What Is Big Pharma – Overview
The term Big Pharma is often used to indicate the largest pharmaceutical companies collectively. It is a group of established and accomplished companies pursued by active investors and retirees. The stock of this group is generally known as the Big Farma collectively.
What Is Big Pharma and How Does It Work?
What Is Big Pharma and How Does It Work?
Big pharma is a collective term generally used to indicate the world’s largest traded pharmaceutical companies. The primary difference between pharmaceutical companies and big pharma is their market valuations.
Big pharma often has a better pipeline and a more diverse portfolio than biotechnology. However, biotechnology portfolios offer faster growth rates and more risks.
The Big Pharma symbolizes some of the most popular pharmaceutical companies. These companies are always on the frontline of vaccine development and prescribed drugs. It is a collective term, just like “Big Tech.”
Big Tech indicates the most significant global tech companies like Microsoft, Apple, and Google. The term Big Pharma indicates something similar in the healthcare field.
15 Largest companies often represent Big Pharma
| Company name | Market value |
|---|---|
| Johnson & Johnson | $ 276 billion |
| Novartis | $ 273 billion |
| Roche | 248 |
| Pfizer | $ 212 billion |
| Merck | $ 164 billion |
| Sanofi | $ 134 billion |
| Bayer | $ 123 billion |
| Novo-Nordisk | $ 118 billion |
| Briston-Myers Squibb | $ 115 billion |
| Abbvie | $ 110 billion |
| GlaxoSmithKline | $ 103 billion |
| Eli Lilly | $ 98 billion |
| AstraZeneca | $ 84 billion |
| Teva Pharmaceutical | $ 59 billion |
| Shire | $ 49 billion |
A few more companies, including Biogen, Amgen, Gilead Sciences, and Celgene, have significant market values. These companies still fall under the biotech sector because their portfolios are maturing.
Benefits of Big Pharma
There are multiple benefits of Big Pharma.
- Like all large corporations, the pharmaceutical industry is also subject to scrutiny. There will be some people who can be skeptical about Big Pharma’s intentions, especially when money is involved. Corporations that go back into development and research make a big part of this money. These corporations also take care of the marketing of these products.
- Without the involvement of Big Pharma, many popular healthcare products would not be available in the market.
- Big Pharma also contributes to ongoing research and clinical trials in immunology, neuroscience, and diseases like cancer.
- Big Pharma also played a vital role in the vaccine development. The largest pharmaceutical companies like Pfizer and AstraZeneca played the forefront of global vaccination.
7 Crucial Facts About Big Pharma
Here is a list of some crucial facts about Big Pharma.
1. They spend reasonable amounts on advertising
Some investors think the hard work is over once the drug has been approved by the FDA (Food and Drug Administration). However, this is not the actual scenario. Beginning a severe advertising campaign takes a lot of hard work and money. This is necessary to promote a drug to physicians and customers to increase awareness.
The cumulative amount of money a company can return to its shareholders per year as a percentage of its market value is called shareholder yield. Two main things can qualify as “shareholder returns.”
- Share repurchases
- Dividends
Big Pharma stocks can offer a crazy shareholder yield. You can regularly find shareholder returns over 2%. It is basically for S&P 500 companies.
3. The Pipelines of Big Pharma Are Huge
Big Pharma companies are often stacked in their pipelines and product portfolios.
4. Big Pharma Spends a Huge Amount on Research and Development
Having a vast pipeline also has certain downsides. The enormous pipeline is responsible for several clinical trials, which can be extremely costly. Big Pharma also invests a lot of money to pay the researchers. The researchers are always encouraged to develop new therapies. In 2013, 10 of the 15 companies mentioned earlier spent around $ 65.8 billion on running trials and paying their researchers.
5. Some of the Highest Profit Margins Are Found in the Big Pharma
The pipelines of Big Pharma are massive. Researching to develop new therapy methods is costly as well. However, these newly developed therapies also possessed some pricing power for these drug developer companies. This can come in handy for these companies to recover their development costs.
6. Big Pharma Can Get Fined
These drug developers can get fined for their advertising practices when they are misleading. It is not very uncommon in the pharmaceutical world. Sometimes, it can be because of some hidden wrongful acts. They can cause problems when they come to light. Big pharma generally sits at the center for some of the biggest fines ever among all the healthcare companies.
7. Big Pharma Can Be Called the Megamergers
Some of the most significant mergers of healthcare companies have happened among current Big Pharma names.
Conclusion
“Big Pharma” refers to the world’s largest pharmaceutical companies collectively. These companies can offer a massive return for their shareholders. Their shareholder’s yield is more than that of other general pharmaceutical companies.
Their contribution to developing new drugs and new therapy methods can have a massive effect on medical science.
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