NOT BIG PHARMA
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Welcome to Pharm Exec's second annual "Stealth Pharma" audit. Once again, our aim is to learn something about how select—and very diverse—non–Big
Pharmas compete vis-à-vis is their Big Pharma peers. If this sounds like a modest, not-definitive goal, that's because it
is. Unlike in our annual "Industry Audit" every September, here we aren't quantifying and weighting metrics to rank the top
16 publicly traded pharmas based on performance.
And for good reason. Stealth Pharma is, by definition, an unwieldy grab-bag category because it includes any company that
is not a Big Pharma. Firms specializing in biotech, franchises, orphan drugs, and generics are all in play. And when it comes
to making comparisons, the diversity of stealth pharmas raises problems way more complex than apples vs. oranges. How do you
rank the performance of an orphan drug superstar like Genzyme against that of a solid specialty pharma like Endo? You don't.
Just sit back, relax, and enjoy our audit lite.
What the Metrics Mean
ENTERPRISE VALUE
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In keeping with the spirit of this exercise, we must confess that there was no rhyme or reason to the selection of these particular
12 stealths. Let's just say that this is not—repeat not—a ranking of the top 12 Stealth Pharma money makers. If anything, we chose these 12 because they are newsmakers—familiar
names that earn ink more often than their 1,000 or so counterparts.
Teva, the generics king, and Novo Nordisk, the franchise giant, tower over all other stealths, with 2007 Revenues in the $8 billion–plus range. This is, of course, small change compared to the likes of Pfizer or GlaxoSmithKline, which
raked in $48 billion or so last year.
ENTERPRISE VALUE/SALES
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Drill down to the next level of metric, and it gets even more interesting. R&D Spend Per Sales for the Big Pharmas ranges from a high of 27 percent at Biogen Idec to a low of 9 percent at Johnson & Johnson. Five stealths
exceed the Big Pharma average of 16 percent, with Celgene, the cancer and immunology specialist, leading the way at 28 percent.
Enterprise Value represents the value of a company in terms of what it might sell for. It's calculated as market capitalization (total number
of shares outstanding multiplied by the price of the stock that day) plus liabilities minus cash. When EV goes up, shareholder
value has been created; when EV goes down, shareholder value is destroyed. As a surrogate for shareholder value, EV is arguably
the most crucial performance metric.
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