IDEAS home Printed from https://ideas.repec.org/a/plo/pone00/0243813.html
   My bibliography  Save this article

Comparing long-term value creation after biotech and non-biotech IPOs, 1997–2016

Author

Listed:
  • Ekaterina Galkina Cleary
  • Laura M McNamee
  • Skyler de Boer
  • Jeremy Holden
  • Liam Fitzgerald
  • Fred D Ledley

Abstract

We compared the financial performance of 319 BIOTECH companies focused on developing therapeutics with IPOs from 1997–2016, to that of paired, non-biotech CONTROL companies with concurrent IPO dates. BIOTECH companies had a distinctly different financial structure with high R&D expense, little revenue, and negative profits (losses), but a similar duration of listing on public markets and frequency of acquisitions. Through 2016, BIOTECH and CONTROL companies had equivalent growth in market cap and shareholder value (>$100 billion), but BIOTECH companies had lower net value creation ($93 billion vs $411 billion). Both cohorts exhibited a high-risk/high reward pattern of return, with the majority losing value, but many achieving growth multiples. While investments in biotechnology are often considered to be distinctively risky, we conclude that value creation by biotech companies after IPO resembles that of non-biotech companies at a similar stage and does not present a disproportionate investment risk.

Suggested Citation

  • Ekaterina Galkina Cleary & Laura M McNamee & Skyler de Boer & Jeremy Holden & Liam Fitzgerald & Fred D Ledley, 2021. "Comparing long-term value creation after biotech and non-biotech IPOs, 1997–2016," PLOS ONE, Public Library of Science, vol. 16(1), pages 1-13, January.
    • Handle: RePEc:plo:pone00:0243813
    DOI: 10.1371/journal.pone.0243813
    as

    Download full text from publisher

    File URL: https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0243813
    Download Restriction: no
    File URL: https://journals.plos.org/plosone/article/file?id=10.1371/journal.pone.0243813&type=printable
    Download Restriction: no
    File URL: https://libkey.io/10.1371/journal.pone.0243813?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. DiMasi, Joseph A. & Grabowski, Henry G. & Hansen, Ronald W., 2016. "Innovation in the pharmaceutical industry: New estimates of R&D costs," Journal of Health Economics, Elsevier, vol. 47(C), pages 20-33.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dosis, Anastasios & Muthoo, Abhinay, 2019. "Experimentation in Dynamic R&D Competition," CRETA Online Discussion Paper Series 52, Centre for Research in Economic Theory and its Applications CRETA.
    2. Yusuke Oh & Koji Takahashi, 2020. "R&D and Innovation: Evidence from Patent Data," Bank of Japan Working Paper Series 20-E-7, Bank of Japan.
    3. Gamba, Simona & Magazzini, Laura & Pertile, Paolo, 2021. "R&D and market size: Who benefits from orphan drug legislation?," Journal of Health Economics, Elsevier, vol. 80(C).
    4. Branstetter, Lee & Chatterjee, Chirantan & Higgins, Matthew J., 2022. "Generic competition and the incentives for early-stage pharmaceutical innovation," Research Policy, Elsevier, vol. 51(10).
    5. Alfred B. Ordman, 2022. "When Will the FDA Do What Is in People’s Best Interests?," American Journal of Economics and Sociology, Wiley Blackwell, vol. 81(4), pages 721-751, September.
    6. Edouard Debonneuil & Anne Eyraud-Loisel & Frédéric Planchet, 2018. "Can Pension Funds Partially Manage Longevity Risk by Investing in a Longevity Megafund?," Risks, MDPI, vol. 6(3), pages 1-27, July.
    7. Billette de Villemeur, Etienne & Versaevel, Bruno, 2019. "One lab, two firms, many possibilities: On R&D outsourcing in the biopharmaceutical industry," Journal of Health Economics, Elsevier, vol. 65(C), pages 260-283.
    8. Fabian Gaessler & Stefan Wagner, 2022. "Patents, Data Exclusivity, and the Development of New Drugs," The Review of Economics and Statistics, MIT Press, vol. 104(3), pages 571-586, May.
    9. Gregor Dorfleitner & Felix Rößle, 2018. "The financial performance of the health care industry: a global, regional and industry specific empirical investigation," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 19(4), pages 585-594, May.
    10. Farasat A. S. Bokhari & Franco Mariuzzo & Anna Rita Bennato, 2021. "Innovation and growth in the UK pharmaceuticals: the case of product and marketing introductions," Small Business Economics, Springer, vol. 57(1), pages 603-634, June.
    11. Stig Johan Wiklund, 2019. "A modelling framework for improved design and decision-making in drug development," PLOS ONE, Public Library of Science, vol. 14(8), pages 1-22, August.
    12. Yin, Nina, 2023. "Pharmaceuticals, incremental innovation and market exclusivity," International Journal of Industrial Organization, Elsevier, vol. 87(C).
    13. Heyoung Yang & Hyuck Jai Lee, 2018. "Long-Term Collaboration Network Based on ClinicalTrials.gov Database in the Pharmaceutical Industry," Sustainability, MDPI, vol. 10(2), pages 1-14, January.
    14. Ralph Siebert & Zhili Tian, 2020. "Dynamic Mergers Effects on R&D Investments and Drug Development across Research Phases in the Pharmaceutical Industry," CESifo Working Paper Series 8303, CESifo.
    15. Stacy Sneeringer & Matt Clancy, 2020. "Incentivizing New Veterinary Pharmaceutical Products to Combat Antibiotic Resistance," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 42(4), pages 653-673, December.
    16. Gemma Turon & Jason Hlozek & John G. Woodland & Ankur Kumar & Kelly Chibale & Miquel Duran-Frigola, 2023. "First fully-automated AI/ML virtual screening cascade implemented at a drug discovery centre in Africa," Nature Communications, Nature, vol. 14(1), pages 1-11, December.
    17. Adrian Towse;Jimena Ferraro;Jorge Mestre-Ferrandiz, 2017. "Incentives for New Drugs to Tackle Anti-Microbial Resistance," Briefing 001842, Office of Health Economics.
    18. Steffen Nauhaus & Johannes Luger & Sebastian Raisch, 2021. "Strategic Decision Making in the Digital Age: Expert Sentiment and Corporate Capital Allocation," Journal of Management Studies, Wiley Blackwell, vol. 58(7), pages 1933-1961, November.
    19. Daniel Tobias Michaeli & Hasan Basri Yagmur & Timur Achmadeev & Thomas Michaeli, 2022. "Value drivers of development stage biopharma companies," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 23(8), pages 1287-1296, November.
    20. Amiya K. Chakravarty, 2021. "The outsourcing conundrum: Misappropriation of intellectual property in supply chains," Naval Research Logistics (NRL), John Wiley & Sons, vol. 68(2), pages 229-240, March.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:plo:pone00:0243813. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: plosone (email available below). General contact details of provider: https://journals.plos.org/plosone/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.