Biopharmaceuticals: Nothing Compares to You

11/17/11

Are biotech and pharma companies doing well, or falling apart at the seams? People will have differences of opinion on this, but one thing is clear: it’s all relative.

At a speech to a trade group in Philadelphia last month, James Greenwood, president of the biotechnology trade group BIO, asked the government to stop picking on the pharma industry. “The drug industry has laid off more workers than the auto industry, but they get bailed out while we’ve continued to get picked on,” he declared. Unfortunately, Greenwood’s comparison of the auto and BioPharma industries was well meaning but seriously misguided. I looked up the profitability of the Big Three auto companies and compared it to three of the largest, US-based pharma companies over a five-year period.

Here’s the data, on yearly profits or losses, in billions of dollars. Losses are expressed in parentheses, and the * indicates results following bankruptcy.

GM Ford Chrysler Pfizer J&J Merck
2006 (2.0) (12.7) (1.5) 19.3 11.1 4.4
2007 (38.7) (2.7) (2.9) 8.1 10.6 3.3
2008 (30.9) (14.6) (16.8) 8.1 13.0 7.8
2009 (4.3*) 2.7 (3.8*) 8.6 12.3 12.9
2010 4.7 2.7 (0.7) 8.3 13.3 0.9

Which industry do you think has had the rougher time in the past five years?

Big pharma and the auto industry are both dominated by multi-national corporations that employ huge numbers of people. Both industries have a high cost-of-entry barrier that limits competition. And it’s also true that both the auto industry and big pharma each laid off hundreds of thousands of workers in the past few years. In the auto industry, however, the largest layoffs were focused on the people who actually built the cars. In contrast, big pharma didn’t lay off the people who make the drugs; they primarily laid off the folks who created, marketed, and sold their products. I point this out to illustrate that gross comparisons between the auto industry and pharma, are, well, rather meaningless. The two industries aren’t really comparable in a large number of ways. People die if they can’t get certain medicines, but I never heard of someone passing away because they couldn’t get a new Chevy.

Despite their recent setbacks, Big Pharma companies are still making money … Next Page »

Stewart Lyman is Owner and Manager of Lyman BioPharma Consulting LLC in Seattle. He provides strategic advice to clients on their research programs, collaboration management issues, as well as preclinical data reviews. Follow @

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  • http://mattwitte@hotmail.com Snore bore

    The spokesperson you referenced at BIO represents smaller, biotech companies and speciality pharma start ups particularly. I think your comments missed the mark. While big pharma has had massive layouts w/o becoming unprofitable, the lack of capital, IPO drought and ridiculus FDA behavior has killed USA’s innovation and the start up venture market killing a job machine that was thriving just 10 years ago.

  • Ted

    Hi Stewart:

    Nice article. The ongoing shell game around R&D expenditures can never get enough coverage. Big pharma is continuing to reap the whirlwind sown in the merger and “re-organization” frenzy of the 90′s.

    Even larger biotechs trend around 50% R&D against revenues. The fact that big pharma prefers to sit on a huge pile of cash rather than marginally increase their internal investment rate says a lot about their self-confidence.

    -t