Contrary to conventional wisdom, returns on pharma R&D investments have held up reasonably well
Just six years ago, the world’s major pharmaceutical companies were held up as the most potent shareholder value creators of the corporate world. Today, equity analysts rate growth prospects for the largest players much closer to the broader market’s, and the price premium relative to the S&P 500 has all but disappeared. Why has Big Pharma taken such a tumble? The prevailing explanation is that something has gone seriously wrong in the research labs; too few new products are emerging to replace older ones coming off patent. Our analysis, however shows returns on R&D investment have held up reasonably well.