The math is simple, but managing a company isn’t. That’s the message we gleaned in analyzing productivity at major pharmas and biotech companies. As measured by revenue per employee as reported in 2016, the most recent full-year numbers available, we found a winning formula: Sell a powerhouse medicine with a relatively small pack of people. For Gilead Sciences, that’s its hepatitis C franchise; for Celgene, that’s Revlimid; for Biogen, it’s multiple sclerosis, at least for now.
Easier said than done, of course. Big biotechs are historically good at maintaining high efficiency, but their highly concentrated therapeutic focus and smaller size can become a drawback as breakthrough products age and shrink. Compare that with some less-efficient Big Pharmas that appear farther down on the list, and you can already see the dilemma: to achieve high efficiency, a company needs to go small, but to be risk-resistant, it has to grow its portfolio.
Biopharma companies are constantly evaluating their assets, streamlining operations, looking for ways to control costs and beefing up their options via M&A and licensing, hoping to strike a balance between how big they want to go and how comfortable they feel depending on a few blockbusters.
All of our 10 most productive companies have used these tools in recent years. Gilead got its hep C franchise through its 2011 Pharmasset buyout, and as that business declines, Gilead is now looking to grow in the burgeoning CAR-T business with last year’s Kite Pharma buy. AbbVie shelled out $20.8 billion for Pharmacyclics and its oncology portfolio, especially blockbuster Imbruvica, but it still largely depends on Humira—and some strategic Humira price hikes. Through two restructuring plans after the Schering-Plough merger, Merck & Co. had slashed about 40,900 positions by the end of 2016 and has set forth a new layoff round for 2018. Pfizer has divested its nutrition business to Nestle, spun off Zoetis and is now looking to sell its consumer health business—the fourth largest in the world.
Pfizer is the last to make our list, with an efficiency rating of $0.55 million, but Roche, Takeda and Eli Lilly are trailing closely behind, standing at $0.53 million, $0.52 million and $0.51 million, respectively. Some recent changes could come into play for next time, including Eli Lilly’s 8%, or 3,500, job cuts announced in September aimed at $500 million in annual savings; Merck & Co.’s job cuts in sales; Takeda’s recent R&D transformation that includes swaths of new deals and transferring its drug development and postapproval capabilities to PRA Health Sciences; and, most recently, Teva’s massive cost-cutting program, which includes 14,000 layoffs.