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Winning in the Reset World: GE and Business Performance (Updates)

The last post (Leaders, Leadership & Culture: Crisis, Values and Performance (Updates)) focused on leadership, values and the consequences and, hopefully, it sits in the context of the widespread denial, lack of resilience and danger that recent surveys had id'd for a lot of major businesses. (Denial's Triumph: From Earnings to Business Performance (NOT) [UPDATES]) What a performing business needs is a good grasp on things, a sound value prop, business model and strategy, superb execution across all the key functions and the operating infrastructure (including HR, IT and Mgt Systems) to tie it all together into one cohesive whole. Yesterday we added a bunch of excerpts from the Finance Industry showing where each of those has been and is being violated, almost across the board by the major names. The thing needed above all others however, the sine qua non or "that without which there is not OTHER", is honest, competent leadership with integrity. In the readings below - and you can judge for yourself - what we find is that the recent spate of good earnings reports were mis-representations, fabrications and maneuverings. Worse yet the material impacts of a continuing and accelerating credit crisis were disguised. Now our public leadership is doing all the right things, in fact overall and on a worldwide basis public leadership is actually performing better than private leadership (Re-building On A Rock: Policy, Economy & Values). It's time for private leadership to step up to the plate and do their jobs as well. Some of the companies we've pointed as exemplars of resilient adaptiveness (WMT, HPQ, Tesco, Zara's, MickeyD's) began their re-thinkings years ago by confronting harsh realities and beginning the major changes that are positioning them well. Another such exemplar, and one that is sadly under-rated is GE which just had it's annual shareholders meeting yesterday. We've taken the trouble to listen to the executive presentation, the slides are available for download by clicking here and now, instead of using our own constructs, we're going to use GE's materials to investigate how companies should be responding. Just to put a couple of points on it the markets have been on a tear recently, largely driven by hopes based on the Finance earnings which we now know are grossly mis-represented and mis-interpreted. To put another point on it because of GE's scope it has to deal with the major dimensions of the current crisis and points toward the major themes for the next decades. The accompanying graphic presents a four-quad composite of how they see things and have been performing so far. No denial there !

Performance in the Re-setting World

And no lack of relative out-performance either ! A central theme, IOHO, of Immelt's portion of the speech is that we're under-going a major structural change in the world socionomic environment. A re-setting as he terms it. The question should be for every company what do they see, how are they positioned and what are they doing to re-position themselves. And then how to they plan on delivering against the plans that result from those insights. Frankly, when you look at this next chart, we're not aware of anybody who's doing better, or even close. Their views of the state of world changes is the same we've been hammering on for a while, the five major focal points they're driving against as strategic objective across their businesses are the right ones over several time frames, the business portfolio is well-positioned, individually strong and largely complementary as well as being individually reasonably well-run (with some caveats).  Finally the set of "themes" they have id'd and positioned themselves for are an astute assessment of what's going to be driving the world economy and business performance for years to come. Whether or not GE delivers against them almost every business needs to be responding to them.

Delivering on the Promise

Which is a matter of execution: good management system, reasonable and resource objectives, right product mix and good functional capability. And the promise of delivery, based on this chart, would seem to be pretty good. GE is downsizing GE Capital but more closely linking it to it's core businesses - which is where a real competitive advantage lies. NB: Jack Welch did some good work at GE in his early days but left a real mess for Immelt to clean-up - a lot of the wrong businesses, 50% or better of the profits coming from Finance and Finance being run as independent fiefdom that fell to far in love with financial engineering and not enough with leveraging finance and key industry expertise. Immelt has been major surgery on the divisions thru sales and acquisitions and is using this crisis to do the same on Finance. Long over-due in over opinion.

Theory of the Case: Business X Function X Timeframe

We introduced a framework for analyzing business performance by talking about what we called the "Theory of the Cases" which asks what's the fundamental organizing principle that drives your argument ? Applied to a business and it's performance evaluation that translates into asking for each line of business what are you doing for each component of the blueprint for each timeframe. The previous two sections spoke to immediate and short-term. The question then becomes what is GE, or any business, doing for the long-term ? The general principle is you should be re-investing in the business and focusing on innovation that create new value. This next graphic samples some of the things that GE is doing, though not all. It would appear that in each of it's major lines of business and at the divisional level GE is turning itself into a real forward-looking innovator, whether it's Healthcare, Entertainment, Energy, the Environment or Infrastructure. It's also doing something else almost as important - it's wrapping core product development and innovation with value-adding services while at the same time re-emphasizing manufacturing excellence. Product Development, Manufacturing and Services are three essential competencies that will be at the heart of the new GE and they, unlike many others, appear to be doing the right things.

Two Major Caveats

We will add two/three major caveats however.

1) Key to all of this is actual boots-on-the-ground delivery. After $millions of investment and a three year delay GE Healthcare recently delivered it's new Physicians Practice software to market. And had it described privately to us as the "buggiest software" an expert had seen in nearly 30 years of working in the field. NOT GOOD.

2) Every consultant, vendor, partner or employee we know of has chuckled bitterly in discussing working with GE's over-controlled and numbers-driven corporate culture. They aren't just tough to do business with, they are counter-productive.

3) Despite the demonstratable out-performance relative valuations remain poor because Mr. Market doesn't know how to evaluate GE. Part of that may be a conglomerate discount but IOHO GE is right when it says it's divisions are complementary in fundamental ways. One of course is differences in cycles which help to stabilize the whole enterprise. Another is the cross-leverage between finance and industry expertise. Finally - and this seems to be growing - there are real operational level synergies between some of the divisions. Particularly when economies of scope and scale can be shared.

Because we think we're far from out of the woods with the global economy and the market has major downturns in store GE isn't a buy right now but it's certainly an "Out-perform". Even if valuations stay poor, once the markets turn up for real, then would be the time to buy in. In the meantime GE definitely goes on the watch list. How it does in the long-turn will depend on valuations - which in turn depend on explanations - which in turn relate to corporate culture. If GE can figure out to tell a better story and translate that into cultural change it'll become a real strategic out-performer. In the meantime it's darn well doing much...much better than most in both the crisis, in intermediate positioning and in long-term positioning.

In the readings you'll find excerpts not just on GE but on the Finance mal-reporting and several other businesses. Along with the URL for Immelt's annual meeting presentation audio clip. Which was very much NOT reported on well, if at all, in the business press. We strongly urge you to listen, download the presentation and use it as a blueprint for evaluating any business you're interested in !

UPDATES:

In case we didn't make it entirely clear there's a bunch of readings that illustrate the points we making using GE as our example. The first tranche focused on the Finance Industry who appear to have violated ALL the principles and guidelines of what we think is good business practice on the whole, though with some clear exceptions. The second tranches are selections are readings across a wide swath of industry and business to give you some other examples, to which we've just added excerpts on Ford and the Pharma Industry. Ford's earnings surprised to the upside and they did it by doing it right. The Pharma guys are facing some stiff headwinds partially due to the economy but mostly by ignoring their broken development model for a decade.

The real point here is that this is all easy to say and hard to do but some people are really doing it right - finding value, establishing a clear strategy and executing under good leadership. That'll make the difference between the winner and loosers. And the good news is that it's now clear that fundamental values are seperating the two.

Last Word:

Let me give the last word herein to Seth Godin and a recent post that puts the notion of "walk the talk" in a nutshell:

What you say, what you do and who you are

We no longer care what you say.

We care a great deal about what you do.

If you charge for hand raking but use a leaf blower when the client isn't home
If you sneak into an exercise class because you were on the wait list and it isn't fair cause you never get a bike
If you snicker behind the boss's back
If you don't pay attention in meetings
If you argue with a customer instead of delighting them
If you copy work and pass it off as your own
If you shade the truth a little
If you lobby to preserve the unsustainable status quo
If you network to get, not to give
If you do as little as you can get away with

...then we already know who you are.

Finance Industry: They're Lying

The Banks Are Fibbing (Jubak vidclip) Are bank profits for real? No, Jim Jubak says, because accounting tricks and gimmicks are responsible for many banks' sudden profits. All these do is delay the day of reckoning.

BofA Results Don't Calm Shareholders  Bank of America Corp. posted an unexpectedly high first-quarter profit of $4.2 billion, but the results didn't soothe investors or quiet the calls for a board shake-up, as concerns emerged about the bank's core operations and need for more capital. Another proxy advisory firm on Monday recommended that shareholders withhold their votes for the re-election of Chief Executive Kenneth Lewis as board chairman, citing the "potential conflict" of the dual roles. Egan-Jones Group Ltd. also suggested withholding votes for several other board members at the bank's annual meeting April 29 in Charlotte, N.C., including lead director Temple Sloan, joining three other advisory firms and two activist investors seeking new leadership."We think there should be significant change in Bank of America to get it back on track," said Egan-Jones managing director Sean Egan. The bank's net profit more than tripled from a year earlier, largely due to trading income from Merrill Lynch & Co., which the bank acquired January, and one-time gains. But core banking operations suffered as the bank set aside $13.3 billion for credit losses during the period, up from $8.5 billion in the fourth quarter, and nonperforming assets jumped to 2.65% from 0.9% in the prior year. Credit cards lost $1.7 billion and the mortgage-insurance division lost $498 million despite an uptick in mortgage refinancings. Profits even dropped by half in the bank's bread-and-butter deposits business. Unemployment is still likely to rise, according to the bank, putting more strain on the company's future performance. "Make no doubt about it," Mr. Lewis said, "credit is bad and will eventually get worse before it stabilizes and improves." Concerns about Bank of America's credit performance dragged down the overall stock market Monday and hurt stocks of other banks and credit-card issuers, spoiling a run-up in the financial sector that began earlier this month with first-quarter profits from J.P. Morgan Chase & Co., Goldman Sachs Group Inc. and Citigroup Inc. as well as robust expectations from Wells Fargo & Co. Bank of America closed down $2.58 a share, or 24%, to $8.02, contributing nearly 21 points of the Dow Jones Industrial Average's 289.60-point drop. The stock-market drop also reignited debate about the health of the U.S. banking industry and the fate of larger institutions like Citigroup and BofA, the nation's largest by assets.

Ignore the Rally in Bank Stocks  For the first time in a long while, things are looking up for the banks. Morgan Stanley and Capital One just reported bigger than expected losses. But overall the results have beaten the gloomiest forecasts, and shares have rocketed from last month's desperate lows. Wells Fargo and JP Morgan Chase have doubled. Bank of America and Citigroup have trebled. Many banks are now talking of repaying the government's TARP money. And leaks suggest all the major banks may pass the government's "stress tests" in a couple of weeks. Many are wondering if the crisis is now over. Are happy days here again? And is it too late to get on board? I wish shareholders the best. And maybe this rally in banking stocks will keep going. I have no idea - I never try to foretell short-term moves in the market. But I wouldn't touch banking stocks with a 10-foot pole. If I had any shares I'd be looking to sell. Why? Here are 10 reasons. 1.These stocks are gambles. They are highly leveraged bets on an economic rebound. They will be most vulnerable if the recovery runs out of steam. And the market rally has already run well ahead of any upturn in economic news.2.And you're betting blind. Your cards are all face down. At least with, say, a retailer you have a pretty good idea what the assets actually are and what they might fetch if they had to be sold quickly. With the banks: Good luck. Nobody really understands what they own - least of all the people in charge. 4. Recent earnings reports, while often not as bad as many had feared, should raise more eyebrows. Write-offs are certainly rising. And analysts at SG Securities say, for example, that up to one third of Wells Fargo's first -quarter profits may have come from an accounting change. 7. For the retail banks: It's hard to have much faith in - or respect for - their business model. Too many rely on nickel and diming customers - on everything from overdraft fees, credit card gotchas and low interest paid on deposits. Bankrate says average fees hit a new high last year. This leaves banks wide open to more regulation, better competition, or simple customer revulsion. 8.As for the Wall Street banks: They aren't run for the benefit of the stockholders anyway. They are run for the staff. The threat of a crackdown on pay is going to cause a stampede to new firms. These banks will happily issue new shares, diluting existing stockholders, just to pay off the TARP money so they can get back to handing out fat bonuses.

Stress Tests Flash a Lot More Red  Wall Street wasn't rattled by newly disclosed details of the government's stress tests of 19 large financial institutions, even though the banks could face hundreds of billions of dollars in additional losses. Federal bank regulators are expected on Friday to start sharing preliminary results of stress tests with the banks that have been scrutinized since February. The findings are expected to be made public next week. Wednesday, analysts scrambled to assess the latest implications of the government's criteria after The Wall Street Journal released details of a confidential document that the Federal Reserve gave banks in February. The document provided details about the formulas regulators used to assess loan losses in a worsening economic environment. The criteria the government is using to assess the financial health of the banking industry appear to be roughly in line with standards some analysts and banks already are embedding in their own calculations. Still, based on those assumptions, there is a view banks likely will face hundreds of billions of dollars in additional losses from the recession that is wreaking havoc with mortgages, credit cards, commercial real estate and virtually every other type of loan. Under those assumptions, 13 of the banks undergoing the stress tests could be hit with $240 billion of losses, according to Westwood Capital LLC. "This seems to be a legitimate exercise. You could argue with a percent here or there, but it seems to be a good stress test," said Dan Alpert, managing director of the New York boutique investment bank. One scenario that assumed a 10.3% unemployment rate at the end of 2010 required banks to calculate two-year cumulative losses of 8.5% on mortgage portfolios, 11% on home-equity lines of credit, 8% on commercial and industrial loans, 12% on commercial real-estate loans and 20% on credit-card portfolios. While those figures are worse than today's economic environment, some aren't too far off estimates analysts and banks already have disclosed.

General Business

Immelt Says GE Is Braced for a Storm General Electric Co. Chief Executive Jeffrey Immelt said the company is preparing for a once-in-a-generation "reset" as it tries to weather what he called the worst recession in 80 years. Speaking at GE's annual meeting Wednesday, Mr. Immelt outlined planned changes at the conglomerate, and tried to appease investors disheartened by the company's recent performance The meeting came after a rough year for GE, largely because of growing losses inside its finance unit, which had been providing roughly half of the Fairfield, Conn., firm's profits. GE shares are down 63% in the past year, though they gained 0.9% to close at $11.80 in 4 p.m. trading Wednesday. Many of the roughly 600 attending shareholders were upset about GE's plan to cut its dividend by 68% for the second half of the year, to 10 cents per quarter. The dividend cut, announced earlier this year, is the company's first since the Great Depression. Other shareholders questioned executive compensation, bonuses and management decisions. Such concerns appeared to boost support for a shareholder proposal asking GE to give investors an annual advisory vote on executive compensation. The measure got support from 43.1% of shares voted, up from 38% for a similar proposal last year.Mr. Immelt said the finance arm, GE Capital, will shrink to concentrate on more profitable sectors that are better connected to other GE businesses. He said the financial services industry would be changed dramatically by the crisis, emerging with fewer competitors and more regulation. Mr. Immelt said GE's $120 billion order backlog and large service businesses would help the company get through the recession. But he said GE would also invest in businesses and products to help drive future growth, such as renewable energy and improving health care. "It's the way to grow in a slow growth world," he said. In an interview, John Krenicki, GE's top energy executive, touted two such innovations: solar energy and technology for "smart grids" that make electricity networks more efficient. He predicted that GE would generate $4 billion per year annually from smart grids in about four years, and about $1 billion annually from its solar unit.

UPS Profit Takes a 56% Tumble United Parcel Service Inc. posted a 56% drop in its first-quarter profit as volume continued to slump. The diversified transportation company also projected earnings below Wall Street expectations for the second quarter, but didn't provide a much-anticipated outlook on freight volume. UPS moves everything from documents to building materials, and is considered barometer for the state of the U.S. economy. Chief Financial Officer Kurt Kuehn said an economic recovery might begin late this year but more likely wouldn't start until next year. He added the company has found $300 million in additional cost cuts to help it offset the effects of the recession. In recent months, virtually every industry linked to freight movement, from rails to trucks to ports, has experienced steep traffic declines. UPS said it expects second-quarter earnings of 45 cents to 55 cents a share. Analysts polled by Thomson Reuters projected 65 cents a share.A slide in volumes for the UPS's premium domestic next-day-air service showed signs of improvement in the first quarter, although much of it stemmed from the exit of rival Deutsche Post AG's DHL unit from the U.S. market. The average daily domestic volume in the next-day air service was off 0.7% in the first quarter, after sliding 8.6% in the fourth quarter and 7.1% in 2008 overall. However, the average revenue per package from the premium domestic service slumped nearly 14%, compared to a 1.1% increase in the fourth quarter. The company attributed the first-quarter pricing trend in next-day-air to lower shipping weights as customers pared back package sizes amid the weak economy, as well as to reduced fuel surcharges due to lower fuel costs. In the international packages division, revenue dropped 19% as average daily volume fell 1%, and operating profit slumped 30%.

The World's Best Retailer THIS MAY BE AN OPPORTUNE time to add shares of Amazon.com to your shopping cart and proceed to checkout. The stock makes sense because the retailer itself makes sense to smart shoppers. They don't waste valuable gas fighting for a parking space in a massive mall parking lot; they find prices that compete with Wal-Mart's and flirt with the Web's biggest bargains; and they can easily peruse a vast array of merchandise -- ranging from gigantic TVs to Elmore Leonard novels to disposable razors. What's more, their purchases tend to get delivered as promised. The many benefits of the e-tailer's business model are even more apparent in tough times. Amazon's highly automated and centralized operations run at a lower cost than those of traditional retailers, allowing the Seattle company to pass on significant savings to its customers. Rather than truck merchandise to thousands of stores from myriad distribution centers, Amazon picks and packs its items from computerized warehouses where they are shipped direct to a customer's house, just the way founder Jeff Bezos envisioned. No stores means fewer layers of expense for real estate, employees, inventory and utilities. While traditional outfits like Circuit City and Linens 'N Things have gone belly up, and speculation mounts about the staying power of household names like Sears (ticker: SHLD), among many others, Amazon.com (AMZN) had a strong Christmas season and free cash flow that rose 16% for 2008.

J.C. Penney Lifts Outlook Again J.C. Penney Co. raised its forecast of financial results for the fiscal first quarter for the second time in two weeks, joining a chorus of companies reporting that the free fall in sales that began last fall appears to be over. At an analysts conference in New York Wednesday, Penney Chief Executive Myron "Mike" Ullman III said he is seeing a "more predictable trend" across the retailer's businesses after watching the chain's customers spend less and profits slide in recent months. His comments come amid a growing debate over whether the global recession is over. Several major companies predicted this week that the economy is approaching a bottom, but others say it is still too soon to tell. Coach Inc., known for its "affordable luxury" accessories, said Tuesday that sales at its North American stores have returned to pre-Christmas levels. French luxury conglomerate Moët Hennessy Louis Vuitton SA said Wednesday that its revenues were up 0.4% for the first quarter, with sales at its fashion and leather-goods business rising 11% globally. Penney said it now expects flat to slightly higher earnings per share in the first quarter ending April 30, an improvement from a previously expected loss of 5 cents to 10 cents a share. Last year, the Plano, Texas-based company earned 54 cents a share in the first quarter.Penney has revised its first-quarter guidance once before. In February, the company forecast a first-quarter loss of between 20 cents and 30 cents a share. It is scheduled to announce first-quarter earnings May 15. Ken Hicks, president and chief merchandising officer, said Penney's long-suffering home-products business, which accounts for about 20% of its revenue, "has stabilized," but he warmed that he "wouldn't declare victory" yet. Indeed, Mr. Ullman said the more predictable trend the company is seeing is "not one we like," because sales levels are lower than they were before the recession. But he called it "good news for people who sell things that people want" because it offers an opportunity to grab market share. Mr. Ullman told analysts the retailer is still showing restraint in opening new stores and is planning fewer than five of them this year. The company is also working to "clarify" its pricing in stores, to make extra discounting clearer and appeal to value-conscious consumers. Peter McGrath, executive vice president and director of sourcing, said the retailer expects further price declines in negotiations with suppliers for fall 2010. He noted that pricing fell 2% to 3% in spring 2009 and another 5% to 6% for fall 2009.

China Takes On the Global Car Business  According to Reuters, the chief of China's large Chongqing Changan Auto Co. is prepared to take a vulture-fund approach to buying assets. He said, "The longer the crisis lasts, the bigger the chance of failure or a scale-down of some American and European automakers." It is a brutal but honest assessment of the industry, and a clear and public sign that China believe that "money talks." China can afford to be in any business for the long haul if it is convinced that it is in its national interest. That cannot be said about any other nation in the world, especially the United States. The American government is putting its money to work trying to save the financial system and millions of jobs. Japanese companies were able to aggressively move into the U.S. and European car markets in the 1970s and 1980s to a large extent because of their low labor costs. The Japanese auto firms created brands, instead of acquiring them. Toyota (TM) and Honda (HMC) developed reputations for quality and service that often eclipsed those of their competition in the West. China plans to compress the decades that Japanese companies needed to build large branded auto firms. It plans to complete the process in a year or two by simply acquiring existing, well-known brands. There is no reason that a Chinese car firm cannot use government money to bid for Chrysler's assets if it is forced into bankruptcy. In France, Citroen and Peugeot are facing financial problems that could get much worse if car sales remain anemic. GM's (GM) Opel unit in Europe needs immediate capital and may be sold at a loss for the No.1 U.S. car company. The Chinese could pick up brands, manufacturing assets, product-development personnel and dealer networks on both sides of the Atlantic. The only hurdle that stands in the way of China's interest in buying car-company assets in the West is the potential desire of governments in the U.S. and E.U. to block buyouts.

Ford posts $1.4 billion loss, burns less cash Ford Motor Co. reported a first-quarter loss of $1.4 billion Friday and said it used less of its cash, emphasizing that it doesn't expect to seek any of the government assistance that is keeping the rest of the Detroit Three alive.The second-largest U.S. automaker said it spent $3.7 billion more than it took in during the first three months of the year, far less than the $7.2 billion it spent in the fourth quarter of 2008. Chief Financial Officer Lewis Booth said the company is confident that it will slow the drain on its cash even further this year, and he said Ford will make it through 2009 without needing government aid. He would not speculate, however, about 2010. "This is a very, very difficult environment," Booth said. "We're comfortable we'll get through this year."While General Motors Corp. and Chrysler LLC have accepted $17.4 billion in federal aid and are racing toward deadlines to make deep cuts or file for bankruptcy, Ford was the first U.S. automaker to modify its contract with the United Auto Workers union and strike a deal to make up to 50 percent of payments to a union-run health care trust in stock instead of cash. The company also completed tender offers to reduce its debt by more than one-third. The company said the moves would result in annual savings of $1 billion. Ford said it remains on track to break even or post a profit on a pre-tax basis in 2011. One day after GM said it would temporarily close 13 North American plants for up to 11 weeks this summer to slash production, Ford said it has increased its second-quarter production forecast to 902,000 units, up 19.5 percent from the first quarter. North American production is expected to rise 25 percent to 435,000 vehicles.The increase is due to seasonal adjustments and because of first-quarter production cuts to reduce dealer inventory. Ford shut down 10 North American assembly plants for an extra week in January to deal with the auto sales slump.

Ford's Mulally: 'We Are Turning The Tide' Seldom has a loss of almost $2 Billion ever looked so good. Then again, when you are Ford and you continually turn in better than expected results, losing a couple billion is further proof business is turning around. It's the reason shares of Ford are surging. Somewhere, someone who bought Ford stock last November at it's low of $1.01 is celebrating their faith, and investment in this auto maker. Ford CEO Alan Mulally was understandably upbeat when he told me this morning, "We are turning the tide in North America." Things have improved so much in the U.S. Mulally says the company will increase auto production by 25% in the second quarter. Compare that to GM (shutting 15 plants for up to 9 weeks) and Chrysler (preparing for a possible bankruptcy filing next week) and you see why folks are so upbeat at Ford. The key to Fords improving results has been its ability to cut costs and slow down the rate at which it burns through cash. The operating cash flow was down $3.7 Billion, but that is a huge improvement than the second half of last year.

U.S. Drug Market Faces Down Year  In an ominous sign for drug makers, an influential research firm expects the U.S. pharmaceutical market to contract this year for the first time in more than 50 years because of the deterioration of the economy. IMS Health Inc., Norwalk, Conn., reduced its world-wide forecast of pharmaceutical sales this year by 8.5% from its outlook six months ago. People have curtailed visits to doctors" offices, and fewer are starting new therapies for chronic conditions such as diabetes, hypertension, insomnia and depression, according to Murray Aitken, senior vice president of health-care insight at IMS. Increased use of cheaper, generic drugs also has softened overall sales growth. Signs of pharmaceutical sales weakness were evident in first-quarter financial reports issued in the past week by a host of major drug makers. The trends should force drug makers to make significant changes, Mr. Aitken told reporters on a conference call, including expanding into emerging markets and raising the bar for developing new drugs. "It's much more difficult now if you are not a very innovative product with a very strong clinical profile to be launching into a therapy area where leading generics are available, and expect to get a first-line position," he said. IMS sees 2009 global pharmaceutical sales of more than $750 billion, down from the more than $820 billion the company had predicted in October. With currency fluctuations stripped out, the new forecast implies market growth of 2.5% to 3.5% for 2009, down from a prior forecast of 4.5% to 5.5%. In the U.S., the biggest market for prescription drugs, IMS sees pharmaceutical sales declining by 1% to 2% to between $280 billion and $290 billion in 2009, which would be the first contraction in the 52 years that IMS has been tracking the market. IMS previously predicted slight U.S. market growth for 2009. A potential economic recovery and changes in U.S. health-care policies could help bolster demand for pharmaceuticals after this year. But mitigating growth will be another wave of patent expirations for blockbuster brands in 2011 and 2012, including Pfizer Inc.'s Lipitor cholesterol drug and the Plavix anti-clotting drug from Sanofi-Aventis and Bristol-Myers Squibb Co. IMS sees a global compound annual growth rate of 3% to 6% through 2013. But in the U.S., the overall five-year growth rate will be essentially flat, IMS said. In other major markets -- Japan, France, Germany, Italy, the U.K., Spain and Canada -- IMS sees average annual pharmaceutical sales growth of 1% to 4%.

Posted by dblwyo on April 23, 2009 11:56 AM |

Comments

Well said.
~~~
thanks

Posted by: Zoe | April 24, 2009 07:22 AM

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