Video Reports

Embed this video

Copy Code

Link to this video

Get LinkEmbedLicenseRecommend (-)Print
Bookmark and Share

By Matthew Coffina, CFA and Damien Conover, CFA | 12-29-2014 02:00 PM

Our 2014 Big Pharma Pipeline Rankings: Who Came Out on Top?

Merck's reinvigorated pipeline and Sanofi's minimal patent-loss exposure placed them atop our rankings this year, while GlaxoSmithKline joined Pfizer toward the bottom.

Matt Coffina: For Morningstar StockInvestor, I'm Matt Coffina. I'm joined today by Damien Conover, who is the director of our health-care team. We are going to talk about pharmaceutical firms' pipelines. Damien, thanks for joining me.

Damien Conover: Matt, thanks for having me.

Coffina: Every year, you do this analysis using our proprietary box methodology, as we call it, basically to rank the pipelines of Big Pharma firms. Could you explain a little bit about this methodology and how it works?

Conover: Sure. What we are trying to do is really distill the main drivers of large pharmaceutical companies. And so when we are distilling it, there are really three key factors we're looking at. We're looking at pipeline, patent exposure, and what we call in-line products. Those are products that don't have patent losses over the next five years but have already been launched. And those are the three factors that really drive our ability to look at the top-line performance of these firms at least over the next five years.

Coffina: So, you've been scoring pipelines in this way for a few years now. How has the methodology performed in the past?

Conover: We've had a lot of success with the methodology. If we go back to several years ago when we first started this, firms that ranked very well like Abbott (ABT) and Novartis (NVS), following two years of their high rankings, they posted 40% gains. A lot of this had to do with the strengths of their pipelines as well as lacking a lot of patent losses, [which is] really what the methodology is supposed to [account for].

Coffina: So, which firms scored the best in this year's ranking and why?

Conover: In this year's ranking, the top two firms were Sanofi (SNY) and Merck (MRK). And just taking those one at a time: Merck's a firm that is really in this transitionary period of reinvigorating its pipeline. What I mean by that is when we think about Merck from several years ago, they were really focused on primary care, which worked well five or 10 years ago. But in today's era of drug development, you really want to be looking at specialty care. And that's really where Merck is just moving into and has expanded its pipeline dramatically, and it should open up great opportunities.

Read Full Transcript
{0}-{1} of {2} Comments
{0}-{1} of {2} Comment
  • This post has been reported.
  • Comment removed for violation of Terms of Use ({0})
    Please create a username to comment on this article