Sizes and specialisations of pharmas

Companies in the sector fall into groups when looked at in terms of the above criteria and size:

• the biggest pharmaceutical companies have large local sales forces and a wide range of established products,
• “speciality pharma” companies that have a narrower product range and a sales force that concentrates on key product types and regions,
• smaller companies that tend to have strong pipelines but few established products and weak, if any, sales forces.

The last category clearly includes many companies that are essentially still start-ups — even though they may be listed. The major pharmaceutical companies dominate the sector and account for most of its market cap.

So far we have not answered the question of how the smaller companies, or even the speciality pharmas manage to sell their products without the large sales forces of the major pharmas. There are two approaches, one or both may be used depending on the strengths of the particular company and the requirements of a particular product:

• licensing the product out to manufacturers with the sales force,
• relying on a specialised sales force that can reach the right prescribers.

The first of these is fairly obvious. The second reflects the specialisations of the doctors who prescribe drugs. An HRT drug may be usually prescribed by gynaecologists, an ADHD drug by paediatricians. In such cases the sales force needed to reach the prescribers is much smaller than that needed to sell a drug that is prescribed by general practitioners.

Speciality pharma companies tend to focus their R & D on products that can be sold by their sales forces. They will also license in drugs to strengthen the portfolio their sales force has. They will also license out drugs to both big pharma and to other speciality pharma cover gaps in their sales force: for example, a British speciality pharma might have strong sales forces in Europe and the US, but not in Japan, and therefore license out Japanese rights to its products.