Industry CFOs are driving much of the current strategy of big pharma, which is to push costs of administration and selling down to compensate for low rates of organic growth through new product introductions. This survey of their views is timely and important in gauging the direction of pharma strategy in the next year.
Last week, GE Capital released some of the major findings from the recently conducted GE Capital CFO Survey. The third-quarter 2010 survey covered 530 CFOs of companies with revenues ranging from $50 million to $1 billion, operating across seven major industries: metals, mining, and metals fabrication; food, beverage, and agriculture; general manufacturing; healthcare; retail; technology and business services; and transportation.
According to the survey, healthcare industry CFOs were slightly less optimistic about the state of their own industry compared to CFOs of other industries (mean response of 5.4, compared with a mean for all industries of 5.5) though they were more optimistic than indicated in the January survey (5.1). (Scoring was conducted on a 1-10 scale with 1 being the weakest and 10 being the strongest.)
The healthcare industry continues to have the lowest expectations for industry growth over the next six months. Additionally, less than half (46 percent) of the CFOs indicated revenue growth expectations for the rest of 2010, down significantly from the 70 percent high expressed in the January survey.
The healthcare industry continues to rank last in the category of expected profitability in 2010, and ranks second-to-last (right above retail) in expected capex spend. It is also the only industry not to cite credit market liquidity as its biggest concern for the US economy in 2010, instead citing healthcare reform, followed by the US budget deficit.
More than half (60 percent) of healthcare CFOs expect to see M&A activity within their industry, down slightly from January (67 percent). Healthcare CFOs were much more likely to expect M&A than their non-industry peers, where only 46 percent expect to see M&A in their respective industries. Opportunities to increase efficiencies through industry consolidation was the leading reason cited for M&A, significantly ahead of other factors, with relatively low purchase prices also being cited.