Abstract
Recently, biotech companies are increasingly attracting the attention from investors. From 2016, of the top 10 performers in the NASDAQ-100 (index consisting of 100 largest non-financial companies listed on NASDAQ), six were biotech. However, the reasons behind their success, or the actions that lead them to be successful, are still ambiguous. This chapter aims to give insights into the critical success factors in the biotech industry by analyzing the strategic and market data of the 10 biotech companies included in Nasdaq-100. Thus, the enterprise value (EV) of companies from 2002 to 2016 was considered to identify fluctuations that can be associated with key indicators such as R&D expenditure, corporate deals, patent portfolio, pipelines, and additional indicators. Our results give an overview of the main critical success factors and strategic actions, in a temporal manner, which the top-valued biotech firms fall into. The factors of highest importance included constant and high investment on R&D, intense transactions related to mergers and acquisitions for big biotech companies, and a favorable regulatory environment for drug approvals. Additional relevant factors involve the company’s focus and a proper management of their innovations. This chapter opens a new perspective by understanding the consolidated critical factors among the top US biotech companies, indicating what they are dependent on to steer them to failure or success.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
A. H. CFA. Enterprise Value (EV), Investopedia, 18-Nov-2003. [Online]. Available: https://www.investopedia.com/terms/e/enterprisevalue.asp. Accessed 23 Jan 2018.
Awards & Recognition, Celgene, 26 Apr 2016. [Online]. Available: http://www.celgene.com/about/awards-recognition/. Accessed 16 Jan 2018.
Bilello, J. A. (2005). The agony and ecstasy of ‘OMIC’ technologies in drug development. Current Molecular Medicine, 5(1), 39–52.
Biotech blastoff: Synageva up 112% on $8B Alexion deal, USA TODAY. [Online]. Available: https://www.usatoday.com/story/money/business/2015/05/06/alexion-synageva/70909976/. Accessed 26 Jan 2018.
Campbell, T. Is this Gilead sciences’ biggest mistake in 2016?, The Motley Fool, 16-Dec-2016. [Online]. Available: https://www.fool.com/investing/2016/12/16/is-this-gilead-sciences-biggest-mistake-in-2016.aspx. Accessed 26 Jan 2018.
Carlson, R. (2016). Estimating the biotech sector’s contribution to the US economy. Nature Publishing Group, 34(3), 247–255.
Celgene swings back to profits in 1st qtr, The Pharma Letter, 05 Apr 2009. [Online]. Available: https://www.thepharmaletter.com/article/celgene-swings-back-to-profit-in-1st-qtr. Accessed 15 Jan 2018.
Celgene to buy Abraxis BioScience for $2.9 billion, Reuters, 30 Jun 2010.
Chandra, T. (2017a). Biotech bonanza: Biotech stocks to keep shining in 2018, Seeking Alpha.
Chandra, T. (2017b). Biotech: Opportunity ahead!, Seeking Alpha.
Chullen, A., Kaltenbrunner, H., & Schwetzler, B. (2015). Does consistency improve accuracy in multiple—based valuation? Journal of Business Economics, 85(6), 635–662.
Clarivate Analytics. (2018). Derwent innovation. [Online]. Available: https://clarivate.com/products/derwent-innovation/. Accessed 16 Jan 2018.
DiMasi, J. A., Grabowski, H. G., & Hansen, R. W. (2016). Innovation in the pharmaceutical industry: New estimates of R&D costs. Journal of Health Economics, 47, 20–33.
Egan, M. (2015). Stockswatch: Hillary Clinton tweet crushes biotech stocks, CNN Money.
Erden, Z., Klang, D., Sydler, R., & von Krogh, G. (2015). ‘How can we signal the value of our knowledge?’ Knowledge-based reputation and its impact on firm performance in science-based industries. Long Range Planning, 48(4), 252–264.
Ernst & Young. (2016). “Beyond borders: Returning to Earth,” Biotechnoogy Reports Beyond. pp. 1–86.
Evens, R. P. (2016). Pharma success in product development—does biotechnology change the paradigm in product development and attrition. The AAPS Journal, 18(1), 281–285.
Evens, R. P., & Kaitin, K. I. (2014). The biotechnology innovation machine: A source of intelligent biopharmaceuticals for the pharma industry—mapping biotechnology’s success. Clinical Pharmacology and Therapeutics, 95(5), 528–532.
Grand View Research. (2017). Biotechnology market analysis by application (health, food & agriculture, natural resources & environment, industrial processing bioinformatics), by technology, and segment forecasts, 2014–2025, San Francisco.
Haeussler, C., Patzelt, H., & Zahra, S. A. (2012). Strategic alliances and product development in high technology new firms: The moderating effect of technological capabilities. Journal of Business Venturing, 27(2), 217–233.
Harlin, M. B., & O’Connor, K. A. (2008). Leveraging your biotech intellectual property. Nature Biotechnology, 26(6), 607–609.
How a pharmaceutical firm priced its life-saving drug at $500K a year, CBC News. [Online]. Available: http://www.cbc.ca/news/health/how-pharmaceutical-company-alexion-set-the-price-of-the-world-s-most-expensive-drug-1.3125251. Accessed 26 Jan 2018.
Investopedia. Using enterprise value to compare companies, Forbes. [Online]. Available: https://www.forbes.com/sites/investopedia/2012/11/15/using-enterprise-value-to-compare-companies/. Accessed 23 Jan 2018.
Keating, G. M. (2015). Ledipasvir/Sofosbuvir: A review of its use in chronic hepatitis C. Drugs, 75(6), 675–685.
King, M. R., & Segal, D. (2008). Market segmentation and equity valuation: Comparing Canada and the United States. Journal of International Financial Markets Institutions and Money, 18(3), 245–258.
MacDiarmid, J., Tholana, T., & Musingwini, C. (2018). Analysis of key value drivers for major mining companies for the period 2006–2015. Resources Policy, 56, 16–30.
Mariani, G., Carlesi, A., & Scarfò, A. A. (2018). Academic spinoffs as a value driver for intellectual capital: The case of the University of Pisa. Journal of Intellectual Capital, 19(1), 202–226.
Misra, M. (2012). Biosimilars: Current perspectives and future implications. Indian Journal of Pharmacology, 44(1), 12.
Moorkens, E., Meuwissen, N., Huys, I., Declerck, P., Vulto, A. G., & Simoens, S. (2017). The market of biopharmaceutical medicines: A snapshot of a diverse industrial landscape. Frontiers in Pharmacology, 8(JUN), 314.
Morgan, S., Grootendorst, P., Lexchin, J., Cunningham, C., & Greyson, D. (2011). The cost of drug development: A systematic review. Health Policy, 100(1), 4–17.
Moyer, C. & Efram, S. (2017). NASDAQ index research: Biotec is booming - Nasdaq’s Biotech index shows impressive performace, Nasdaq Global Information Services, [Online]. Available: http://business.nasdaq.com/marketinsite/2017/Nasdaq-Index-Research-Biotech-is-Booming.html. Accessed 11 Dec 2017.
Nasdaq. (2016a). In: “Nasdaq 100 – Nasdaq.com,” nasdaq.com. [Online]. Available: http://www.nasdaq.com/markets/indices/nasdaq-100.aspx. Accessed 21 Nov 2016.
Nasdaq. (2016b). In: Biotech leading the NASDAQ-100 index performance, Nasdaq. [Online]. Available: http://business.nasdaq.com/marketinsite/2016/biotech-leading-the-Nasdaq-100-index-performance.html. Accessed 12 Jan 2016.
Njowa, G., & Musingwini, C. (2018). A framework for interfacing mineral asset valuation and financial reporting. Resources Policy, 56, 3–15.
PhRMA. (2013). Medicines in development: Biologics, Washington, DC.
Quintana-García, C., & Benavides-Velasco, C. A. (2016). Gender diversity in top management teams and innovation capabilities: The initial public offerings of biotechnology firms. Long Range Planning, 49(4), 507–518.
Rader, R. A. (2008). (Re)defining biopharmaceutical. Nature Biotechnology, 26(7), 743–751.
Regalado, A. EmTech: Record number of genomes sequenced in 2014, MIT Technology Review. [Online]. Available: https://www.technologyreview.com/s/531091/emtech-illumina-says-228000-human-genomes-will-be-sequenced-this-year/. Accessed 26 Jan 2018.
Ribal, J., Blasco, A., & Segura, B. (2010). Estimation of valuation multiples of Spanish unlisted food companies. Spanish Journal of Agricultural Research, 8(3), 547–558.
Roijakkers, N., & Hagedoorn, J. (2006). Inter-firm R&D partnering in pharmaceutical biotechnology since 1975: Trends, patterns, and networks. Research Policy, 35(3), 431–446.
Russo, G. (2008). Prospects: The ongoing financial crisis will affect the biotechnology sector — but the sector’s used to it. Nature, 455(7217), 1273–1273.
Sareewiwatthana, P., & Janin, P. (2017). Tests of quantitative investing strategies of famous investors: Case of Thailand. Investment Management and Financial Innovations, 14, 218–226.
Spence, P. & Giovannetti, G. T. (2017). Biotechnology report 2017 – beyond borders – staying the course.
Thomson Reuters. (2018). Thomson Reuters EIKON. [Online]. Available: financial.thomsonreuters.com/Thomson/Eikon%0A. Accessed 16 Jan 2018.
U.S. FDA declines to approve Eli Lilly and Incyte arthritis drug Olumi, Reuters, 17 Apr 2017.
Wagner, S., & Cockburn, I. (2010). Patents and the survival of Internet-related IPOs. Research Policy, 39(2), 214–228.
Walsh, G. (2014). Biopharmaceutical benchmarks 2014. Nature Biotechnology, 32(10), 992–1000.
Williams, S. The 3 underlying reasons Why Gilead Sciences, Inc. Could remain wildly successful,” The Motley Fool, 03 Jan 2015. [Online]. Available: https://www.fool.com/investing/general/2015/01/03/the-3-underlying-reasons-why-gilead-sciences-could.aspx. Accessed 26 Jan 2018.
Xconomy: Acetylon crafts new buyout deal with Celgene, spins out startup regenacy,” Xconomy, 02 Dec 2016. [Online]. Available: https://www.xconomy.com/boston/2016/12/02/acetylon-crafts-new-buyout-deal-with-celgene-spins-out-startup-regenacy/. Accessed 19 Jan 2018.
Z. I. Research. Alexion seeks label expansion, Zacks Investment Research. [Online]. Available: https://www.zacks.com/stock/news/50969/alexion-seeks-label-expansion. Accessed 26 Jan 2018.
Acknowledgments
This research was partially funded by São Paulo Research Foundation (FAPESP) grant number 2014/22500-8 and by Coordination for the Improvement of Higher Education Personnel (CAPES) grant number BEX13297/13-9.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2021 Springer Nature Switzerland AG
About this chapter
Cite this chapter
Pereira, C.G., Lavoie, J.R., Shaygan, A., Daim, T.U., Luqueze, M.A.O., Porto, G.S. (2021). Technology Intelligence Map: Biotechnology. In: Daim, T.U. (eds) Roadmapping Future. Applied Innovation and Technology Management. Springer, Cham. https://doi.org/10.1007/978-3-030-50502-8_17
Download citation
DOI: https://doi.org/10.1007/978-3-030-50502-8_17
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-030-50501-1
Online ISBN: 978-3-030-50502-8
eBook Packages: Business and ManagementBusiness and Management (R0)