Name of the Company: Allergan
Business Sector: Pharmaceutical Industry
Operating Geography: Ireland, Europe, Global
About the Company: Allergan plc, is headquartered in Dublin, Ireland. It is a bold, global pharmaceutical company and a leader in a new industry model – Growth Pharma. Allergan focuses on developing, manufacturing and commercializing branded pharmaceuticals, devices and biologic products for patients around the world. The company markets a portfolio of leading brands and best-in-class products for the central nervous system, eye care, medical aesthetics and dermatology, gastroenterology, women's health, urology and anti-infective therapeutic categories.
Revenue: 14570.6 million USD (2016)
Competitive Analysis of allergan
|1. A sound R&D strategy|
2. TEVA agreement
3. Operations in more than 100 countries with sound business strategy
|1. High dependency on suppliers
2. High dependency on regulatory laws in foreign countries as well as in the US
3. Dependency on small number of large wholesalers and distributors as primary customers
|1. Integrating recently acquired businesses to enhance profitability|
2. Improving control over suppliers as well customers
3. Timely development and launches of new products ahead of competitors
|1. Large competitors with deep pockets
2. Company can be subjected to various litigations
3. After market developments
1. A sound R&D strategy: Company devotes heavy funds and resources to R&D of branded products, biosimilars, and proprietary drug delivery technologies. The R&D strategy focuses on application of proprietary drug delivery technology for new product developments in specialty areas, acquisition of various development stage drugs and biosimilars and the development of sustained-release, semi-solid, liquid, oral transmucosal, transdermal, gel, injectable, and other drug delivery technologies and the application of these technologies to proprietary drug forms.
2. TEVA agreement: As a part of TEVA agreement, company received $33.3 billion in cash, net cash acquired by TEVA which included net working capital along with 100.3 million unregistered shares of TEVA which approximated to value of $ 5 billion. It also disinvested one of its part, Anda distribution technologies to TEVA at $ 500 million as it was not much profitable. So along with TEVA Agreement Company has started its realignment operations focussing on the profitable ventures.
3. Operations in more than 100 countries with sound business strategy: The company has sound business strategy which is focussing on three distinct operating segments namely US specialized Therapeutics, US general medicine, and International. Under international strategy, the company has its operations in more than 100 countries in Asia-Pacific, Europe, America, and Middle-East.
1. High Dependency on suppliers: First of all the supplier that the company recognizes has to be approved by Food and Drug Administration (FDA). After that certain raw materials that the company uses for manufacturing of drugs and Active Pharmaceutical Ingredients (API) are available from a limited number of suppliers and sometimes from only a single supplier. So any delay caused from the end of supplier can seriously interrupt the manufacturing operations. The company cannot afford to lose any of its suppliers.
2. Higher dependency on regulatory laws in foreign countries as well as in the US: Entire pharmaceutical industry including Allergan is subjected to complex, extensive regulations by FDA, US Drug Enforcement Association, Occupational Safety and Health Administration. In foreign countries also various similar agencies influence the production, distribution, testing, approval, labeling, and packaging of various products. So changes in laws which are normally made more stringent adversely affect the performance of the company.
3. Dependency on small number of larger wholesalers and distributors as the primary customers: Sale to certain customers accounted for more than 10% of their revenue in each of the last three years. These significant customers have a wide distribution coverage in North America. As a result, small number of big customers control a larger share of market which increases the buyers’ power which eventually is detrimental to the company.
1. Integrating recently acquired businesses to enhance profitability: Recently in 2016 Allergan has acquired Tobira Therapeutics Inc., Vitae Pharmaceuticals Inc., ForSight VISION Inc. The companies if integrated properly regarding culture, alignment of vision, business practices could result into hefty profits for Allergan as the acquisitions are done keeping in mind the business strategy of acquiring the companies which are complementing the business of the company.
2. Improving control over suppliers as well customers: The company currently is not holding a position of power in front of their suppliers as well as buyers because, in both suppliers and buyers case, small number of big players are controlling the markets. The company’s expansion in new international markets brings them the opportunity to find new potential suppliers as well as the buyers which can help the company acquire greater power during negotiations.
3. Timely development and launches of new products ahead of competitors: Pharmaceutical Industry is a highly competitive industry, and a first mover advantage can prove to be immensely beneficial to company’s revenue. Robust R&D strategy provides the company an opportunity to develop and launch new products ahead of competitors. Effective marketing of the product and the brand symbolizing technological innovations will improve the sales of the company’s products.
The unpublished sections of the entire SWOT analysis is available in the 'Complete Report' on purchase.
|1. Adverse effects of regulations enforced by European Union|
2. Reimbursement and Pricing of company’s product under scrutiny during Trump’s administration
3. Healthcare Reform
|1. Challenging and tighter credit conditions
2. Foreign currency fluctuations
|1. Social contract signed to keep price change in check||1. Opportunities due to development of Biotechnology|
|1. Federal Regulations of negotiations between branded and generic products|
2. Internal Revenue service legislation
3. Approvals from FDA and similar such associations
|1. Large environmental liabilities due to company’s operations|
1. Adverse effects of regulations enforced by European Union: EU has imposed regulations where every API imported must comply with the manufacturing standards as regulated by EU. Allergan is a global company where the manufacturers of the API can be in a country where such regulations are not imposed so they may not comply with the EU regulations to some extent or at all. The company additionally can face severe delay and financial expenditure if it wishes to certify the supplier with the standards as set by the EU.
2. Reimbursement and Pricing of company’s product under scrutiny during Trump’s administration: Under President Donald Trump’s administration significant changes are taking place in policies of reimbursement of healthcare products and services covered under the plans that were authorized by the ACA. Increased scrutiny on pricing and reimbursement policies under the present government brings unpredictability.
3. Healthcare Reforms: The demand of the products of Allergan depends largely on the extent and coverage of reimbursement paid by the third-party payers. But recently these third-party payers are challenging the pricing of healthcare products. Also, various reforms in healthcare, development of organizations like the HMOs and the MCOs, government insurers bring unpredictability in determining the future coverage and reimbursement of the products of the company which can adversely affect the price and demand of the company’s products.
1. Challenging and tighter credit conditions: The cost and availability of credit to the partners, manufacturers, suppliers, third-party distributors can decrease due to illiquid credit markets and wider credit spreads. This can adversely affect their capability to buy raw materials and inventory which can further disrupt the operations of the company. Global efforts towards containment of health care costs put additional pressure on pricing and market access.
2. Foreign currency fluctuations: The company has its operations in numerous countries outside US. It has constantly entered into acquisitions, hedging, licensing and borrowing in non-US countries which bring currency exchange rates under consideration. Appreciation of non-US currency against US Dollar can increase the company’s cost of operations in such countries.
1. Social Contract: From September 2016, Allergan has entered into a social contract with the patients which says that the company will limit its price increase only once a year. Also, the price rise will be in single digit percentage which means that after rebates and discounts, price rise will be in low to medium range. In 2016 average price increase for US products was 4.8%.
The unpublished sections of the entire PESTLE / PESTEL analysis is available in the 'Complete Report' on purchase.
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Copyrights and Disclaimer
Allergan SWOT and PESTLE analysis has been conducted by Parth Joshi and reviewed by senior analysts from Barakaat Consulting.