Top 20 generics companies by 2014 revenue

Print 17 November 2015
Eric Palmer / FeircePharma

To most of the world, the term "generic" suggests something everyday, common or bland, but to the drug industry generic is anything but bland. It represents a high-volume, low-margin business that is certainly not for sissies.

It calls for scientific and manufacturing skills, a superb sales operation, and fortitude. It comes with risks but also has plenty of rewards. In the U.S., the largest drug market in the world, generic drugs account for 80% of the prescriptions written. According to data from the market intelligence miners at EvaluatePharma, worldwide sales of generic drugs in 2014 were $74.2 billion, up 7% for the year. Of that, the top 20 generics producers collected $61.7 billion, 83.1% of the take.

But the fact is, most of those 20 hold only a fraction of the whole. Only the top two generics companies, Teva Pharmaceuticals ($TEVA) and Novartis ($NVS), which sells generics through its Sandoz operation, hold double-digit shares, 12.2% and 11.5% respectively. Only the top 5 generics companies, which in 2014 also included Mylan ($MYL), Actavis and Sun Pharmaceutical, held a market share above 5%. To dice it another way, those top 5 had 2014 generics sales of $35.2 billion, 47.4% of the worldwide generics sales and 57% of the sales generated by the top 20. You get the picture.

Still, when you look at the tail end of the spectrum, even number 20, Japan-based Nichi-Iko Pharmaceutical, had generics sales of $1.2 billion.

The current year may be remembered for awhile, with a lot of M&A germinating, some of it friendly, some not so friendly. Teva has a $40-plus-billion deal to buy essentially Actavis, the generics business of Allergan ($AGN), which has decided to trade in its generics heritage to concentrate on the branded side of the ledger. That deal will elevate Teva's leading position so that it should be unreachable in size for some time. Meanwhile, Mylan is trying rather awkwardly to pull off a buyout of Perrigo ($PRGO), which Perrigo is working hard to avoid.

It is worth noting that there was some significant M&A action in generics in 2014, like Mylan's $5.7 billion deal to buy Abbott Laboratories' ($ABT) generics business in developed countries and Sun Pharmaceutical's $4 billion takeover of troubled Indian compatriot Ranbaxy Laboratories.

Other notable events in 2014 exemplify some of the challenges of the generics business. High drug prices have become the topic du jour recently, but last year a number of generics players said employees had been subpoenaed by federal prosecutors to give up information on potential collusion on pricing. Impax Laboratories ($IPXL) and Lannett both acknowledged in 2014 that employees in their operations had received DOJ subpoenas seeking info on generic drug pricing.

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