OVERVIEW OF METRICS

The first thing to notice is how, as a group, the Stealth Pharmas stack up against Big Pharma (the top 15 companies listed in Pharm Exec's Industry Audit last year):

Enterprise value/sales

Earnings Per Share

For Pharm Exec's "Industry Audit" Top 15, the average revenue for 2005 was $18.4 billion; for the Stealths, the average revenue was much lower: $1.34 billion.

The top pharmas spent, on average, about $3.4 billion on R&D in 2005, while the Stealths spent about $157 million—no surprise, given the differences in scale.

But R&D-spend-to-sales ratios were almost equivalent: Big Pharma doled out almost 20 percent of revenues on R&D to the Stealths' near 17 percent. Enterprise value—or the value of a company if one were to purchase it (market capitalization plus debt minus cash)—is quite different. Reality check: Arguably the most valuable of the 5,000 or so Stealths out there is Teva, at almost $25 billion in enterprise value (EV) as of September 2006; Pfizer, the industry leader, is capitalized at well over $200 billion (see "Enterprise Value"chart).

Price/Earnings

R&D spend/sales

But when it comes to the normalizing ratio of EV to sales, the 15 Stealths selected here are valued, on average, higher: 5.31 to 4.42 for Big Pharma. This tells us that growth and profitability are likely to be found more with the Stealths than with their bigger brethren, at least right now.

As for other interesting dimensions, Big Pharma wins the earnings-per-share multiple ($1.86), while the Stealths nab the price-to-earnings crown ($42.9).

Gross Margin

The sales-to-assets ratio is about equal with .55 for Big Pharma and .53 for the Stealths—it takes about a dollar in assets to produce about 50 cents in revenue. And this evens out the important metric of profit to assets, with each around 8.5 percent.