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Industry Analysis
Industry Analysis of Pharmaceuticals in the US
Apostolos Ziovas
Objectives
Concentration and competition intensity
Observations of Revenue Analysis
Let's first look at the pharma industry as a whole. For the US, the pharmaceutical industry is quite dominated by a few large firms whith relative stable market shares amon the years. More than 80% of the market share is dominated by the 4 biggest companies J&J, Merck, AbbVie and Lilly. We observe that J&J has a slight dicrease the last 8 years.
Observations of 4-firm Concetrated Ratio
The 4-firm concentrated ratio, that is, the aggregated % of market shares held by the largest 4 companies, confirms our observations. Throught the years we see that the market is dominated from the 4 big players slightly higher than 80%. It is clearly that is a nearly monopolized market with a few large firms dominating the marketplace but leaving a small crack for smaller companies to squeeze in. The structure is quite stable in the past 5 years. So the barrier of entry is high for the pharmaceutical in the US.
Observations of Operating Income Graph
In addition to market share, profit share graph may also be meaningful as the most profitable companies may not be the largets in revenue. This graph for US pharma shows that J&J has constantly the large share of operating income. On the other hand Merck & Co, while has the 2nd largest portion of market share in terms of revenue, seems to have some fluctuations among the years. Especially for 2023 the Operating Income has been colapsed for Merck. AbbVie has gained the 2nd position regarding Operating income. Lilly seems to increase its operating income the last 2 years.
Observations of Net Income Graph
In addition to the previous graphs, net income share graph may also be meaningful as we see some huge fluctiations for the biggest players. 20217 was a very bad year for most of the companies in terms of net income except AbbVie which managed to retain their portion stable. On the other hand we see J&J makes a sharp dicrease while Lilly seems to be on the negative side. The following years we see a return to normality for all big players. What is worth mentioning is that for 2023 Merch, the 2nd player has lost most of its net income making Zoetis the 4th most valuable player for that specific year.
Conclusions
The US Pharma Industry is quite dominated by a few large companies
The concentration level remains stable among the years about 80% for the 4 largest companies.
The entry barier is high for Pharma Industry in US.
