Abbvie became the first big pharma firm to generate more than $1m in sales per employee last year, and has significantly outplayed its peers on this performance ratio since becoming a standalone entity in 2011. Bristol-Myers Squibb, meanwhile, is not far from vaulting the $1m threshold, a notable achievement considering that it has yet to receive a big topline boost from the Celgene business.
A straight combination of the courting couple shows that Bristol-Myers Squelgene would have topped the table last year, suggesting that once job cuts are factored in the company could be leading the big pharma pack in 2020. The utility of the sales-per-employee ratio beyond its use as a ranking tool is debatable, of course, but this analysis provides food for thought for those still questioning the logic of the sector’s most recent megamerger.
The analysis below, based on EvaluatePharma data, was conducted by dividing annual employee numbers by net revenues. The ratio is typically used to compare the relative efficiencies of similar companies.
It should be remembered that big patent expiries dent this ratio – this can be seen from 2011 for Bristol, in the wake of losing billions of dollars in Plavix sales. The US group managed to reverse this decline largely thanks to the success of its immuno-oncology franchise.
The acquisition of Celgene is set to give Bristol another boost, on this metric at least, though of course a wide range of measures are used to assess a company’s productivity. The approaching Revlimid patent expiry means that the immediate benefit of this expensive deal will be relatively short-lived, a major concern for investors.
Astrazeneca provides the opposite story here: it too suffered a big topline blow with the loss of Seroquel in 2011, but failed to drive a recovery in its sales-per-employee ratio, largely because new products have not made up for the loss of its big hitters, which also include Crestor and Nexium.
Astra now ranks as the least productive big pharma group on this metric, and executives must have shifted uncomfortably on news of the sudden departure of Sanofi’s chief executive, Olivier Brandicourt, last week. Both companies have been criticised for failing to restock their pipelines and build new blockbuster brands, and their lowly positions in this analysis are partly a result of this deficiency.
Staff numbers will also influence a company’s potential for efficiency, and when looking at Abbvie and Bristol’s performances it should be remembered that they are the smallest of the big pharma employers.
Sanofi has the third-largest pharma workforce, with more than four times the staff of Bristol; it would not be surprising if the company’s incoming chief exec, Novartis’s Paul Hudson, decides that headcount is a pressing issue. Mr Hudson will join Sanofi on September 1, but the company is already swinging the axe, announcing 466 job cuts in France and Germany yesterday.
Still, Novartis and Johnson & Johnson both employ more people than Sanofi and managed to generate a more impressive sales ratio. At $604,000 per staff member J&J last year beat the big pharma average of $561,000, showing that a larger size is not necessarily correlated with inefficiency.
Astrazeneca, meanwhile, is thoroughly middle table on employee numbers, and on productivity is being bested by companies of all sizes. Merck & Co, for example, has roughly the same number of staff as Astra, but each employee generated almost double the sales last year: $613,000 vs $343,000.
Being little does seem to be an advantage, however. Lilly, the third-smallest employer after Abbvie and Bristol, is the third-most efficient on the sales-per-employee ratio. Further supporting this is the performance of biotech companies: with comparatively tiny workforces generating blockbuster revenues, their sales ratio efficiency is on another scale to big pharma.
Of course it could be argued that Abbvie looks more like a biotech than a big pharma firm, with its relatively small headcount and reliance on one very large biological product. In any case the loss of Humira is looming, and as things stand it is hard to see the company remaining at the top of the table once US biosimilars arrive.