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 that are 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?
Big pharma is a collective term that is 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, prescribed drugs and even for COVID -19. It is a collective term just like the term “Big Tech.”
The term Big Tech indicates the largest global tech companies like Microsoft, Apple, Google, etc. The term Big Pharma indicates something similar in the healthcare field.
There are 15 major companies that often represent Big Pharma
|Company name||Market value|
|Johnson & Johnson||$ 276 billion|
|Novartis||$ 273 billion|
|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|
There are a few more companies, including Biogen, Amgen, Gilead Sciences, and Celgene who have great market values. These companies still fall under the biotech sector because their portfolios are still 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 the intentions of Big Pharma, especially when there is money involved. A big part of this money is made by corporations that go back into development and research. 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 has a contribution to multiple ongoing research and clinical trials in immunology, neuroscience, and diseases like cancer.
- Big Pharma also played a vital role in the vaccine development for the current COVID-19 pandemic. The largest pharmaceutical companies like Pfizer and AstraZeneca played the forefront role in global vaccination.
7 Crucial Facts About Big Pharma
Here is a list of some important facts about Big Pharma.
1. They spend good amounts on advertising
Some investors think that the hard work is over once the drug has FDA (Food and Drug Administration) approval. However, this is not the actual scenario. It takes a lot of hard work and money to begin a serious advertising campaign. This is necessary to promote a drug to physicians and customers to increase awareness.
2. Big Pharma Stocks Offer Good Shareholder Returns
The cumulative amount of money that a company can return to its shareholders per year as a percentage of its market value is called shareholder yield. There are two main things that can qualify as “shareholder returns.”
- Share repurchases
Big Pharma stocks can offer a crazy shareholder yield. You can regularly find shareholder returns in excess of 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 huge 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 the year 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 huge. Conducting research 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 biggest mergers of healthcare companies have happened among current Big Pharma names.
The term “Big Pharma” generally 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 other general pharmaceutical companies.
Their contribution to developing new drugs and new therapy methods can have a massive effect on medical science.