**Free sample report: Poor R&D Productivity as a Self-Inflicted Injury**


Source: Taichi Yamamoto, PhD, Children’s Hospital Oakland Research Institute (CHORI)

The Hidden Pipeline is a series of regularly updated research reports that characterize the contents and economic values of larger drug and biotechnology companies’ research pipelines. And, by comparing the costs of producing these product pipelines to their contents and economic values, Hidden Pipeline reports objectively measure R&D productivity – in most cases over multiple decades — for each of the (currently 22) specific companies analyzed

Our research reports are intended primarily for two audiences: pharmaceutical and biotechnology (biopharma) executives, and biopharma investors. By establishing credible, objective measures of R&D productivity, we believe that pharmaceutical executives will be better able to actively manage, and thus improve, the R&D productivity of their own organizations. By more objectively comparing the contents of research pipelines to their apparent (as a percent of share prices) market values, we believe investors (and companies’ internal business development functions) are better able to identify mis-valued pipelines, focusing their investments where value is greatest, and avoiding pipelines whose market values exceed the apparent economic values of the pipeline’s contents. Perhaps most importantly, by moving executives and investors to a shared set of credible and objective metrics, we hope to improve transparency and accountability

The Hidden Pipeline product suite currently consists of two regularly updated research reports; we will soon introduce a third research report, as well as an interactive data tool that can be used by managements and investors to perform their own analyses using the data that underlay our regular reports

The current reports are:

Biopharmaceuticals R&D Productivity: Metrics, Benchmarks, and Rankings for the 22 Largest (by R&D spending) US-Listed Firms

This 128-page, 152 exhibit report published in April 2014 objectively characterizes current and past levels of R&D productivity for the 22 largest US-listed R&D firms. For the entire group of companies and for each individual company, we show economic returns to R&D spending (essentially earnings dollars per R&D dollar), the innovation yield of R&D spending (essentially quality adjusted ideas per R&D dollar), and the average quality of R&D v. peers. All of these metrics are shown across time, in most cases multiple decades. Additionally, we snapshot the target therapeutic areas that account for at least 80 pct of each company’s phase II and earlier research activity, the company’s rank v. peers in each of these target research areas; and, an objective measure of how well or how poorly a given company is using in-licensing to optimize the compounds it places into development. This report will be updated no less frequently than annually

The price of this report is $6,495 for a single-user license. Multi-user licenses are also available (please contact us)

Relative Price and Value of pre-Phase III (‘Hidden’) Pipelines for the 22 Largest Drug & Biotech Companies

This quarterly series of reports compares the apparent market value of companies’ pre-phase III pipelines with the apparent economic value of those pipelines. Specifically, we solve for the apparent market value of product pipelines by subtracting from firms’ enterprise values the net present values of all other assets (i.e. marketed products, products filed for approval, phase III products and other non-pharma lines of business). We find that pre-phase III pipelines generally account for roughly 25% to 30% of biopharma firms’ enterprise values on average, but that this percentage varies greatly across firms. Separately, we estimate the economic value of innovation in each company’s pre-phase III (aka ‘Hidden’) pipeline. This process relies in large part on identifying the patents associated with pre-phase III projects, and using these patents (and related citation patterns) to estimate the amount, quality, and therapeutic area focus of innovation in each company’s Hidden Pipeline. We regularly find outliers, i.e. companies with large market values assigned to pre-phase III pipelines despite having pipelines with too little innovation (amount and quality) to justify those large market values, and vice versa. Since November of 2012, a theoretical portfolio that holds long only those stocks with significantly undervalued Hidden Pipelines has outperformed a comparator index (stocks with accurately or over-valued Hidden Pipelines). On a capitalization weighted basis, our long positions realized a return of 60.9% v. 35.4% for the comparator index, an excess return of 25.5%

This report is updated quarterly. An ‘as published’ (reports are sent on the same date as first published to institutional investors) single-user annual subscription is $8,000. Live worksheets of the Hidden Pipeline data and valuation calculations are made available to ‘as published’ subscribers. Multi-user licenses are available

Pending reports and data products:

“Hidden Pipelines: Who’s Doing What”

This report identifies the research areas (by World Health Organization ATC category) that account for 80 percent of the quality adjusted innovation in each of the 22 largest publicly-listed R&D companies. We provide the company’s rank v. peers in each of its target research areas, identify the top 3 competitors in each of the company’s target research areas, and show how the company’s rank v. peers has changed on a rolling 3-year basis over the last 20 years. We identify the percentage of each company’s research activity falling into a given research area on both sales weighted (the percent of activity in an area is up- or down-weighted based on the sales potential of the research area) and non-sales weighted bases

Separate tables are provided for each company (listing key research areas by company with ranks and trends), and for each of the research areas (listing key companies by research area with ranks and trends)

This report will be updated no less frequently than annually

 The Hidden Pipeline Data Tool

Currently available in beta version spreadsheet form to ‘as published’ and multi-user subscribers, the Hidden Pipeline Data Tool is an interactive spreadsheet that allows users to:

• Identify the percent of innovation in a given company’s Hidden (pre-phase III) that falls into any given research area (WHO ATC category)

• Identify and rank companies by amount and quality of innovation within any user-selected research area (WHO ATC category)

• Compare the R&D productivity (across multiple metrics and time periods) of a selected company to peers; and,

• Compare the apparent economic value of innovation in a given company’s Hidden Pipeline to that Hidden Pipeline’s market capitalization, thus identifying companies whose Hidden Pipelines are apparently over- or under-valued

The Hidden Pipeline Data Tool is published no less frequently than quarterly. The Data Tool is being migrated to an online tool in Tableau format

The Hidden Pipeline Data Tool is provided at no additional cost to multi-user licensees, and to single-user ‘as published’ licensees of the quarterly “Relative Price and Value …” series