Does R&D Pay? (journal article)


This month we highlight a paper published earlier this year in Drug Discovery Today. The article, “Does R&D Pay?” looks at the effectiveness of different R&D strategies. This is achieved by looking at 10 year historical financial performance of different types of drug firms (big pharma, specialty/ generic, and biotech).

And it leads to some interesting conclusions about where investors might get the best return…

Here’s the article abstract:

Pharmaceutical R&D is notoriously risky, lengthy and costly; moreover, it does not always produce products of blockbuster status. The conventional route of fully discovering, developing and marketing a new chemical entity is followed by the large pharmaceutical companies, whereas other organizations in the pharmaceutical sector – such as generic or specialty companies and biotechnology companies – only operate over portions of the full R&D process. Here, we compare the ten-year financial performance of these three subsectors through their price/earnings ratios and their return on capital metrics to understand which of these strategic alternatives offered the best return to investors.

Drug Discovery Today
Volume 15, Issues 5-6, March 2010, Pages 230-234

The paper was written by David Cavalla, Principal at ATPBio and Director of Numedicus; and Raman Minhas, CEO of ATPBio. ATPBio is a consultancy supporting biotech funding through VC, big pharma investors and partnering.

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