The pharmaceutical industry includes companies involved in the manufacturing and development of prescription drugs and over-the-counter products that are used to prevent illnesses in humans or animals (Oliver, 2017). Although Value Line has noted that the industry is ranked 92nd (out of 97 industries) in regard to timeliness and has experienced falling ratio of industry strength, the sector still contains a strong base of safe, well-established equities with above average income components (Ratty, 2017). The true costs of drug development can be outstanding and without proper return on investment, pharmaceutical companies cannot develop the drugs that may save lives in the future. One way companies have been able to generate revenue is by developing brand name drugs that are produced and sold for cheaper prices against a competitor’s brand name drug. The following companies: Merck, Pfizer, and J&J will be assessed regarding their dominant products within the industry as well as their current position. The pharmaceutical industry is also highly globalized with 15 multinational companies that dominate the industry (Oliver, 2017). In fact, recent studies show the industry is growing at a rate of 5%, which is just behind the two other major healthcare segments – medical services and equipment. Everyday our market is changing the way it is. Typically, the higher the debt ratio, the more likely a company is at risk of solvency. The individual companies set their own prices and expect to be compensated for the high cost of research and development (R&D). The industry relies on the advancement of medical technology to develop new drugs for unmet needs. The significance of generic drugs is that they do not have to contain the same exact components as brand name drugs, they simply must contain the same active ingredient in a similar dosage. Merck’s ROE remained flat with an average ROE of 13% between 2012 to 2016 while Pfizer’s ROE trended downward from 18% to 12% between 2012 to 2016. Industry averages for net profit margin trended upward and can also be seen with J&J (Table 3a, 3d). Pharma companies face a range of policy and regulatory issues—activity that affects the pace at which drugs come to market, supply chain and safety, tax, and pricing polices limiting payment rates. Although it is important to note that while Merck and Pfizer are predominately pharmaceutical companies, pharmaceuticals are one only one component of J&J’s entire portfolio. The primary focus of the financial analysis will include the Merck, Pfizer, and J&J. As a small content curator, I am always looking for ways to provide new content. Widespread population aging and sedentary lifestyles leading to increased chro… Highly efficient medicines and other treatment based solutions are responsible for pushing various markets operating in this sector. A decrease in net income from $6 million in 2012 to $3 million in 2016 can be attributed to a decrease in sales between 2012 and 2016. These forces include the companies competing in the industry, the power of the buyers, the power of the sellers, the threat of new entrants, and the threat of rivals producing substitutes. The equity multiplier increased in 2013 from 2.26 to 2.88 in 2016. Based on statistics from the Pharmaceutical Research and Manufacturers of America (PhRMA), only two out of ten marketed drugs generate enough revenue to cover initial costs for the development of a drug (Oliver, 2017). Businesses in all industries have a unique opportunity to market directly to their customers nowadays. The loss of patent exclusivity allowed competition with generic pharmaceutical manufacturers (Oliver, 2017). Lastly, collaborations have been increasing in the pharmaceutical industry to allow manufacturers to share the cost of R&D and improve the possibility of generating (but sharing) more revenue. The equity multiplier increased between 2014 to 2015 from 2.02 to 2.28 as a result of an increase in total assets and a decrease in total equity. Pfizer’s total revenue decreased from $58 million in 2012 to $52 million in 2016 (Table 2b). Ultimately, the increase in ROE between 2013 and 2014 resulted from an increase in profit margin. With no patent protection, generic pharmaceutical manufactures can easily replicate drugs without investing a substantial about of capital in research and development (Oliver, 2017). Pfizer created a cheaper drug to compete with J&J’s Remicade for arthritis but is unable to sell to health insurers, hospitals and clinics due to exclusionary contracts imposed by J&J (Rockoff, 2017). As such, you may wish to interpret the regulatory frameworks of the pharmaceutical industry as a Legal matter, and not a Political one. Indian Pharmaceuticals Industry Analysis . Pfizer currently has some of the most highly recognizable brand name drugs and have impacted multiple clinical guidelines. The profit margin between 2013 and 2014 increased from 10% to 28.22% due to a substantial increase in net income as a result of decreased interest expense. As you’ve seen, the pharmaceutical industry is sure to stick around. We couldn’t find any significant Legal factors affecting the pharmaceutical industry. The global pharmaceutical packaging market size was valued at USD 98.58 billion in 2019 and is anticipated to expand at a CAGR of 8.5% over the forecast period. The top three publicly traded pharmaceutical companies included in this industry analysis includes Johnson and Johnson (J&J), Pfizer Inc., and Merck and Co. Inc. The benchmark analysis is used to assess the profitability and liquidity ratios for Merck, Pfizer, and J&J against industry standards. Further analysis is required to determine this cause. However, in a recent Wall Street Journal article, it was particularly noted that the pharmaceutical industry has begun an offensive to battle groups that advocate for lower drug prices (Loftus, 2016). As new medications are created from various biological sources, pharmaceutical companies might have a wider range of drugs to produce and distribute, generating additional revenue. Without the pharmaceutical industry, no life-saving medications would be available to make an impact in the healthcare system. Global Dexamethasone Acetate Market Top Manufacturers Analysis: Chemocare, Sigma-Aldrich, Kingyork, LGM Pharma The Atypical Chemokine Receptor 3 market report presents an analytical study that is defined based on the various parameters and trends followed by the global market. One country that has showcased robust strength in the wake of the coronavirus pandemic is Vietnam. The pharmaceutical industry has been one of the more controversial industries in the United States primarily due to high drug prices. The advancement of technology is essential to further develop within this industry but the cost of an average of $1.2 billion to develop a drug and the average time of 10 years to fully bring drug into market limit the ability of many companies to consistently develop new drugs (Oliver, 2017). By Packaging this market is … In particular, it’s the role of biotechnology in medicine that might impact the pharmaceutical industry. Advancements in active pharmaceutical ingredient (API) manufacturing, and growth of the biopharmaceutical sector is also driving the market growth. Market Research Report Summary. Please consider supporting us by disabling your ad blocker. If companies do comply, they risk losing billions of dollars of profit due to taxes and discounts. The industry contains a handful of high-yield equities with a relatively low-risk profiles (Ratty, 2017). However, despite the lucrative n… The asset turnover remained flat with no major changes. Merck’s total assets and total liabilities remained relatively flat with a five-year average of $101 million in total assets and $54 million in total liabilities (Table 1a). Did you find this post helpful? Thus, the aging population means we have more health issues to tackle. By advertising direct to consumers, businesses will be able to lower their customer acquisition costs and gain more customers as a result. As per the analysis provided in the report, the global market of Pharmaceutical Membrane Filters is estimated to growth at a CAGR of _% during the forecast period 2018 to 2025 and is expected to rise to USD _ million/billion by the end of year 2025. Ultimately, the decrease in ROE between 2013 and 2014 resulted from an increase in equity multiplier. The pharmaceutical traceability market analysis includes type segment and geography landscape. Individual components show an increase in profit margin between 2013 to 2014 from 10% to 28% resulting from an increase in net income. Many companies improved operating as a result of experiencing a more favorable general environment in addition to support from President Trump regarding relaxation of industry regulations of drug prices (Ratty, 2017). Unfortunately, due to high cost of treatment, up to 20% of cancer patients forego treatment (Oliver, 2017). Between 2013 to 2014, Pfizer’s ROE decreased from 29% to 13% (Table 4b). (Oliver, 2017). Merck’s equity ratio in 2016 was 0.42 and has remained flat between 2012 to 2016 with an average ratio of 0.46 (Table 3b). The perception of cheaper generic drugs as adequate alternatives to more expensive brand name drugs will be a key social issue further discussed within the pharmaceutical industry. Manufacturers will negotiate to be classified in a lower tier to drive demand at the cost of reducing revenue (Oliver, 2017). With continued scrutiny of increased drug prices, many of the major pharmaceutical companies have become more selective with the development of new drugs. With limited technological advancement in addition to high cost of drug development, fewer and fewer blockbuster drugs are being produced. PESTEL or PESTLE analysis, also known as PEST analysis, is a tool for business analysis of political, economic, social, and technological factors. 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