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Published by: Datamonitor
Published: Nov. 12, 2009
Table of Contents
- ABOUT DATAMONITOR HEALTHCARE
- About the Healthcare Strategic Analysis Team
- 1. Executive Summary
- Strategic scoping and focus
- Related reports
- Upcoming related reports
- Key findings
- Big Pharma set for dramatic decline in revenue growth through 2014
- A conceptual framework for profitability
- Diversification as a tool to counter Big Pharma's forecast slowdown
- Big Pharma has a track-record of moving beyond the pharmaceutical sector
- The Big Pharma peer-set shows considerable variation in prescription focus
- Prescription focus correlates with operating margin
- Destinations for diversification within the healthcare landscape
- Assessing the relative attractiveness of each sector within the healthcare landscape
- Total healthcare market size of $3.7 trillion in 2008
- The highest operating margins are associated with branded pharma
- The branded pharma sector cannot be bested
- Recommendations to maximize operating profit growth
- Diversified companies should become more pharma-focused...
- ...or diversify strategically
- Pharma-focused companies should remain pharma-focused and engage in consolidation
- Strategy must be tailored to the company
- Table of Contents
- 2. Historical trends in diversification
- Key findings
- Overview of Big Pharma's business model
- Historical M&A and divestment analysis, 2000-Q2 2009
- Analysis of mergers, acquisitions, and divestments over time
- Analysis of mergers, acquisitions, and divestments by type
- A history of non-pharmaceutical M&A
- Big Pharma divestment profile is more varied
- Big Pharma's current business model
- Historical prescription pharmaceutical revenue growth rate justifies Big Pharma's focus to date
- Big Pharma's pharmaceutical focus varies considerably at the company level
- Correlation between operating profit and pharma focus
- Company case studies
- Prescription-focused companies
- Pfizer has bolstered its pharma focus by acquisition
- Eli Lilly beginning to make defensive moves
- Bristol-Myers Squibb - becoming smaller and less diversified
- Diversified companies
- Johnson & Johnson is a successful diversifier
- Novartis - strategic diversification
- Bayer looking to increase its pharma focus
- Exiting companies
- Procter & Gamble diversifies away from pharmaceuticals completely
- 3. Defining the healthcare landscape
- Key findings
- The 10 sectors under analysis
- A focus on diversification within the life sciences sector
- Healthcare products and provision represents the primary division in human healthcare
- Payers, hospitals, and drug supply chain intermediaries represent the key healthcare providers
- Overlap between prescription benefits management organizations and mail order pharmacies
- Overlap between retail pharmacy chains and drug distribution
- Healthcare products classified as either pharmaceutical or non-pharmaceutical
- Pharmaceutical products subdivided into prescription and over-the-counter
- Non-pharmaceutical products divided into consumer health, medical devices and diagnostics, and alternative health
- The consumer health/over-the-counter spectrum
- The primary divider in animal health is 'companion' versus livestock
- The provision of healthcare services in animal health is identical for companion animals and livestock
- Consumer health is the key product differentiator between companion animals and livestock
- Grouping of animal health pharmaceutical and over-the-counter products
- Consumer health, pest control, and medical devices and diagnostics constitute the non-pharmaceutical division in animal health
- 4. Sizing the healthcare landscape
- Key findings
- Healthcare landscape overview
- Prescription branded pharmaceutical market
- Market size
- Operating margin
- Indicative Profit Potential
- Strategic outlook
- Over-the-counter/consumer health market
- Market size
- Operating margin
- Indicative Profit Potential
- Strategic outlook
- Health insurance market
- Market size
- Operating margin
- Indicative Profit Potential
- Strategic outlook
- Medical devices and diagnostics market
- Market size
- Operating margin
- Indicative Profit Potential
- Strategic outlook
- Retail pharmacy market
- Market size
- Operating margin
- Indicative Profit Potential
- Strategic Outlook
- Hospital market
- Market size
- Operating margin
- Indicative Profit Potential
- Strategic outlook
- Generics market
- Market size
- Operating margin
- Indicative Profit Potential
- Strategic outlook
- Prescription benefits management market
- Market size
- Operating margin
- Indicative Profit Potential
- Strategic outlook
- Pharmaceutical wholesaler market
- Market size
- Operating margin
- Indicative Profit Potential
- Strategic outlook
- Animal health market
- Market size
- Operating margin
- Indicative Profit Potential
- Strategic outlook
- 5. Assessing the healthcare landscape
- Key findings
- Healthcare landscape overview
- Healthcare products present a more lucrative alternative to healthcare provision
- The product-provision division should not be breached
- The branded pharmaceuticals sector cannot be bested
- Pharma-focused companies should seek growth within the pharmaceuticals sector
- Diversified companies should increase their prescription drug focus
- Strategic diversification - small, incremental moves within the product landscape
- Pharmaceutical - medical device and diagnostics tie-ups
- Pharmaceutical - consumer health/over-the-counter tie-ups
- Strategic diversification - small, incremental moves within the provision landscape
- Retail pharmacy - prescription benefits management company tie-ups
- Retail pharmacy - wholesaler tie -up
- Strategic diversification - parallel moves can provide synergies with minimal costs
- 6. Bibliography
- Publications and online articles
- Datamonitor reports
- APPENDIX
- Exchange rates
- About Datamonitor
- About Datamonitor Healthcare
- Datamonitor consulting
- Disclaimer
- List of Tables
- Table 1: Market size, operating margin and indicative profit potential for the healthcare landscape
- Table 2: Big Pharma's mergers, acquisitions, and divestments by sector type, 2000-Q2 2009
- Table 3: Notable divestures of non-core pharma assets by Bristol-Myers Squibb, 2005-09
- Table 4: Financial performance of Johnson & Johnson's key divisions, 2005-08
- Table 5: Notable divestments by Bayer, 2004-09
- Table 6: The relative importance of mail order pharmacy services to the top three prescription benefits management companies in the US, 2008
- Table 7: Retail pharmacy chains associated with wholesaler operations in the UK, 2006
- Table 8: Prescription and over-the-counter product classification
- Table 9: Consumer health and diagnostics/medical device classification
- Table 10: Prescription and over-the-counter product classification
- Table 11: Non-pharmaceutical animal health services
- Table 12: Global prescription branded pharmaceutical market, 2008
- Table 13: Operating margin for the leading prescription branded pharmaceutical companies, 2005-08
- Table 14: Indicative Profit Potential for the prescription branded pharmaceutical market, 2008
- Table 15: Global over-the-counter/consumer health, 2008
- Table 16: Operating margin for the leading over-the-counter/consumer health companies, 2005-08
- Table 17: Indicative Profit Potential for the over-the-counter/consumer health market, 2008
- Table 18: US health insurance market, 2008
- Table 19: Operating margin for the leading US health insurers, 2005-08
- Table 20: Indicative Profit Potential for the health insurance market
- Table 21: Global medical device and diagnostics market, 2008
- Table 22: Operating margin for the leading medical devices and diagnostics companies, 2005-08
- Table 23: Indicative Profit Potential for the medical devices and diagnostics market, 2008
- Table 24: Global retail pharmacy market, 2008
- Table 25: Operating margin for the leading US retail pharmacies, 2005-08
- Table 26: Indicative Profit Potential for the retail pharmacy market, 2008
- Table 27: US hospital market, 2008
- Table 28: Operating margin for the leading US hospitals, 2005-08
- Table 29: Indicative Profit Potential for the US hospital market, 2008
- Table 30: Global prescription generics market, 2008
- Table 31: Operating margin for the leading generics companies, 2005-08
- Table 32: Indicative Profit Potential for the generics market, 2008
- Table 33: US prescription benefits management market, 2008
- Table 34: Operating margin for the leading US prescription benefits management companies, 2005-08
- Table 35: Indicative Profit Potential for the prescription benefits management market, 2008
- Table 36: Global pharmaceutical wholesale market, 2008
- Table 37: Operating margin for the leading US pharmaceutical wholesalers, 2005-08
- Table 38: Indicative Profit Potential for the pharmaceutical wholesale market, 2008
- Table 39: Global animal health market, 2008
- Table 40: Operating margin for the leading animal health companies, 2005-08
- Table 41: Indicative Profit Potential for the animal health market, 2008
- Table 42: Examples of human to animal drug cross-over
- Table 43: Currency exchange rates, 2008
- List of Figures
- Figure 1: Big Pharma's projected sales growth decline through 2014
- Figure 2: Profit at the company and sector level
- Figure 3: Big Pharma mergers and acquisitions by sector type, 2000-Q2 2009
- Figure 4: The spectrum of Big Pharma's business diversification, 2008
- Figure 5: The correlation between Big Pharma's prescription focus and operating margin, 2005-08
- Figure 6: The ten healthcare sectors, 2009
- Figure 7: Market size across the healthcare landscape, 2008
- Figure 8: Average operating margin across the healthcare landscape, 2005-08
- Figure 9: Indicative profit potential across the healthcare landscape, 2008
- Figure 10: Big Pharma's potential responses to the patent cliff
- Figure 11: Optimizing operating margin growth
- Figure 12: Big Pharma mergers, acquisitions, and divestments, 2000- Q2 2009
- Figure 13: Big Pharma mergers and acquisitions by sector type, 2000-Q2 2009
- Figure 14: Big Pharma's divestments by sector type, 2000-Q2 2009
- Figure 15: Big Pharma's focus on prescription drug sales, 2001-08
- Figure 16: The spectrum of Big Pharma's business diversification, 2008
- Figure 17: The correlation between Big Pharma's prescription focus and operating margin, 2005-08
- Figure 18: The diversification profile for Pfizer, Novartis, Eli Lilly, Johnson & Johnson, Bayer, and Bristol-Myers Squibb, 2007
- Figure 19: Pfizer's prescription focus and operating margin, 2001-08
- Figure 20: Eli-Lilly's prescription focus and operating margin, 2001-08
- Figure 21: Bristol-Myers Squibb's prescription focus and operating margin, 2001-08
- Figure 22: Johnson & Johnson's prescription focus and operating margin, 2001-08
- Figure 23: Novartis's prescription focus and operating margin, 2001-08
- Figure 24: Bayer's prescription focus and operating margin, 2001-08
- Figure 25: Pharmaceuticals sales for Procter & Gamble, 2004-08
- Figure 26: The ten healthcare sectors, 2009
- Figure 27: The human and animal healthcare divide within the life sciences sector
- Figure 28: The product-provision division running through human healthcare
- Figure 29: The organizations responsible for human healthcare provision
- Figure 30: The pharmaceutical, non-pharmaceutical divide in human healthcare products
- Figure 31: The subcategorization of pharmaceutical products
- Figure 32: The subcategorization of non-pharmaceutical products
- Figure 33: The over-the-counter-consumer health spectrum
- Figure 34: The companion-livestock divide in animal health
- Figure 35: Classification of service provision in animal healthcare
- Figure 36: Animal healthcare products for companion animals and livestock
- Figure 37: Market overview for the global healthcare landscape, 2009
- Figure 38: Market size, operating margin and indicative profit potential for the ten healthcare sectors
- Figure 39: The companion animal-livestock split in animal health, 2004
- Figure 40: Indicative profit potential of the human and animal health care sector
- Figure 41: A comparison of the size and profitability of individual sectors within the healthcare landscape, 2009
- Figure 42: Drivers and resistors for prescription to over-the-counter switching
AbstractIntroduction
Courtesy of the patent cliff, the pharmaceutical industry is set for a dramatic slow down in revenue growth from 2011. Industry players are therefore looking to implement strategies which will cushion them against the anticipated revenue short-fall, with diversification away from pharmaceuticals into other healthcare sectors one avenue under consideration.
Scope
- Analysis of Big Pharma's current business model, and the mergers, acquisitions and divestments which have shaped it.
- Classification of the human and animal healthcare landscape.Analysis of ten healthcare sectors using market size, operating margin, and indicative profit potential.
- Assessment of the healthcare landscape, with key recommendations for pharma companies looking to make future M&A decisions.
Highlights
The average operating margin of pharma-focused companies tends to be higher than that of those with a more diversified business model, implying that increasing pharma-focus is the best strategy to drive profit growth.
Both the market size and operating margin associated with pharmaceuticals makes it the most rewarding of all ten healthcare sectors under analysis, and suggests that diversification on the part of Big Pharma will tend to end in profit dilution.
Patents are key to the high rewards associated with pharmaceuticals, and are also responsible for making the medical device/diagnostics sector the third most attractive sector under analysis, with branding playing a similar role for consumer/over-the-counter health.
Reasons to Purchase
- Understand how Big Pharma's business model has evolved, and how this has impacted on operating margin.
- Identify the major sectors within the healthcare landscape, and understand how they relate to one-another.
- Analyze the attractiveness of each sector as a target to diversify into, based on market size, operating profit, and indicative profit potential.
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