 14: Novartis: financial and operational highlights, 200509 ($m)
Parameters Income statement Total revenue Cost of goods and services Gross profit Operating expense Operating income Net income Balance sheet Total current assets Total assets Total current liabilities Total liabilities Total shareholders equity Cash flow Cash from operating activities Cash from investing activities Cash from financing activities Net change in cash Key statistics Total common shares outstanding Year-end share price Market capitalization Enterprise value Number of employees Free cash flow Key ratios P/E ratio EPS EV/EBITDA EV/sales Profitability ratio Gross margin Operating margin Net income margin Resource management Return on equity Return on capital employed Return on assets Financial strength Quick ratio Interest coverage ratio Debt to equity ratio Operational efficiency
Currency
Unit
2009
2008
2007
2006
2005
$ $ $ $ $ $
45,103.0 (12,179.0) 32,924.0 (23,724.0) 9,982.0 8,400.0
42,584.0 (11,439.0) 31,145.0 (22,181.0) 8,964.0 8,195.0
38,947.0 (11,032.0) 27,915.0 (21,134.0) 6,781.0 11,946.0
34,393.0 (9,411.0) 24,982.0 (18,052.0) 7,642.0 7,175.0
29,446.0 (7,439.0) 22,007.0 (15,807.0) 6,507.0 6,130.0
$ $ $ $ $
33,691.0 95,505.0 19,470.0 38,118.0 57,387.0
20,881.0 78,299.0 16,504.0 28,011.0 50,288.0
27,430.0 75,452.0 16,641.0 26,229.0 49,223.0
21,404.0 68,008.0 16,234.0 26,897.0 41,111.0
21,443.0 57,732.0 15,328.0 24,742.0 32,990.0
$ $ $ $
12,191.0 (14,219.0) 2,809.0 2,894.0
9,664.0 (10,367.0) (2,573.0) 2,038.0
16,809.0 (6,244.0) (9,318.0) 5,360.0
8,757.0 (6,357.0) (4,931.0) 3,815.0
7,771.0 (7,168.0) (271.0) 6,321.0
NA $ $ $ NA $
2,274.4 52.5 119,358.1 130,527.1 99,384.0 14,078.0
2,264.9 45.9 104,047.2 110,883.2 96,717.0 11,980.0
2,264.5 48.7 110,210.8 112,487.8 98,200.0 19,942.0
2,348.2 50.5 118,491.7 121,251.7 100,735.0 10,987.0
2,335.9 45.4 105,933.8 106,084.8 90,924.0 9,151.0
NA $ NA NA
14.2 3.7 10.9 2.9
12.7 3.6 9.8 2.6
9.2 5.3 12.5 2.9
16.5 3.1 12.7 3.5
17.3 2.6 13.6 3.6
NA NA NA
% % %
73.0% 22.1% 18.7%
73.1% 21.1% 19.3%
71.7% 17.4% 30.7%
72.6% 22.2% 20.9%
74.7% 22.1% 20.9%
NA NA NA
% % %
15.6% 13.1% 9.7%
16.5% 14.5% 10.7%
26.4% 11.5% 16.7%
19.4% 14.8% 11.4%
18.6% 15.3% 10.6%
NA NA NA
1.4 18.1 0.2
0.9 30.9 0.2
1.3 28.6 0.2
1.0 28.7 0.2
1.2 22.1 0.2

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Financial Analysis
Asset turnover ratio Receivable turnover ratio Inventory turnover ratio Revenue per employee Net income per employee Other Capex to revenues Capex Revenue by division Pharmaceuticals Vaccines and diagnostics Sandoz Consumer health Corporate ( including eliminations) Operating income by division Pharmaceuticals Vaccines and diagnostics Sandoz Consumer health Corporate ( including eliminations) Revenues by geography Europe The Americas Asia/Africa/Australasia Other revenues Discontinued operations
NA NA NA $ $
0.5 5.9 2.1 453,825.6 84,520.6
0.6 6.2 2.0 440,294.9 84,731.7
0.5 6.1 2.2 396,609.0 121,649.7
0.5 6.0 2.3 341,420.6 71,226.5
0.5 5.5 2.0 323,852.9 67,418.9
NA $
% Million
-0.04 -1887
-0.05 -2316
-0.08 -3133
-0.06 -2230
-0.05 -1380
$ $ $ $ $
28,915.0 2,814.0 7,503.0 5,871.0 NA
26,951.0 2,173.0 7,582.0 5,878.0 NA
24,451.0 1,844.0 7,190.0 5,462.0 NA
22,738.0 965.0 6,107.0 4,941.0 (358.0)
20,390.0 0.0 4,838.0 4,513.0 (295.0)
$ $ $ $ $
8,392.0 372.0 1,071.0 1,016.0 NA
7,579.0 78.0 1,084.0 1,048.0 (825.0)
6,086.0 72.0 1,039.0 812.0 (1,228.0)
6,703.0 (26.0) 736.0 761.0 (532.0)
6,014.0 0.0 342.0 657.0 (506.0)
$ $ $ $ $
18,362.0 17,820.0 8,085.0 836.0 NA
18,034.0 16,286.0 7,139.0 1,125.0 NA
16,108.0 17,558.0 6,134.0 875.0 (1,728.0)
13,591.0 17,929.0 5,500.0 NA NA
12,000.0 15,011.0 5,201.0 NA 0.0
DATAMONITOR

DBHC0392
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Financial Analysis
Table 15:
Novartis: key industry-specific ratios, 200509
2009 1.73 1.43 0.15 9.67% 0.16 18.74% 22.13% 0.52 2.10 5.88 0.24 18.12 1.73 3.69 2.08 14.21 0.13 0.11 0.18 0.03 0.47 13.08 10.92 -4.2%
2008 1.27 0.91 0.06 10.66% 0.16 19.33% 21.05% 0.55 2.03 6.23 0.17 30.91 1.48 3.62 2.07 12.70 0.15 0.04 0.14 0.03 0.41 12.37 9.84 -5.4%
2007 1.65 1.32 0.14 16.65% 0.26 30.73% 17.41% 0.54 2.22 6.08 0.15 28.61 1.15 5.28 2.24 9.23 0.12 0.01 0.13 0.02 0.22 16.59 12.47 -8.0%
2006 1.32 1.04 0.08 11.41% 0.19 20.94% 22.22% 0.55 2.29 5.98 0.16 28.73 0.87 3.06 2.88 16.51 0.15 0.01 0.12 0.02 0.29 15.87 12.73 -6.5%
2005 1.40 1.16 0.11 10.62% 0.19 20.86% 22.10% 0.51 2.00 5.51 0.19 22.13 0.90 2.62 3.21 17.28 0.15 0.03 0.15 0.02 0.34 16.30 13.58 -4.7%
DATAMONITOR

DBHC0392
Page 114
Financial Analysis
GlaxoSmithKline
Table 16: GlaxoSmithKline: financial and operational highlights, 200509 ($m)
Parameters Income statement Total revenue Cost of goods and services Gross profit Operating expense Operating income Net income Balance sheet Total current assets Total assets Total current liabilities Total liabilities Total shareholders equity Cash flow Cash from operating activities Cash from investing activities Cash from financing activities Net change in cash Key statistics Total common shares outstanding Year-end share price Market capitalization Enterprise value Number of employees Free cash flow Key ratios P/E ratio EPS EV/EBITDA EV/sales Profitability ratio Gross margin Operating margin Net income margin Resource management Return on equity Return on capital employed Return on assets Financial strength Quick ratio Interest coverage ratio Debt to equity ratio Operational efficiency $ $ $ $ $ $ $ $ $ $ $ $ $ $ $
Currency
Unit
2009
2008
2007
2006
2005
44,422.3 (11,556.6) 32,865.7 (21,450.1) 13,193.0 8,661.2
38,133.5 (10,045.4) 28,088.1 (17,752.9) 11,182.3 7,206.4
35,571.7 (8,326.0) 27,245.6 (16,099.3) 11,890.1 8,164.8
36,368.7 (7,845.3) 28,523.4 (16,777.4) 12,226.8 8,438.8
33,918.0 (7,460.1) 26,458.0 (16,263.7) 10,764.2 7,342.6
27,513.4 67,118.9 18,975.9 51,451.8 15,667.1
27,042.0 61,686.7 15,685.9 49,267.3 12,419.4
21,337.4 48,548.5 16,199.5 33,510.9 15,037.6
17,212.7 40,014.2 11,376.5 25,316.4 14,697.8
20,634.3 42,590.2 14,893.6 31,141.6 11,448.5
12,278.5 (6,284.1) (4,343.9) 9,971.8
11,282.5 (1,799.3) (7,685.6) 8,568.8
9,647.7 (4,773.0) (2,665.2) 5,043.9
6,822.8 (2,381.8) (7,503.9) 2,759.2
9,329.8 (2,599.4) (4,563.1) 6,219.9
NA $ $ $ NA $
5,991.6 66.2 396,407.6 412,770.0 99,913.0 10,058.0
5,661.4 57.6 325,888.3 343,036.8 99,003.0 9,032.3
6,012.6 75.1 451,369.0 463,111.9 103,000.0 7,273.7
5,991.6 75.7 453,358.9 459,226.4 100,000.0 4,683.7
5,962.9 70.1 417,942.3 421,890.1 100,000.0 7,915.8
NA $ NA NA
45.8 1.4 31.3 9.3
45.2 1.3 30.7 9.0
55.3 1.4 38.9 13.0
53.7 1.4 37.6 12.6
56.9 1.2 39.2 12.4
NA NA NA
% % %
74.0% 29.7% 20.0%
73.7% 29.3% 19.3%
76.6% 33.4% 23.4%
78.4% 33.6% 23.7%
78.0% 31.7% 22.2%
NA NA NA
% % %
61.7% 27.4% 13.4%
52.5% 24.3% 13.1%
54.9% 36.8% 18.4%
64.6% 42.7% 20.4%
64.1% 38.9% 17.2%
NA NA NA
1.1 10.9 1.6
1.3 8.6 2.0
1.0 17.5 1.1
1.2 24.9 0.6
1.2 16.1 0.9

DBHC0392
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Financial Analysis
Asset turnover ratio Receivable turnover ratio Inventory turnover ratio Revenue per employee Net income per employee Other Capex to revenues Capex Revenue by division Pharmaceuticals Consumer healthcare Operating income by division Pharmaceuticals Consumer healthcare Revenues by geography US Europe International UK Rest of world Operating income by geography US Europe International UK Rest of world
NA NA NA $ $
0.7 4.4 1.8 444,609.8 86,687.0
0.7 4.1 1.8 385,175.5 72,789.8
0.8 4.2 1.9 345,356.0 79,269.5
0.9 4.4 2.2 363,687.2 84,388.0
0.8 4.1 2.2 339,180.4 73,426.5
NA $
% Million
0.05 2220.48874
0.06 2250.24141
0.07 2373.94988
0.06 2139.06038
0.04 1414.03479
$ $
Million Million
37,134.5 7,287.8
31,915.2 6,218.3
30,007.9 5,563.7
31,440.7 4,928.0
29,221.8 4,696.2
$ $
Million Million
NA NA
9,913.9 1,268.4
NA NA
11,157.3 1,069.5
9,644.6 1,119.6
$ $ $ $ $
15,974.1 NA NA 2,900.1 25,548.1
15,261.6 NA NA 2,561.9 20,310.1
15,922.4 NA NA 2,458.5 17,190.8
17,385.0 10,977.2 8,006.6 NA NA
15,451.0 10,792.4 7,674.6 NA NA
$ $ $ $ $
NA NA NA NA NA
3,055.1 4,639.9 3,487.3 NA NA
4,461.3 5,748.5 1,680.2 NA NA
3,907.0 4,229.6 4,090.2 NA NA
NA NA NA NA NA
DATAMONITOR

DBHC0392
Page 116
Financial Analysis
Table 17:
GlaxoSmithKline: key industry-specific ratios, 200509
2009 1.45 1.11 0.13 13.4% 0.62 19.98% 29.70% 0.69 1.82 4.45 1.62 10.94 -0.78 1.45 25.30 45.77 0.27 0.48 0.53 -0.01 -0.54 31.29 31.29 5.0%
2008 1.72 1.32 0.18 13.1% 0.52 19.35% 29.32% 0.69 1.80 4.14 2.04 8.61 -0.81 1.27 26.24 45.22 0.24 0.52 0.55 -0.01 -0.64 30.68 30.68 5.9%
2007 1.32 1.02 0.11 18.4% 0.55 23.38% 33.43% 0.80 1.93 4.23 1.10 17.50 -0.73 1.36 30.02 55.28 0.37 0.34 0.51 -0.01 -0.54 38.95 38.95 6.7%
2006 1.51 1.18 0.15 20.4% 0.65 23.67% 33.62% 0.88 2.17 4.39 0.58 24.87 -0.68 1.41 30.85 53.72 0.43 0.26 0.30 -0.01 -0.48 37.56 37.56 5.9%
2005 1.39 1.16 0.13 17.2% 0.64 22.23% 31.74% 0.80 2.19 4.05 0.89 16.10 -0.63 1.23 36.51 56.92 0.39 0.30 0.37 -0.01 -0.51 39.19 39.19 4.2%
DATAMONITOR

DBHC0392
Page 117
Financial Analysis
Sanofi-Aventis
Table 18: Sanofi-Aventis: financial and operational highlights, 200509 ($m)
Currency
Unit
2009
2008
2007
2006
2005
$ $ $ $ $ $
42,883.5 (10,989.7) 31,893.8 (24,223.3) 8,878.2 7,342.7
40,189.1 (10,232.4) 29,956.7 (24,710.1) 6,128.0 5,370.7
40,733.0 (10,558.7) 30,174.2 (22,658.6) 8,243.7 7,339.9
41,126.2 (10,581.1) 30,545.2 (25,104.7) 6,733.3 5,586.9
39,765.1 (10,551.8) 29,213.3 (25,659.8) 4,027.7 3,149.1
$ $ $ $ $
33,295.4 111,638.7 17,290.6 44,434.3 67,204.4
21,481.5 100,395.2 13,032.8 37,823.8 62,571.5
17,506.8 100,293.4 13,484.7 38,173.8 62,119.6
16,958.7 108,450.6 14,334.0 44,855.5 63,595.1
18,298.9 121,256.1 21,505.2 56,924.6 64,331.5
$ $ $ $
11,875.3 (10,162.7) (1,097.6) 6,543.6
11,886.4 (3,004.0) (5,312.1) 5,893.7
9,910.2 (2,393.2) (6,722.1) 2,386.2
9,210.1 (1,101.8) (8,164.2) 1,608.0
8,922.8 (1,535.5) (8,346.9) 1,741.9
NA $ $ $ NA $
1,305.9 77.5 101,152.1 107,278.7 104,867.0 9,385.9
1,309.3 63.3 82,899.9 85,668.2 98,213.0 9,646.7
1,346.9 87.8 118,303.3 124,449.5 99,495.0 7,664.9
1,346.8 97.6 131,386.2 139,769.3 100,289.0 7,182.3
1,336.5 103.2 137,930.3 152,037.0 97,181.0 7,328.8
NA $ NA NA
13.8 5.6 6.8 2.5
15.4 4.1 5.9 2.1
16.1 5.4 8.4 3.1
23.5 4.1 9.2 3.4
43.8 2.4 12.3 3.8
NA NA NA
% % %
74.4% 20.7% 18.5%
74.5% 15.2% 14.9%
74.1% 20.2% 19.5%
74.3% 16.4% 14.9%
73.5% 10.1% 9.1%
NA NA NA
% % %
11.3% 9.4% 6.9%
8.6% 7.0% 5.4%
11.7% 9.5% 7.0%
8.7% 7.2% 4.9%
4.9% 4.0% 2.6%
NA NA NA
1.6 20.5 0.2
1.3 13.9 0.1
0.9 19.9 0.1
0.8 13.0 0.2
0.6 6.5 0.2

DBHC0392
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Financial Analysis
Asset turnover ratio Receivable turnover ratio Inventory turnover ratio Revenue per employee Net income per employee Other Capex to revenues Capex Revenue by division Pharmaceuticals Vaccines Revenues by geography Europe US Other countries
NA NA NA $ $
0.4 5.4 2.0 408,932.1 70,019.4
0.4 5.6 2.0 409,203.0 54,684.4
0.4 5.9 2.0 409,397.0 73,771.9
0.4 5.9 2.1 410,077.3 55,707.9
0.3 5.7 2.2 409,185.8 32,404.2
NA $
% Million
6% 2489.41455
6% 2239.77578
6% 2245.3543
5% 2027.79202
4% 1594.06209
$ $
Million Million
37,982.7 4,900.7
36,141.8 4,047.2
36,761.1 3,971.9
37,494.6 3,631.6
36,807.1 2,958.0
$ $ $
16,817.8 13,145.8 10,907.4
16,869.4 12,006.4 9,571.3
16,992.2 13,212.7 8,917.3
17,041.0 13,898.9 8,630.0
16,922.4 13,341.0 7,825.3
DATAMONITOR

DBHC0392
Page 119
Financial Analysis
Table 19:
Sanofi-Aventis: key industry-specific ratios, 200509
2009 1.93 1.57 0.14 6.93% 0.11 18.51% 20.70% 0.40 1.96 5.43 0.18 20.54 3.07 5.62 1.51 13.78 0.09 0.09 0.13 0.04 0.55 12.08 6.76 5.8%
2008 1.65 1.26 0.08 5.35% 0.09 14.89% 15.25% 0.40 2.00 5.65 0.13 13.95 2.88 4.10 1.32 15.44 0.07 0.07 0.10 0.05 0.70 13.98 5.92 5.6%
2007 1.30 0.91 0.04 7.03% 0.12 19.45% 20.24% 0.39 2.05 5.88 0.13 19.90 2.45 5.45 1.90 16.12 0.09 0.06 0.10 0.03 0.45 15.10 8.44 5.5%
2006 1.18 0.83 0.02 4.86% 0.09 14.92% 16.37% 0.36 2.14 5.87 0.15 13.05 2.11 4.15 2.07 23.52 0.07 0.07 0.10 0.02 0.51 20.76 9.16 4.9%
2005 0.85 0.63 -0.03 2.60% 0.05 9.09% 10.13% 0.33 2.21 5.68 0.24 6.50 1.67 2.36 2.14 43.80 0.04 0.07 0.16 0.02 0.71 37.75 12.33 4.0%
DATAMONITOR

DBHC0392
Page 120
Financial Analysis
AstraZeneca
Table 20: AstraZeneca: financial and operational highlights, 200509 ($m)
Currency
Unit
2009
2008
2007
2006
2005
$ $ $ $ $ $
32,804.0 (5,775.0) 27,029.0 (15,486.0) 11,543.0 7,467.0
31,601.0 (6,598.0) 25,003.0 (15,859.0) 9,144.0 4,176.0
29,559.0 (6,419.0) 23,140.0 (15,046.0) 8,094.0 5,934.0
26,475.0 (5,559.0) 20,916.0 (12,700.0) 8,216.0 6,043.0
23,950.0 (5,356.0) 18,594.0 (12,092.0) 6,502.0 4,706.0
$ $ $ $ $
23,760.0 54,920.0 17,640.0 34,260.0 20,660.0
15,869.0 46,950.0 13,415.0 31,038.0 15,912.0
16,996.0 47,988.0 15,218.0 33,210.0 14,778.0
16,936.0 29,932.0 9,447.0 14,628.0 15,304.0
13,770.0 24,840.0 6,839.0 11,243.0 13,597.0
$ $ $ $
11,739.0 (2,476.0) (3,629.0) 9,828.0
8,742.0 (3,896.0) (6,362.0) 4,123.0
7,510.0 (14,887.0) 6,051.0 5,727.0
7,693.0 (272.0) (5,366.0) 6,989.0
6,743.0 (1,182.0) (4,572.0) 4,895.0
NA $ $ $ NA $
1,448.0 45.2 65,493.0 66,799.0 62,700.0 10,777.0
1,453.0 37.6 54,603.7 62,313.7 65,000.0 9,837.0
1,495.0 37.5 56,092.4 65,518.4 67,400.0 6,380.0
1,564.0 45.5 71,099.4 65,331.4 66,800.0 6,354.0
1,617.0 40.1 64,874.0 61,190.0 65,000.0 5,776.0
NA $ NA NA
8.8 5.2 4.9 2.0
13.1 2.9 5.3 2.0
9.5 4.0 6.6 2.2
11.8 3.9 6.8 2.5
13.8 2.9 7.8 2.6
NA NA NA
% % %
82.4% 35.2% 22.8%
79.1% 28.9% 13.4%
78.3% 27.4% 20.2%
79.0% 31.0% 22.9%
77.6% 27.1% 19.7%
NA NA NA
% % %
40.8% 31.0% 14.7%
27.2% 27.3% 8.8%
39.5% 24.7% 15.2%
41.8% 40.1% 22.1%
34.6% 36.1% 18.9%
NA NA NA
1.2 9.6 0.5
1.1 6.9 0.7
1.0 7.6 1.0
1.6 14.6 0.1
1.7 13.0 0.1

DBHC0392
Page 121
Financial Analysis
Asset turnover ratio Receivable turnover ratio Inventory turnover ratio Revenue per employee Net income per employee Other Capex to revenues Capex Revenues by geography UK Continental Europe The Americas Asia, Africa & Australasia Intra-Group eliminations Operating income by geography UK Continental Europe The Americas Asia, Africa & Australasia
NA NA NA $ $
0.6 4.4 3.4 523,189.8 119,090.9
0.7 4.5 3.5 486,169.2 64,246.2
0.8 5.4 2.9 438,560.8 88,041.5
1.0 6.6 2.5 396,332.3 90,464.1
1.0 6.4 2.4 368,461.5 72,400.0
NA $
% Million
0.03 962
-0.03 -1095
0.04 1130
0.05 1339
0.04 967
$ $ $ $ $
1,809.0 8,876.0 17,295.0 4,824.0 0.0
1,910.0 9,358.0 16,081.0 4,252.0 0.0
1,981.0 8,584.0 15,421.0 3,573.0 0.0
7,809.0 11,982.0 14,436.0 3,085.0 (10,837.0)
6,425.0 11,267.0 12,647.0 2,954.0 (9,343.0)
$ $ $ $
3,124.0 4,809.0 3,265.0 345.0
2,907.0 3,136.0 2,705.0 396.0
2,060.0 2,894.0 2,734.0 406.0
1,852.0 3,648.0 2,437.0 279.0
1,526.0 3,073.0 1,628.0 275.0
DATAMONITOR

DBHC0392
Page 122
Financial Analysis
Table 21:
AstraZeneca: key industry-specific ratios, 200509
2009 1.35 1.25 0.11 14.66% 0.41 22.83% 35.19% 0.64 3.41 4.38 0.54 9.64 2.06 5.16 3.17 8.77 0.31 0.25 0.30 0.05 0.40 5.79 4.90 2.9%
2008 1.18 1.06 0.05 8.80% 0.27 13.37% 28.94% 0.67 3.51 4.54 0.74 6.94 1.90 2.87 3.43 13.08 0.27 0.32 0.35 0.05 0.66 6.81 5.30 -3.5%
2007 1.12 0.98 0.04 15.23% 0.39 20.19% 27.38% 0.76 2.94 5.40 1.03 7.56 1.78 3.97 3.80 9.45 0.25 0.33 0.46 0.05 0.45 8.09 6.58 3.8%
2006 1.79 1.55 0.25 22.07% 0.42 22.90% 31.03% 0.97 2.50 6.58 0.08 14.65 1.42 3.86 4.65 11.77 0.40 0.05 0.06 0.03 0.37 7.95 6.83 5.1%
2005 2.01 1.69 0.28 18.95% 0.35 19.72% 27.15% 0.96 2.43 6.36 0.09 13.00 1.04 2.91 4.77 13.79 0.36 0.06 0.07 0.03 0.36 9.41 7.82 4.0%
DATAMONITOR

DBHC0392
Page 123
Financial Analysis
Abbott Laboratories
Table 22: Abbott Laboratories: financial and operational highlights, 200509 ($m)
Parameters Income statement Total revenue Cost of goods and services Gross profit Operating expense Operating income Net income Balance sheet Total current assets Total assets Total current liabilities Total liabilities Total shareholders equity Cash flow Cash from operating activities Cash from investing activities Cash from financing activities Net change in cash Key statistics Total common shares outstanding Year-end share price Market capitalization Enterprise value Number of employees Free cash flow Key ratios P/E ratio EPS EV/EBITDA EV/sales Profitability ratio Gross margin Operating margin Net income margin Resource management Return on equity Return on capital employed Return on assets
Currency
Unit
2009
2008
2007
2006
2005
$ $ $ $ $ $
30,764.7 (13,209.3) 17,555.4 (11,319.6) 6,235.7 5,745.8
29,527.6 (12,612.0) 16,915.5 (11,221.7) 5,693.8 4,880.7
25,914.2 (11,422.0) 14,492.2 (9,913.6) 4,578.5 3,606.3
22,476.3 (9,815.1) 12,661.2 (10,619.0) 2,042.2 1,716.8
22,337.8 (10,641.1) 11,696.7 (7,334.4) 4,362.3 3,372.1
$ $ $ $ $
23,313.9 52,416.6 13,049.5 29,517.9 22,898.7
17,042.6 42,419.2 11,591.9 24,939.7 17,479.6
14,042.7 39,713.9 9,103.3 21,935.4 17,778.5
11,281.9 36,178.2 11,951.2 22,124.0 14,054.2
11,386.0 29,141.2 7,415.5 14,725.9 14,415.3
$ $ $ $
7,275.2 (3,698.7) 1,002.0 8,809.3
6,994.6 (2,087.5) (3,485.9) 4,112.0
5,183.8 (1,136.3) (2,312.6) 2,456.4
5,262.1 (11,397.6) 3,621.9 521.2
5,047.4 (720.1) (2,592.3) 2,893.7
NA $ $ $ NA $
1,612.7 52.7 84,923.9 92,359.3 73,000.0 6,186.1
1,601.6 53.0 84,867.8 91,160.1 69,000.0 5,706.9
1,580.9 54.3 85,903.6 94,762.4 68,000.0 3,527.6
1,537.2 46.0 70,759.3 82,553.8 66,663.0 3,924.3
1,539.2 36.3 55,843.4 57,733.7 59,735.0 3,839.9
NA $ NA NA
14.8 3.6 11.1 3.0
17.4 3.0 12.1 3.1
23.8 2.3 14.7 3.7
41.2 1.1 22.9 3.7
16.6 2.2 10.1 2.6
NA NA NA
% % %
57.1% 20.3% 18.7%
57.3% 19.3% 16.5%
55.9% 17.7% 13.9%
56.3% 9.1% 7.6%
52.4% 19.5% 15.1%
NA NA NA
% % %
28.5% 15.8% 12.1%
27.7% 18.5% 11.9%
22.7% 15.0% 9.5%
12.1% 8.4% 5.3%
23.4% 20.1% 11.6%

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Financial Analysis
Financial strength Quick ratio NA Absolute Absolute Absolute 1.5 12.0 0.7 1.2 10.8 0.6 1.2 7.7 0.6 0.7 4.9 0.9 1.2 18.1 0.3
Interest coverage ratio NA Debt to equity ratio Operational efficiency Asset turnover ratio Receivable turnover ratio Inventory turnover ratio Revenue per employee Net income per employee Other Capex to revenues Capex Revenue by division Pharmaceuticals Nutritionals Diagnostics Vascular Other Operating income by division Pharmaceuticals Nutritionals Diagnostics Vascular Revenues by geography US The Netherlands Germany Japan Italy France Canada $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ NA $ NA NA NA $ $ NA
0.6 5.1 4.4 421,434.3 78,710.1
0.7 5.7 4.4 427,935.5 70,735.1
0.7 5.6 4.0 381,091.7 53,034.0
0.7 5.8 3.7 337,163.4 25,752.7
0.8 6.2 4.2 373,948.4 56,450.4
% Million
4% 1089.048
4% 1287.724
6% 1656.207
6% 1337.818
5% 1207.493
16,486.0 5,284.0 3,578.0 2,692.0 2,725.0
16,708.0 4,924.0 3,575.0 2,241.0 2,080.0
14,632.0 4,388.0 3,158.0 1,663.0 2,073.0
12,395.0 4,313.0 2,843.0 1,082.0 1,843.0
13,691.0 3,937.0 2,689.0 253.0 1,768.0
6,443.0 910.0 406.0 557.0
6,331.0 859.0 375.0 205.0
5,509.0 855.0 252.0 (188.0)
4,522.0 1,206.0 240.0 (115.0)
4,294.0 1,036.0 261.0 (136.0)
Million Million Million Million Million Million Million
14,453.0 1,801.0 1,481.0 1,590.0 1,172.0 959.0 902.0
14,495.0 1,753.0 1,381.0 1,249.0 1,089.0 977.0 924.0
13,252.0 1,271.0 1,235.0 1,111.0 974.0 854.0 832.0
11,995.0 1,061.0 885.0 1,054.0 848.0 696.0 762.0
12,707.0 899.0 992.0 1,027.0 806.0 657.0 680.0
DATAMONITOR

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Financial Analysis
Table 23:
Abbott Laboratories: key industry-specific ratios, 200509
2009 1.79 1.54 0.20 12.12% 0.28 18.68% 20.27% 0.65 4.37 5.12 0.71 12.00 -1.50 3.56 3.71 14.78 0.16 0.29 0.41 -0.03 -0.42 14.81 11.09 3.5%
2008 1.47 1.23 0.13 11.88% 0.28 16.53% 19.28% 0.72 4.40 5.67 0.60 10.77 -1.36 3.05 4.86 17.39 0.18 0.28 0.34 -0.03 -0.45 16.01 12.10 4.4%
2007 1.54 1.22 0.12 9.50% 0.23 13.92% 17.67% 0.68 3.97 5.65 0.64 7.72 -1.24 2.28 4.83 23.82 0.15 0.31 0.37 -0.02 -0.54 20.70 14.73 6.4%
2006 0.94 0.71 -0.02 5.26% 0.12 7.64% 9.09% 0.69 3.67 5.76 0.88 4.91 -1.16 1.12 5.03 41.22 0.08 0.29 0.51 -0.03 -1.04 40.42 22.93 6.0%
2005 1.54 1.19 0.14 11.57% 0.23 15.10% 19.53% 0.77 4.19 6.25 0.33 18.07 -1.10 2.19 3.87 16.56 0.20 0.21 0.22 -0.03 -0.50 13.23 10.09 5.4%
DATAMONITOR

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Financial Analysis
Merck & Co.

Table 24: Merck & Co.: financial and operational highlights, 200509 ($m)
Currency
Unit
2009
2008
2007
2006
2005
$ $ $ $ $ $
27,428.3 (9,018.9) 18,409.4 (16,022.1) 2,387.3 12,901.3
23,850.3 (5,582.5) 18,267.8 (13,214.8) 5,053.0 7,808.4
24,197.7 (6,140.7) 18,057.0 (12,766.6) 5,290.4 3,275.4
22,636.0 (6,001.1) 16,634.9 (13,090.6) 3,544.3 4,433.8
22,011.9 (5,149.6) 16,862.3 (11,325.7) 5,536.6 4,631.3
$ $ $ $ $
28,428.6 112,089.7 15,750.7 53,031.7 59,058.0
19,304.9 47,195.7 14,318.7 28,437.4 18,758.3
15,045.4 48,350.7 12,258.2 30,166.0 18,184.7
15,230.2 44,569.8 12,722.7 27,010.1 17,559.7
21,049.3 44,845.8 13,242.4 26,868.1 17,977.7
$ $ $ $
3,392.0 3,156.0 (1,638.3) 9,311.4
6,571.7 (1,834.4) (5,522.5) 4,368.3
6,999.2 (2,810.0) (4,866.1) 5,336.1
6,765.2 (4,883.7) (5,604.2) 5,914.7
7,608.5 2,267.2 (3,040.4) 9,585.3
NA $ $ $ NA $
3,562.5 35.8 127,396.0 136,594.1 100,000.0 1,931.4
2,983.5 29.9 89,206.9 91,190.7 55,200.0 5,273.4
2,983.5 54.7 163,168.1 164,154.5 59,800.0 5,988.2
2,976.2 39.8 118,513.2 124,479.8 60,000.0 5,785.0
2,976.2 27.9 83,066.4 81,013.9 61,500.0 6,205.8
NA $ NA NA
9.9 3.6 27.5 5.0
11.4 2.6 13.6 3.8
49.8 1.1 22.6 6.8
26.7 1.5 21.4 5.5
17.9 1.6 11.2 3.7
NA NA NA
% % %
67.1% 8.7% 47.5%
76.6% 21.2% 33.3%
74.6% 21.9% 14.0%
73.5% 15.7% 19.6%
76.6% 25.2% 21.0%
NA NA NA
% % %
33.2% 2.5% 16.2%
42.3% 15.4% 16.3%
18.3% 14.7% 7.0%
25.0% 11.1% 9.9%
25.8% 17.5% 10.3%
NA NA
Absolute Absolute
1.3 NA
1.2 NA
1.1 NA
1.1 NA
1.5 NA

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Financial Analysis
Debt to equity ratio Operational efficiency Asset turnover ratio Receivable turnover ratio Inventory turnover ratio Revenue per employee Net income per employee Other Capex to revenues Capex Revenue by division Pharmaceutical Other segment Other Revenues by geography US Japan Europe, Middle East and Africa Other
NA
Absolute
0.3
0.2
0.2
0.3
0.3
NA NA NA $ $
0.3 5.3 1.7 274,283.0 129,013.0
0.5 6.4 2.7 432,070.7 141,456.5
0.5 7.0 3.4 404,643.8 54,772.6
0.5 7.3 3.5 377,266.7 73,896.7
0.5 7.5 3.1 357,917.1 75,305.7
NA $
% Million
5% 1460.6
5% 1298.3
4% 1011
4% 980.2
6% 1402.7
$ $ $
25,236.5 2,114.0 77.8
22,081.3 1,694.1 74.9
22,282.8 1,848.1 66.8
0.0 0.0 0.0
0.0 0.0 0.0
$ $ $ $
14,401.2 2,425.6 7,093.1 3,508.4
13,370.5 1,823.5 5,773.8 2,882.5
14,690.9 1,533.2 5,159.0 2,814.6
13,776.8 1,479.0 4,977.1 2,403.1
12,766.6 1,637.9 5,203.5 2,403.9
DATAMONITOR

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Financial Analysis
Table 25:
Merck & Co.: key industry-specific ratios, 200509
Financial ratios Current ratio Quick ratio Net working capital ratio Return on asset Return on equity Net income margin Operating margin (return on sales) Asset turnover ratio Inventory turnover ratio Receivable turnover ratio Debt to equity ratio Dividend per share Earning per share Market to book ratio Price earning ratio Return on capital employed Long-term debt ratio Total debt ratio Dividend yield Dividend payout Enterprise value/EBIT Enterprise value/EBITDA Capex to revenues
2009 1.80 1.29 0.11 16.20% 0.33 47.48% 8.70% 0.34 1.74 5.28 0.27 NA -0.98 3.62 2.16 9.88 0.02 0.17 0.17 -0.03 -0.27 57.22 27.52
2008 1.35 1.19 0.11 16.34% 0.42 33.26% 21.19% 0.50 2.68 6.43 0.21 NA -1.14 2.62 4.76 11.42 0.15 0.12 0.12 -0.04 -0.44 18.05 13.64
2007 1.23 1.07 0.06 7.05% 0.18 14.04% 21.86% 0.52 3.36 6.96 0.22 NA -1.15 1.10 8.97 49.82 0.15 0.11 0.11 -0.02 -1.05 31.03 22.55
2006 1.20 1.06 0.06 9.92% 0.25 19.59% 15.66% 0.51 3.50 7.25 0.32 NA -1.12 1.49 6.75 26.73 0.11 0.17 0.17 -0.03 -0.75 35.12 21.42
2005 1.59 1.46 0.17 10.33% 0.26 21.04% 25.15% 0.49 3.11 7.52 0.29 NA -0.58 1.56 4.62 17.94 0.18 0.16 0.16 -0.02 -0.37 14.63 11.18
DATAMONITOR

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Financial Analysis

Table 26: Eli Lilly and Company: financial and operational highlights, 200509 ($m)
Currency
Unit
2009
2008
2007
2006
2005
$ $ $ $ $ $
21,836.0 (4,247.0) 17,589.0 (12,231.2) 5,357.8 4,328.8
20,371.9 (4,376.7) 15,995.2 (17,302.8) (1,307.6) (2,071.9)
18,633.5 (4,248.8) 14,384.7 (10,629.9) 3,876.8 2,953.0
15,691.0 (3,546.5) 12,144.5 (8,964.3) 3,180.2 2,662.7
14,645.3 (3,474.2) 11,171.1 (8,767.8) 2,403.3 1,979.6
$ $ $ $ $
12,486.5 27,460.9 6,568.1 17,935.6 9,525.3
12,453.3 29,212.6 13,109.7 22,474.9 6,737.7
12,316.1 26,874.8 5,436.8 13,370.9 13,503.9
9,753.6 22,042.4 5,254.0 11,222.2 10,820.2
10,795.8 24,580.8 5,716.3 13,788.9 10,791.9
$ $ $ $
4,335.5 142.8 (5,533.7) 4,462.9
7,295.6 (7,268.8) 2,346.0 5,496.7
5,154.5 (4,328.1) (844.9) 3,220.5
3,975.9 608.4 (4,578.8) 3,109.3
1,913.6 (2,215.9) (1,880.5) 3,006.7
NA $ $ $ NA $
1,149.9 34.7 39,925.1 42,124.3 40,360.0 3,570.5
1,137.8 40.3 45,820.7 50,786.0 40,500.0 6,348.4
1,135.2 53.4 60,609.0 62,395.7 40,600.0 4,072.1
1,132.6 52.1 59,007.3 59,611.8 41,500.0 2,898.1
1,131.1 56.6 64,007.3 67,498.8 42,600.0 615.5
NA $ NA NA
9.2 3.8 6.3 1.9
(22.1) (1.8) (274.5) 2.5
20.5 2.6 12.7 3.3
22.2 2.4 15.0 3.8
32.3 1.8 21.6 4.6
NA NA NA
% % %
80.6% 24.5% 19.8%
78.5% -6.4% -10.2%
77.2% 20.8% 15.8%
77.4% 20.3% 17.0%
76.3% 16.4% 13.5%
NA NA NA
% % %
53.2% 25.6% 15.3%
-20.5% -8.1% -7.4%
24.3% 18.1% 12.1%
24.6% 18.9% 11.4%
18.3% 12.7% 8.1%
NA NA
Absolute Absolute
1.5 NA
0.8 NA
1.8 NA
1.4 13.4
1.6 22.8

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Financial Analysis
Debt to equity ratio Operational efficiency Asset turnover ratio Receivable turnover ratio Inventory turnover ratio Revenue per employee Net income per employee Other Capex to revenues Capex Revenue by division Neurosciences Endocrinology Oncology Cardiovascular Animal health Other pharmaceuticals Revenues by geography US Europe Other foreign countries
NA
Absolute
0.7
1.6
0.4
0.3
0.6
NA NA NA $ $
0.8 7.1 1.6 541,030.7 107,254.7
0.7 7.5 1.7 503,009.9 -51,158.0
0.8 7.5 1.8 458,953.2 72,734.0
0.7 6.8 1.7 378,096.4 64,161.4
0.6 6.3 1.8 343,786.4 46,469.5
NA $
% Million
4% 765
5% 947.2
6% 1082.4
7% 1077.8
9% 1298.1
$ $ $ $ $ $
8,976.4 5,677.4 3,161.7 1,971.1 1,207.2 177.7
8,371.5 5,493.5 2,877.1 1,882.7 1,093.3 207.7
7,851.0 5,037.7 2,446.4 1,624.1 995.8 219.7
6,728.5 5,014.5 2,020.2 730.4 875.5 321.9
6,080.0 4,636.9 1,801.0 778.8 863.7 484.9
$ $ $
12,294.4 5,227.2 4,314.4
10,930.1 5,333.5 4,108.3
10,145.5 4,731.8 3,756.2
8,599.2 3,804.0 3,287.8
7,798.1 3,818.6 3,028.6
DATAMONITOR

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Financial Analysis
Table 27:
Financial ratios Current ratio Quick ratio
Eli Lilly and Company: key industry-specific ratios, 200509

2009 1.90 1.47 0.22 15.28% 0.53 19.82% 24.54% 0.77 1.59 7.13 0.70 NA -1.87 3.76 4.19 9.22 0.26 0.32 0.32 -0.05 -0.50 7.86 6.33 3.5% 2008 0.95 0.76 -0.02 -7.39% -0.20 -10.17% -6.42% 0.73 1.74 7.47 1.55 NA -1.81 -1.82 6.80 -22.12 -0.08 0.29 0.65 -0.04 0.99 -38.84 -274.52 4.6% 2007 2.27 1.80 0.26 12.07% 0.24 15.85% 20.81% 0.76 1.77 7.49 0.37 NA -1.63 2.60 4.49 20.52 0.18 0.21 0.23 -0.03 -0.63 16.09 12.67 5.8% 2006 1.86 1.42 0.20 11.42% 0.25 16.97% 20.27% 0.67 1.71 6.80 0.34 13.36 -1.53 2.35 5.45 22.16 0.19 0.21 0.22 -0.03 -0.65 18.74 14.97 6.9% 2005 1.89 1.56 0.21 8.05% 0.18 13.52% 16.41% 0.60 1.85 6.33 0.60 22.85 -1.46 1.75 5.93 32.33 0.13 0.31 0.34 -0.03 -0.84 28.09 21.57 8.9%
Net working capital ratio Return on asset Return on equity Net income margin Operating margin (return on sales) Asset turnover ratio Inventory turnover ratio Receivable turnover ratio Debt to equity ratio Interest coverage ratio Dividend per share Earning per share Market to book ratio Price earning ratio Return on capital employed Long-term debt ratio Total debt ratio Dividend yield Dividend payout Enterprise value/EBIT Enterprise value/EBITDA Capex to revenues
DATAMONITOR

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Financial Analysis
Bristol-Myers Squibb Company

Table 28: Bristol-Myers Squibb Company: financial and operational highlights, 200509 ($m)
Currency
Unit
2009
2008
2007
2006
2005
$ $ $ $ $ $
18,808.0 (5,140.0) 13,668.0 (8,865.0) 4,803.0 10,612.0
17,715.0 (5,316.0) 12,399.0 (9,080.0) 3,319.0 5,247.0
15,617.0 (4,919.0) 10,698.0 (8,608.0) 2,090.0 2,165.0
16,208.0 (5,420.0) 10,788.0 (8,783.0) 2,005.0 1,214.0
18,605.0 (5,737.0) 12,868.0 (9,163.0) 3,705.0 2,842.0
$ $ $ $ $
13,958.0 31,008.0 6,313.0 16,223.0 14,785.0
14,697.0 29,486.0 6,710.0 17,278.0 12,208.0
10,102.0 25,926.0 8,398.0 15,364.0 10,562.0
10,302.0 25,575.0 6,496.0 15,584.0 9,991.0
12,283.0 28,138.0 6,890.0 16,930.0 11,208.0
$ $ $ $
4,065.0 (4,380.0) (17.0) 7,683.0
3,707.0 5,079.0 (2,582.0) 7,976.0
3,153.0 (202.0) (3,213.0) 1,801.0
2,083.0 206.0 (3,351.0) 2,018.0
1,836.0 1,191.0 (3,637.0) 3,050.0
NA $ $ $ NA $
2,200.0 24.6 54,208.0 52,886.0 28,000.0 3,335.0
2,200.0 23.3 51,150.0 49,913.0 35,000.0 2,766.0
2,200.0 24.7 54,428.0 58,899.0 42,000.0 2,310.0
2,200.0 23.6 51,942.0 57,359.0 43,000.0 1,298.0
2,200.0 19.7 43,318.0 48,863.0 43,000.0 1,098.0
NA $ NA NA
5.1 4.8 9.6 2.8
9.7 2.4 12.1 2.8
25.1 1.0 19.8 3.8
42.8 0.6 19.6 3.5
15.2 1.3 10.5 2.6
NA NA NA
% % %
72.7% 25.5% 63.1%
70.0% 18.7% 35.2%
68.5% 13.4% 18.7%
66.6% 12.4% 10.2%
69.2% 19.9% 18.5%
NA NA NA
% % %
78.6% 19.4% 35.1%
46.1% 14.6% 18.9%
21.1% 11.9% 8.4%
11.5% 10.5% 4.5%
25.4% 17.4% 10.1%
NA NA
Absolute Absolute
2.0 NA
1.9 NA
0.9 NA
1.3 NA
1.5 NA

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Financial Analysis
Debt to equity ratio Operational efficiency Asset turnover ratio Receivable turnover ratio Inventory turnover ratio Revenue per employee Net income per employee Other Capex to revenues Capex Revenues by geography US Europe, Middle East and Africa Other Western Hemisphere Pacific
NA
Absolute
0.4
0.6
0.6
0.7
0.8
NA NA NA $ $
0.6 5.5 3.2 671,714.3 379,000.0
0.6 4.6 2.7 506,142.9 149,914.3
0.6 4.3 2.3 371,833.3 51,547.6
0.6 4.9 2.6 376,930.2 28,232.6
0.7 5.5 2.8 432,674.4 66,093.0
NA $
% Million
0.04 730
0.05 941
0.05 843
0.05 785
0.04 738
$ $ $ $
11,909.0 4,206.0 1,300.0 1,393.0
10,611.0 4,370.0 1,329.0 1,405.0
8,992.0 3,914.0 1,390.0 1,321.0
8,785.0 3,979.0 1,517.0 1,927.0
10,461.0 5,136.0 1,592.0 2,018.0
DATAMONITOR

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Financial Analysis
Table 29:
Bristol-Myers Squibb Company: key industry-specific ratios, 200509
2009 2.21 1.99 0.25 35.08% 0.79 63.07% 25.54% 0.62 3.23 5.53 0.43 NA 1.13 4.82 3.67 5.11 0.19 0.25 0.26 0.05 0.23 11.01 9.60 3.9%
2008 2.19 1.93 0.27 18.94% 0.46 35.24% 18.74% 0.64 2.71 4.64 0.55 NA 1.12 2.39 4.19 9.75 0.15 0.29 0.30 0.05 0.47 15.04 12.07 5.3%
2007 1.20 0.95 0.07 8.41% 0.21 18.75% 13.38% 0.61 2.32 4.31 0.59 NA 1.01 0.98 5.15 25.14 0.12 0.25 0.36 0.04 1.02 28.18 19.75 5.4%
2006 1.59 1.27 0.15 4.52% 0.11 10.20% 12.37% 0.60 2.62 4.89 0.74 NA 1.00 0.55 5.20 42.79 0.11 0.38 0.39 0.04 1.81 28.61 19.56 4.8%
2005 1.78 1.48 0.19 10.10% 0.25 18.46% 19.91% 0.66 2.78 5.51 0.77 NA 0.99 1.29 3.86 15.24 0.17 0.39 0.40 0.05 0.77 13.19 10.54 4.0%
DATAMONITOR

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Appendix
APPENDIX
Datamonitor Industry Profiles draw on extensive primary and secondary research, all aggregated, analyzed, cross-checked and presented in a consistent and accessible style. Review of in-house databases created using 250,000-plus industry interviews and consumer surveys and supported by analysis from industry experts using highly complex modeling and forecasting tools, Datamonitors inhouse databases provide the foundation for all related Industry Profiles. Preparatory research Datamonitor also maintains extensive in-house databases of news, analyst commentary, company profiles and macroeconomic and demographic information, which enable researchers to build an accurate market overview. Definitions market definitions are standardized to allow comparison from country to country. The parameters of each definition are carefully reviewed at the start of the research process to ensure they match the requirements of both the market and Datamonitors clients. Extensive secondary research activities ensure we are always fully up-to-date with the latest industry events and trends. Datamonitor aggregates and analyzes a number of secondary information sources, including: national/governmental statistics; international data (official international sources); national and international trade associations; broker and analyst reports; company annual reports; business information libraries and databases.
Modeling & forecasting tools: Datamonitor has developed powerful tools that allow quantitative and qualitative data to be combined with related macroeconomic and demographic drivers to create market models and forecasts, which can then be refined according to specific competitive, regulatory and demand-related factors. Continuous quality control ensures that Datamonitors processes and profiles remain focused, accurate and up-to-date.

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Global Top 10 Pharmaceutical Companies Report: Industry, Financial and SWOT Analysis

Reference Code: DBHC0392 Publication Date: November 2010

Global Top 10 Pharmaceutical Companies

Global Top 10 Pharmaceutical Companies

Global Top 10 Pharmaceutical Companies

Factors influencing the likelihood of new entrants in the global pharmaceuticals

Global Top 10 Pharmaceutical Companies

Global Top 10 Pharmaceutical Companies

Table 26: Table 27: Table 28: Table 29:

130 132 133 135

Global Top 10 Pharmaceutical Companies

EXECUTIVE SUMMARY Industry analysis

Global Top 10 Pharmaceutical Companies

Top 10 companies landscape

Global Top 10 Pharmaceutical Companies

Table 1: Year 2005 2006 2007 2008 2009

CAGR, 200509 Source: Datamonitor

Global pharmaceuticals market ($ billion), 200509

0 2005 2006 2007 Year $ billion % Growth 2008 2009

Global Top 10 Pharmaceutical Companies

Global Pharmaceuticals Market Share: % Share, by Value, 2009

Global Top 10 Pharmaceutical Companies

Global pharmaceuticals market forecast ($ billion), 200914

Global Top 10 Pharmaceutical Companies

Market Segmentation: Product

MARKET SEGMENTATION: PRODUCT

Global pharmaceuticals market segmentation: product (% share), 2009

Oncology 6.4% Other therapeutic purposes 32.3%

Central Nervous System 18.5%

Global Top 10 Pharmaceutical Companies

Market Segmentation: Geographic

MARKET SEGMENTATION: GEOGRAPHIC

Global pharmaceuticals market segmentation: geography (% share), 2009

Global Top 10 Pharmaceutical Companies

Five Forces Analysis

FIVE FORCES ANALYSIS Summary

Forces driving competition in the global pharmaceuticals market, 2009

Global Top 10 Pharmaceutical Companies

Five Forces Analysis

Drivers of buyer power in the global pharmaceuticals market, 2009

Global Top 10 Pharmaceutical Companies

Five Forces Analysis

Global Top 10 Pharmaceutical Companies

Five Forces Analysis

Global Top 10 Pharmaceutical Companies

Five Forces Analysis

Global Top 10 Pharmaceutical Companies

Five Forces Analysis

Drivers of degree of rivalry in the global pharmaceuticals market, 2009

Global Top 10 Pharmaceutical Companies

Top 10 Companies Landscape

TOP 10 COMPANIES LANDSCAPE Overview

Global Top 10 Pharmaceutical Companies

Top 10 Companies Landscape

Revenues and sales of global top 10 pharmaceutical companies ($m), FY2009

* Currency conversions calculated using FY2009 annual average exchange rates.

Source: Company Reports, PharmaVitae

Revenues of global top 10 pharmaceutical companies ($m), FY2009

Global Top 10 Pharmaceutical Companies

Top 10 Companies Landscape

Global Top 10 Pharmaceutical Companies

Top 10 Companies Landscape

Merck & Co.

Eli Lilly and Company