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Top 20 pharma report.

PATENT EXPIRATIONS AND CURRENCY SWINGS were the big stories for Top Pharma revenues in 2012. Cumulatively, our Top 20 companies saw revenues fall 3% to $448 billion last year, although their net income for that span was virtually flat, at $93 billion. Our top six companies all saw revenues fall last year as they reload for the future. The only companies to show double-digit gains relied on generics (Mylan), an acquisition (Teva, getting a full year of Cephalon revenues) or out-and-out sales growth (Gilead).

Nonetheless, the ranking remained relatively stable (we included last year's position in the chart on the right for reference). That likely won't be the case next year, with shakeups due to further generic erosion and AbbVie's shift over to the Top Biopharma ranks. In fact, as more Tops Pharmas derive greater shares of revenue from their biologics programs, we may have to rethink the whole Pharma/Biopharma split in a few years. ...

--Gil Y. Roth Editor

01 PFIZER, INC.

235 E. 42nd St.

New York, NY 10017-5755

Tel: (212) 573-2323

Fax: (212) 573-7851

WWW.PFIZER.COM

As we've seen in past years, Pfizer reflects the trends and of the rest of the Top Pharma cohort. This isn't to say that they're all following the #1 player in our market, but rather that Pfizer is so large that it manages to create a sort of microcosm for pharma as we know it.

Big patent expirations? Check!

Patent problems in India? Check!

Fewer acquisitions? Check!

Niche blockbusters for orphan indications? Check! (well, soonish)

Partnerships with other majors? Check!

Working up some biosimilars? Check!

More layoffs? Check!

Settlements large and small with governments and individuals? Check!

Non-traditional collaborations in emerging markets? Check!

Tough decisions on pursuing risky but lucrative therapeutic programs? Check!

Deep thinking about what a pharma company needs to be? Check!

This year, that involved seeing what happens when the biggest drug in the world goes off the patent cliff. Because of Ranbaxy's 180-day exclusivity period, Pfizer's Lipitor didn't go through a full year of race-to-the-bottom pricing for its statin, but the results were rough nonetheless; Pfizer lost $5.6 billion in Lipitor revenues in 2012. If you're scoring at home, $5.6 billion is larger than all but eight drugs' 2012 sales: Lantus, Advair, Crestor, Remicade, Humira, Rituxan, Herceptin and Avastin, (The fact that the last three of those drugs all come from Roche helps explain why that company is our #1 Biopharma.)

Lipitor's free-fall continued in 1Q13, with the drug shedding another $769 million in sales to come in at $626 million. That collapse has dropped Lipitor to #5 in Pfizer's sales ranks, behind Lyrica, Enbrel, Prevnar 13 and Celebrex. In a case of "what the patent gods take away, they also giveth," Pfizer received a patent extension for Celebrex in March 2013, extending coverage for that drug through December 2015, rather than May 2014.

One of the stated reasons that Pfizer purchased Wyeth in 2009--helping the company reduce the overall impact of Lipitor's expiration--did in fact hold up, despite our snarky comments. Pfizer's top three sellers, as of 1Q13, come from the Wyeth deal.

That doesn't mean Pfizer now has a stable structure. In January 2013, Pfizer spun out it animal health business in an IPO as Zoetis, a move it announced in June 2012. That move was one of a series of divestitures for the company. At the time, Pfizer held on to 80% of the new company's shares. The stock performed well in its first several months and, in May 2013, the decision was made to divest control entirely, offering Pfizer shareholders an opportunity to exchange shares and pick up an interest in Zoetis at a 7% discount, beginning in June. If it can't find enough takers, it may try again or use a special dividend to dispose of its remaining shares.

Meanwhile, top management is still considering whether to split Pfizer up further. In January 2013, chief executive officer Ian Read said the company may reorganize Pfizer around two units for branded and generic drugs. According to a Bloornberg report, Mr. Read told analysts in a conference call, "We will move toward separate management [for those segments], and at that point we'll evaluate whether shareholders would prefer to have the opportunity to invest in two separate companies or not." He also added that speculation was fruitless.

Three months later, chief financial officer Frank D'Amelio told Bloornherg that the company is in "a study year" and would spend 2013 assessing whether to make such a split. At that time, Mr. Read noted that a move of that proportion would take three years to execute. In the short term, the company will build a tramework where those two segments are a bit more transparent, so investors can get a better idea of the health of each business. Speculation, however, remains fruitless.

We've covered this topic in past years, and it looks like Pfizer is waiting to see how the Abbott/AbbVie split is received by the investing public. Abbott was in a much thornier situation than Pfizer is, dependent as Abbott was on the sales of a single drug (Humira) to fuel more than half of its pharma revenues. No Pfizer drug accounted for more than 8% of total pharma revenues in 2012 (9% in 1Q13, as Lyrica sales grew 12%).

There's one aspect of this branded/generic spit that's never been clear to us: what happens when current branded drugs go generic? Does the new branded company just stop making them, keep producing it as a new "established portfolio," or hand them off to the old generic company, even though the two firms are supposed to he independent? I suppose we'll find out the answer to that from AbbVie soon.

However Pfizer is structured, it's going to see a nice earnings bump of $1.4 billion courtesy of Protonix, a Wyeth drug that saw its pa tent expire in 2011. How will they get that much money out of an expired med? Well, Teva and Sun Pharma both launched at-risk generics of Protonix in 2007 and 2008, lost an infringement case, and recently settled with Pfizer and Takeda (which now owns Protonix' other seller, Nycomed) for $2.2 billion. Pfizer will receive 64% of the payout. And that's why they call it an "at-risk launch".

Pharma R&D remains even riskier, of course. Pfizer has seen several approvals in the past year that may help propel it into the post-Lipitor era. The most anticipated of these was Eliquis, the anti platelet treatment Pfizer co-developed with Bristol-Myers Squibb. That drug was cleared for reduction in the risk of stroke and systemic embolism in patients with nonvalvular atrial fibrillation by the FDA in December 2012 after several delays. It'll battle Pradaxa (Boehringer Ingelheim) and Xarelto (J&J) to supersede the longstanding standard of care warfarin.

Pfizer and BMS are hoping to expand Eliquis' label to cover recurrent venous thromboembolism (VTE), which will help push the drug toward its predicted mega-blockbuster status. For now, sales were quiet in 1Q13 as Eliquis had to gain a foothold against those established competitors. Strong head-to-head data will help.

Pfizer also got approval in the U.S. and Japan for Xeljanz, its oral treatment for rheumatoid arthritis (RA), in November 2012. That JAK3 inhibitor will try to carve out a niche against the injectable drugs that dominate the market: Humira, Remicade, Enbrel, and others. As with those treatments, trials are underway in a number of immunological areas. If it snags a fraction of the sales of those biologics (as well as reaching patients who can't tolerate them), Xeljanz could reach blockbuster status in short order. There are other JAK inhibitors reaching the market soon, which is why Pfizer began direct-to-consumer ads for Xeljanz in recent months.

In April 2013, the EU's Committee for Medicinal Products for Human Use (CHNLP) rejected the drug based on its risk/benefit profile. CHMP was concerned about serious infections, GI perforations and malignancies, and did not feel that the drug produced consistent reduction in disease activity and joint damage. Pfizer appealed the ruling.

The EU also dragged its heels a bit on Bosulif, an oral treatment for chronic myeloid leukemia that the FDA approved in September 2012. The European Commission gave the drug conditional marketing authorization in March 2013, pending a CHMP review.

That sounds like a somewhat productive pipeline, albeit one fraught with uncertainty about market uptake and competition. On the development side, analysts are intrigued by palbociclib, an investigational compound for breast cancer. Phase II results were impressive enough that the FDA gave the treatment Breakthrough Therapy designation, which could speed it to market. (We're talking a near-quadrupling of progression-free survival on average.) In drug development terms, that means maybe 2015 or '16. Some analysts think it could become hit peak sales of $5 to $8 billion, which would constitute a real game-changer for our mega-pharma company. Palbociclib is being co-developed with Onyx, in a deal that stretches back to the Warner-Lambert days.

As big as Pfizer is, it doesn't have an infinite R&D budget. In fact, the company slashed R&D spending by 13% in 2012, with plans to drop it by another 10% or so in 2013. Examining its pipeline and the research cuts that Pfizer has made, it looks like the company is less involved in early research and more focused on development, a model proposed by other major pharmas in recent years. That's ironic, because several of its new drugs were actually discovered and developed in house. Which is also ironic, because Pfizer was criticized for many years for not being able to develop anything that wasn't licensed or acquired.

In March 2013, Pfizer quit development of filibuvir, a treatment for hepatitis C. That field has gotten so competitive. Pfizer concluded that it wouldn't be able to make enough of an impact, and bowed out.

The company also surrendered on an Alzheimer's disease treatment it was developing with Johnson & Johnson, after a trial failed in July 2012. Pfizer and J&J did continue a Phase 11 study of the biologic as a subcutaneous formulation, which wrapped in February 2013, according to clinicaltrials.gov. There's been no word on the results, but we're going to assume that there was no fantastic result in a subpopulation that will warrant continued development.

As we said at the outset, many of the stories that you'll find in other Top Company profiles can be found within Pfizer. The world's biggest pharma has finally begun to fall back to the pack. Lucky for them, everyone else's patent woes mean they'll likely stay in the top spot for another year.

TOP 20 PHARMA NEWSMAKERS

JOHN KELLY, PFIZER GLOBAL SUPPLY

OUR #1 COMPANY CAN BE a bellwether for the rest of the industry, from R&D focus and outsourcing practices to network rationalization and technology applications. We spoke to John F Kelly, vice president of Strategy and Transitioning Sites for Pfizer Global Supply (PGS), to find out how the company has retooled and how it's positioning itself for the future, including its plans to build partnerships with a limited number of CMOs.

--GYR

Contract Pharma: How has Pfizer Global Supply's structure changed since we last spoke in 2011?

John Kelly: One of the most important things is that we've developed a fundamental value proposition for what PGS brings to Pfizer, to balance Quality/Compliance, Supply Reliability and Delivering Value, without ever compromising on Quality/Compliance. In Addition we're beginning to consolidate all of our small molecule manufacturing into a single operating unit. We had an organization that was more closely aligned with the commercial businesses: Primary Care, Specialty Care, Established Products and Emerging Markets. What we've done is to begin creating Pharmaceutical Manufacturing Operations, or PharmaOps, to organize a network of small molecule manufacturing sites.

CP: When was that change made?

JK: Beginning in December 2012. That team is organized into three groups: API plants, solid oral dose, and sterile injectables.

CP: What was the rationale?

JK: We want to tie our technologies more closely together. Having these in the same team brings a different perspective to the discussion about the technology, the size and the shape of the network.

They used to be organized geographically, when we had many more plants. Then we moved to a business-facing model, and now we're looking at a technology focus.

The driver was to put common technologies together. As we look to drive efficiencies, we have teams that speak a common language about their shared technologies, working together.

We have plans to roll Emerging Markets plants into the PharmaOps group. That will put all small molecule manufacturing operations into one group. Eventually, there'll be three operations groups: small molecule, large molecule, and consumer. That's the model we're looking to build.

We're trying to bring more of the strategy function within my team. The strategy component of Network Performance, which is there to drive operational efficiencies across our network, now reports to me.

CP: Congratulations! But tell me, how do you define strategy?

JK: It means different things to different people, doesn't it? One thing it's not is a tactical, "What do we need to deliver here and now?" quick punch. What my team tries to do is to balance what we need now--what we need to deliver this year and in the next few years--with a longer-term view, beyond a multi-year horizon. Now, that's not so easy in this industry, but the reality is, you need to take that perspective.

It might involve a projection of the network that we're going to need, because it takes time to shape the network for the future. In the case of Network Performance, we need to consider the opportunities to use different tools across our sites that may take time to implement. I'm talking about tools that could set up our plants for success in the longer term.

Some people will tell you that their strategy is simply to get through the year, and that might hold up, depending on the circumstance. But we're looking at the longer term. How can we use our fundamental value proposition to deliver value to Pfizer, Inc.?

CP: How has your group been involved in doing that?

JK: We had two major strategic projects in the past two years: we spun off our Animal Health business and divested our Nutrition business.

The Animal Health move took a long time to prepare, because it was a very integrated business, at all levels. I'm talking about shared facilities, integrated processes, and more. Pfizer is very good at integrating businesses; that makes it a challenge to separate them.

As part of the Zoetis [Animal Health] spinoff, we separated 25 manufacturing facilities that were largely dedicated to Animal Health. We carved out some additional sites that were essentially two facilities on one property.

We had acquired Nutrition as part of the Wyeth purchase, and we had five manufacturing sites dedicated to that business. We divested that to Nestle in November 2012.

Those are corporate projects for Pfizer, Inc. that we supported from a strategic point of view.

CP: And how do you prepare for something like Pfizer, inc. 's potential split into two companies, branded and generic?

JK: We have a very flexible manufacturing network that can be adapted to whatever strategy the company takes in the future. Having that network flexibility is one of our key goals. Whatever the future direction of the business is, PGS is going to be there to support the company and add value going forward.

CP: What are the deciding factors in what facilities you keep or divest?

JK: Certain parts of our business clearly have technology that is in demand. Their volume and capacity utilization is high. Take sterile injectables: that's a very heavily utilized network, and we're making investments in it.

Then take our API and solid oral dose facilities: as you look at products that are going off patent and the new product pipeline, we see a different mix both in terms of the volumes required for API and the dosage units. So that's where most of our focus has been. A lot of the sites that have exited the network have come from reviews of our API and solid oral dose needs.

It's about understanding demand five-plus years down the road. Where will the volume be and where is the business going? Given the nature of our patent-protected business, we can be fairly certain as to when it will happen. You can circle the date on the calendar.

CP: Did you have many single-product facilities in the network?

JK: The majority are multi-use facilities. We had a dedicated Lipitor plant in Ireland. That was a high-volume site dedicated to making those tablets. It could potentially have been used for other purposes, but our other sites were able to handle multiple products already.

CP: Where are you headed in the short term?

JK: We have five focus areas for this year:

1 Optimizing our supply performance and inventory management. It's critical to have the right products in the right places at the right time.

2 Managing our external partners. I foresee the day when we'll be looking at our internal network and our external partners on a very even playing field.

3 Deploying our Network Performance platform across our supply network. How can we increase our performance and effectiveness across the network. When we identify a plant that's strategic going forward, we want to invest in that plant to achieve the highest levels of operational effectiveness.

4 Accelerating the transition to a future state of supply network. Changes take time, because of tech transfer, regulatory process, and other reasons. We want to get to that next state (not necessarily an "end state") more quickly.

5 Embedding an "own it" culture. We want colleagues to take ownership of the business, in terms of what we do and what we deliver. It may seem obvious, but with 22,000 supply colleagues around the world, there has to be an effort to create a culture of ownership.

We've always been a metric-driven company. We're working on forward-looking, predictive metrics, rather than ones that look at the historical scorecard.

CP: When Pfizer Inc. is reviewing its long-term strategy, how much does it tap PGS as a consultative resource?

JK: With Tony Maddaluna being part of the executive leadership of the company, we're part of the discussion. It's incumbent on us to contribute From that role. We're involved in nearly every strategic initiative that the company undertakes.

CP: We last spoke when you were just starting in this job in 2011. What have' you learned in the two years since you took on this role?

JK: As we've reshaped our network, it's been a challenge. The value that a manufacturing and supply network can deliver has become very apparent to me. Delivering on it is a challenge. Exiting sites, whether through sale or closure, is difficult; you're separating colleagues who've been with the company a long time.

It's not a case of getting rid of underperforming sites. These sites deliver, so that's not an issue. Some of them are award-winning facilities, hut because of the changing mix of our products, it necessitates that we reshape the network. That's why we make a significant effort to sell sites where we can, to retain jobs and continue operating in their communities. That's a challenge, because the market for facilities has changed. It's not that easy to sell a manufacturing site anymore. There needs to be a "win-win" value proposition for buyer and seller. We work very hard to find that sweet spot, where we can sell a facility and keep it an ongoing operation.

But in some cases there isn't a market for certain sites, usually because of overcapacity in the industry.

CP: What's the proportion of closures to sales?

JK: It's approaching 50/50. Given what we've seen in the past few years, we knew we were in a tough market. Being able to sell half our transitioning sites was a very good outcome.

CP: Is most of that interest from CMOs?

JK: It's generally split between CMOs and smaller pharma companies that are trying to enter a particular market although there is at least one example where we sold a site to a big pharma company.

CP: What types of sites garner the most interest?

JK: We've divested a consumer manufacturing site and a solid oral dose site recently. We also sold a clinical scale biologics site. It's a diverse range. What seems most effective is if we have a value proposition that includes some level of a trailing supply agreement.

It's incumbent on the buyer to have a plan to bring in new business, of course, and not rely on that supply agreement too extensively.

CP: When we spoke two years ago, you were dealing with a network of almost 500 suppliers. How has that changed?

JK: When we spun off our Animal Health business, 200 or so CMOs were supplying that group. So that by itself pared down our external network, allowing us to focus on around 200 or so suppliers. It's still a couple hundred suppliers, and that's a large number. We wait to identify that handful or so that we can work with more closely in a partnership.

CP: What's involved in that sort of partnership? Early, you mentioned the notion of a level playing field between internal network and external supply.

JK: It takes a fair amount of trust, and a level of transparency for both parties. We need to understand their full capabilities and utilize that in our decision-making when we source products.

I should say that the notion of a level playing field is in regards to our key external partners. Not all of our 200 suppliers have the capability to work with us in this way and deliver value.

Given the geographic and technology needs of our business, certain partners bring certain attributes and capabilities that might drive us to work with them more extensively.

CP: What are you looking for in (hose potential part tiers?

JK: That'll he based on their supply performance, their regulatory performance, their geography, their technology and other factors.

CP: Can you tell me anything about those forward-looking metrics you mentioned earlier?

JK: It's based on that notion that past performance is no indicator of future results. It's about looking at trends and developing new metrics that we hadn't looked at before that might be more predictive of performance. It's not ready for prime time yet.

02 NOVARTIS

Lichtstrasse 35

CH-4056, Basel

Switzerland

Tel: (41) 61324 1111

Fax: (41) 61324 8001

WWW.NOVARTIS.COM

Novartis' integrated healthcare model has kept it near the top of our charts, with contributions coming from a wide range of areas. That setup hasn't totally protected it from the patent cliff, as pharma revenues fell by $1.2 billion in 2012, which is almost exactly how much Diovan sales dropped as it began to face generic competition.

Diovan's erosion has actually been slower than anticipated in the U.S. While the combination Diovan HCT product has competition from Mylan's generic, the monotherapy, which generated more than 60% of Diovan revenues, has yet to see a generic entrant. This is because the rights to its 180-day generic exclusivity period are held by Ranbaxy, an Indian company that has gotten into a lot of trouble with the FDA in the past decade. In May 2013, Ranbaxy made a major settlement with the agency, and expects to get its generic Diovan monotherapy approved any time now. Since that approval will start the six-month exclusivity window, it looks like Novartis may not take too bad a revenue hit in 2013.

By the following year, of course, much of the bottom will fall out. Zometa and Gleevec patents will drop this year and 2015, respectively, leaving Novartis with more holes to fill. By then, revenue growth from its newer products may save the company from an extreme sales drop. Novartis certainly isn't at risk of losing its spot as the #2 pharma in the world, but the Diovan uncertainty won't help it pass Pfizer for #1.

In its November 2012 R&D update, the company noted that it had seven blockbusters by the end of 2011, and hopes to have 14 (or more!) by 2017. Gilenya crossed that barrier in 2012, and will likely be followed next year by Tasigna, Galvus and Afinitor. We're not quite sure where another six (or more!) are going to come from, since they'll (likely) need to replace Diovan, Gleevec and Zometa/Reclast. In addition, some fast-growing products may level out or fall quickly as competition mounts. (We're looking at you, Gilenya. Sure, you may have blasted through the blockbuster ranks in no time flat as a first-in-class oral treatment for multiple sclerosis, but the arrival of Sanofi's Aubagio and Biogen Idec's Tecfidera may take the wind out of your sails.)

Novartis does have a raft of products that it plans to file for registration in the next year-plus, along with label expansions for critical products. Late-stage prospects cover oncology, heart failure, COPD, and an anti-inflammatory biologic that may have some benefits against MS.

In oncology, the company projects that physicians will shift from Gleevec to Tasigna as more data comes in; Novartians contend that Tasigna has a lower risk of progression for chronic myeloid leukemia than Gleevec does, with the implication that it can lead to treatment-free remission in patients. That would be an Litter game-changer and would redound to Novartis' credit.

The company also hopes to see good results from Jakavi, its JAK1/JAK2 inhibitor to treat the blood cancer myelofibrosis. Novartis got Jakavi approved in the EU, Canada and other markets, but licensing partner Incyte has the U.S. rights locked up. Incyte managed $136 million in Jakafi sales in 2012, and $48 million in 1Q13. Novartis saw $35 million in 1Q13 revenues from non-U.S. markets.

Novartis received Breakthrough Therapy designation for a treatment for patients with anaplastic lymphoma kinase positive (ALK+) metastatic non-small cell lung cancer (NSCLC), based on strong Phase I results. Two Phase II trials are ongoing and the company plans to go into Phase III later this year, with a filing as early as 2014, if all goes well.

There are also very high expectations for the company's daily COPD combo-treatment QVA149. Peak sales estimates run as high as $5.0 billion, if Novartis can get its highest dose approved. One of the two ingredients in QVA149, glycopyrronium bromide, was approved in the EU in October 2012 as the Seebri Breezhaler, a once-daily maintenance dose of COPD.

Novartis made history in November 2012 when it received FDA approval for Flucelvax, the first flu vaccine made by cell culture rather than egg-based manufacturing. The new vaccine, to be made at a facility in NC paid for in part by the U.S. Department of Health and Human Services, should be able to accommodate both seasonal influenza and a pandemic disaster. The company is trying to build up its vaccine portfolio into a profit-making unit.

Novartis suffered a regulatory setback in April 2013 when India's Supreme Court ruled that Gleevec (imatinib) is not eligible for patent protection in that country. Novartis had received a patent for imatinib in 1993, but the version in Gleevec is a compound that allows for bioavailability. The company argued that the molecule that was patented in 1993 "could not safely be administered to patients and represented only the first step in the process to develop Glivec as a viable treatment for cancer." It's a complex case, and not simply a compulsory licensing incident, although the Indian government has complained that the price of a round of treatment of Gleevec is too high.

In June 2013, Novartis began investigating a report that sales reps in India have been artificially inflating sales for Galvus diabetes medication, lying on invoices and using bonus money to buying Galvus from wholesalers, which would registered it as sales.

In other regulatory-legal news, Novartis was charged with colluding with competitors in two European markets--J&J in the Netherlands over generic fantanyl, and Roche in Italy over blocking Avastin in favor of Lucentis--and also got sued twice in four days in April 2013 by the U.S. government over kickbacks--to doctors to prescribe hypertension and diabetes drugs, and to pharmacies to move kidney transplant patients over to its immunosuppressant drug. The physician-related suit includes the charge of a $10,000 dinner for three at famed sushi restaurant Nobu. They should've held out for Masa. In November 2012, Novartis paid $20 million to the U.S. and Texas over Medicare fraud charges.

Each of those events (plus the ongoing quality troubles as a number of Novartis and Sandoz sites) sounds bad, but the worst press Novartis got in the past year came when chairman Dan Vasella retired, and Novartis revealed that it would pay him as much as $78 million over six years as part of a noncompete clause.

The press, the Swiss public, and many shareholders went ballistic. Coming in the same year that Novartis posted a sales shortfall and (more importantly) 2,500 layoffs, the package came off as obscene. Within weeks, both parties canceled the clause, even though Dr. Vasella pledged "to make the net amount available for philanthropic activities."

Novartis has challenges ahead with multiple expirations, but its pipeline is delivering at the right time to see it through.

03 MERCK & CO., INC.

One Merck Dr.

P.O. Box 100

Whitehouse Station. NJ 08889-0100

Tel: (908) 423-1000

Fax: (908) 735-1253

WWW.MERCK.COM

Merck and Sanofi swapped spots again in our Top 20 ranks, with Sanofi's currency problems trumping Merck's major patent expiration. But, boy, was that expiration a doozy. Singulair, previously Merck's top seller, lost patent protection in August 2012 in the U.S., and sales for the year fell by $1.6 billion. Singulair revenues dropped another $1.0 billion in 1Q13, and will post at least that big a drop in 2Q13, leaving Merck with a $2.0 billion hole to climb out of, just to stay even with 2012.

Further, as a result of ceding territories in its legal settlement with J&J, Merck's revenues for Remicade took a $600 million hit in 2012. Good thing Merck has Januvia and its 23% growth rate to keep it going!

Well, until 2013, that is. Merck's runaway best-selling diabetes treatment posted a 4% sales drop in 1Q13. The company contends that this was a result of wholesaler inventory drawdowns, and that sales would grow at mid-single-digits in the U.S. for the rest of the year and low double-digits everywhere else. In comparison, sales of Janumet, a combo of Januvia and metformin, grew 4% in 1Q13 to $409 million.

The bigger worry for Merck is that Januvia will turn out to be tied to an increased risk of pancreatitis and pancreatic cancer in users. An animal study conducted in 2008 seemed to show a risk for that extremely lethal cancer, and in March 2013, the FDA and EMA both began investigations into whether GLP-1 therapies like Januvia increase that risk in patients. The company contends that it has mountains of evidence from its clinical trials and patient records demonstrating the safety of Januvia, but if there's one thing we've learned from diabetes treatments, it's that you never know what will crop up over long timelines and large patient bases.

With Januvia slowing down, and patent expirations coming for Temodar and Maxalt--and their combined sales of $1.6 billion in 2012--Merck needs a boost from its pipeline.

Two years ago, chief executive officer Ken Frazier declared that Merck wouldn't cut its R&D budget in order to goose earnings. It was an admirable mission statement, showing that Merck is out to develop useful therapies, not cater to short-term shareholders. In March of this year, he took another big R&D step, replacing research chief Peter Kim with Roger Perlmutter. Dr. Perlmutter had left Merck in 2000, moving over to Amgen where he oversaw R&D operations and helped get approval for nearly a dozen drugs, including Prolia/Xgeva, Sensipar, and Nplate. Shortly before we went to press, Dr. Perlmutter removed Merck's "franchise head" management layer, resulting in some senior-level layoffs. More reductions in R&D are planned in the months ahead.

Outside observers considered Dr. Perlmutter's hiring a reproof to Dr. Kim's 10-year tenure, but Mr. Frazier was very careful not to lay the company's R&D problems at Dr. Kim's feet. Merck did have some high-profile development issues in recent years. The company tried for years to market a combination of extended-release niacin and laropiprant, to get niacin's cholesterol-lowering benefits without the facial-flushing side effects. The drug was approved by the EMA in 2008, but shot down by the FDA in the same year. Turns out, the FDA's caution was warranted. In December 2012, a massive clinical trial revealed that the combo not only had no beneficial effects compared to statins, but that it also increased adverse effects, including diabetic complications. Merck withdrew the drug from all markets.

In February 2013, Merck announced that it was delaying filing its new osteoporosis treatment, odanacatib, for approval until 2014, rather than the first half of 2013, as originally planned. The company noted that it needed to examine the efficacy and safety results of an ongoing extension trial. The data-monitoring committee flagged a side effect from the trial, but Merck hasn't disclosed what it is. All they've told the public is that "we continue to believe in the potential of odanacatib to address unmet medical needs for patients with osteoporosis and look forward to filing in 2014."

Merck is still pushing forward with vorapaxar, the antiplatelet drug it picked up when it bought Schering-Plough. One Phase HI failure led the company to write off $1.7 billion in R&D costs, but it's pushing forward with the drug for prevention of cardiovascular events in patients with a history of myocardial infarction but no history of stroke or transient ischemic attack (TIA). In February 2013, vorapaxar failed in a trial to prevent a secondary stroke in patients who've had strokes or TIA, and it boosted the rate of intracranial bleeding, to boot.

Even Merck's successes haven't been game-changers. We wrote last year about its first-in-class HCV treatment, Victrelis, which posted $500 million in revenues in its first full year, but got destroyed by Vertex's competitor. Victrelis revenues were flat at $110 million in 1Q13, and more competition is coming.

Merck also gained approval for a drug that's brought on condemnation among industry-watchers. In May 2013, FDA approved Liptruzet, a combination of Merck's Zetia and atorvastatin (generic Lipitor), to lower LDL cholesterol. In a press statement about the approval, the company noted, "No incremental benefit of Liptruzet on cardiovascular morbidity and mortality over and above that demonstrated for atorvastatin has been established." To paraphrase, "This branded drug does not appear to be any better at preventing heart attacks than generic Lipitor." Given the controversy surrounding Merck's treatment of its previous Zetia combo, Vytorin, it's surprising that the FDA approved the drug before a large outcomes trial, due to finish in 2014, was assessed.

On the plus side, Zostavax sales recovered after years of shortages due to manufacturing problems. Those gains were more than offset by the ongoing generic erosion of Cozaar/Hyzaar, but at least the shingles treatment is well on its way to reaching blockbuster status for Merck.

R&D failures and ongoing patent expirations have given Merck executives a lot of sleepless nights, but the company may have a cure for that! In May 2013, Merck's got a favorable FDA advisory panel result for first-in-class insomnia treatment suvorexant. As we went to press, Merck received a complete response letter for surovexant, calling for a lower starting dose of the drug than Merck had been planning. No to new trials, but yes to new CMC.

Merck's also optimistic about its PD-1-targeting melanoma treatment, lambrolizumab, but that candidate only recently began Phase II trials. In June 2013, Merck announced plans to conduct a trials in advanced melanoma and NSCLC later in the year. The FDA gave lambrolizumab Breakthrough Therapy designation in April 2013, so it could conceivably reach market quickly (albeit behind BMS' PD-1 candidate, nivolumab). If the NSCLC trial works out, Merck could have a mega-blockbuster.

It's a big bet, but Merck's R&D shortfall in years past means the company has to swing for the fences to stay competitive in its post-Singulair years.

04 SANOFI

174 Avenue de France

75013 Paris

France

Tel: (33) 1 5377 4000

Fax: (33) 1 5377 4296

WWW.SANOFI.COM

Currency fluctuation giveth, and it taketh away. Last year, a strong Euro pushed Sanoh ahead of Merck for the #3 spot in our ranks. This year, an 8% drop in the value of the Euro makes Sanofi's performance Look worse than it was. Pharma revenues actually grew 5% last in constant exchange rates (CER), to nearly [euro]30 billion. Still, we're fickle taskrnasters here at Contract Pharma, so Sanofi is officially the #4 company in our 2012 list.

Much of Sanofi's growth came from the world's best-selling diabetes drug, Lantus, which added [euro]1 billion in revenues Last year (+26% in CER). Sanoi caught a break in February 2013 when Novo Nordisk's Lantus competitor, Tresiba, received a complete response letter from the FDA, in which the agency asked for an outcomes trial. That move could keep Tresiba out of the U.S. market for years, and Sanofi will be the prime beneficiary.

Lantus' gains, along with revenues from the Genzyme acquisition, have helped offset the slower-than-expected generic erosion of Plavix. Sanofi received much lower royalties from BMS for Plavix and Avapro sales in the U.S., but Sanofi's Plavix revenues were slightly up in Euros, from [euro]2040 to [euro]2066. Sanofi's Plavix revenues dropped 6% in 4Q12 and 11% in 1Q13, while Sanofi's Avapro/Aprovel sales dropped 34% and 21% in those quarters, respectively. Meanwhile, sales of cancer treatment Eloxatin cratered in 1Q13, falling 85% to $78 million. Without that drop, Sanofi's top products would have had a flat quarter, instead of an 8% fall.

Along with the erosion of Plavix sales, Sanofi is also out $53 million, after France's antitrust authority fined the company for disparaging Plavix generics. Teva complained that Sanofi engaged in a "strategy of denigration" against its generic entry in 2009. Sanofi projects that it will lose $1.1 billion in earnings (sales plus royalties from BMS) for Plavix in the first half of 2013.

We've covered Sanofi's plans to move into the post-Plavix era previously: buy Genzyme, do heavy-duty internal/external R&D, grow in emerging markets, vaccines, generics and animal health, and, of course, make cost cuts. No major restructuring programs were announced in the past year, but the company did reveal its plans to consolidate its operations in its home country of France in September 2012. R&D operations in general were tabbed to grow or be maintained, while industrial vaccine operations would have to "improve [their] economic performance." Sanofi hopes for 900 voluntary retirements by 2015 as part of "streamlin[ing] support functions to respond to the Group's diversification and improve their efficiency."

Shortly before press time, Reuters reported that Sanofi plans to drop 207 jobs in France, the net result of 376 layoffs and 169 new job openings on the R&D side. That news source said that union documents showed a net loss of 445 employees being at the Sanofi Pasteur vaccine unit (754 layoffs and 309 new roles), and another 243 jobs cut from its animal health and generic businesses. Saofi would not confirm those figures.

The fate of Sanofi's research site in Toulouse has been up for debate, after Sanofi announced it would move anti-infectious research there to a site in Lyon. In May 2013, the company reported that it will look at spin-offs, local startups and "creation of a technological platform to provide services for Sanofi and other biotechnological or pharmaceutical companies" at the site.

In September 2012, Sanofi got FDA approval for Aubagio, the oral multiple sclerosis treatment that came over with the purchase of Genzyme. That treatment, caught between Novartis' established Gilenya and Biogen Idec's potential mega-hit Tecfidera, may not reach blockbuster status. Initially, the EMA voted that Aubagio doesn't count as a New Active Substance, which would put the drug at risk of generic exposure as soon as 2016. Sanofi requested a review of that decision and, shortly before press time, the European Medicines Agency's (EMA) Committee for Medicinal Products for Human Use (CHIMP) reversed that decision. The move gives Sanofi eight years of data exclusivity and two more years of market exclusivity from the date of approval.

The company is still waiting for approval for MS treatment Lemtrada, the future of which was a point of contention during negotiations to buy Genzyme. Analysts aren't too high on Lemtrada's prospects, arguing that newer MS drugs may overtake its benefits. CHMP recommended it for approval based on a pair of Phase III trials comparing it to Rebif.

One of Sartofi's biggest drug approvals was for a product with a limited patient base. In January 2013, the FDA approved Kynamro, a cholesterol treatment co-developed with Isis, to help reduce bad cholesterol in patients with homozygous familial hypercholesterolemia (HoFH). There are only a few hundred people in America with HoFH, but what's significant is that Kynarrup is the it uses antisense, a gene silencing technique that's been long promised to transform drug development. Only one antisense drug has been approved before this one, and Kynamro stands a chance at becoming the first commercially successful one.

Sanofi also made news with the approval of Zaltrap, a colorectal cancer treatment. However, it wasn't the sort of news the company wanted. Several months after the August 2012 approval, doctors at Memorial Sloan-Kettering Cancer Center Lambasted the drug's pricing, contending that it was twice as high as that of Avastin, while not appreciably better when adjusted for dosage size. Within a week, Sanofi offered an effective 50% discount on Zaltrap in the U.S.

Sanofi's partner on Zaltrap is Regeneron, a 25-year-old pharma firm (and the newest addition to our Top 10 Biopharma ranks, thanks to the sales of Eylea in 2012). The companies are also collaborating on dupilumab, a biologic treatment for asthma (and other indications) that may revolutionize treatment of that illness, as well as other programs. In February 2013, Sanofi informed Regeneron of plans to raise its equity stake in the company; it currently holds 17% of shares and but has an agreement in place not to acquire more than 30%.

In June 2013, the FDA approved the sBLA for Sanofi's four-strain influenza vaccine, Fluzone Quadrivalent, in people age six months and older. The new vaccine will include two A strains and two B strains to protect against variations in flu seasons.

Not all the R&D results have been positive. Also in June 2013, Sanofi threw in the towel on a pair of Phase III candidates, iniparib for non-small cell lung cancer, and otamixaban, an anticoagulant. Sanofi said it would take a $285 million charge to write down iniparib, but didn't mention costs related to otamixaban.

For now, Sanofi's pharma fortunes are tied to Lantus and its successor, Lyxumia, which was approved in Japan shortly before press time. If the latter doesn't suffer the same fate as Novo Nordisk's Tresiba, Sanofi may gain some much needed breathing room as it passes by its patent cliff.

05 GLAXOSMITHKLINE, PLC

980 Great West Rd.

Brentford, Middlesex 1W8 9GS

United Kingdom

Tel: (44) 020 8047 5000

Fax: (44) 020 8047 7807

WWW.GSK.COM

GlaxoSmithKline is at a crossroads. Year-in and year-out, GSK is among the biggest of the big, but its overreliance on a single product has made it vulnerable and has left the company searching for the way forward. It's suffered a boatload of patent expirations, but none have been as damaging as those that beset the competitors ahead of it in our ranks.

GSK is the first company in this year's list to have an utterly out-of-whack[TM] ratio between its top seller and its second-best performer. In this case, Advair brought in 6.4 times the revenues of Avodart. In fact, Advair garnered more sales than all of GSK's other blockbusters combined.

That's not as bad as some other companies in our ranks, as you'll see. To be fair, had diabetes treatment Avandia not been reduced to rubble by a super-restrictive REMS program, GSK would have had a little more balance in its portfolio. Still, it sets up a situation where GSK has to rely on Seretide staying ahead of next-generation asthma and COPD treatments (and that its unique delivery method remains difficult to substitute). Can they get their pipeline to pay off in time?

GSK finally completed its hostile(ish) takeover of development partner Human Genome Sciences in August 2013, raising its initial bid by $1.0 billion to top out at $3.6 billion. The move brings lupus treatment Benlysta and HGS' bio-pipeline under GSK's aegis. Benlysta posted sales of $110 million in 2012.

In February 2013, decided on an "expansion of our new major change programme," which is British for "more restructuring." The move piggybacks the restructuring announced in 2Q12, and is expected to yield $1.5 billion in savings by 2016, at a cost of $2.3 billion. Part of the move entails reducing its presence in Europe due to the "sustained shift ... in the European reimbursement and pricing environment." GSK's sales in Europe dropped 7% in 2012 and fell 3% in 1Q13 as a result of government price cuts.

During its 1Q13 earnings announcement, GSK announced plans to establish a Global Established Products portfolio of "tail" pharma products. The group should include around 50 products with annual sales of $4.5 billion, and will have its own management group. Sales for that segment will be split out beginning in 2014, but there's no GSK talk (yet) of spinning GEP into its own company. In a conference call, chief executive officer Sir Andrew Witty said the move "opens up optionality for us in the future," which is British for "maybe." GSK is also looking to sell its Lucozade and Ribena drink brands, which some analysts contend could bring in around $1.5 billion.

Those structural fixes will help juice earnings, but GSK needs to see pharma growth soon. The company has had a number of FDA approvals recently, including two oral treatments for melanoma, COPD drug BREO Ellipta, a quadrivalent flu vaccine, and an anti-toxin for inhalational anthrax. There are also applications pending in the U.S. and EU for albiglutide, a once-weekly diabetes treatment. The NDA was filed in January 2013, so that might take a while to process.

Peak combined sales estimates for the two melanoma drugs range from $750 million to $2.3 billion, while BREO Ellipta, a new combination treatment co-developed with Theravance, could become the successor to Advair. No one is projecting $8 billion in revenues for the once-daily drug, especially because it hasn't been cleared to treat asthma, but some estimates do range as high as $4 billion in annual sales.

There's a multi-billion-dollar question mark at the center of GSK. An FDA advisory panel recently voted to reduce the REMS program on diabetes treatment Avandia, after "reanalysis" of the controversial trial that showed increased risk of heart attacks and strokes. If the FDA acts on the panel's advice, will GSK be able to benefit? The company hasn't expressed any interest in widening Avandia's use, and the drug lost its patent protection 2011. It brought in $3.2 billion in 2006, before evidence arose of its increased risk of heart attacks.

GSK faces some tough headwinds in Europe. Alternatives to Advair, the loss of Vesicare (expired co-marketing pact), and well as generic erosion for a number of products, including Valtrex, Paxil, Lamictal, Combivir, has left the company in a mild decline. For 2012, that puts GSK ahead of the game. If BREO Ellipta and the myeloma drugs can break big in their markets, and abiglutide can get off the launch pad, GSK might be in a good position when its next round of patent expirations hit in 2015.

06 ASTRAZENECA, PLC

2 Kingdom St.

London W2 6BD

United Kingdom

Tel: (44) 00 7604 8000

Fax: (44) 020 7604 8151

WWW.ASTRAZENECA.COM

AstraZeneca is the last of our top six companies to post a sales drop in 2012, and it was a doozy. A wave of expirations and other price pressures led to a $5.6 billion shortfall, with little to offset it. Only Pfizer posted a larger total sales drop, and only Bristol-Myers Squibb (coming in at #11) fell by such a large percentage. The loss of patent protection for Seroquel IR was the main culprit, lopping $3.0 billion off of 2012's results, and another $627 million from 1Q13.

Even AZ's top performer, Crestor, showed weakness, as the statin faced pressure from generic Lipitor. Its 6% drop last year accelerated in 1Q13, with sales falling 12% to $1.3 billion. The drug lost a patent baffle in Australia in March 2013, where it brought in approximately $350 million in 2012 sales, but AZ successfully defended Crestor's patents in the U.S. in December 2012, leading to a settlement with several generic companies and opening the door for an off-brand Crestor several months prior to its July 2016 pediatric exclusivity extension. Nexium will go next, likely cratering its $4.0 billion in revenues.

There's little growth from AZ's newer products, certainly not enough to hold back the next wave of patent expirations. This situation cost chief executive officer David Brennan his job in April 2012, and the company now has to hope that the new top dog, Pascal Soriot, can turn things around.

Mr. Soriot previously served as chief operating officer of Roche's pharma division and chief executive at Genentech, so he has some idea of what a productive pharma company looks like. His first move after joining the company in August was to conserve the company's cash by suspending $2.2 billion in share repurchases.

In March 2013, Mr. Soriot offered his strategy for AZ's future. In his words, the company's strategic priorities are

* Driving our on-market growth platforms to return to growth as we move through a period of patent expiries and revenue declines;

* Progressing the Phase II pipeline, that has the potential to double Phase Ill asset volume by 2016, and deliver on the promise of our biologics portfolio;

* Launching a steady flow of specialty care products, balancing the company's historic strength in primary care;

* Rebuilding the R&D engine through innovation and distinctive science supported by co-location of our teams and better access to globally recognized science clusters;

* Dramatically simplifying the business, improving productivity and building a culture that supports long-term success;

* Leveraging business development and acquisitions to deliver upside to the company's base plan and to strengthen the pipeline further.

As part of that, AZ's focus will narrow to three areas--Respiratory, Inflammation & Autoimmunity; Cardiovascular & Metabolic Disease; and Oncology--while picking its spots in Infection/Vaccines and Neuroscience.

None of these moves look like they'll cover the short-term devastation that AZ faces. Even doubling Phase Ill assets by 2016 doesn't offer much growth before the end of the decade. As is, if everything breaks right, Mr. Soriot contends the company can exceed revenues of $21.5 billion in 2018. (In a sign that not everything is going to break right, AZ took a $140 million writeoff in June 2013 when it gave up in Phase III on a co-developed compound, Rigel's fostamatinib, an oral RA treatment.)

So a best-case scenario means that 2018 AZ will be almost 25% smaller than the 2012 version. You can bet that AZ isn't planning to support the current infrastructure with (at least) 25% lower revenues, so Mr. Soriot has to slash costs while still getting something out of R&D.

Last year's writeup included a pre-Soriot restructuring announcement intended to "create a simply and more innovative R&D organization with a lower and more flexible cost base." This year's overlapping attempt at "dramatically simplifying the business [and] improving productivity" will involve firing 5,050 employees by 2016, at a cost of $2.3 billion and savings of $800 million each year.

As part of the reorg, AZ announced plans to build R&D centers close to bio-clusters, in order to take advantage of talent and partnership opportunities. The company will focus on Cambridge, UK, Gaithersburg, MD and Moldnal, Sweden. For Cambridge, AZ will spend around $500 million on a new site to house its HQ and consolidate its small molecule and biologics R&D.

AZ has also restructured its executive team to reflect its R&D priorities. Research head Martin Mackay was ousted in January 2013, after barely two years on the job, and AZ now has three senior R&D positions covering discovery and early-stage development for small molecules and for biologics, and late-stage development.

Can AZ survive long enough to accomplish its goals? The company still has high hopes for anti-platelet drug Brilinta. Once projected as a Plavix-buster, Brilinta posted revenues of $51 million in 1Q13, with a 29% increase in prescriptions from 4Q12. Early analyst estimates of $1 to $2 billion (or greater!) by 2015 have been revised to $1.3 billion or so by 2018. AZ has a diagnostic that identifies a subset of patients who may stand to benefit from the drug, but will that be enough to get Brilinta to break out against Lilly's Effient and generic Plavix?

In addition to Brilinta, AZ hopes for growth from its diabetes partnership with Bristol-Myers Squibb. Their co-developed Onglyza treatment brought in $90 million (+27%) for AZ in 1Q13, but reimbursement issues have hampered prescriptions this year. They received EU approval for Forxiga, an SGLT2 inhibitor for type 2 diabetes, in November 2012, but it's in the early stages of rollout, with negligible sales. The FDA issued a complete response letter for Forxiga's U.S. application early last year; no word on how that's advancing.

In August 2012, BMS and AZ closed their deal to co-buy Amylin, giving each a share of Byetta and Bydureon revenues ($69 million in 1Q13). It's early days for that partnership, but the $3.2 price tag for half of Amylin (along with a $135 million option to "certain additional governance rights over key strategic and financial decisions regarding Amylin's portfolio"), means AZ needs to see significant results.

It'll get darker for AstraZeneca in the next few years; we hope the board, the shareholders and every other relevant party has the patience to see Mr. Soriot's strategy through.

07 JOHNSON & JOHNSON

One Johnson & Johnson Plaza

New Brunswick, NJ 08933

Tel: (732) 524-0400

Fax: (732) 524-3300

WWW.JNJ.COM

Finally! One of our Top 20 companies actually grew its pharma revenues in 2012! Johnson & Johnson's engine was firing on all cylinders last year, with major increases by newer products offsetting relatively mild declines. Remicade remains tops at the company, with four times the revenue of J&J's second-biggest seller, Velcade. That's one of the highest ratios in our ranks (although Humira and Seretide/Advair laugh at Remicade), but J&J doesn't appear hyper-dependent on its top seller, as it posted six other blockbusters in 2012, has two more primed to cross the billion-dollar mark in 2013, and is advancing a pipeline with potential mega-drugs in oncology and hepatitis C.

Sure, the company's consumer healthcare reputation remains a work-in-progress (at best), and the device business is facing around 10,000 lawsuits due to faulty artificial hips, but we're here to discuss the pharma unit (which is still negotiating a multi-billion-dollar settlement for improper marketing of Risperdal), so let's not focus on the negatives! J&J had a good year, by 2012 big pharma standards! Zytiga, its new oral treatment for prostate cancer, absolutely blew up in its first full year, more than offsetting the final collapse of Levaquin revenues. It's growing fast enough that it may just compensate for the decline of Aciphex sales, too.

At the same time, J&J's portfolio of autoimmune biologics--Remicade, Stelara and Simponi--combined to post sales of $7.8 billion (+17%) in 2012, and showed a similar growth rate in 1Q13.

For the longest time, most of the talk about J&J's new drugs centered around Xarelto, its anti-clotting drug intended to treat acute coronary syndrome (ACS). Although the drug reached the market in mid-2011 to treat deep vein thrombosis (DVT) in certain surgery patients, J&J hasn't been able to convince the FDA to approve it for ACS, where it was expected to fight for a multi-billion-dollar prize against Pradaxa and Eliquis. In November 2012, the agency cleared it to treat blood clots in patients with DVT or pulmonary embolism, but sent J&J its second complete response letter in March 2013 regarding the ACS label.

There's no word on when that'll be resolved, but J&J didn't take its eye off the R&D ball all this time. In addition to the massive success of Zytiga, the company has also seen a breakout from Invega Sustenna, the long-lasting version of its schizophrenia treatment, while getting approvals for several drugs with lower sales potential like Sirturo, a treatment for multidrug-resistant tuberculosis.

In March 2013, J&J received FDA approval for Invokana, a first-in-class diabetes treatment intended to lower blood glucose. Even with a pretty extensive set of postmarketing studies, getting Invokana onto the U.S. market is quite an achievement for J&J. Forxiga, a competitor SGLT2 inhibitor from AstraZeneca and Bristol-Myers Squibb, was turned down by the FDA because of liver cancer risks, but did receive approval in the EU late in 2012. A few days before lnvokana's approval, Lilly and Boehringer Ingelheim submitted an NDA for their own SGLT2 inhibitor, but J&J will have a significant head start on them.

There is a question of how well J&J will do in this market, given that they have to build up a diabetes sales force, but that's a much better question than, "Will we ever get our diabetes drug approved?"

The company is also hoping to get further into huge market for hepatitis C treatments with simeprivir, a drug co-developed with Medivir, which received priority review status from the FDA in May 2013. J&J also co-markets Vertex's HCV treatment, Incivo/Incivek, but that drug demonstrates how hyper-accelerated the field is. When Incivek hit the market in mid-2011, it broke records in patient uptake, posting $782 million in sales in half a year. By 2012, growth began to slow as new treatments were approved, and Lncivek reached $1.3 billion in total revenues. For 2013, it's on a pace to dip back below $1.0 bill ion. J&J reported Incivo revenues of $162 million in 1Q13, an increase of 23%. We can't recall ever seeing a drug have that steep a take-off then fall back to earth without receiving a recall or black box warning. So it's great news that J&J submitted simeprivir for approval in March 2013, but it's tough to guess how big a bite it can take out of the HCV market.

At an analyst meeting in May 2013, J&J outlined its plans to file for approval a slew of new products in the next four years, including simeprivir, a pair of cancer treatments that have received Breakthrough designation from the FDA, two more autoimmune biologics, several vaccines, and a three-month version of Invega Sustenna.

On a longer timeline, J&J is conducting Phase II trials on an inhalable formulation of party-drug/horse-tranquilizer ketamine. Early research has shown ridiculously good results in treating depression and suicidal ideation in people with major depressive disorder, as in, they get better overnight, rather than the months it can take for a conventional antidepressant to begin working. So apparently, my pharmanaut pals back at college really were on to something.

On the device end of the business, J&J hasn't shied away from major acquisitions to secure its market position, most recently the $21.3 billion buyout of Synthes in 2011. The company has been focused more on product development and partnerships on the pharma side of things. Still, a company as large J&J needs to find major new markets just to keep afloat. It may have found several. That should help keep chief executive officer and (as of 2013) chairman Alex Gorsky secure while he tries to solve the rest of J&J 's raft of problems.

(Note: we made it through an entire J&J writeup without mentioning any of its product recalls, even though they extended into the pharma side with a June 2013 recall of 32 million packages of oral contraceptives!)

08 ABBOTT LABORATORIES

100 Abbott Park Rd.

Abbott Park. IL 60064-6400

Tel: (847) 937-6100

Fax: (847) 937-9555

WWW.ABBOTT.COM

Welcome to the top! Now get out! Abbott's Humira was the world's top-selling drug in 2012, closing in on the $10 billion mark after a 17% uptick last year. As a reward, Abbott has split off its proprietary pharmaceuticals division into a new company, effective January 1, 2013.

We'll focus this report on AbbVie's efforts as it works through its first year as a standalone business. Now that Abbott has taken its $5.1 billion in generic sales (not quite good enough to get it in the Top 20 ranks) and left, AbbVie faces the problem of having the biggest drug in the world and not much beside it.

Humira's sales are so outsized that it represents the biggest #1-to-#2 ratio in the industry, with sales 7.8 times larger than any other product in its portfolio. In 1Q13, with AbbVie's proprietary-only portfolio, Humira posted more in sales than ALL of the company's other products. With the broadest label in its category and new indications still getting approved, Humira is sure to keep growing in the double digits, while the rest of AbbVie's drugs struggle along (AndroGel excepted, and that's starting to slow down).

In fact, when we run AbbVie as a standalone company next year, it's almost certain to be listed as a Top Biopharma, rather than a Top Pharma company, since its biologic revenues will account for more than half of its drug sales. Knocking Amgen down to #3 is quite a start for a new company! (But if you don't like that criterion for what makes a biopharma versus a pharma, we should note that paring away Abbott's generic business would have dropped pre-AbbVie to #10 in our ranks, with 2012 revenues of $18.0 billion.)

Given the importance of Humira to AbbVie's fortunes, the company is taking out all the stops to prevent competitors from developing a biosimilar of the drug in time for its patent expiration in 2016. The company is also working to downplay the biosimilars threat by developing new, patented formulations and delivery methods for Humira, but it's also been taking its case to court.

In March 2013, AbbVie sued the EMA to block the release of patient-level data from clinical studies, a followup to its April 2012 petition to the FDA to block any biosimilar of Humira, since development would constitute a violation of trade secrets. The EMA suit appeared to be in response to a request from UCB Pharma in September 2012 for Humira's clinical study reports; AbbVie argued

  "Those reports therefore provide a very specific road map for a
  company wishing to develop a TNF antagonist for the therapeutic use
  in question, by enabling it to develop a similar
  'biologics/biosimilar' strategy in order to produce a follow-on
  medicinal product or to add new therapeutic indications to an
  existing medicinal product. The reports also provide information
  about some of the hurdles the applicants had to overcome, which could
  reduce the development process for a medicinal product by two to
  three years."


UCB withdrew its request, but AbbVie is still wrestling with the EMA over this issue. We can't exactly blame AbbVie for trying every avenue to delay or stop biosimilar development, but it will seem a little dodgy if the company begins its own bioimilar initiative down the line.

AbbVie's dependence on Humira will grow even more severe as some of its key products wither. TriCor was hit with generic competition in the U.S. in November 2012, and the company's other cholesterol treatments, Trilipix and Niaspan, will get face generics within the next year. Those three thugs represented around 13% of proprietary drug sales in 2012. The company plans to lay off hundreds of salespeople in its cardiovascular area in anticipation of those revenues drying up.

So how's AbbVie going to build up its drug portfolio to complement Humira? Not with the chief scientific officer who helped launch the new company. In May 2013, the company mentioned in an SEC filing that CSO John Leonard will retire in a few months when his successor is named. Dr. Leonard had been with Abbott since 1992.

The company suffered a significant R&D failure in October 2012 when safety issues forced it to end Phase III trials of bar-doxolone (co-developed with Reata Pharmaceuticals) to treat chronic kidney disease and diabetes. Abbott had ex-U.S. rights to the drug, and some sales estimates had been in the billion-dollar range. Enrollment for trials of ABT-199, a treatment for chronic lymphocytic leukemia, were paused while the company worked out dosing and monitoring approaches for certain patients at risk of a harmful side effect.

The new company's R&D focus is on six areas: HCV, neuroscience, immunology, oncology, renal disease and women's healthm and AbbVie touts 20 mid- and late-stage programs in its pipeline. The company has hopes of getting in on the massive hepatitis C virus (HCV) market with an unnamed, interferon-free, oral Phase III treatment that received Breakthrough designation from the FDA in May 2013. The company is also continuing to advance an oral selective JAK1 inhibitor, co-developed with Galapagos, to move into the rheumatoid arthritis and Crohn's disease spaces. Elsewhere in the immunology arena, AbbVie announced a collaboration with Alvine in May 2013 focused on an oral treatment for celiac disease. The pact involved a $70 million upfront payment and an option to acquire either the compound or equity in Alvine, which is handling Phase II work.

So there are some prospects, but there's nothing in the immediate timeline that's going to narrow the spread between Humira and everything else it sells. Richard Gonzalez, the chairman and chief executive officer of the new AbbVie, has his work cut out for him, even as he counts the dollars pouring in from what could be the best-selling drug of all time.

09 ELI LILLY & CO.

Lilly Corporate Center

Indianapolis, IN 46285

Tel: (317) 276-2000

Fax: (317) 277-6579

WWW.LILLY.COM

Lilly climbed in this year's ranks, but only because BMS out-plummeted it. The Indianapolis pharma may hold steady in next year's ranking, too, although it has a pretty steep patent cliff ahead. Revenues fell $2.0 billion in 2012, with Zyprexa shedding $3.0 billion in sales.

Shortly after press time last year, Lilly received a six-month extension on Cymbalta's patent protection in the U.S., courtesy of pediatric exclusivity. (The drug isn't approved for people under 18, and Lilly doesn't plan on pursuing a pediatric indication.) That means Lilly's top-selling drug will now face generic competition beginning in December 2013, cramming most of its revenue loss into a single fiscal year. That's the best light we can shine on the prospects of the company losing most of a $5.0 billion revenue source.

Lilly also got good news in August 2012, when a U.S. court upheld its compound patent for Alimta, giving it protection through 2017. That'll keep its #2 drug on the market long enough to become #1 (unless Humalog passes it up, as it did in 1Q13). Still, the specter of disappearing Cymbalta and Evista revenues led Lilly to lay off 1,000 sales reps in April 2013. The move cleared out almost 30% of Lilly's U.S. sales force, at a cost of $64.7 million.

As with most of its competitors, Lilly hasn't had enough production from its pipeline to offset its expiring drugs. Effient, the Plavix-killer co-developed with Daiichi Sankyo, seems to have plateaued below the $500 million mark, despite the multibillion-dollar expectations for that drug. In August 2012, a head-to-head trial demonstrated no advantage for Effient over generic Plavix in acute coronary syndrome. That could kill Effient's prospects for significant growth.

Lilly suffered other R&D failures in the past year, and the company can ill afford any more hiccups. There were so many that one analyst wondered if the company has pushed too many high-risk projects into late-stage development. (In drug development, as we know, there aren't exactly a lot of low-risk candidates out there.)

Shortly after press time in July 2012, schizophrenia treatment pomaglumetad methionil washed out in one Phase II trial, and was dropped from development a month later, when a second trial's results came in.

The company also stopped development of enzastaurin in May 2013, after a poor showing in a lymphoma trial. Tabalumab, a MAb that came over with Lilly's 2008 purchase of ImClone, failed to show efficacy in Phase III trials against rheumatoid arthritis (RA) in February 2013, but the company will continue to pursue it as a treatment for lupus. In January 2013, development partner Bristol-Myers Squibb gave up its rights to another ImClone candidate, necitumumab. No official statement, but the drug had safety issues in one Phase III trial.

Lilly did receive Fast Track status from the FDA for another ImClone-derived drug, ramucirumab, to treat gastric cancer. Royalties from Erbitux sales added up to $397 million in 2012, so it would help if ImClone's pipeline started to help pay off its $6.5 billion purchase price.

Lilly had better fortune with its oral JAK1/JAK2 inhibitor for RA. In June 2013, the company posted positive results from a Phase IIb trial of the drug, which is being co-developed with Incyte Corp. The study showed that clinical improvements observed in week 24 of the trial were maintained through 52 weeks.

Lilly's most publicized failure--Alzheimer's disease (AD) treatment solanezumab--is another sign that the company is swinging for the fences. In December 2012, the company announced it would keep working on solanezumab, despite trial results that would not support a BLA filing. Lilly will start a new Phase III trial in patients with mild AD beginning in 3Q13, in hopes of finding a patient population that benefits from this treatment to block beta-amyloid plaques. In June 2013, the company had to cancel another AD treatment in Phase II, due to toxicity issues.

That leaves evacetrapib as the big potential blockbuster in Lilly's pipeline. A CETP inhibitor that raises HDL cholesterol while reducing the LDL variety evacetrapib could be a huge seller for Lilly, or it could meet the same fate as Pfizer's torcetrapib and Roche's dalcetrapib. The company began a trial of evacetrapib in high-risk vascular disease in 2012 in collaboration with the Cleveland Clinic. At a recent healthcare conference, a Lilly speaker said that there will be an update on the key Phase III trial later this year.

After all of its R&D mishaps, the company's historical focus on diabetes has become even more critical to its future. Lilly and development partner Boehringer Ingelheim submitted their oral SGLT2 inhibitor, empagliflozin, to the FDA in March 2013. The drug managed to control glucose and sustain weight loss, but will be playing catch-up with J&J's Invokana if it gets approved in early 2014.

Lilly plans to submit dulaglutide, a once-weekly treatment for type 2 diabetes, sometime in 2013. That drug is meant to take on Sanofi's top-seller, Lantus, which is only formulated for daily use, and also showed positive results against Byetta and Januvia. Another trial will test it against Novo Nordisk's Victoza.

Lilly also has an insulin glargine drug (LY2963016) that may qualify in Europe as a biosimilar of Lantus, giving it a quicker path to the market than if it was submitted as a new drug. In January 2013, Boehringer Ingelheim relinquished its interest in a basal insulin product (LY2605541) from the companies' development pact. Lilly is forging ahead with that drug, and will continue all of its pre-planned clinical trials. That's another high-risk move, since a similar product from Novo Nordisk was rejected by the FDA, pending an extensive safety trial. If it hits, it could be big, but that's how we got into this mess.

Lilly's optimism about diabetes also stretches into its insulin manufacturing operations. The company plans to add two insulin cartridge-filling lines and boost its insulin API capacity at its Indianapolis-based facilities with a $320 million investment. Previously, the company only filled insulin vials in the U.S., but the market has shown growing interest in injection pens. When complete, Lilly's expansion will employ 175 people.

Thanks to that Cymbalta extension, Lilly got a six-month reprieve on D-day, but time is running out. It's admirable that the company is sticking with Alzheimer's disease, but by the end of the decade, Lilly might resemble Novo Nordisk, a high-powered diabetes company with a few interesting side programs.

10 TEVA PHARMA

5 Basel St.

P.O. Box 3190

Petach Tikva, 49131 Israel

WWW.TEVAPHARM.COM

In a year when almost every pharma posted losses or scant gains, Teva managed 11% growth in 2012, moving it up two spots to #10 in our Top Pharma ranks. A full year of Cephalon's portfolio under its belt helped to juice results, as did another double-digit gain for relapsing multiple sclerosis treatment Copaxone.

Teva got some good news for top-seller Copaxone, which made up 22% of total pharma sales in 2012. In June and July 2012, the company received favorable patent rulings for Copaxone in the U.S. and UK, respectively. As a result, Teva should remain protected from generic exposure through 2015 at least.

In fact, the company is hoping for much longer coverage than that. Unlike the sudden implosion of revenues a typical drug faces when generics enter the field, Teva argues that Copaxone is so complex, with such a poorly understood mechanism of action, that a generic version might require full clinical trials from a regulatory body in order to get on the market. Further, MS is such a difficult disease to treat, and so prone to unpredictable, acute flareups that degrade the patient's nervous system, that doctors may be inclined to keep using Copaxone and not risk a lesser effect from a generic product. This is a case where we might see extreme reluctance to move a patient from a drug that's working fine. (The new oral MS treatments that have been making news are meant to be used if Copaxone fails or produces intolerable side effects.)

Teva is also hoping to stay ahead of the generic Copaxone curve by introducing a new dosage form that requires injection three times a week instead of the current daily injection regimen. The company has also moved forward with development of oral laquinimod for MS, with hopes of leapfrogging the oral treatments developed by Novartis, Sanofi/Genzyme and Biogen Idec in recent years.

With Copaxone (relatively) sorted out, chief executive officer Dr. Jeremy Levin can continue his work of trying to bring Teva into its specialty pharma future.

In December 2012, Dr. Levin gave a presentation to investors in which he outlined the shape of the new Teva and its growth plans. He noted that Teva shouldn't be too reliant on a single product as it currently is, and wants to expand the company's portfolio through new drugs--many licensed in or co-developed with partners--as well as New Therapeutic Entities (NTEs), Teva's term for new uses, formulations, or combinations of existing marketed drugs.

The company decided to sell its injectables manufacturing site in Irvine, CA in February 2013. The facility suffered quality issues in 2010 and Teva has poured a lot of money into remediation. Some were surprised at the decision to let the site go, but Dr. Levin noted that five other Teva facilities could take over its production. As with the Mirabel site in Montreal that Teva sold to Halo last year, the company would likely keep a supply agreement in place with the buyer of the Irvine facility.

In April 2013, he announced plans to reduce Teva's manufacturing footprint further, part of his strategy to lower expenses by $2 billion in the next five years. At that time, he noted that the company's high-priced acquisitions from the previous decade had left Teva with an inefficient structure that needed streamlining. The company has also shut down some R&D programs and ended collaborations that were outside its comfort zone.

Teva also sold off its animal health business in the U.S. to Bayer HealthCare in September 2012 for $60 million upfront and $85 million in milestones related to manufacturing and sales targets. The facility in St. Joseph, MO and Teva's Animal Health business, received a consent decree of permanent injunction in 2009, barring the unit from selling veterinary drugs. Some products returned to market in 2011 and Bayer has restored several more, with plans during the next 12 to 18 months to bring more products back after the massive GMP failures from 2007 to 2009.

In April 2013, Teva established a Global Specialty Medicines Group, with the goal of "optimiz[ing] our commercialization," according to Dr. Levin. The GSM will use the company's local generics operations to leverage its specialty offerings. In order to make its way into the post-Copaxone era, Teva will need to break into the Chinese market, where it has little presence. Its generic products are much more likely to succeed there than its higher-priced branded meds.

The company is also making strides in building a stable branded portfolio to smooth out the lumps of the generic market. In 1Q12, Teva benefited from first-to-file status for Zyprexa and an "insurance" payout from Ranbaxy for generic Lipitor. Without those boosts in 1Q13, generic revenues dropped $324 million in the U.S. The company will face more pain throughout the year, as Provigil sales fall off a cliff (4Q12 dropped 93%, from $350 million to $25 million; 1Q13 sales fell from $291 million to $24 million).

Teva is a mega-powerhouse in generics, with $10 billion in 2012 revenues, but its branded and biosimilars portfolios will dictate its future. Dr. Levin seems to taken Teva's foot off the M&A pedal, and now faces the hard work of integrating the company he inherited while advancing its R&D partnerships and finding new uses for its existing portfolio.

11 BRISTOL-MYERS SQUIBB Co.

345 Park Ave.

New York, NY 10154-0037

Tel: (212) 546-4000

Fax: (212) 546-4020

WWW.BMS.COM

Bristol-Myers Squibb tied AstraZeneca for the biggest pert.) centage drop in revenues in 2012, with a 17% fall. Plavix sales fell $4.5 billion after its May 2012 patent expiration, and another $450 million in Avapro dollars evaporated during the year. Like AZ, it has more expirations to contend with in the next few years. Unlike AZ, BMS has some bright spots in its future.

Orencia and Sprycel raced past the $1.0 billion mark last year, and will soon be joined by Yervoy. The company also gained approval for coronary syndrome treatment Eliquis late in 2012, opening the door for BMS and development partner Pfizer to try to cut into Pradaxa's early market lead. Long-term estimates for Eliquis still consider it a double-blockbuster (bringing in at least $1.0 billion annually for each partner), but its soft launch in 1Q13 only brought in $22 million.

Meanwhile, BMS may have a mega-ace up its sleeve, as next-gen oncology immunotherapy nivolumab posted unprecedented benefits in patients with metastatic melanoma. Some analysts are excitedly projecting Avastin-like revenues from the drug.

These great results notwithstanding, BMS' "string of pearls" strategy got all tangled up last year. For years, the company has made small and mid-sized acquisitions and licensing deals to boost its pipeline and help it survive the post-Plavix period. A number of these moves have paid off, but R&D is a cruel mistress.

In January 2012, the company spent $2.5 billion to buy Inhibitex and its Phase H oral hepatitis C treatment (BMS-094). In August 2013, BMS discontinued development of Inhibitex's compound after safety issues arose, writing off $1.8 billion in the process. (Please note that we referred to the Inhibitex purchase as "a relative bargain" after Gilead spent $11 billion on Pharmasset.)

Eight months later, the company's chief scientific officer, Dr. Elliot Sigal, was replaced by Dr. Francis Cuss. Since the age difference between Dr. Sigal and Dr. Cuss is only three years (61 to 58), some analysts took this as a sign that Dr. Sigal's early retirement was attributable to the Inhibitex failure. Dr. Cuss, a 10-year veteran of BMS, was credited with integrating several past acquisitions--Adnexus, Medarex and ZymoGenetics--into the company's R&D organization.

Shortly before BMS went public with the problems in the BMS-094 trial, the company made its biggest splurge yet, going halfsies with AstraZeneca to buy Amylin (total effective price: $7.0 billion). We covered that move in the As We Go To Press section of last year's report. Amylin's commercial products, Byetta and Bydureon, contributed $137 million to BMS in 1Q13 and are expected to grow as BMS and AZ market the heck out of them. (Early assessments of the buyout need to be revised, since BMS was negotiating at a time when it knew something bad was happening with its $2.5 billion Inhibitex deal.)

The partners have built up a significant diabetes portfolio, with Amylin's products, Onglyza/Kombiglyze, and Forxiga, a first-in-class treatment for Type 2 diabetes. The FDA rejected Forxiga (a.k.a. dapagliflozin) in January 2012 based on concerns about breast and bladder cancer, but the EMA approved it in November 2012. (Sales in 1Q13 were negligible.) In June 2013, BMS and AZ received priority review status for metreleptin, an orphan treatment for lipodystrophy that came over with the Amylin acquisition. It's not expected to be a huge product, but after the drug washed out as an obesity treatment, it still seems poised to help a patient group.

The Amylin move helped build an entire diabetes team out of whole cloth, but we're skeptical that BMS will make another multi-billion-dollar deal anytime soon. There was some talk in the Wall Street Journal in March 2013 that BMS was looking for a major acquisition, potentially of Biogen Idec or Shire, "according to people familiar with the company's thinking."

That sort of talk tends to come from banks and other firms that benefit from assembling M&As, not from producing therapeutics. BMS has taken its biggest patent hits already, and even though there's more to come as Abilify, Sustiva and Baraclude (as a result of bad news from a patent court in December 2012) face generic competition in the next few years, the company looks poised to weather the storm. It swung for the fences on a few occasions, and if Inhibitex was a strikeout, then the 2009 purchase of Medarex (for $2.3 billion), which yielded Yervoy and potentially nivolumab, was a grand slam. The company has enough promising late-stage assets, fast-growing new products, and inter-company partnerships to keep it from being M&A fodder anytime soon.

12 TAKEDA PHARMACEUTICAL CO.

1-1, Doshomachi 4-chome

Chuo-ku, Osaka 540-8645 Japan

Tel: (81) 66 204 2111

Fax: (81) 66 204 2880

WWW.TAKEDA.COM

A 5% drop in the value of the yen kept Takeda from taking advantage of Bristol-Myers Squibb's weakness. In constant currency, Japan's largest pharma posted a 3% gain in drug revenues in fiscal 2012 (which ended March 31, 2013).

Somehow, Takeda managed to post that 3% increase in pharma sales, even though its key products dropped 21% (!) from their 2011 figures, led by a $2.3 billion drop in Actos revenues. The company doesn't break out sales of individual products very clearly, so we may be missing something in the reading, but even adding in the sub-$500 million products that Takeda lists in its annual statement and databook, sales of "major products" fell 10%, or $1.2 billion, in 2012. Accounting for both that and its reported growth means that there's $1.8 billion of "other" floating around in Takeda's pharma books. Sure wish we had loose change like that in our sofa cushions.

Opaque accounting notwithstanding, Takeda is trying to stick to a growth path despite losses from Actos and Blopress from generic competition. The acquisition of Nycomed has helped with that, providing nearly $1.0 billion in Protonix revenues (and a sizeable infringement settlement; see Pfizer's report for more on that) and entre into emerging markets where Takeda had little penetration, particularly Russia, Brazil and China.

In the U.S., it hopes for a big diabetes score with its DPP4 inhibitor, Nesina, which was approved by the FDA in January along with two combo-drugs (with Actos and metformin, respectively). Takeda also expects solid performance in the U.S. from the gout drugs that came over with last year's URL Pharma purchase, Uloric and Colcrys.

In May 2013, Takeda unveiled the latest in its rolling three-year mid-range plans. The mid-range strategy includes focusing on six therapeutic areas--Cardiovascular & Metabolic, Oncology, CNS, Immunology & Respiratory, General Medicine, and Vaccine--and getting more efficient at marketing, sales and manufacturing, using Nycomed's legacy infrastructure to improve procurement methods.

The biggest organizational news tied to that plan was the decision to integrate the Millennium Oncology unit into Takeda more fully. In May 2013, Takeda announced that Millennium's chief executive officer, Deborah Dunsire, would step down, to be replaced by her lieutenant, Anna Protopapas. In a Pharmalot interview, Ms. Protopapas commented, "The driver here is to really capture synergies and capturing the way we do ... back-offce operations, the ways of doing development and leveraging efficiencies." Oncology will still be led by Millennium's Cambridge, MA campus, but various functions will be streamlined for efficiency and savings. She noted that a third of Takeda's R&D budget is spent on oncology.

Along with its new three-year plan, Takeda unveiled its "Vision 2020" strategy for the future. It was a bit short on details, but had plenty of corporate cheering and stressed the need for diversity in its talent pool. The company made several smaller buys in the past year, mainly to shore up its new vaccine division, but it's anybody's guess as to whether Takeda will climb up our ranks as it gets past the Actos and Blopress patent cliffs.

13 BOEHRINGER-INGELHEIM

Binger Strasse 173

55216 Ingelheim

Germany

Tel: (49) 6132 77 0

Fax: (49) 6132 77 3000

WWW.BOEHRINGER-INGELHEIM.COM

Pradaxa remains the big story at Boehringer Ingelheim, in more ways than one. The oral anticoagulant posted mammoth results in 2012, reaching blockbuster status in its second full year, with $1.4 billion in sales. It's also attracted a sizable amount of injury lawsuits in the U.S. due to internal bleeding side effects. The FDA has received a large number of post-marketing reports of GI bleeding in patients who have used Pradaxa, but in November 2012, the agency concluded that those rates are no higher than with new users of the standard treatment, warfarin, but will continue to evaluate the data for its ongoing safety review. (It doesn't hurt that an "antidote" for Pradaxa is in development, to help counter some of those excessive bleeding episodes.)

Pradaxa now has two competitors on the market in J&J/Bayer's Xarelto and Pfizer/BMS' Eliquis, but those drugs have plenty of ground to make up, after Pradaxa's huge U.S. launch. In 1Q13, Xarelto posted $158 million in sales, while Eliquis, which was approved in December 2012, launched with $22 million in revenues. With three of these anticoagulants on the market, we'll see how the FDA chooses balances the risk-benefit ratio as more data comes in.

Pradaxa was approved in China in February 2013, a critical market for BI. The company reported 32% growth in China in 2012, one of only three companies to increase market share in that span.

In January 2013, the FDA gave priority review (and orphan drug) status to BI's non-small cell lung cancer treatment afatinib, which recently demonstrated a near-doubling of progression-free survival against chemotherapy. BI expects the agency to take action on the NDA by 3Q13, along with a companion diagnostic co-developed with Qiagen.

BI is also making progress in its diabetes partnership with Lilly. Following on the approval of Tradjenta, the companies submitted empagliflozin, an oral SGLT2 inhibitor, for approval in both the EU and U.S. for the reduction of blood gluclose levels in patients with type 2 diabetes.

However, in January 2013, BI terminated development of one of the Lilly compounds it was working on, a novel basal insulin analog, citing "independent strategic portfolio considerations." Lilly plans to continue development and submit the treatment to the FDA as early as 2014.

With Spiriva showing solid growth (13% in Euros) and Pradaxa continuing its boom, BI's position seems secure.

14 BAYER HEALTHCARE

51368 Leverkusen

Germany

Tel: (49) 214 30 1

Fax: (49) 214 30 66328

WWW.BAYER.COM

Last year, we noted that Bayer is pushing to hit a goal of 26% overall growth in pharma revenues between 2011 and 2014, from [euro]9.9 billion to [euro]11.5, so 2012's 9% sales growth (in Euros) makes a very good start. In fact, the company was so happy that it made a 2015 target of [euro]13.0 billion in pharma revenues!

Bayer more than offset generic losses to Yasmin with strong performance from other established products. In 1Q13, Bayer saw an additional [euro]200 million in revenues from new products like Xarelto, Eylea and Stivarga, and expects solid results from newly approved prostate cancer treatment Xofigo. Bayer hopes to add first-in-class pulmonary hypertension treatment Riociguat to that stable of new products. All told, the company expects those five drugs to generate total sales of [euro]5.5 billion at peak, albeit including partners' shares.

As part of that goal, Bayer and partner J&J are trying to get Xarelto's label expanded, but failed to get approval for prevention of heart attacks and strokes in patients with serious chest pain or history of cardiac illness. FDA approved it for treatment of deep vein thrombosis and pulmonary embolism in November 2012. Bayer will need all five new and pending drugs to perform, as multiple sclerosis treatment Betaferon declines against the pressure of next-generation MS drugs. The company has some lofty performance goals ahead, but some wise partnering efforts have put it in a position to succeed.

15 ASTELLAS PHARMA

2-3-11. Nihonbasht-Honcho 2-chome, Chuo-ku

Tokyo, Japan 103-8411

Tel: (81) 3 3244 3000

Fax: (81) 3 3244 3272

WWW.ASTELLAS.COM

A stellas maintains a stronghold through its transplantation/immunology and urology franchises. With only mild declines, its immunosuppressant Prograf continues to provide steady revenues despite generic competition in the U.S. Part of the reason is that these drugs are often taken long-term and generics are not as sought after in transplantation as with other therapeutic areas. In Europe, Prograf sales are steady thanks to an exclusive once-daily injectable, while continued sales growth is expected in Japan and Asia. In the meantime, Astellas has several clinical-stage drug candidates in clinical development, including ASP015K (to treat rheumatoid arthritis, etc.), ASKP1240 (prevention of organ transplant rejection), and Diannexin (prevention of delayed graft function in kidney transplantation).

In the overactive bladder space (OAB), Vesicare is the leading treatment in Japan, the U.S., and Europe. Thwarting impending declines with Vesicare's first patent expiry in 2015, newly approved Myrbetriq, which offers a different mechanism of action to treat OAB, will likely pick up any slack. Myrbetriq became available in the U.S. in late October 2012. This should provide plenty of time to implement its strategy of launching a new-generation drug to supplement the one heading toward expiry, and moving patients over to the newer therapy.

As parts of its 2014 MTP strategy, Astellas is striving to become a global category leader in a third therapeutic area, oncology A step towards realizing this goal comes with the September 2012 FDA approval of XTANDI (ertzalutamide), an androgen receptor inhibitor for the treatment of prostate cancer (developed in partnership with Medivation). On the not-so-bright side, this past May, the FDA Oncologic Drugs Advisory Committee (ODAC) voted that the application for tivozanib did not demonstrate a favorable benefit/risk profile for the treatment of advanced renal cell carcinoma (RCC). While the FDA is not bound by the Committee's guidance, its input will be considered in the review of the tivozanib, which is expected in late July.

Other oncologic efforts include the recent partnership with Ambrx for the discovery and development of novel antibody drug conjugates (ADCs), which allow for the targeted delivery of drugs. Astellas paid $15 million upfront, and will pay as much as $285 million in research, development, regulatory and sales milestones for an undisclosed number of oncology targets, which Astellas would have worldwide rights to develop and commercialize.

In May, president and CEO, Yoshihiko Hatanaka, announced plans to restructure its R&D framework. Initiatives include utilizing more external capabilities and resources, undertaking new therapeutic areas and technologies, including regenerative medicine and vaccines, and ensuring sufficient late-stage pipeline investment. Through the establishment of Astellas Innovation Management (AIM), the company aims to enhance external opportunities during the preclinical development stage, and consolidate research functions. These initiatives, scheduled during FY2013, involve reallocating resources by closing and scaling back U.S.-based research functions, some of which will transfer to the Tsukuba Research Center. OSI Pharmaceuticals will be closed, along with Perseid Therapeutics. Astellas Research Institute of America LLC will be scaled back to focus on CNS therapies. The losses related to these initiatives are approximately JPY 11 billion have been accounted for in the FY14 forecast.

As a strictly innovative drug firm, the company prides itself on its drug discovery capabilities and development portfolio, as well as a well-balanced business platform. If its OAB strategy works, Myrbetriq will make up for any losses Vesicare may suffer under pending expiry, steadying revenues as other oncology initiatives ranging from early to late-stage development candidates, progress.

16 DAIICHI SANKYO CO.

3-5-1 Nihonbashi-Honcho, Chuo-ku

Tokyo 103-8426 Japan

Tel: (81) 3 6255 1111

Fax: (81) 3 5255 7035

WWW.DAIICHISANKYO.COM

Daiichi's five-year business plan aims to transform the company into a 'Hybrid Business Powerhouse' by strengthening business in key markets (Japan, India, and U.S.) and emerging markets. The goals, mapped out below, entail achieving sales of Yen 1,300 billion in 2017. We're still waiting on a few late-stage development prospects from last year's report, but Daiichi's pipeline appears to be on track. Ranbaxy woes however, may linger.

The Olmesartan franchise remains essential to the company's portfolio, while it suffered from generic competition in the U.S., overall sales were up. With the looming patent expiry in the EU and Japan, anticipated product launches in 2014-15 in atrial fibrillation and venus thromboembolism by expanding in emerging countries through Ranbaxy, along with plans acquire external assets and deploy its next-generation product, edoxaban, will be vital. Daiichi also plans to expand its presence in biologics and the biosimilar business and has received a grant toward expanding bio-production facilities.

Additional per year targets include: achieving more than two new major indication launches for new medical entities (NME) including new biologics, bringing four major indications to late development stage for biosimilars, and initiating nine Phase 1 projects. Upcoming projects scheduled to be approved/launched in 2015-16 include Edoxaban in VTE, Prasugrel in CVA, Etanercept biosimilar for RA. Additionally, the company is seeking further indications for antiplatelet agent Prasugrel, marketed as Effient in the U.S. in cooperation with Eli Lilly and Co.

The company is hoping to recoup its leadership in the U.S. injectable iron market through the launch of Injectafer for iron deficiency anemia. Luitpold Pharmaceuticals, a Daiichi Sankyo Group Co. headquartered in Shirley, NY, is positioning this next-generation product to succeed the struggling anemia treatment Venofer in the niche injectables market. Luitpold is also plans to release competitive generic injectables onto the market. LPI experienced a 5.4 billion yen decline in sales as mainstay product Venofer was negatively affected by competing products, and LPI itself was affected by a warning issued by the FDA in the early part of the FY11 concerning its plant in Shirley.

In other product news, Daiichi and partner Mitsubishi Tanabe Pharma launched the selective DPP-4 inhibitor Tenelia tablets, which offer a new treatment option for type 2 diabetes, and Daiichi launched its osteoporosis treatment PRALIA (denosumab) Subcutaneous Injection in Japan. Daiichi has been working on denosumab since 2007, when it licensed the rights from Amgen to develop and market the antibody in Japan. It's also approved to treat bone complications from multiple myeloma and bone metastases, and is currently in Phase HI trials for early-stage breast cancer.

Helping to address the thorn in Daiichi's side, subsidiary Ranbaxy Laboratories has taken actions to correct the conduct that led to the investigations by the U.S. Department of Justice (DOJ) and the U.S. FDA. These efforts include undisclosed changes to management, culture, operations and compliance. According to a company statement, Daiichi Sankyo believes that certain former shareholders of Ranbaxy concealed and misrepresented critical information concerning the U.S. DOJ and FDA investigations.

Ranbaxy sales declined 29% in the fourth quarter, primarily impacted by the recall of atorvastatin in the U.S. market due to possible glass contamination. The company says it has taken several Corrective and Preventive Actions (CAPA) and began shipment of atorvastatin to its formulation facility in the U.S. Also, during the quarter, 15 regulatory agency inspections from the U.S. FDA, EU Countries/ EMEA, Germany, South Africa and India were conducted at Ranbaxy's global manufacturing sites. Now that progress has been made in the negotiations with the FDA's DOJ, which has been a major issue the past few years, Daiichi plans to step up the evolution of its Hybrid Business Model. This includes recently integrating Daiichi and Ranbaxy's business operations in Thailand to offer generics, and utilizing Ranbaxy to support Daiichi's Brazilian subsidiary to enter the branded generics market there.

The innovative pharmaceuticals business in Japan will need to be the driving force to help counterbalance continued erosion of Olmesartan. That is, unless Ranbaxy manages to get its act together.

17 OTSUKA PHARMACEUTICAL GROUP

2-9 Kanda-Tsukasamachi, Chiyoda-ku

Tokyo 101 -0048 Japan

Tel: (81) 3-6717-1410

WWW.OSTUKA.COM/EN

18 GILEAD SCIENCES, INC.

333 Lakeside Dr.

Foster City, CA 94404

Tel: 650-574-3000

Fax: 650-578-9264

WWW.GILEAD.COM

19 MYLAN INC.

1500 Corporate Dr., Ste. 400

Canonsburg, PA 15317

Tel: 724-514-1800

WWW.MYLAN.COM

Dey, Mylan's specialty business, focuses on respiratory, allergy and psychiatric therapies.

20 EISAI

4-6-10 Koishikawa, Bunkyo-ku

Tokyo 112-8088, Japan

Tel: (81) 3 3817 3700

Fax: (81) 3 3811 3077

WWW.EISALCO.JP

Top 20

Pharmaceutical Companies

based on 2012 pharma revenues

1    Pfizer                 $51,214    (prev.: 1)

2    Novartis               $46,732    (prev.: 2)

3    Merck                  $40,601    (prev.: 4)

4    Sanofi                 $38,259    (prev.: 3)

5    GlaxoSmithKline        $33.787    (prev.: 5)

6    AstraZeneca            $27.973    (prev.: 6)

7    Johnson & Johnson      $25,351    (prev.: 7)

8    Abbott Laboratories    $23,133    (prev.: 9)

9    Eli Lilly & Co.        $20,566    (prev.: 8)

10   Teva                   $18,535   (prev.: 12)

11   Bristol-Myers Squibb   $17,621   (prev.: 10)

12   Takeda                 $16,961   (prev.: 11)

13   Boehringer-Ingelheim   $14,665   (prev.: 13)

14   Bayer                  $13,890   (prev.: 14)

15   Astellas               $12.168   (prev.: 15)

16   Daiichi-Sankyo         $11,504   (prev.: 16)

17   Otsuka                 $10.295   (prev.: 17)

18   Gilead                  $9.398   (prev.: 18)

19   Mylan                   $6,750   (prev.: 20)

20   EISAI                   $6.647   (prev.: 19)

Note: In all Top Company profiles, dollar amounts are in millions.

HEADCOUNT            91,500 (incl. 9.300 in Animal Health)

YEAR ESTABLISHED                                      2000
PHARMA REVENUES                                    $51,214  -11%
TOTAL REVENUES                                     $58,986  -10%
NET INCOME                                         $14,598   46%
R&D BUDGET                                          $7,870  -13%

DRUGS APPROVED

Drug            Indication

Prevnar 13      pneumococcal disease immunization for 6 years
                through 17 years

Rebif Rebidose  single-use auto-injector for relapsing forms of
                multiple sclerosis

Xalkori         ALK-positive advanced non-small cell lung cancer

Inlyta          adult patients with advanced renal cell carcinoma
                (RCC)

Lyrica          neuropathic pain associated with spinal capsules
                cord injury

DRUG PROGRAMS CANCELLED

Drug          Indication
PF-04382923   age-related macular degeneration
PF-04856883   type 2 diabetes
PF-04856884   renal cell carcinoma, cancer
PF-04605412   cancer
inotuzumab    relapsed or refractory CD22+ aggressive
ozogamicin    non-Hodgkin lymphoma (NHL)

DRUGS PENDING

Dru9                     Indication

Xeljanz                rheumatoid arthritis (EU)
(tofacitinib citrate)

Remoxy                 moderate to severe pain (U.S.)

bazedoxifene-          menopausal vasomotor symptoms (U.S/EU)
conjugated estrogens

Viviant                osteoporosis treatment and prevention (U.S.)

tafamidis              transthyretin familial amyloid polyneuropathy

meglumine              (U.S.)

PHASE IIB AND BEYOND

Drug               Indication

Eliquis            venous thromboembolism prevention

ALO-02 Oxycodone-  moderate to severe pain
naltrexone core

tanezumab          osteoarthritis signs and symptoms (on clincial hold)

dacomitinib        advanced non-small cell lung cancer
(PF-00299804)

inotuzumab         aggressive non-Hodgkin lymphoma
ozogamicin

palbociclib        1st line advanced breast cancer
(PD-0332991)

Zithromax/         malaria
chloroquine

MnB rLP2086        adolescent and young adult meningitis B
(PF-05212366)

EARLY RESEARCH PROJECTS

Drug            Indication

PF-06282999    acute coronary syndrome
RN317          hypercholesterolemia
(PF-05335810)

Dekavil        rheumatoid arthritis

PF-03715455    COPD

PF-06342674    type 1 diabetes

PF-04958242    schizophrenia

PF-05089771    chronic pain

PF-05236812    Alzheimer's disease

PF-03084014    cancer

PF-05280602    hemophilia

PF-06252616    muscular dystrophies

PF-06687859    spinal muscular atrophy

PF-05402536    smoking cessation

PF-06425090    clostridium difficile colitis

PF-06444752    asthma

DRUGS COMING OFF PATENT

Drug       Indication

Spiriva    COPD

Lyrica     pain

Aricept    Alzheimer's disease

Celebrex   osteoarthitis
Viracept   HIV

Zyvox      Nosocomial pneumonia caused by
           Staphylococcus aureus

Vfend      antifungal

TOP-SELLING DRUGS

Drug         Indication                           $  (+/- %)

Lyrica       epilepsy / neuropathy           $4,158      13%
Lipitor      cholesterol                     $3,948     -59%
Enbrel       inflammation (ex-N.A.)          $3,737       2%
Prevnar 13   pneumococcal vaccine            $3,718       2%
Celebrex     arthritis                       $2,719       8%
Viagra       erectile dysfunction            $2,051       4%
Norvasc      antihypertensive                $1,349      -7%
Zyvox        bacterial infections            $1,345       5%
Sutent       cancer                          $1,236       4%
Premarin     menopause                       $1,073       6%
Genotropin   HGH deficiency                    $832      -6%
Xalatan      glaucoma                          $806     -36%
Benefix      hemophilia                        $775      12%
Detrol       overactive bladder                $761     -14%
Vfend        fungal infections                 $754       1%
Chantix      smoking cessation                 $670      -7%
Pristiq      neuropathic pain                  $630       9%
ReFacto AF   hemophilia                        $584      15%
Zoloft       antidepressant                    $541      -6%
Revatio      pulmonary arterial hypertension   $534       0%
Medrol       inflammation                      $523       3%

Alliance Revenues *                         $3.630  24%

Aricept               Alzheimer's disease
Exforge               hypertension
Rebif                 multiple sclerosis
Spiriva               COPD
Enbrel                inflammation
(U.S., Canada)

Account for 71% of total pharma sales, down from 72% in 2011

HEADCOUNT           120,000
YEAR ESTABLISHED       1996
PHARMA REVENUES *   $46,732   -3%
TOTAL REVENUES      $56,673   -3%
NET INCOME           $9,618    4%
R&D BUDGET           $9,116   -1%

DRUGS APPROVED/LAUNCHED

Drug                     Indication

Ilaris                   active systemic juvenile idiopathic arthritis,
                         acute gouty arthritis

Simbrinza                elevated intraocular pressure (I0P) in patients
Suspension               with primary open-angle glaucoma or ocular
                         hypertension

Jetrea                   sight-threatening vitreomacular traction and
intravitreal injection   macular hole

Zortress                 organ rejection in adult liver transplant

Exjade                   chronic iron overload in patients with
                         non-transfusion-dependent thalassemia

Bexsero                  meningitis

Signifor injection       Cushing's disease

Flucelvax                seasonal influenza

Seebri Breezhaler        COPD

Votubia                  non-cancerous kidney tumors associated with
                         tuberous sclerosis complex

Jakavi                   myelofibrosis

DRUGS PENDING

Drug              Indication

Lucentis          myopic choroidal neovascularization
(ranibizumab)

indacterol,       COPD
glycopryrronium
bromide

serelaxin         acute heart failure

PHASE HB AND BEYOND

Drug     Indication

AFQ056   fragile X syndrome
AIN457   psoriasis
BAF312   multiple sclerosis
BKM120   breast cancer
DEB025   chronic hepatitis C
LBH589   relaped or refractory miltiple myeloma
LCQ908   familial chylomicronemia syndrome
LCZ696   hypertention
PKC412   acute myeloid leukemia
TKI258   renal cell cancer

EARLY RESEARCH PROJECTS

Drug                              Indication

LGX818                            melanoma
ATI355                            spinal cord injury
BYL719                            solid tumors
KAF156                            antimalaria
pseudomonas aeruginosa            infection in cystic fibrosis
FCC 3 H5N1                        H5N1
quadrivalent influenza vaccine    flu

DRUGS COMING OFF PATENT

Drug              Indication
Zometa            cancer-related bone loss
Comtan            Parkinson's disease
Reclast/Aclasta   osteoporosis
Gleevec           oncology
Focalin XR        attendtion deficit/hyperactivity disorder
Miacalcin         osteoporosis

TOP SELLING DRUGS

Drug               Indication                $  (+/- %)

Gleevec            chronic myeloid      $4,675       0%
                   leukemia

Diovan             hypertension         $4,417     -22%

Lucentis           age-related macular  $2,398      17%
                   degeneration

Sandostatin group  acromegaly           $1,512       5%

Exforge            hypertension         $1,352      12%

Zometa             bone metastasis      $1,288     -13%

Gilenya            multiple sclerosis   $1,195     142%

Exelon             Alzheimer's disease  $1,050      -2%

Tasigna            chronic myeloid        $998      39%
                   leukemia

Galvus             diabetes               $910      34%

Exjade             iron chelation         $870       2%

Neoral             immunosuppression      $821      -9%

Afinitor           oncology               $797      80%

Voltaren           inflammation/pain      $759      -4%

Reclast            osteoporosis           $590      -4%

Myfortic           transplantation        $579      12%

Ritalin            ADHD                   $554       1%

Comtan             Parkinson's disease    $530     -14%

Xolair             asthma                 $504       5%

Account for 55% total pharma sales, up form 53% in 2011

HEADCOUNT          83,000
YEAR ESTABLISHED     2009
PHARMA REVENUES   $40,601  -2%
TOTAL REVENUES    $47,267  -2%
NET INCOME         $6,661   6%
R&D BUDGET         $8,168  -4%

DRUGS APPROVED/LAUNCHED

Drug       Indication
Liptruzet  atherosclerosis

DRUGS PENDING

Drug                  Indication
MK-7243               allergy, grass pollen
suvorexant            insomnia
sugammadex            neuromuscular blockade reversal
vintafolide, MK-8109  platinum-resistant ovarian cancer
Dulera                COPD
Noxafil oral tablet   antifungal

PHASE HB AND BEYOND

Drug                         Indication

MK-3641                      allergy, ragweed

anacetrapib,                 atherosclerosis
MK-0859

MK-3415A                     clostridium difficile Infection

MK-8175A                     contraception

MK-3102                      diabetes mellitus

MK-8962                      fertility, corifollitropin alfa

vaniprevir,                  hepatitis C
MK-7009

V212 herpes zoster

V503 HPV vaccine (9 valent)  HPV-related cancers

odanacatib,                  Osteoporosis
MK-0822

preladenant,                Parkinson's disease
MK-3814

V419                        pediatric hexavalent combination vaccine

MK-3222                     psoriasis

vorapaxar,                  thrombosis

DRUGS COMING OFF PATENT

Drug       Indication

Propecia   hair loss
Vytorin    cholesterol
Maxalt     migraine
Zetia      cholesterol
Cancidas   antifungal

TOP SELLING DRUGS

Drug            Indication                        $   (+/- %)

Januvia         diabetes                     $4,086       23%
Singulair       asthma                       $3,853      -30%
Zetia           cholesterol                  $2,567        6%
Remicade        rheumatoid arthritis         $2,076      -22%
Vytorin         cholesterol                  $1,747       -7%
Janumet         diabetes                     $1,659       22%
Gardasil        HPV vaccine                  $1,631       35%
Isentress       HIV/AIDS                     $1,515       11%
Cozaar/Hyzaar   high blood pressure          $1,284      -23%
Varivax         chickenpox vaccine           $1,273        6%
Nasonex         allergic rhinitis            $1,268       -1%
Temodar         oncology                       $917       -2%
Fosamax         postmenopausal osteoporosis    $676      -21%
Peglntron       hepatitis C                    $653       -1%
Zostavax        shingles                       $651       96%
Maxalt          migraine                       $638        0%
Nuvaring        contraception                  $623        0%
Cancidas        antifungal                     $619       -3%
Rotatec         rotavirus vaccine              $601       -8%
Pneumovax       pneumococcal vaccine           $580       16%
Victrelis       hepatitis C                    $502      259%

Account for 72% of total pharma sales, same as in 2011

DRUGS APPROVED/LAUNCHED

Drug             Indication

Zaltrap          metastatic colorectal cancer
Lyxumia          type 2 diabetes
Once-Daily

Kynamro          homozygous familial hypercholesterolemia
injection

Aubagio          relapsing forms of multiple sclerosis

Auvi-Q           life-threatening allergic reactions

Fluzone QIV IM   influenza vaccine

DRUGS PENDING

Drug                     Indication

VaxiGrip QIV IM          influenza vaccine
Lemtrada (alemtuzumab)   multiple sclerosis
Lyxumia (lixisenatide)   type 2 diabetes

PHASE IIB AND BEYOND

Drug                  Indication

eliglustat tartrate   Gaucher disease
iniparib              squamous NSCLC
SAR302503             myelofibrosis
otamixaban            acute coronary syndrome
alirocumab            hypercholesterolemia
sarilumab             rheumatoid arthritis
SAR399063             pre-sarcopenia

EARLY RESEARCH PROJECTS

Drug        Indication

SAR153192   solid tumors
SAR650984   hematological malignancies
SAR260301   PTEN--deficient tumors
GZ404477    Parkinson's disease
SAR391786   rehabilitation post orthopedic surgery
SAR228810   Alzheimers disease
SAR252067   Crohn's disease and ulcerative colitis
SAR113244   systemic lupus erythematosus
SAR127963   trauma brain injury
SAR126119   acute ischemic stroke
SAR407899   pulmonary hypertension
GZ402665    Niemann-Pick type B
GZ402671    Fabry disease
RetinoStat  wet age-related macular degeneration
StarGen     Stargardt disease
GZ402663    age-related macular degeneration
UshStat     Usher syndrome 1B

DRUGS COMING OFF PATENT

Drug    Indication
Lantus  diabetes

TOP SELLING DRUGS *

Drug                   Indication                   $   (+1/- %)

Lantus                 diabetes                $6,377        17%
Lovenox                thrombosis              $2,434       -17%
Plavix                 heart attack, stroke    $2,656        -6%
Polio/Pertussis/Hib    vaccines                $1,522         2%
Aprovel                hypertension            $1,480       -18%
Eloxatin               colorectal cancer       $1,229       -18%
Influenza vaccines     influenza               $1,136        -1%
Renagel                hyperphosphatembosis      $839        45%
Menactra               meningitis vaccine        $836        18%
Cerezyme               Gaucher disease           $814        33%
Taxotere               cancer                    $724       -44%
Allegra                allergic rhinitis         $711       -12%
Ambieri                insomnia                  $639        -6%
Adacel                 adult booster vaccines    $638        -2%
Myozyme Pompe disease                            $594         3%
Amaryl diabetes                                  $541       -11%
Depakine epilepsy                                $527        -2%

Account for 62% of total pharma sales, up from 61% in 2011

HEADCOUNT          99,488
YEAR ESTABLISHED     2002
PHARMA REVENUES   $33,787   -5%
TOTAL REVENUES    $41,885   -5%
NET INCOME         $7,518  -14%
R&D BUDGET         $6,042   -3%

DRUGS APPROVED/LAUNCHED

Drug                  Indication

raxibacumab           inhalation anthrax

Revolade/Promacta     hepatitis C induced thrombocytopaenia

Votrient              sarcoma

Fluarix Quadrivalent  seasonal influenza prophylaxis

MenHibrix             neisseria meningitis groups C & Y &

hemophilus            type b disease prophylaxis
influenzae

Nimenrix              neisseria meningitis groups A, C, W & Y
                      disease prophylaxis

Fabior                acne vulgaris

Sorilux               scalp psoriasis

Relvar/Breo           COPD

DRUGS PENDING

Drug              Indication

albiglutide       type 2 diabetes

dolutegravir      HIV infections

Tyverb/Tykerb     metastatic breast cancer, in combination with
                  trastuzumab

dabrafenib        metastatic melanoma

trametinib        metastatic melanoma

Flu pre-pandemic  pre-pandemic and pandemic influenza

H5N1              prophylaxis

Anoro/UMEC        COPD

Relvar/Breo       asthma

Duac low dose     acne vulgaris

PHASE IIB AND BEYOND

Drug                 Indication

MAGE-A3              melanoma, non-small cell lung cancer
                     immunotherapeutic

Arzerra              follicular lymphoma

Benlysta             systemic lupus erythematosus, vasculitis

mepolizumab          severe asthma

sirukumab            rheumatoid arthritis

darapladib           atherosclerosis

dolutegravir +       HIV infections
abacavir sulphate
+ lamivudine

vercirnon            Crohn's disease

Relenza i.v.         influenza

Patrome (IPX066)     Parkinson's disease

Tyverb/Tykerb        gastric cancer, head and neck squamous
                     cell carcinoma

trametinib +         metastatic melanoma, adjuvent therapy
dabrafenib

Zoster               herpes zoster prophylaxis

Mosquirix            malaria prophylaxis

MMR                  measles, mumps, rubella prophylaxis

2696273              adenosine deaminase severe combined
                     immune deficiency (ADA-SCID)

drisapersen          Duchenne muscular dystrophy

migalastat HCI       Fabry disease

fluticasone furoate  asthma


umeclidinium         COPD

alitretinoin         chronic hand eczema

EARLY RESEARCH PROJECTS

Drug          Indication

FRAME         resectable non-small cell lung cancer
WT1           breast cancer
1995057       acute lung injury
otelixizumab  rheumatoid arthritis

DRUGS COMING OFF PATENT

Drug        Indication

Lovaza      hypertriglyceridemia
Avodart     benign prostatic hyperplasia
Relenza     influenza
Pandemrix   A(H1N1)v2009 influenza
Prepandrix  influenza prophylaxis

TOP SELLING DRUGS

Drug               Indication                 $  (+/- %)

Seretide/Advair    asthma, COPD          $7,996      -2%

Avodart            enlarging prostate    $1,252       4%

Flovent            respiratory           $1,234      -5%

Infanrix           pediatric vaccine     $1,228      11%

Kivexa             HIV                   $1,054       6%

Hepatitis vaccine  hepatitis             $1,024      -7%

Ventolin           asthma                $1,000       3%

Lamictal           epilepsy, bipolar       $967      12%
                   disorder

Augmentin          antibacterial           $963      -6%

Lovaza             cholesterol             $962       5%

Synflorix          pneumococcal vaccine    $610       9%

Paxil              CNS                     $593     -15%

Rotarix            pediatric vaccine       $570      19%

Account for 58% of total pharma sales, same as in 2011

HEADCOUNT          51.700
YEAR ESTABLISHED     1999
PHARMA REVENUES   $27,973  -17%
TOTAL REVENUES    $27,973  -17%
NET INCOME         $6,405  -32%
R&D BUDGET         $5,243   -5%

DRUGS APPROVED/LAUNCHED

Drug     Indication

Zinforo  complicated skin and soft tissue infections,
         community acquired pneumonia

DRUGS CANCELLED

Drug      Indication

AZD2820   obesity
AZD9773   severe sepsis
AZD1480   solid tumors
AZD3514   prostate cancer
AZD8683   COPD
MEDI-570  systemic lupus erythematosus

DRUGS PENDING

Drug     Indication

Forxiga  diabetes

DRUGS IN PHASE IIB AND BEYOND

Drug           Indication

Bydureon dual  diabetes
chamber pen

SaxaDapa       diabetes

Faslodex       1st line advanced breast cancer

metreleptin    lipodystrophy

CAZ AVI        serious infections

naloxegol      opioid-induced constipation

brodalumab     psoriasis

fostamatinib   rheumatoid arthritis

lesinurad      hyperuricaemia in patients with gout

EARLY RESEARCH PROJECTS

Drug      Indication

AZD 1722  end stage renal disease / chronic kidney disorder

ATM AVI   serious bacterial infections

MEDI-550  pandemic influenza

MEDI-557  RSV prevention in high risk adults

MEDI5117  rheumatoid arthritis

AZD1208   hematological malignancies

AZD2O14   solid tumors

AZD8848   asthma

AZD7594   COPD

MEDI207O  Crohn's disease

MEDI-551  multiple sclerosis

MEDI5872  systemic lupus erythematosus

RDEA3170  chronic management of hyperuricaemia in
          patients with gout

DRUGS COMING OFF PATENT

Drug       Indication

Zomig      migraine
Nexium     GERD
Blopress   hypertension
Symbicort  asthma
Crestor    cholesterol

TOP SELLING DRUGS

Drug            Indication                      $  (+/- %)

Crestor         cholesterol                $6,253      -6%
Nexium          peptic ulcer, acid reflux  $3,944     -11%
Symbicort       asthma                     $3,194       1%
Seroquel XR     anti-psychotic             $1,509       1%
Seroquel IR     anti-psychotic             $1,294     -70%
Zoladex         oncology                   $1,093      -7%
Synagis         RSV                        $1,038       6%
Atacand         hypertension               $1,009     -30%
Seloken/Toprol  hypertension                 $918      -7%
Pulmicort       asthma                       $866      -3%
Losec/Prilosec  peptic ulcer, acid reflux    $710     -25%
Iressa          oncology                     $611      10%
Arimidex        oncology                     $543     -28%

Account for 82% of total pharma sales, down from 83% in 2011

HEADCOUNT         127,600
YEAR ESTABLISHED     1887
PHARMA REVENUES    $2,351  4%
TOTAL REVENUES    $67,224  3%
NET INCOME        $10,514  9%
R&D BUDGET         $5,362  4%

DRUGS APPROVED/LAUNCHED

Drug              Indication

Dacogen           multiple myeloma

Sirturo           multi-drug resistant tuberculosis

Invokana          type 2 diabetes

Simponi           ulcerative colitis

Zytiga            metastatic castration-resistant prostate
                  cancer (mCRPC)

Evarrest Fibrin   problematic bleeding during surgery
Sealant Patch

Xarelto           deep vein thrombosis and/or pulmonary
                  embolism, reduction of risk of recurrence

DRUGS PENDING
Drug              Indication

Simeprevir        chronic hepatitis C virus

Simponi           rheumatoid arthritis (IV)

Canagliflozin/    type 2 diabetes
Metformin

Stelara           active psoriatic arthritis

bedaquiline       pulmonary. multi-drug resistant tuberculosis
                  (MDR-TS)

PHASE IIB AND BEYOND

Drug                    Indication

Ibrutinib               relapsed/refractory patients with chronic
(PCI-32765)             lymphocytic leukemia, mantle cell lymphoma
Siltuximab              cancer
(ONTO 328)

sirukumab               rheumatoid arthritis
Prezista                fixed dose combination HIV tablet
(darunavir) and
cobicistat (GS-9350)

Invega                  schizophrenia--3 month injectable
SustennalXeplion
long acting injectable

Velcade                 mantle cell lymphoma 1st line

Yondelis                soft tissue sarcoma, relapsed ovarian cancer

EARLY RESEARCH PROJECTS

Drug             Indication

methoxsalen      hematological malignancies

Ipilimumab       prostate cancer

Infliximab       Stevens-Johnson syndrome, corneal blindness

1D93 + GLA-SE    pulmonary tuberculosis

everolimus       breast cancer

Cetuximab/IMRT   cancer of head and neck
+ Ipilimumab

ABT-494          rheumatoid arthritis

OPC-108459       atrial fibrillation

LY2940680        small cell lung cancer

EDI200           X-linked hypohidrotic ectodermal dysplasia

hLL1-DOX         non-Hodgkin's lymphorna, chronic
(IMMU-115)       lymphocytic leukemia

DKN-O1           multiple myeloma, solid tumors, NSCLC

DRUGS COMING OFF PATENT

Drug        Indication

Aciphex     GERD
Risperdal   schizophrenEa

TOP SELLING DRUGS

Drug              Indication                 $  (+/- %)

Remicade          rheumatoid arthritis  $6,139      12%
Velcade           myeloma/Iymphoma      $1,500      18%
Procnt/Eprex      anemia                $1,462     -10%
Risperdal Consta  schizophrenia         $1,425     -10%
Prezista          HIV/AIDS              $1,414      17%
Concerta          ADHD                  $1,073     -15%
Stelara           plaque psoriasis      $1,025      39%
Zytiga            oncology                $961     219%
Aciphex/Pariet    acid reflux             $835     -14%
Invega Sustenna   schizophrenia           $796     111%
Simponi           rheumatoid arthritis    $607      48%
Invega            schizophrenia           $550      10%

Account for 70% of total pharma sales, up from 65% in 2011

HEADCOUNT          21,500
YEAR ESTABLISHED     1888
PHARMA REVENUES   $23,133   3%
TOTAL REVENUES    $39,874   3%
NET INCOME         $5,963  26%
R&D BUDGET         $2,778   6%

DRUGS APPROVED/LAUNCHED

Drug      Indication

Humira    Crohn's disease/pediatric, axial
          spondyloarthritis, ulcerative colitis

PHASE IIB AND BEYOND

Drug                    Indication

Elagolix                endometriosis

Elotuzumab              multiple myeloma

Levodopa/               advanced Parkinson's disease
Carbidopa Intestinal
Gel (LCIG)

Daclizumab              relapsing remitting multiple sclerosis

Humira                  hidradenitis suppurativa, peripheral

(adalimumab)            spondyloarthritis, uveitis

HCV Interferon-         hepatitis C
Free Combination
(genotype 1)

atrasentan              diabetic nephropathy

ALV003                  celiac disease

EARLY RESEARCH PROJECTS

Drug         Indication

ABT-199      relapsed/refractory chronic lymphocytic leukemia,
             relapsed/refractory multiple myeloma, non-Hodgkin's
             lymphoma, systemic lupus erythematosus

Veliparib    BRCA mutated, high grade serous ovarian and
             breast cancer, gastric cancer

ABT-122      rheumatoid arthritis

ABT-981      osteoarthritis

ABT-700      advanced solid tumors

ABT-767      solid tumors (breast, ovarian, prostate, or pancreatic)

ABT-494      rheumatoid arthritis

ABT-806      advanced solid tumors

ABT-263      chronic lymphocytic leukemia

DRUGS COMING OFF PATENT

Drug       Indication

Advicor    cholesterol
Niaspan    cholesterol

TOP SELLING DRUGS

Drug             indication                 $  (+/- %)

Humira           rheumatoid arthritis  $9,265      17%
AndroGel         testosterone          $1,185      36%
TriCor/TriLipix  cholesterol           $1,098     -20%
Kaletra          HIV/AIDS              $1,013     -13%
Niaspan          cholesterol             $911      -7%
Synagis          RSV                     $842       6%
Lupron           hormone treatment       $800      -1%
Creon            digestion               $659       5%
Synthraid        hyperthyroidism         $656       3%
Sevoflurane      anesthesia              $602      -9%
Clarithromycin   antibiotic              $501      -9%

HEADCOUNT          38,100
YEAR ESTABLISHED     1876
PHARMA REVENUES   $20,566  -9%
TOTAL REVENUES    $22,603  -7%
NET INCOME         $4,089  -6%
R&D BUDGET         $5,278   5%

DRUGS APPROVED/LAUNCHED

Drug        Indication

Amyvid      imaging of beta-amyloid neuritic plaque density in
            patients with cognitive impairment

Cialis      signs and symptoms of benign prostatic hyperplasia

Tradjenta   add-on therapy to insulin

Jentadueto  type 2 diabetes

Erbitux     KRAS mutation-negative metastatic colorectal cancer
            in combination with FOLFIRI

DRUGS PENDING

Drug            Indication

liprotamase     exocrine pancreatic enzyme insufficiency
empagliflozin   type 2 diabetes

PHASE IIB AND BEYOND

Drug                  Indication

baricitinib           rheumatoid arthritis, psoriasis and diabetic
                      nephropathy

ixekizumab            psoriasis and psoriatic arthritis

tabalumab             lupus and multiple myeloma

evacetrapib           CV events in high-risk vascular disease

dulaglutide           type 2 diabetes

LY2963016             type 1 and 2 diabetes

basal insulin analog  type 1 and 2 diabetes

edivoxetine           pediatric ADHD

solanezumab           Alzheimer's disease

enzastaurin           diffuse large B-cell lymphoma (DLBCL)

necitumumab           squamous non-small cell lung cancer

ramucirumab           metastatic breast, colorectal and gastric cancers

EARLY RESEARCH PROJECTS

Drug                               Indication

IL-1 [beta]                        cardiovascular disease
CSF-1R                             cancer
Ferroportin                        anemia
Gemcitabine                        cancer
Hepcidin                           anemia
NOTCH Inhibitor                    cancer
P13 Kinase/mTOR Inhibitor          cancer
p38 MAP Kinase Inhibitor I         cancer
p70 S6 Kinase/AKT Dual Inhibitor   cancer
VEGFR3                             cancer

DRUGS COMING OFF PATENT

Drug       Indication

Cymbalta   antidepressant
Humalog    diabetes
Envista    osteoporosis
Zyprexa    schizophrenia and bipolar disorder
Alimta     nonsquamous non-small cell lung cancer

TOP SELLING DRUGS

Drug        Indication                  $  (+/- %)

Cymbalta    anxiety, depression,  $4.994      20%
            diabetic peripheral
            neuropathic pain

Alimta      cancer                $2,594       5%

Humalog     diabetes              $2,395       1%

Cialis      erectile dysfunction  $1,926       3%

Zyprexa     schizophrenia         $1,701     -63%

Humulin     diabetes              $1,239      -1%

Forteo      osteoporosis          $1,151      21%

Evista      postmenopausal        $1,010      -5%
            osteoporosis

Strattera   ADHD                  $621         0%

Account for 86% of total pharma sales, same as in 2011

HEADCOUNT          46,500
YEAR ESTABLISHED     1944
PHARMA REVENUES   $18,535   11%
TOTAL REVENUES    $20,317   11%
NET INCOME         $1,963  -29%
R&D BUDGET         $1,356   24%

DRUGS APPROVED/LAUNCHED

Drug       Indication

Quartette  next-gen extended oral contraceptive

DRUGS PENDING

Drug        Indication

Liquinimod  relapsing, remitting multiple sclerosis
Lonquex     chemotherapy-induced neutropenia

PHASE IIB AND BEYOND

Drug                    Indication

Laquinimod              moderate to severe Crohn's disease

Huntexil                Huntington's diease

ER hydrocodone          pain

Nuvigil                 bipolar disorder

Reslizunmab             eosinophilic asthma

ProAir Spiromax         asthma

Glatiramer Acetate      relapsing-remitting multiple sclerosis

Gemcitabine,            pancreatic cancer
Cisplatin, Epirubicin,
and Capecitabine

Olanzapine              eating disorder

XEN4-02                 pain

DRUGS COMING OFF PATENT

Drug      Indication

Copaxone  galucoma
Treanda   chronic lymphocytic leukemia
Copaxone  multiple sclerosis
Provigil  sleep disorders

TOP SELLING DRUGS

Drug            Indication                 $   (+/- %)

Generics                             $10,385        2%
Copaxone        MS                    $3,996       12%
Treanda         oncology                $608      364%
Women's health                          $448        2%
ProAir          bronchial spasms        $406       -7%
Provigil        insomnia                $417       19%
Nuvigil         insomnia                $347      303%
Ovar            chronic asthma          $297       -3%
Azilect         Parkinson's disease     $330       14%
Oncology        incl. biosimilars       $252       -6%

Account for 94% of total pharma sales, down from 96% in 2011

HEADCOUNT          28,000
YEAR ESTABLISHED     1887
PHARMA REVENUES   $17,621  -17%
TOTAL REVENUES    $17,621  -17%
NET INCOME         $2,501  -52%
R&D BUDGET         $3,904    2%

DRUGS APPROVED/LAUNCHED

Drug      Indication

Sustiva   HIV-1 infected pediatric patients

Eliquis   risk of stroke and systemic embolism in
          patients with nonvalvular atrial fibrillation

Forxiga   type 2 diabetes

DRUGS PENDING

Drug          Indication

Metreleptin   metabolic disorders associated with rare
              forms of lipodystrophy

PHASE IIB AND BEYOND

Drug           Indication

BMS-790052     hepatitis C

BMS-663068     HIV-1

BMS-650032     hepatitis C

BMS-986094     hepatitis C

BMS-936558     squamous cell non-small cell lung cancer,
               unresectable or metastatic melanoma

Entecavir      chronic hepatitis B, rheumatoid arthritis,
               ankylosing spondylitis. psoriatic arthritis,
               juvenile idiopathic arthritis

BMS-188667     lupus nephritis

Abatacept      juvenile idiopathic arthritis

aripiprazole   pervasive developmental disorder

EARLY RESEARCH PROJECTS

Drug          Indication

BMS-936558    advanced melanoma
(Ants-PD-1)

Daclatasvir   hepatitis C

Urelumab      solid tumors and B-cell non-Hodgkin's
(BMS-663513)  lymphorna

BMS-906024    acute T-cell lymphoblastic leukemia or T-cell
              lymphoolastic lymphoma

BMS-929075    chronic hepatitis C

BMS-936558    renal cell carcinoma
(Anti-PD-1)

BMS-911543    cancer

BMS-981 164   atopic dermatitis

BMS-936564    acute myelogenous leukemia and selected

(Anti-CXCR4)  B-cell cancers

BMS-982470    solid tumors

BMS-962476    atherosclerosis

Nivolumab     non-Hodgkin's lymphorna, hodgkin
              lymphoma, multiple myeloma, chronic
              myelogenous leukemia

BMS-852927    hypercholesterolemia

BMS-241027    Alzheimer's disease

DRUGS COMING OFF PATENT

Drug        Indication

Sustiva     HIV
Ability     schizophrenia, bipolar disorder
Baraclude   hepatitis B

TOP SELLING DRUGS

Drug       Indication                 $  (+/- %)

Ability    schizophrenia         $2.827       3%
Plavix     platelet inhibitor    $2,547     -64%
Sustiva    HIV/AIDS              $1,527       3%
Reyataz    HIV/AIDS              $1,521      -3%
Baraclude  hepatitis B           $1,388      16%
Orencia    rheumatoid arthritis  $1.176      28%
Sprycef    leukemia              $1.019      27%
Yervoy     oncology                $706      96%
Erbitux    oncology                $702       2%
Avapro     hypertension            $503     -47%

Account for 82% of total pharma sales, down from 83% in 2010
HEADCOUNT          30,481
YEAR ESTABLISHED     1781
PHARMA REVENUES   $16,961  -2%
TOTAL REVENUES    $18,843  -2%
NET INCOME         $1,588   1%
R&D BUDGET         $3,924  10%

DRUGS APPROVED/LAUNCHED

Drug                                Indication

Nesina and fixed-dose combination   type 2 diabetes
Oseni + Kazano

Lotriga                             hyperlipidemia

Revestive                           short bowel syndrome

DRUG PROGRAMS CANCELLED

Drug          Indication

TAK-701       advanced malignancies
TAK-591       hypertention
MLN0518       glioblastoma
motesanib     advanced non-squamous non-small cell
diphosphate   lung cancer
MLN8237       acute myelogenous
veltuzumab    rheumatoid arthritis

DRUGS PENDING

Drug                 Indication

cetilistat           obesity

fixed-dose           hypertension
combination of
Azilva tablets and
amlodipine besylate

H5N1                 pandemic influenza

brentuximab          CD30 positive Hodgkin lymphoma and CD30

vedotin              positive anaplastic large cell lymphoma

vedolizumab          moderately to severely active ulcerative colitis
                     and Crohn's disease

h. pylori            erradication by concomitant therapy with proton
                     pump inhibitors

PHASE HB AND BEYOND

Drug               Indication

brentuximab        relapsed cutaneous T-cell lymphoma,
vedotin            Hodgkin lymphoma

vedolizumab        ulcerative colitis, Crohn's disease

lurasidone         bipolar disorder
hydrochloride

vortioxetine       generalized anxiety disorder

fasiglifam         diabetes

orteronel          prostate cancer

ixazomib citrate   multiple myeloma, amyloidosis
alisertib          T-cell lymphoma

trelagliptin       diabetes

vonoprazan         acid-related diseases

ramelteon          bipolar disorder

trebananib         ovarian cancer

ganitumab          metastatic pancreas cancer

idebenone          Duchenne muscular distrophy

EARLY RESEARCH PROJECTS

Drug        Indication

TAK-329     diabetes

TAK-733     solid tumors

TAK-272     hypertension

TAK-063     schizophrenia

MLN4924     avanced malignancies

MLN0128     multiple myeloma, Waldenstrom's macroglobulinemia,
            solid tumors

MLN0264     advanced gastointestinal malignancies

MLN2480     solid tumors

namilumab   rheumatoid arthritis

Lu AA24530  major depressive and generalized anxiety disorders

AMG 403     pain

ITI-214     cognitive impairment associated with schizophrenia

TOP SELLING DRUGS

Drug              Indication      $   (+/- %)

Actos               diabetes  $1,487     -60%
Blopress        hypertension  $2,052     -25%
Prevacid                GERD  $1,333     -14%
Lupron       prostate cancer  $1,410      -8%
Protonix                GERD    $944      92%
Velcade      multiple myeloma   $882      20%
Enbrel   rheumatoid arthritis   $523      -1%

Account for 51% of total pharma sales, down from 66% in 2011

HEADCOUNT          46,228
YEAR ESTABLISHED     1817
PHARMA REVENUES   $14,665   4%
TOTAL REVENUES    $18,890   3%
NET INCOME         $3.594  75%
R&D BUDGET          $3296   0%

DRUGS APPROVED/LAUNCHED

Drug                           Indication

Jentadueto                     type 2 diabetes
Tradjenta (add-on to insulin)  type 2 diabetes
empagliflozin                  type 2 diabetes

DRUGS PENDING

Drug        Indication

afatinib    EGFR mutation-positive advanced or metastatic
            non-small cell lung cancer

Olodaterol  COPD maintenance

Pradaxa     acute deep vein thrombosis and pulmonary embolism
            and the prevention of recurrent DVT and PE

PHASE HB AND BEYOND

Drug              Indication

BI 695500         rheumatoid arthritis
BI 201335         hepatitis C
BIBF 1120         idiopathic pulmonary fibrosis
afatinib          head and neck squamous cell carcinoma
Interferon-gamma  sepsis, septic shock
nintedanib        NSCLC, adenocarcinoma
volasertb         leukemia

DRUGS COMING OFF PATENT

Drug       Indication

Combivent  COPD
Spiriva    COPD

TOP SELLING DRUGS

Drug       Indication                 $   (+/- %)

Spiriva    COPD                  $4,580        4%
Micardis   hypertension          $2,087       -6%
Pradaxa    atrial fibrillation   $1,425       63%
Combivent  COPD                  $1,135        6%

Account for 63% of total pharma sales, up from 51% in 2011

HEADCOUNT         110,500
YEAR ESTABLISHED     1971
PHARMA REVENUES   $13,890    0%
TOTAL REVENUES    $51,123    1%
NET INCOME         $3,145   -9%
R&D BUDGET         $2,014   -7%

DRUGS APPROVED/LAUNCHED

Drug      Indication

Xarelto   seondary prevention after ACS

Xofigo    bone metastases

Stivarga  advanced/recurrent colorectal cancer (CRC),
          gastrointestinal stromal tumors (GIST)

Skyla     long-term contraception

Eylea     neovascular (wet) age-related macular
          degeneration, central retinal vein occlusion

DRUGS PENDING

Drug          Indication

riociguat     chronic thromboembolic pulmonary hypertension
radium-223    castration-resistant prostate cancer with
dichloride    bone metastases
regorafenib   metastatic and/or unresectable GIST

DRUGS COMING OFF PATENT

Drug     Indication

Avelox   bacterial infections

TOP SELLING DRUGS

Drug            Indication                $  (+/- %)

Betaferon       multiple sclerosis   $1,564       1%
Kogenate        hemophilia           $1,520       2%
Yasmin          contraception        $1,344     -10%
Nexavar         oncology             $1,018       1%
Adalat          hypertension           $861      -3%
Mirena          women's health         $870       8%
Avalox          antibiotic             $625      -8%
Aspirin Cardio  cardiovascular         $612       9%
Glucobay        diabetes               $525       4%

Account for 64% of total pharma sales, down from 65% in 2011


Contributors

Editor: Gil Y. Roth

Associate Editor: Kristin Brooks

Contributing Editor: Derek B. Lowe

All profiles written by Gil Roth. except Astellas and Daiichi-Sankyo, by Kristin Brooks

The Lowe Down capsules written by Derek Lowe (http://pipeline.corante.com)

Pipeline information compiled by Kristin Brooks

Revenue information compiled by Gil Roth

Photo courtesy of Eli Lilly & Co.

RELATED ARTICLE: LOWE DOWN

Pfizer's continued to divest itself of all distractions (nutritional products, animal health) and put its money down on what got them to the position they've reached today. Buying other companies and stripping them down like ears of corn? No, no, discovering drugs is what they're about! It's a process so important that they're building a big new site in Cambridge, just up the street from a massive Novartis construction site, and they're planning to fill it with steely-eyed drug designers. And the compounds they dream up are so important to Pfizer's pfuture that the company is going to have them made by the cheapest labor they can find, many time zones away. So you know that they mean business. Drug development, however, will take place in Groton. It's a good thing that Pfizer never bought an island in the Indian Ocean; that's probably where the toxicology testing would end up being done. If you know someone with project-management software or videoconferencing equipment to sell, put them onto this big opportunity. Chinese phrasebooks might come in handy, too--suggested entries include translations for, "You said this would be ready two months ago," and, "No, I don't think that they have any more starting material in Groton, either."

--Derek Lowe

RELATED ARTICLE: ASIA NEWS

Pfizer had ... interesting times in the far east this past year. In October 2012, India's patent board revoked Pfizer's patent for cancer treatment Sutent. That followed earlier moves by the patent board to permit generics of Sutent competitor Nexavar (Bayer) and Tarceva (Roche), and for India's Supreme Court to deny a patent to Gleevec (Novartis). Pfizer appealed the board's decision, and in June 2013 the Intellectual Property Appellate Board set aside the revocation and asked the patent board to reconsider the case in light of new information.

In August 2012, Pfizer ended its three-year supply agreement with Claris Life Sciences. The companies began working together in 2009 to supply Claris' generic parenterals to the U.S., Europe and Australia under Pfizer's name. In 2010, the FDA issued a warning to Claris regarding quality issues and banned the sale of its products in the U.S. until compliance issues were resolved. The FDA lifted the ban in August 2012 following a facility inspection in February.

Also in August, Pfizer and Mylan signed a long-term strategic collaboration to develop, manufacture, distribute and market generic drugs in Japan. Pfizer will be responsible for commercialization of the combined generics portfolio, and managing the marketing and sales effort. Mylan will be responsible for operations, including R&D and manufacturing. The pact will include a portfolio of more than 350 marketed products, as well as more than 125 additional products in development. Products included in the collaboration will be sold under the Pfizer brand with joint labeling.

A month later, Pfizer set up a joint venture to manufacture and sell generics in China with Hisun Pharmaceuticals. Making the announcement, the companies noted that Hisuin will transition from an API manufacturer into an established branded generics company. Presumably, the JV will involve investment in significant dosage form development expertise, as well as building a sales force.

In February 2013, Pfizer announced plans to close its Singapore clinical research unit, laying off 30 employees as part of global R&D cuts. The site had been established in 2000.

RELATED ARTICLE: ACQUISITION NEWS

Target: NextWave

Price: $255 million upfront, with $425 in milestones

Announced: October 2012

What they said: "By combining the advantages of Quillivant XR with Pfizer's commercialization expertise, we will be able to provide ADHD patients and their caregivers a new treatment option."

--Albert Bourla, president and general manager, Pfizer's Established Products Business Unit

RELATED ARTICLE: OUTSOURCING NEWS

In June 2013, Pfizer sold a 500,000-sq.-fit. commercial manufacturing facility in Bristol, TN to UPM Pharmaceuticals. Financial terms weren't disclosed, but as part of the deal UPM will continue to manufacture Pfizer's current portfolio of products within the facility for two years. The site was part of King Pharmaceuticals, which Pfizer acquired in 2010.

The acquisition will provide UPM with large-scale commercial capabilities for manufacturing and packaging of solid oral dosage tablets and capsules, as well as semisolid manufacturing of creams and ointments. The facility will also provide for tech transfer support, pilot plant scaleup capabilities, analytical and microbial testing, as well as dedicated suites for potent compounds.

UPM's president, James E. Gregory, noted that the facility "will give UPM the capability to annually produce 3.5 billion tablets and 680 million capsules; this will be a dramatic growth opportunity for our company and our clients."

RELATED ARTICLE: Biographical Note

John F. Kelly is vice president of Strategy and Transitioning Sites for Pfizer Global Supply (PGS). Mr. Kelly joined Pfizer in 1982 as Plant Services Engineer at the Brooklyn, NY site. In 2011, he was appointed vice president, Strategy and Transitioning Sites for PGS in New York. His responsibilities include driving PGS strategy and global sourcing, and leading the Transitioning Sites Operating unit.

Prior to his current position, he held assignments in New York (Technical Services, Plant Network Strategy) Brooklyn (Engineering, Manufacturing), Barceloneta, PR (Manufacturing, Quality Operations) and Vega Baja, PR (Site Leader).

RELATED ARTICLE: LOWE DOWN

As mentioned in my Pfizer writeup, Novartis is confidently spending a bundle on an expanded facility in Cambridge. As the first movers in the "Let's take Big Pharma to Massachusetts" trend, they can feel proud for having been trendsetters. (Meanwhile, the degree to which New Jersey is emptying out is startling.)

The confidence is apparently justified. Novartis has one of the more wide-ranging drug pipelines in the industry, which is a good thing, since it's looking at some patent-expiration worries. Nothing at AstraZeneca or Eli Lilly level, you understand (that is, more worrisome than terrifying), but inevitable just the same. The company doesn't spend much time talking about its strategy to anyone else, so it's hard to piece together Novartis' plan to deal with all this. That wide range of drugs includes some prospects in extremely competitive fields, so the company might be looking for areas where there aren't so many elbows being thrown (the company has mentioned Alzheimer's as an interest, which is nothing if not wide open). But the wide-open fields got that way for good reasons. There will be some balancing to do ...

--Derek Lowe

RELATED ARTICLE: SEGMENTS

Novartis makes no noises about splitting up its consolidated structure, although there's occasional chirping from financial firms that would stand to gain by brokering that sort of split. With the departure of chairman, former chief executive officer, and Alcon-deal architect Dan Vasella, the reasoning goes, it might be time to devolve. But that deal hasn't been a flop like Merck's purchase of Schering-Plough, and it doesn't seem to be a drag on the rest of the company's performance. (The April 2013 resignation of the chief fiancial officer, Jon Symonds, also added a little fuel to that breakup fire.)

Still, as we do each year, we provide a breakdown of Novartis' various revenue streams, and where they would each fall within our Top Companies listings.

Pharma: $32.2 billion (would fall to #5, between GSK and AZ)

Alcon: $10.2 billion ($4.0 billion in opthalmic pharmaceuticals would be added to Pharma, pushing Novartis past GSK

Vaccines/Diagnostics: $1.9 billion (that would be good enough for #8 in our Top Biopharma ranks)

Sandoz (generics): $8.7 billion (good enough to squeeze between Gilead and Mylan for #19 on our list)

Consumer: $3.7 billion (down $900 million from last year, mainly because of those production problems at its Lincoln, NE site)

RELATED ARTICLE: QAULITY IS JBO #1

Novartis's total revenues and diversified structure have enabled it to challenge J&J as one of the biggest companies in the industry. The Swiss titan is also challenging J&J for the biggest meltdown of a consumer health manufacturing facility. Novartis' site in Lincoln, NE went into Operation: Shutdown in December 2011 after a scathing FDA warning letter. Consumer Health sales dropped $900 million in 2012, which the company attributes "mainly" due to the problems at Lincoln.

In April 2013, the company announced plans to lay off 300 workers from the site, and to refocus the facility to process only oral and powdered drugs. The FDA inspected the site in February 2013, and Novartis began shipping an animal health product from the site in April. Novartis has also used some CMOs to produce several of its OTC products until Lincoln gets cleared by the agency. Those products include Excedrin, Lamisil and Triaminic, which resumed shipping in 4Q12.

In January 2013, Novartis recalled 200 lots of Triaminic and Theraflu because their CR caps didn't work correctly. FDA received a dozen reports of children unscrewing bottle caps. The lots were manufactured before the warning letter in 2011.

Novartis has also been working its way out from warning letters issued in late 2011 to Sandoz sites in Colorado, North Carolina and Canada. The Colorado site was cleared in 4Q12, but another Sandoz facility was cited by FDA in May 2013. That one, in Unterach, Austria, handles parenterals and came over with the $1.2 billion EBEWE purchase in 2009.

RELATED ARTICLE: CHINA PIVOT

In April 2013, Merck opened a new manufacturing facility in Hangzhou, China. The site will provide drugs for China and the Asia-Pac region. The $120 million, 75,000-[m.sup.2] facility can hold 16 high speed packaging lines for tablets and sterile medicines. The company estimated the site's annual capacity as more than 300 million, and noted that it will package products for both clinical trials and commercial operations.

RELATED ARTICLE: PHARMA BEDFELLOWS

In a sign of how weird the pharma landscape has become, Merck and Pfizer entered a collaboration pact to develop an SGLT2 inhibitor for diabetes. In April 2013 Merck bought in with a $60 million upfront payment and will pay further milestones, in exchange for a 60% share of revenues (as well as "certain costs"). The companies will collaborate on the development of Pfizer's ertugliflozin and a combination of that compound with Janumet.

That same month, Merck began collaborating with Bristol-Myers Squibb in hepatitis C. The companies are in a non-exclusive deal to conduct Phase II trials of a once-daily oral combo of their experimental HCV drugs. Merck will conduct the trials; financial details weren't disclosed, and further development isn't covered under the pact.

RELATED ARTICLE: LOWE DOWN

T he return of Roger Perlmutter is all you need as evidence that Merck thinks that something has been going wrong in their R&D. So far, he seems to have been given a pretty free hand to shake things up, but the problem with shaking things up at that early stage is that you don't see the results for years, assuming that you ever do at all. That's a general problem with the industry and its timelines: you grab the steering wheel and give it a good twist, and the front wheels don't respond for another 10 miles. And by the time the vehicle turns, there may well be another driver entirely.

There's quite a bit later down the pipeline, but some of what's there is worrisome. The bigger the potential market for the compounds, the more questions seem to be sticking to them. Odanacatib is coming along slower than expected for osteoporosis, and might be landing in a crowded market if it finally makes it. Anacetrapib, the CETP inhibitor, could be a gigantic drug, but that mechanism has given every company that's worked on it cause to regret their decision. Merck deserves points for bravery on that one, but bravery (while necessary) is not sufficient.

--Derek Lowe

RELATED ARTICLE: ACQUISITION NEWS

Target: Genfar

Price: Not disclosed; Genfar had sales of $133 million in 2011

Announced: October 2012

What they said: "With this acquisition, Sanofi has a unique opportunity to strengthen its presence in Latin America through a large portfolio of affordable pharmaceuticals in a broad range of markets in the Andean countries and Central America."

--Heraldo Marchezini, senior vice president of Latin America, Sanofi

RELATED ARTICLE: LOWE DOWN

So now that Genzyme's pretty well digested, and now that the nasty patent expirations have hit, what is the Sanofi we see before us? The biggest company on the French stock exchange is still going around telling investors that they're undervaluing their drug portfolio. That's even with the Regneron PCSK9 inhibitor in Phase III, putting Sanofi in good position to be first to market in what could a crowded space (it's been a while since there was a big new mechanism in atherosclerosis). They're still talking about looking around for deals, but then again, so is everyone else, so deals are correspondingly harder to come by and more expensive.

You can tell that they're trying to make the most of what they have already: the company's doing such an aggressive job with the pricing of its current drugs that the European health systems are starting to push back. All this seems to point to a quiet period at the company for the next year or two, while they tend to their own pipeline, cultivate the Genzyme stuff (and the biologic/vaccine portfolio in general), and perhaps do a small acquisition here or there. Genzyme was enough of a meal for any python of this size.

--Derek Lowe

RELATED ARTICLE: OUTSOURCING NEWS

In Reverse-Outsourcing News, Sanofi will serve as the CMO for Transgene's immunotherapy products. The work is expected to begin in 1Q15 at Sanofi/Genzyme's Polyclonals site in Lyon, France. Sanofi will produce clinical and commercial batches and Transgene will be a preferred customer of the commercial manufacturing platform for 15 years. The companies will invest a combined $13 million in a manufacturing suite at the Lyon site.

In March 2013, Sanofi also signed a pact to produce API for a biologic for DBV Technologies. The company will provide scale-up, process validation, and commercial scale supply of Viaskin, a therapeutic protein delivery system.

RELATED ARTICLE: ACQUISITION NEWS

Target: Okairos

Price: $325 million

Announced: May 2013

What they said: "Okairos' technology complements GSK's existing vaccine technology and expertise and will enable GSK to continue its work developing the next generation of vaccines. The deal also includes a small number of early stage assets."

--press statement

RELATED ARTICLE: OUTSOURCING NEWS

GSK didn't make any new major outsourcing announcements in the past year, but it did sign a multiyear extension of its drug development services pact with Aptuit. That deal covers work at Aptuit's Center for Drug Discovery & Development in Verona, Italy, a site that Aptuit bought from GSK in 2010.

GSK also extended its finance and accounting partnership with Genpact for five years. In January 2013, Paul Fry, senior vice president for Finance Services in GSK's Core Business Services, said, "Our continued partnership with Genpact is a key element in our drive to deliver simpler, more efficient and standardized business processes for GSK."

RELATED ARTICLE: SETTLE UP

Shortly after last year's issue went to press, GSK pulled a Michael Corleone and settled a whole lot of accounts. In this case, the company made $3 billion in settlements with the feds and the states (and D.C.) regarding Medicaid fraud, Avandia marketing, and improper sales and marketing of numerous products, including Paxil, Wellbutrin, Lamictal, Zofran, Imitrex, Lotronex, Flovent, Valtrex, and Advair. As part of the settlement, GSK entered into a corporate integrity agreement with the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services. The CIA also covers some of GSK's manufacturing operations, because of the fallout from its former manufacturing site in Cidra, PR.

In smaller-scale nuttiness, GSK fired the head of its China R&D unit, Jiangwu Zang, after learning that a study from his unit published in Nature Medicine contained false data.The study didn't involve patients directly, but did use some blood samples. At press time, there was no word as to whether this was an isolated incident, or if GSK is searching other trials from Mr. Zang and his team for questionable data.

RELATED ARTICLE: LOWE DOWN

All year there have been rumors and rumblings about rearrangements inside GlaxoSmithKline. But looking back, that seems fairly normal. They've had a number of redos in the way that their research departments are set up, each time touted as The Way Things Should Really Be. I'm not sure what they do with all the posters, letterheads, notepads and other stuff that bears the acronyms and logos of the previous systems--if they have a cogeneration plant somewhere, I suppose they could burn it all for fuel.

Some of the big investment firms don't seem particularly keen on the company, and many of its investors seem fixated on the stock's dividend, regarding any growth from new drugs as an unexpected bonus. But that dividend will depend on some new drugs coming along (won't it?), a fact that income investors sometimes seem to lose sight of. GSK has a lot of stuff coming up in front of the FDA, with Breo/Relvar as perhaps the big one. These regulatory hearings will decide GSK's strategy, their dividend ... and maybe (if things don't go so well) another Grand Strategy. Here's hoping for no new slogans and posters.

--Derek Lowe

RELATED ARTICLE: LOWE DOWN

So here's another company trying the Totally New Site gambit, this one in the original Cambridge (UK, that is). At least the construction crews in the New World's Cambridge can dig away without fear of disturbing hordes of Roman silver, although the recent identification of Richard Ill's gravesite does at least take him out of the equation. I recommend caution. Given the way things have been going for AstraZeneca the last few years, I wouldn't rule out someone digging through the roof Beelzebub's living room. Admittedly, Cambridge is not its traditional location, but you never know.

But whatever magic this location (or any location) can work won't be apparent for another several years. In the meantime, AZ is dealing with an absolutely hair-curling string of costly clinical failures and patent expirations, with little prospect of near-term relief. The company is making a lot of deals, up and down its whole development timeline, in the hopes that these will do what it hasn't been able to do for itself. There have been layoffs, initiatives, re-organizations, and consolidations, and there will surely be more. By the time the new site gets opened, what sort of AZ is going to be moving into it?

--Derek Lowe

RELATED ARTICLE: ACQUISITION NEWS

Target: Pearl Therapeutics

Price: $560 million, plus $590 million in milestones

Announced: June 2013

What they said: "Pearl's novel formulation technology, together with its development products and specialist expertise, are a great complement to AstraZeneca's long-established capabilities in respiratory disease, one of our core therapy areas."

--Pascal Soriot, chief executive officer, AZ

Target: Omthera Therapeutics

Price: $443 million, including Contingent Value Rights

Announced: May 2013

What they said: "[Lead compound] Epanova offers real potential both as a distinctive monotherapy for the treatment of hypertriglyceridemia and in combination with Crestor for patients at high risk of adverse cardiovascular events. This is an exciting acquisition that clearly complements our existing portfolio in cardiovascular and metabolic disease, one of our core therapy areas."

--Pascal Soriot

Target: AlphaCore

Price: Not disclosed

Announced: April 2013

What they said: "Cardiovascular disease is projected to remain the single leading cause of death worldwide over the next decade and beyond. Through novel approaches like LCAT, we hope to shift the treatment paradigms in this area to help prevent and treat these conditions."

--Dr. Bahija Jallal, executive vice president, Medlmmune unit of AZ

RELATED ARTICLE: LOWE DOWN

Now that the long-running problems with product recalls, unapproved promotions, and so on have (generally) died down, the underlying strength of J&J's drug business is easier to appreciate. These guys are a behemoth, with a well-spread-out portfolio of products and a lot going on in the clinic, not that they feel to urge to update people very often about much of it. I suspect that there are whole programs that have been born and died in the place without ever being mentioned, the sorts of things that smaller companies would have press-released all over the landscape.

But J&J isn't shy about going out to get things to sell, if need be. There are surely quite a few VPs in there somewhere whose entire jobs consist of keeping track of all the deals that have been made or are in the works. Between the pharma/biologic side of the company and the medical devices and consumer care units, this company is so well-rounded that it looks like some sort of business school case rather than something from the real world. There's bound to be some luck involved in that, but it takes a lot of skill to manage that, too.

--Derek Lowe

RELATED ARTICLE: ACQUISITION NEWS

Target: Aragon Pharmaceuticals

Price: $650 million upfront, and $350 in milestones, plus royalties

Announced: June 2013

What they said: "[This acquisition) further enhances our leadership in prostate cancer drug development.

"--Peter F Lebowitz, M.D., Ph.D., Global Therapeutic Area

Head, Oncology for Janssen R&D

Target: Corimmun

Price: not disclosed

Announced: June 2012

What they said: "COR-1 is an early stage development compound with a novel mechanism for treating heart failure that has the potential to improve heart function by suppressing antibodies that can exacerbate this condition."

--Peter M. DiBattiste, M.D.,

Global Therapeutic Area Head, Cardiovascular

Disease and Metabolism, Janssen R&D

RELATED ARTICLE: OUTSOURCING NEWS

J&J continued to suffer supply constraints for cancer treatment Doxil in 2012, due to problems at its CMO, Ben Venue Labs. Not that money matters compared to the number of cancer patients who had to delay or forego treatment, but Doxil revenues fell from $402 million in 2011 to $83 million last year. The company reported that it had restored full access to the drug in the U.S., by employing an "alternate manufacturing approach" (that is, a second CMO finishing bulk product made by BVL). The FDA approved a generic version of Doxil in February 2013 from Sun Pharma, and has cleared subsequent lots of J&J's bioutsourced Doxil several times in 2013.

RELATED ARTICLE: LOWE DOWN

Oh, do I hate typing AbbVie, but we seem to be stuck with it. And Abbvie itself is stuck with a few things, too: the loss of some big cardiovascular moneymakers (Tricor and Niaspan), leaving more than half its revenues to come from one drug. The good news is that drug is Humira, and since no one still knows what a biosimilar would look like or what will happen if one gets approved, its 2016 patent expiration might not matter so much.

There's a lot of oncology and CNS in the late-stage pipeline, as well as hepatitis C. But that last one looks like a brutally competitive market, and CNS has a notoriously high failure rate, even out through Phase III. So it's too early to say what's going to happen here: a few regulatory successes, and AbbVie will actually be in good shape for a while. A nasty run in the clinic ... well, they still have Humira, and if anything happens to that, things will get very bad indeed. As I've mentioned before this year, there seem to be a lot of investors buying AbbVie stock for its dividend, but drug stocks are not exactly certificates of deposit. They're ... urn, certificates of excitement. That's it.

--Derek Lowe

RELATED ARTICLE: LOWE DOWN

Doom and gloom has been the theme for these notes on Lilly over the past few years, with occasional updrafts all the way up into mere pessimism. And it's hard to make the case for anything different this time. The company's valiant, praiseworthy, and thus far utterly unfulfilling quest to treat Alzheimer's has continued, with its beta-secretase inhibitor dropping out of Phase II before we could even find out if it worked or not. That comes after a valiant and not-so-praiseworthy attempt to persuade the world that its Alzheimer's antibody trials really did work, despite every appearance of having done no such thing.

The company's making strong efforts in oncology and diabetes, but none of these are going to make the upcoming losses of Cymbalta, Humalog, and Evista easy to take. The best case you can make is that things are going to be really nasty for a while until the newer drugs kick in. And the worst case, well ... let's not dwell on that one, OK? But without some headlines within the next year about drugs that actually work in Phase II and Phase III, Lilly and its investors are going to experience it. Thus the focus on Alzheimer's--just one semi-efficacious approved drug there might turn things around. But what are the odds?

--Derek Lowe

RELATED ARTICLE: ACQUISITION NEWS

Target: MicroDose Therapeutx

Price: $40 million upfront, $125 million in milestones

Announced: June 2013

What they said: "The MicroDose [respiratory] platform is both simple and attractive, and their addition will help us to address the unmet needs of the youngest and oldest patients, who have a requirement for a better way of taking the medicines they rely upon."

--Michael Hayden, President, Teva

Global R&D, and chief scientific officer

RELATED ARTICLE: LOWE DOWN

Deal after deal, acquisition after acquisition: that's what made Teva the big generics force it is today. But now that it's the biggest company in that category, management seems to be looking around and wondering why, exactly, they went to all the trouble. The generics business is competitive and cutthroat, with lower margins than those of discovery-based drug companies. It's supposed to have some stability to make up for that, though, and Teva's probably waiting for some of that to kick in any time now. Problem is, a good bit of its (high-margin) money is coming from Copaxone, a compound that it has exclusivity on, and the multiple sclerosis space has become hugely competitive over the last two or three years.

Teva's latest idea is to split the difference between generics and completely new drugs, with something called a New Therapeutic Entity. This would be a reworked version of an existing drug--different enough to sell for more money, but similar enough to have a shorter (and cheaper) path to approval. It all depends on how many opportunities there are in that space, and no one's quite sure yet. And would a compound that's different enough to persuade payers to spend more on it really be similar enough to get an easy regulatory path?

--Derek Lowe

RELATED ARTICLE: BACKUP PLAN

In June 2013, the Obama administration relented and allowed Teva's Plan B One-Step emergency contraceptive to he sold over the counter without age restrictions. The administration has yielded many disappointments since 2009, but it was quite disheartening to see the Obama White House follow the same anti-science agenda of its predecessor. In 2011, the secretary of Health and Human Services, Kathleen Sebelius, overruled an FDA decision to permit the OTC distribution of Plan B One-Step, earning the ire of a federal judge who ordered the decision reversed. The (male) judge wrote that Sec. Sebelius' move "was politically motivated, scientifically unjustified, and contrary to agency precedent."

The FDA had determined that the product was safe and not likely to be abused, but Sec. Sebelius complained that the agency's studies had not determined whether 11-year-old girls would be capable of reading and understanding the Plan B One-Step's instructions. This seems like something to take up with the Department of Education and not the FDA.

Teva will have to file a supplemental application for wider OTC distribution of the emergency contraceptive, which the FDA has promised to approve without delay.

RELATED ARTICLE: LOWE DOWN

Bristol-Myers Squibb managed in the past year to set some kind of dollars-per-unit-time record for deals that didn't work out. Others have blown more cash, but it took them longer. The disastrous foray into a hepatitis C acquisition (Inhibitex) blew up spectacularly within months, but (at least from outside) there doesn't seem to have been much that BMS could have done about it. Like all the rest of us, they have to live and die by the clinical results, which this time came up very bad indeed. They're still in the hunt, though, in what's becoming one of the most competitive markets around.

But that's just one disease area, and this is a big company (albeit lacking consumer care, animal health, and some of the other sidelines of their competitors). Oncology has been a strong point, but Plavix's expiration was just the beginning; BMS is going to have to make up for several more patent expirations and sales-rights agreement changes in the next couple of years. While some other companies look to be cruising along placidly, at BMS they're going to be bailing water, fixing holes in the hull, repainting the railings and running fire drills, all at the same time.

--Derek Lowe

RELATED ARTICLE: ACQUISITION NEWS

Target: Inviragen

Price: $35 million

Announced: May 2013

What they said: "Takeda has taken another major step toward its goal of establishing a world-class global vaccine business by acquiring Inviragen and its advanced vaccine candidate against dengue."

--Rajeev Venkayya, M.D., executive vice president, head of Takeda's Vaccine Business Division

Target: Envoy Therapeutics

Price: $140 million, including upfront and contingent payments

Announced: November 2012

What they said: "Since our initial investment in 2009, it has been clear to us that Envoy's scientific excellence in combination with their vision for the utilization of bac TRAP technology have great potential to create and explore truly innovative targets across multiple therapeutic areas."

--Dr. Paul Chapman, general manager of Pharmaceutical Research Division at Takeda.

Target: LigoCyte Pharmaceuticals

Price: $60 million upfront, plus milestones

Announced: October 2012

What they said: "This acquisition is a major step forward in the expansion of Takeda's vaccine business, and a demonstration of Takeda's dedication to preventing illness in children and adults around the world."

--Dr. Rajeev Venkayya

RELATED ARTICLE: LOWE DOWN

Takeda's move this year to take direct control of Millennium, after a period of hands-off management, doesn't look like the act of a company that's confident about the future. Leaving that site alone was a great idea, they said, and completely the right plan--until it wasn't. But Takeda has been scrambling ever since the expiration of the Actos patent--despite many efforts over the years, nothing ever came along that could make up for that revenue when it finally went away. There seems to be a lot in the late-stage pipeline, but that does not equal revenue, not quite.

Takeda's chief executive officer has been talking about cozying up to academia for new ideas; it's a popular strategy, but not one that has much to point at so far. And the company is also talking about "urgency: which is one of those words I've never been sure about. In the abstract, I can see the point, but in practice, I worry that it just stirs people up to look busy. To get all Zen about it, urgency has to come from within--it doesn't get applied externally, not if you want it to have any long-term efficacy.

--Derek Lowe

RELATED ARTICLE: ACQUISITION NEWS

Target: Steigerwald Arzneimittelwerk

Price: not disclosed

Announced: May 2013

What they said: "This acquisition broadens our product offering for the treatment of gastrointestinal disorders and gives us the opportunity to enhance our presence in Germany, the fast-growing regions of East-Central Europe, and the CIS countries."

--Dr. Marijn Dekkers, chief executive officer, Bayer AG

Target: Conceptus

Price: $1.1 billion

Announced: April 2013

What they said: "Our experience in the field of gynecology combined with our sales and distribution expertise will help to further develop Conceptus" business."

--Andreas Fibig, president, Bayer HealthCare Pharmaceuticals

Target: Teva Animal Health (U.S.)

Price: $60 million, plus $85 million in milestones

Announced: September 2012

What they said: "Teva's animal health business is a great strategic fit that allows us to strengthen and broaden our range of animal care solutions for our customers."

--Dr. Joerg Reinhardt, chief executive officer, Bayer HealthCare
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Date:Jul 1, 2013
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