Pharmaceutical Preperations - Industry Analysis

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Industry Analysis: Pharmaceutical Preparations
Macro and Micro Analysis

Macro & Micro Industry Analysis: Pharmaceuticals
subgroup: Pharmaceutical preparations

The report analyses the macro and micro-environmental factors of the industrial group called “Manufacture of pharmaceutical preparations” with the standard industrial code of 21200, according to the most recent version of the UK Standard Industrial Classification (SIC) of 2007. (Office for National Statistics, 2007) Although different classification models from the United Nations and the United States attribute different codes to this industry, they generally share the same definitions, when it comes to the areas associated with it. These include: manufacturing, processing and fabrication of drugs in pharmaceutical preparations for human use as well as veterinary usage. Most of the products are developed and finished in a form aimed for final consummation, as for example ampoules, capsules, ointments, tablets, solutions, medical powders, vials and suspensions. The industry focuses on the design of products for two essential lines; firstly, pharmaceutical preparations that are designed initially medical, dental as well as veterinary purposes and secondly, pharmaceutical preparations that are designed initially for public, namely common consumers. (United States Department of Labor, 2012)

The Pharmaceutical sector in an especially interesting one since it is basically one of the most rapid augmenting industries being worth several trillion dollars worldwide and influencing the health of more than 4.6 billion humans worldwide. It constitutes on average over more than 10% of the GDP of the most developed nations and therefore forms a large portion of not only these countries’ economies but also the entire world economy. (Sheth, 2010) With a global population surpassing the 7 billion mark and a trend for further growth due to an ageing population with a higher life expectancy (on average 67.2 years) the pharmaceutical industry is set for rapid augmentation. (Central Intelligence Agency, 2012) According to a study by IMS Health, the value of the global pharmaceutical industry market rose 4,5% from 2011 to 2012 to reach a total market worth of US$880 billion. (ABPI, 2012) In Europe, the pharmaceutical preparations industry is the 5th largest sector, accounting for 3.5% of total manufacturing production and employing approximately 633,000 people in 2011. (European Commission, 2011)

The Pharmaceutical industry is not oligopolistic since there are more than 200 major companies fighting over market shares. Therefore, the market shares are relatively low and hence the industry would be seen as a very competitive one. Thus the most profitable companies, as demonstrated in the graph below (Pfizer, Novartis, Merck & Co, Sanofi and Astrazeneca), defend a share in the low-to-mid single digits. (Sloman, Hinde & Garatt, 2010)

Figure 1: Market share 2011

Source: ABPI (2011)

The table below shows a comparison of the five largest companies in the pharmaceutical preparations industry concerning sales, market share, R&D expenses, paid out dividends and number of employees in 2011.

Figure 2: Financial comparison 2011

Source: Table created by author. Data retrieved from annual reports, 2011

Pfizer
The American corporation was founded by the cousins Charles Pfizer and Charles Erhart in 1849 as manufacturer of fine chemicals and has since grown into a multinational pharmaceutical corporation. Its headquarters are in New York City and its key research facilities are centred in Groton, Connecticut. Trough through the years, Pfizer has made several big acquisitions, including Warner-Lambert in 2000, Pharmacia in 2003 and the latest acquisition was Wyeth in 2009, which was bought for US$68 billion. Pfizer is the largest pharmaceutical company in the world and trades its shares at the New York Stock Exchange (NYSE). In 2011 it reported a slight...
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