ABSTRACT
In the biopharmaceutical industry, market valuation of companies is based on R&D capabilities. When biopharmaceutical companies are granted patents and market exclusivity, they can secure market monopoly and cash flow until patent expires. Publication activities from 14 US pharmaceutical firms were correlated to the number of patents between 1973 and 1986. Another method to assess R&D capabilities is to examine the number of alliances at each individual biotechnology firm, including counter-partners who ascribe market value based on the quality and quantity of those relationships. When a biotechnology firm has high quality and quantity alliances, analysts and the market interpret the alliances as an indication of higher R&D capability, and usually the firm also gains higher market valuation. In addition to the market valuation indicators, other companies' new competitive medicines may lower firm's market valuation. Even with an understanding of the various factors and indicators involved, there is still not a clear-cut method to measure R&D capabilities and market value.
