August 1, 2006 (Vol. 26, No. 14)

Overview of the Global Pharmaceutical Market

Last year saw the global pharmaceutical market grow to $602 billion, up 7.7% from 2004. North America contributed 44.1% of global pharmaceutical sales in 2005. The three major pharmaceutical regionsNorth America, Europe, and Japanaccounted for 82.3% of the world market.

Global pharmaceutical sales growth of 7.7% in 2005 was primarily driven by a 10.8% growth in European markets. However, sales growth in all major markets slowed in 2005, with the Japanese pharmaceutical market growth falling from 10.7% in 2004 to just 4.6% in 2005.

The U.S. pharmaceutical market grew by 7.0% in 2005 to $252 billion. The U.S. retail pharmaceutical market grew to $183 billion and was dominated by sales in the central nervous system, cardiovascular, and alimentary/metabolism therapy areas.

The European pharmaceutical market grew by 10.8% to $170 billion in 2005. Germany, France, and the U.K. together accounted for almost 50% of all European pharmaceutical sales in 2005. The Japanese pharmaceutical market grew by 4.6% in 2005 to $60.3 billion.

Main Companies

Sixty four companies generate pharmaceutical sales in excess of $1 billion and these account for 72.6% of the global pharmaceutical market. The top-10 companies, ranked by pharmaceutical sales, generated total sales of $252 billion in 2005, with a year-on-year increase of 5.1%. Total pharmaceutical sales from the top-10 companies accounted for more than 40% of the total market. Pfizer was the leading company in 2005 with a market share of 7.4%. Sanofi-Aventis and GlaxoSmithKline both had market shares of 5.6%, AstraZeneca 4.0%, and Johnson and Johnson 3.7%.

The top 10 biotechnology companies by revenue all generated revenues in excess of $1 billion in 2005. The leading biotechnology company was Amgen with total revenues of $12.4 billion. Next was Genentech with revenues of $6.6 billion, and third was Genzyme with $2.7 billion. The top 10 biotechnology companies all increased revenues in 2005, with Gilead Sciences achieving the greatest increase of 53.1%.

For the top 10 pharmaceutical companies there is a strong relationship between sales and value. Current market share and future growth expectations are important factors in determining company value. Sales levels and year-on-year growth rates are critical components in building shareholder value for pharma firms. Sales levels also influence R&D levels, which as a result, help to sustain future sales growth.

Key Trends and Opportunities

The global pharmaceutical market is forecast to grow to $842 billion in 2010, an equivalent CAGR of 6.9% over the next five years. U.S. market growth has slowed over the last three years and is set to remain moderate over the next five years. Sales growth will be limited by high prescription drug co-pays for insured consumers, the growing availability of generic drugs, and a lack of new blockbuster drugs coming through the pipeline.

Strong growth in the 10 European markets that joined the E.U. in 2004 will help boost European sales over the next five years. Continued double-digit growth in China will result in it becoming the seventh-ranked market by pharmaceutical sales in 2010.

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