SSR Index of Drug and Biotech Pipeline Values
We solve for the share price value of research pipelines by subtracting the NPV of approved and near-to-market products from companies’ enterprise values. We then estimate the relative volume and quality of future products in these pipelines using quality-adjusted patent data
By comparing pipeline market values to patent-based estimates of pipeline contents, we identify companies with apparently over- or undervalued pipelines
In November of 2012 we ranked the ten largest (by mcap) drug / biotech companies according to pipeline value. The five companies identified as having undervalued pipelines all outperformed their peers (avg. outperformance 5.7 pct); three of the five companies identified as having overvalued pipelines underperformed peers (avg. underperformance 6.1 pct) (Exhibit 1)
This note updates and expands these indices to the 22 largest (mcap) drug and biotech companies. Our results imply long or overweight positions in BMY and ABBV, and short or underweight positions in PFE and NVS
Separately, we offer two indices of R&D productivity; among the larger companies LLY, NVS, and PFE have been the least productive; BMY, NVO, and ABBV have been the most productive
For our full research notes, please visit our published research site.