Thinking Smaller Is Big for Big Pharma: Eli Lilly & Co. (LLY), Sanofi SA (ADR) (SNY), Bristol Myers Squibb Co. (BMY)

Let’s assume that this scenario does play out. If it does, which big pharma companies are in best position to thrive? Those already ranking high in terms of other drugs percentage of total revenue have the highest likelihood to do well assuming our underlying premise. However, the number of new drugs in the pipeline will also be key. Let’s examine this angle for our top three companies.

Source: I3 Analytics BioPharma Navigator.

Sanofi held relatively steady in terms of trials initiated until 2012. However, the company had a major push last year. The number of late-stage trials initiated grew significantly compared to the prior two years.

Source: I3 Analytics BioPharma Navigator.

Bristol-Myers Squibb is still well off of its peak from 2009, but the company has generally increased the number of new clinical trials initiated over the past three years. Bristol’s pipeline volume doesn’t look quite as strong as Sanofi’s, but we should also consider that Sanofi is a much larger organization in terms of annual revenue.

Source: I3 Analytics BioPharma Navigator.

The volume of clinical trials initiated by Pfizer has been on a downward slope in recent years. However, look at the high numbers from 2009 at the beginning of this decline. Even with the drop, Pfizer still ties with Sanofi in the number of phase 2 and phase 3 trials initiated in 2012 and exceeds that of Bristol.

These numbers don’t tell us the probability of drugs in these trials ever making it to market. Also, some of these trials are for new indications for current blockbuster drugs. However, in general, higher volumes of drugs in the pipeline should translate to more new drugs eventually approved.

Thinking smaller
We can’t really just look at the volumes of “other” drugs and make predictions of stock performance. However, I would maintain that the quantity of smaller drugs in a pharmaceutical company’s arsenal is and will continue to be an important factor for investors to consider. Diversification works with drug portfolios in the same way it works for stock portfolios.

Big is still beautiful. Companies with multiple blockbuster drugs that are growing sales (and have several years of patent protection) should continue to be the stars of the pharma world. But pharmaceutical companies that also can count on solid revenue coming in from those other drugs that don’t get the limelight should be the best picks for investors. Thinking smaller could be big for big pharma.

The article Thinking Smaller Is Big for Big Pharma originally appeared on Fool.com and is written by Keith Speights.

Fool contributor Keith Speights has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.