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. Branstetter, Lee & Chatterjee, Chirantan & Higgins, Matthew J., 2022. "Generic competition and the incentives for early-stage pharmaceutical innovation," Research Policy, Elsevier, vol. 51(10).
    3. Abe C. Dunn & Lasanthi Fernando & Eli Liebman, 2024. "How Much Are Medical Innovations Worth? A Detailed Analysis Using Cost-Effectiveness Studies," BEA Papers 0132, Bureau of Economic Analysis.
    4. 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.
    5. 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.
    6. Yin, Nina, 2023. "Pharmaceuticals, incremental innovation and market exclusivity," International Journal of Industrial Organization, Elsevier, vol. 87(C).
    7. Rathi, Sawan & Majumdar, Adrija & Chatterjee, Chirantan, 2024. "Did the COVID-19 pandemic propel usage of AI in pharmaceutical innovation? New evidence from patenting data," Technological Forecasting and Social Change, Elsevier, vol. 198(C).
    8. 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.
    9. 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.
    10. 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.
    11. Adrian Towse;Jimena Ferraro;Jorge Mestre-Ferrandiz, 2017. "Incentives for New Drugs to Tackle Anti-Microbial Resistance," Briefing 001842, Office of Health Economics.
    12. 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.
    13. Aysun, Uluc, 2024. "Technology diffusion and international business cycles," Journal of International Money and Finance, Elsevier, vol. 140(C).
    14. Gold, E. Richard, 2021. "The fall of the innovation empire and its possible rise through open science," Research Policy, Elsevier, vol. 50(5).
    15. Alba C. Rojas-Cordova & Niyousha Hosseinichimeh, 2018. "Trial Termination and Drug Misclassification in Sequential Adaptive Clinical Trials," Service Science, INFORMS, vol. 10(3), pages 354-377, September.
    16. Crego, Julio & Kárpáti, Daniel & Kværner, Jens & Renneboog, Luc, 2022. "The Economic Value of Eliminating Diseases," Other publications TiSEM 8b51764f-3ccd-4bb8-9da1-4, Tilburg University, School of Economics and Management.
    17. Camille Loir & Bertrand Groslambert, 2023. "The impact of innovation on the profitability of the biotech industry," Economics Bulletin, AccessEcon, vol. 43(3), pages 1286-1297.
    18. Casey B. Mulligan, 2020. "Economic Activity and the Value of Medical Innovation during a Pandemic," Working Papers 2020-48, Becker Friedman Institute for Research In Economics.
    19. 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.
    20. Henry Grabowski & Carlos Brain & Anna Taub & Rahul Guha, 2017. "Pharmaceutical Patent Challenges: Company Strategies and Litigation Outcomes," American Journal of Health Economics, MIT Press, vol. 3(1), pages 33-59, Winter.

    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.