Pharmaceutical industry: Investors unfazed by drug-patent expiry

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Your data on changing stock prices for five pharmaceutical companies from 1997 to 2010 (Nature 480, 1617; 2011) erroneously indicate a 39% drop in aggregated share value, when in fact it would have risen by 82% (see Correction, Nature 480, 425; 2011). The error was due mainly to the selection of unadjusted, rather than adjusted, stock-market closing prices.

The corrected data set indicates that the aggregated share prices rose roughly in line with the Dow Jones Industry Average. Considering that these companies have the biggest patent cliffs in the industry, this result is very positive; moreover, it argues against your implication that the impending expiry of their patents is affecting investor confidence in pharmaceutical stocks.

Investors accept that the strength of a company's patent portfolio is only one of several factors. Hence, despite the impending expiry of patents for blockbuster products, including Pfizer's Lipitor, the performance of the five worst-hit companies was comparable with that of other sectors for the period 1997–2010.

Other factors such as decreasing revenues can also affect investor confidence. Your simplistic view that the patent cliff is the only contributor does an injustice to the efforts of pharmaceutical companies and governments, and unnecessarily perpetuates a false uncertainty.

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  1. University College London, UK; Harvard Stem Cell Institute and Harvard Business School, Massachusetts, USA.

    • David Brindley
  2. Brock Reeve The Harvard Stem Cell Institute, Cambridge, Massachusetts, USA.

  3. Chris Mason University College London, UK.

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  1. Report this comment #37267

    Chris Mason said:

    The authors, DB, BR & CM, want to acknowledge Chris Allen and James Zeitler (Harvard Business School) for their significant assistance in producing the corrected statistics; and William Sahlman (Harvard Business School), Emily Culme-Seymour (London Regenerative Medicine Network) and Natasha Davie (University College London/Harvard Stem Cell Institute/Harvard Medical School) for their significant contributions.

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