The pharma industry has traditionally outperformed many other industries, but revenue and profit developments can vary substantially from one company to another. By analyzing more than 150 of the largest stock-listed pharma and life-sciences companies, the Roland Berger Global Pharma Study 2023 identifies those that achieved high revenue growth and high profitability from 2019 to 2022 – and derives key characteristics these “winners” have in common.
Business leadership, strategic coherence, a proven ability to execute, and an appropriate size and financial position demonstrably set these companies apart from the “profitless growers”, “value generators” and “underperformers” in the pharma business. The industry has worked to become more efficient in recent years, especially during the Covid-19 pandemic. Many companies streamlined sales and marketing, lowering selling, general and administrative expenses (SG&A) by on average 4 percentage points and their drag on profits.
Winning companies, in particular, have made their operations (32% COGS compared to 40% of underperforming peers) more cost effective to better face challenges both new and familiar.
These include serving smaller patient populations as personalized medicine continues to grow, ensuring supply-chain safety in the face of new geopolitical risks, focusing on environmental and social sustainability, and contending with increased price pressure as inflation continues to adversely affect many input costs.
How do winning pharma companies perform better than others? Firstly, they have positions of business leadership. These result in revenue growth consistently stronger than that of profitless growers, value generators and underperformers – and in strong, resolute thought leadership that enables them to set the agenda in their areas of the pharma market.
Pharma winners have a strategic coherence that leads to a tighter focus on specific diseases or therapeutic areas (54% of winners compared to only 35% of underperforming peers).
This allows them to continually realize operational synergies and manage their portfolio of business assets decisively when opportunities arise. Two other proxies for strategic coherence are leadership in environmental, social and corporate governance issues (ESG) and stable and experienced top-level management teams.
Winners also have a proven ability to execute that expresses itself in greater operating efficiency. Their SG&A expenditures as a proportion of revenues (22% compared to 30% of underperforming peers) are noticeably smaller than those of pharma companies in the other three categories, a sign that winners are driving the general industry trend towards more streamlined omnichannel sales and marketing divisions.
Size and financial position make up the last key feature that defines a pharma winner. Its revenues are usually significantly larger than those of underperformers, for example, its capital structure is more solid thanks to lower debt, and its presence is more global.
Roland Berger is here to help pharma companies address strategic questions so that they can assume or sustain leading positions in their industry. They have to face a number of current issues and structural problems in order to continue fulfilling their many pivotal roles.
Unveiling pharma industry winners! Roland Berger's Global Pharma Study 2023 reveals key traits shared by high-growth, high-profit companies.
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