Big 3 Pharma: Innovation, Growth, and Market Dominance

The pharmaceutical industry is an industry in medicine that discovers, develops, produces, and markets pharmaceutical drugs for use as medications to be administered to patients (or self-administered), with the aim to cure and prevent diseases, or alleviate symptoms.

Continually evolving with new products, technologies, and innovations. Here, we highlight some of the most prominent pharmaceutical companies that lead the way within the industry.

Eli Lilly and Company (LLY.NY)

With a heritage 148 years strong since its founding on May 10, 1876, Eli Lilly and Company is headquartered in Indianapolis, Indiana, U.S.A. It boasts a global workforce of over 44,000 employees, with around 10,000 dedicated to research and development. Clinical research is conducted in more than 55 countries, supported by R&D facilities in 7 countries and manufacturing plants in 9 countries. The company's products are marketed in approximately 105 countries worldwide.

Given the company pipeline has been quite extensive, with drugs under clinical clinical trials in various therapeutic areas. The company’s Alzheimer’s treatment, Donanemab, recently faced a delay in regulatory approval, but Eli Lilly remains positive about the outcome. With Peak sales of Donanemab are projected to reach $10 billion.

Overall, Eli Lilly is poised for substantial sales growth in the coming years. The obesity drugs market, in particular, is projected to surge 16-fold to over $100 billion by 2030, while these positive prospects may already be reflected in the current stock price, LLY stock could continue to rise due to increased market share for its drugs and anticipated regulatory approvals.

Key Pointers to Note:

• Eli Lilly’s Revenues have risen 39% from $24.5 billion in 2020 to $34 billion in 2023.

• With the obesity drug, Zepbound, approved by the U.S. FDA in November last year and is expected to generate more than $16 billion in annual sales by 2029.

• Gross income grew significantly to $27,042 million in 2023, up from $17,598 million in 2019, reflecting a growth of 23.41% from the previous year. The gross profit margin for 2023 was not explicitly reported, but the growth in gross income suggests a positive trend.

• Selling, general, and administrative (SG&A) expenses were notably high at $16,717 million in 2023. Research and development (R&D) costs were $9,313 million, indicating a steady increase in investment in innovation, from $5,595 million in 2019.

• Pretax income was $6,555 million in 2023, with a slight decline from $6,806 million in 2022, translating into a -3.70% growth rate. Net income for 2023 was $5,240 million, and the basic and diluted earnings per share (EPS) both stood at $5.80, marking a decline in EPS growth of -15.96% from the previous year.

Novo Nordisk (NVO.NY)

Novo Nordisk A/S is a leading Danish pharmaceutical company with operations across the globe. Controlled by Novo Holdings A/S, it specializes in diabetes care and also focuses on hemostasis management, growth hormone, and hormone replacement therapies. Its key products include Ozempic and Wegovy for diabetes and obesity, respectively, among others.

With over 48,000 employees and products available in 168 countries, Novo Nordisk was formed from a merger in 1989. The company is known for its strong sustainability record and has been recognized as a top workplace by Fortune. As the largest pharmaceutical company in Denmark, Novo Nordisk's market value even surpassed Denmark's GDP in 2023, making it the highest valued company in Europe.

One of the market leaders in diabetes and weight loss treatments, it puts them in the forefront of the market, giving them an competitive advantage over other pharmaceutical companies.

Key Pointers to Note:

• Novo Nordisk's sales revenue has seen steady growth over the past five years, reaching DKK 232,261 million in 2023, with a notable increase of 31.26% compared to the previous year.

• The cost of goods sold (COGS), including depreciation and amortization (D&A), has also risen consistently, reaching DKK 38,814 million in 2023, representing a 25.31% increase from 2022.

• Gross income has significantly increased to DKK 193,447 million in 2023, showing a growth rate of 32.52% from the previous year.

• Selling, general, and administrative (SG&A) expenses have risen to DKK 90,063 million in 2023, reflecting a 25.86% increase from 2022.

• Novo Nordisk's earnings before interest and taxes (EBIT) reached DKK 103,384 million in 2023, demonstrating substantial growth of 51.03% compared to the previous year.

• Earnings per share (EPS) also saw notable growth, reaching DKK 18.67 for basic EPS and DKK 18.62 for diluted EPS in 2023, showing increases of 52.32% and 52.38%, respectively, from the previous year.

Merck & Co. Inc (MRK.NY)

Merck & Co., Inc is an American pharmaceutical giant based in Rahway, New Jersey. It originated as the U.S. branch of the German-founded Merck Group in 1891. Today, it ranks among the world's top five pharmaceutical companies by revenue. Merck & Co. develops and markets a wide range of pharmaceuticals, vaccines, biologic therapies, and animal health products, including major sellers in cancer immunotherapy, diabetes treatments, and vaccines for HPV and chickenpox.

The company holds the 71st spot on the Fortune 500 list for 2022 and the 87th on the Forbes Global 2000 list for the same year, based on its 2021 revenues. In 2023, it moved up to the 73rd place on the Forbes Global 2000 list.

Merck previously acquired Acceleron Pharma for $11.5 billion in cash, mainly for its promising treatment, sotatercept, aimed at pulmonary arterial hypertension (PAH), a serious condition causing high blood pressure in the lungs. It's considered one of the most promising projects in pharmaceuticals, projected to generate $2.6 billion in annual sales by 2028. Sotatercept is expected to see continuous growth beyond this decade.

Key Pointers to Note:

• Sales revenue for the company increased slightly to $59,871 million in 2023 from the previous year.

• Cost of goods sold, including depreciation and amortization, was $13,897 million in 2023, with depreciation accounting for $3,872 million and amortization for $2,044 million.

• Gross income rose to $43,894 million, showing a growth of 6.37% compared to the previous year. Selling, general, and administrative expenses totaled $40,007 million, with research and development costs at $30,530 million.

• The company's earnings before interest and taxes stood at $6,211 million.

• The company's pretax income for 2023 was $1,889 million, with an income tax of $1,512 million.

• The net income for the year was $365 million, resulting in earnings per share of $0.14.
  

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Sources:
1.Investing in Pharmaceutical Stocks: A Healthy Portfolio Available at:
https://www.ourcrowd.com/investment-themes/pharmaceuticals#:~:text=Value%20and%20Potential,-Pharmaceutical%20technology%20is&text=It%20encompasses%20all%20aspects%20of,by%20making%20drugs%20more%20affordable.
2.Should You Pick Eli Lilly Stock After A 4x Rise In Three Years? Available at :https://www.forbes.com/sites/greatspeculations/2024/03/19/should-you-pick-eli-lilly-stock-after-a-4x-rise-in-three-years/?sh=6ce81ddd566b
3 Eli Lilly and Co Financial Statements. Available at:
https://www.wsj.com/market-data/quotes/LLY/financials
4. About Novo Nordisk; Available at:
https://www.novonordisk.com/about/what-we-do.html#
5.Should You Invest in Novo Nordisk (NVO) Ahead of Q1 Earnings? Available at: https://www.nasdaq.com/articles/should-you-invest-in-novo-nordisk-nvo-ahead-of-q1-earnings#:~:text=Novo%20Nordisk%20plays%20to%20its,run%20and%20benefit%20its%20investors.
6.Novo Nordisk Income Statements. Available at: https://www.wsj.com/market-data/quotes/NVO/financials/annual/income-statement
7.Merck & Co Company Overview; Available at: https://www.merck.com/company-overview/
8. 3 Reasons to buy Merck Stock; Available at: https://www.fool.com/investing/2023/09/22/3-reasons-to-buy-merck-stock/
9.Merck & Co Company Income Statements. Available at: https://www.wsj.com/market-data/quotes/MRK/financials/annual/income-statement

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