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January 30, 2006
Forecast: Rain, Eventually
Business Week, whose reporting on the industry I've been uncomplimentary about in the past, is saying that year-end earnings reports show that European drugmakers are moving past the American-based ones in profitability.
And that's probably true, for 2005 anyway. Merck (and to a lesser extent, Pfizer) got hammered last year, and several other companies turned in pretty unremarkable performances. But the comparison that the magazine is making is, for the most part, an artifact. US companies had some big sellers a few years ago, and the European companies looked like they were falling behind. Now the patent expirations are looming (and some bad news has hit), so the situation is reversing. It happens.
It doesn't make much sense to divide drug companies up just by location of their headquarters in the first place. GlaxoSmithKline, for example, is a British company, but their culture seems more or less identical to that of the American companies. And I'd have to think that Novartis would have more in common with another big outfit like Merck than it would with a smaller European company. I'm not saying that the European companies don't tend to have a different way of doing things, because on average I think that they do. It's just that the comparisons aren't as easy to do as you'd think.
The BW piece goes on about various drug recalls on this side of the ocean, but they make things look more dramatic by not including some of the other European companies like Bayer (which went through a painful recall of its statin drug a few years ago). The article also makes much out of Sanofi-Aventis and their prospects for Acomplia (rimonabant) this year - but how would Aventis look if they were still on their own? That merger issue makes the comparison with the US companies rather complicated, too, since Pfizer's biggest drugs were acquired through buying other companies.
The article doesn't try to draw many larger conclusions about how the European companies might be doing things differently or how the American ones got into trouble. And it's a good thing, too, because it's hard to come up with any generalizations that make sense. (You might be able to sell a specialty-markets versus direct-to-consumer difference, but the piece doesn't bother trying). What readers are left with some sort of weather report: "It was cold a few days ago, but now it's not. Today it's raining, but tomorrow, who knows?".
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