Live

Watch CBSN Live

Ranking of 20 Drug Companies Shows Sales Force Effectiveness Reaching Plateau

A ranking of 20 drug companies by sales and marketing productivity shows that 10 companies saw upward trends in effectiveness in Q2 2009. Last quarter, 13 companies had upward trends. The numbers indicate that companies have started to reach a plateau in their efforts to wring more revenues out of their sales and maketing investments.

Gilead remains the most productive company, earning $6.30 for every $1 spent on sales and marketing. Last quarter, Gilead acquired CV Therapeutics, lost a dollar in revenue yield as a result of the cost, but still beat every other company in the table, and still saw an upward overall trend in its efficiency. When the costs of CVT are fully passed through Gilead's books, the question will once again raise itself: Will Gilead ever approach a ceiling in its productivity?

Amgen, at No.2, saw flat perfomance. Over the very long term this company appears to be trending slightly down. The costs of the launch of denosumab -- if it ever comes -- will sorely test this company's ability to benefit from the extra revenues that would produce.

Teva, at No.3, seems to be in a long slow decline as it gets bigger and bigger. It's like a poster child for what happens when nimble outfits turn into corporate behemoths. The fact that Teva isn't benefitting from the leverage of being a leader in the generics business should be a warning to Pfizer and other companies hoping to push into generics. Novartis, another company with a significant generics unit, was also flat. Perhaps the cost-cutting and commodification inherent in the generics business puts a lid on sales effectiveness?

Pfizer fell from No. 5 to No. 10. It was only just flat, and there's an argument to be made that it's actually heading downward over the longer term. The Wyeth acquisition can't happen too soon for this company -- Wyeth, at No. 7, is becoming more efficient over time.

Abbott Labs, up from No. 13 to No. 5, remains the most volatile company in the table. It's a never-ending cycle of boom and bust with this company.

AstraZeneca at No. 16 appears to be treading water while those around it rise. It was at No. 12 last quarter.

The big success story in the table is Bristol-Myers Squibb. It kept its place at No. 6 but that masks a clear long-term rise in efficiency -- a rare thing in big-cap pharma companies. Surely this makes it more of an acquisition target for someone like Sanofi?

20 Drug Companies Ranked by Sales and Marketing Efficiency*

  1. Gilead, 6.30, up
  2. Amgen, 4.08, flat
  3. Teva, 4.06, down
  4. Sanofi, 3.93, up
  5. Abbott, 3.70, up
  6. BMS, 3.65, up
  7. Wyeth, 3.56, up
  8. Merck, 3.41,up
  9. Novo, 3.39, up
  10. Pfizer, 3.28,flat
  11. J&J, 3.18, up
  12. Lilly, 2.99, flat
  13. Novartis, 2.99, flat
  14. GSK, 2.94 down
  15. Schering, 2.86, up
  16. AZ, 2.81, flat
  17. Allergan, 2.56, flat
  18. Sepracor, 2.22, up
  19. Medicis, 1.97, flat
  20. Shire, 1.88, flat
* Source: Companies' quarterly earnings statements Methodology: BNET produced the numbers by dividing a company's revenues by its spending on SG&A, producing a revenue yield per $1 of SG&A. The majority of SG&A costs are sales force and advertising expenses. The yield is a rough guide to how well a drug company martials its marketing resources each quarter. Results were compared to the previous four quarters to identify a trend.