Product Tails And Therapeutic Focus

If the cumulative sales profile of any major pharmaceutical company is analysed, it will more or less resemble the curve shown below. This illustrates that about 20% of a company's products contribute about 80% of sales and vice versa, says Carter Edwards Pharma Notes No. 1, the first in a series of articles on the drug industry from Carter Edwards & Partners, a corporate finance firm.

This is one of the reasons many pharmaceutical companies have been such high-margin businesses, notes the article. Having a large turnover from a small number of products is efficient in important micro-economic measures because:

- economies of scale means that purchasing power is maximized;