Merck vs Pfizer

Today's Merck is a global healthcare leader working to help the world be well. Merck is known as MSD outside the United States and Canada. Through our prescription medicines, vaccines, biologic therapies, and consumer care and animal health products, we work with customers and operate in more than 140 countries to deliver innovative health solutions. We also demonstrate our commitment to increasing access to healthcare through far-reaching policies, programs and partnerships. For more information, visit www.merck.com and connect with us on Twitter, Facebook and

Eli Lilly & Company (Lilly) was founding in 1876 by Colonel Eli Lilly in Indianapolis, Indiana. A veteran of the United States Civil War and a pharmaceutical chemist by trade, Lilly set out to start a company with three underlying goals. First manufacture high quality pharmaceutical products, second medications would be dispensed by medical staff rather than through a mobile tradeshows which was popular at the time, and finally, Lilly’s medication would be developed using current science data. In 1886, Lilly went on to hire a pharmaceutical chemist which led to Lilly’s esteemed research and development history that they are known for to this very day (Lilly, 2015).

What cost would Merck incur from investing in this unprofitable drug? What Benefits would Merck receive from investing in this unprofitable drug?

Antibiotics have been around since 1928 when Alexander Fleming discovered penicillin. Penicillin was a new drug that could kill bacterial invaders without harming the human body. Chemist Paul Ehrlich called it a “magic bullet”. In his book The Antibiotic Paradox, Dr. Scott Levy says Penicillin earned the accolade “miracle drug” because of “its unique and rapid control

The pharmaceutical market is said to grow at a CAGR of 2.7% from 2011-2016 which will plummet the market to a value of 299.5 US billion dollars by the end of 2016.

Eli Lilly & Company (Lilly) was founding in 1876 by Colonel Eli Lilly in Indianapolis, Indiana. A veteran of the United States Civil War and a pharmaceutical chemist by trade, Lilly set out to start a company with three underlying goals. First manufacture high quality pharmaceutical products, second medications would be dispensed by medical staff rather than through a mobile tradeshows which was popular at the time, and finally, Lilly’s medication would be developed using current science data. In 1886, Lilly went on to hire a pharmaceutical chemist which led to Lilly’s esteemed research and development history that they are known for to this very day (Eli Lilly & Company, 2015).

Therefore, R&D must focus on improvement in output quantity and quality. It must be driven by the most knowledgeable and experienced human resources in organizations. Given the fundamental importance of R&D in the pharmaceutical sector, it is hardly surprising to note that the U.S. drug industry spent between $ 30-40 billion each year in the period 1999-2005 towards funding their respective research operations. Since the early eighties, U. S. industries have always spent between 15-22% of their sales revenues towards R&D activities. Pfizer spends around $6 billion on R&D every year. Successful new drugs (once approved, their manufacturing costs are usually a small fraction of their price) generate a profuse cash flow which can readily recover costs of past R&D ventures as well as finance fresh ones. Alternative sources of investment capital — from the bond and stock markets — are not perfect substitutes for cash-flow financing. Competition is a force that all players of the industry need to contend with and overcome in order to thrive and develop. With easier access to cutting edge knowledge, capital and other production factors, all companies are capable of developing some drugs which meet today’s people’s medicinal demands in the context of lifestyle diseases, neurological disorders and unknown diseases breaking out on a global scale. Generic drug manufacturers have no R&D costs to recover and they eat into the market shares of their major/branded

Pfizer Inc. is a global pharmaceutical company that creates and manufactures products for both humans and animals. Pfizer is headquartered in New York City and employs about 115,000 people.

Merck & Co. is a global leading position pharmaceutical company that is into drug research and production. However Merck suffered market share

Pfizer Consumer Healthcare Introduction Identification & Description of Internal Function Data Collection Approach Company's Supply Chain Management Flow Chart for the process 1 2 3 4 5 The Company: Incorporated in 1849 -Market Leader in Healthcare Industry Reliable Marketing and Sales Netwrok Strong Research and Development depratment for a number of years. Patent protection for products Effective Supply Chain Profitable Organization with growth potential -Earnings Before Tax and Interest (EBIT) $18,684 as of 31st Dec, 2012 $15,755 as of 31st Dec, 2011 $11,212 as of 31st Dec, 2010

Merck was a manufacturer of fine chemicals in Germany, had only a small sales presence in the United States until the First World War. In 1917, the U.S. government seized the stock of all German-held subsidiaries, the Merck family and other investors bought back the company’s stock and incorporated as a U.S. firm with no ties to the German parent. Mergers and acquisitions with other small U.S. chemical firms followed, and scale economies, coupled with necessity, led to a large R&D push at Merck. By the start of World War II, Merck Research Labs (MRL) was the leading pharmaceutical research institution in the United States. Developments in vitamins, antibiotics, hormones made by Merck boosted its profitability and strengthened its position as leading drug researcher and manufacturer. Merck was seen as a science led company which made breakthrough drugs and theses drugs would sell themselves on its own merits. They had a research driven model which was highly successful in the beginning and their profits were at the top most levels in the industry. In the 1990s, operating profit margins as high as 40% were common among leading drug makers. By 2001, price competition and buyer demands exerted pressure on margins, but the return on human pharmaceuticals sales still exceeded 30%, more than double that of the average corporation in the S&P 500 Composite Stock Index. They were successful in attracting top scientific minds into the company to manufacture drugs

In the first year it generated revenues of 67.8$ billion and net income of 8.26$ billion. (philippidis, 2011)Pfizer is the largest player in the pharmaceutical market having the best power in marketing and forming associations. It also posts the highest dividends in the industry. Pfizer faces challenges common to all pharmaceutical companies such as patent expiration and FDA regulation. It is dedicated to applying science and global resources to progress health and well-being at every stage of life. Subsidiary members are Agouron pharmaceuticals, G.D Searle & company, Greenstone, Park- Davis, Wyeth, Pharmacia, Upjohn, Warner &lambert. (control, 2011)

Pfizer is one of the world 's major pharmaceutical companies, and the main one in the US market. Pfizer produces a wide range of pharmaceutical products for various medical sectors, including: cardiology, neurology and oncology. In addition, Pfizer produces basic consumer healthcare products that help consumers with their everyday healthcare issues.

For my financial case study, I chose to delve deeper into the financial records of Pfizer Inc. Their corporate headquarters are located in New York City but their research headquarters are in Groton, Connecticut. Pfizer is a famous pharmaceutical company that produces a number of lifesaving drugs. Pfizer develops and produces medicines and vaccines for a wide range of medical disciplines, including immunology, oncology, cardiology, diabetology/endocrinology, and neurology. Some known drugs are Lipitor, Lyrica, Viagra and Celebrex which have helped Pfizer become so prosperous and to this day, remain one of the largest pharmaceutical companies in the world. Pfizer is broken down into nine different principal operating divisions: Primary Care, Specialty Care, Oncology, Emerging Markets, Established Products, Consumer Healthcare, Nutrition, Animal Health, and Capsugel. Overall, Pfizer as a whole has become a leading corporation in the competitive pharmaceutical industry and the numbers prove it.

Overall in terms of return on investment (R.O.I.), market share, and profitability, Pfizer performed well in 2014. Pfizer generated a 7.01% R.O.I., a 28.3 % return on equity (R.O.E.), and a 12.78% return on assets (R.O.A.). In the last four years shareholders have witnessed their shares more than double totaling: 23, 858, 089 shares. And as a matter of fact, in terms of profitability, Pfizer has generated more revenue than any other pharmaceutical company in the world. Pfizer has a gross profit margin of 81.42%, an operating profit margin of 29.44%, and a net profit margin of 42.65% (CSI Market, 2014).