Factors Related to Small- and Mid-Capitalization Pharmaceutical Company Success Using Stock Performance as a Surrogate
MetadataShow full item record
AbstractBackground: Developing novel pharmaceuticals demands substantial investment despite high uncertainty of success and ultimate market value. While many established drug companies are highly profitable and have large portfolios of diversified assets, much of new drug innovation, a very high-risk, high-reward gambit, stems from smaller companies striving to bring their first products to market. While drug costs, and thus pharmaceutical company profits, can be controversial, it is unquestionable that the products from these companies provide great benefit to humanity. Hence, the ongoing success of the industry as a whole is quite relevant from a public health perspective. Methodology: We sought to investigate factors influencing pharmaceutical company success using company stock performance on major US indices as a surrogate. As the profitability of large-capitalization (cap) pharmaceutical companies is well established, we focused on small- and mid-cap companies in this analysis. Small- and mid-cap pharmaceutical companies (both currently active and now defunct) and historical share prices were captured, including company details and the nature of drug pipelines. Funding by US academia was acquired via CMS.gov Open Payments and categorized into contributions < or ≥$100,000. Stock performance was considered good (+ ≥25%), mediocre (±25%), or poor (- ≥25%). Univariate and multivariate associations were assessed. Results: Of the 420 companies included in the analysis, 101 (24%) had good, 76 (18%) mediocre, and 243 (58%) poor performance. The following were associated with performance in univariate analysis: initial public offering (IPO) price (P < 0.001), time from IPO (P < 0.001), number of drug programs (P = 0.019), and academic funding (P = 0.00013), with trend for diverse pipelines (both oncology and nononcology programs under development) (P = 0.069). On multivariate analysis, IPO price was inversely associated (P < 0.0001), while academic funding (P < 0.0001) and more drug programs (P = 0.0025) were positively associated with performance. Analysis of pharmaceutical IPOs since 2000 suggests a 20% rate of outright company failure. Conclusions: The majority of included companies had lackluster stock performance, suggestive of low potential for drug development success and high probability of financial disaster. Robust drug pipelines and academic collaboration seem to be strongly related to company success.
Rights/TermsCopyright © 2021, Ferris et al.
Identifier to cite or link to this itemhttp://hdl.handle.net/10713/16966
- Guidelines, editors, pharma and the biological paradigm shift.
- Authors: Singh AR, Singh SA
- Issue date: 2007 Jan
- Late-stage Product Development and Approvals by Biotechnology Companies After Initial Public Offering, 1997-2016.
- Authors: McNamee LM, Cleary EG, Zhang S, Salim U, Ledley FD
- Issue date: 2021 Jan
- Company stock prices before and after public announcements related to oncology drugs.
- Authors: Rothenstein JM, Tomlinson G, Tannock IF, Detsky AS
- Issue date: 2011 Oct 19
- [Early achievements of the Danish pharmaceutical industry--8. Lundbeck].
- Authors: Grevsen JV, Kirkegaard H, Kruse E, Kruse PR
- Issue date: 2016
- Just how good an investment is the biopharmaceutical sector?
- Authors: Thakor RT, Anaya N, Zhang Y, Vilanilam C, Siah KW, Wong CH, Lo AW
- Issue date: 2017 Dec