TY - JOUR
T1 - Counting chickens before the eggs hatch
T2 - Associating new product development portfolios with shareholder expectations in the pharmaceutical sector
AU - Grewal, Rajdeep
AU - Chakravarty, Anindita
AU - Ding, Min
AU - Liechty, John C.
PY - 2008/12
Y1 - 2008/12
N2 - Drug development is the lifeblood of pharmaceutical firms and a critical source of innovation in the healthcare industry. Pharmaceutical firms maintain their competitiveness by continuously developing and introducing new drugs, which requires an efficient new drug portfolio management process. However, the current literature does not elaborate on strategies pertaining to these new drug (product) portfolios (i.e., portfolios of drugs under development), nor does it provide the means with which to understand the future cash flow-generating potential of these portfolio strategies. To address this problem, we propose a set of generic descriptors of new drug portfolio strategies (i.e., portfolio breadth, portfolio depth, blockbuster strategy, and stages of the drug development process) and relate these descriptors to Tobin's q, a forward-looking measure of shareholder expectations. The results of a latent class regression analysis show that shareholder expectations of firms with broad new drug portfolios and potential blockbusters are positive. For most firms, shareholders focus on the final stage of the drug development process and deemphasize portfolio depth. In contrast, for a minority of mostly small firms, shareholders seem to value the earlier stages of the drug development process and stress portfolio depth.
AB - Drug development is the lifeblood of pharmaceutical firms and a critical source of innovation in the healthcare industry. Pharmaceutical firms maintain their competitiveness by continuously developing and introducing new drugs, which requires an efficient new drug portfolio management process. However, the current literature does not elaborate on strategies pertaining to these new drug (product) portfolios (i.e., portfolios of drugs under development), nor does it provide the means with which to understand the future cash flow-generating potential of these portfolio strategies. To address this problem, we propose a set of generic descriptors of new drug portfolio strategies (i.e., portfolio breadth, portfolio depth, blockbuster strategy, and stages of the drug development process) and relate these descriptors to Tobin's q, a forward-looking measure of shareholder expectations. The results of a latent class regression analysis show that shareholder expectations of firms with broad new drug portfolios and potential blockbusters are positive. For most firms, shareholders focus on the final stage of the drug development process and deemphasize portfolio depth. In contrast, for a minority of mostly small firms, shareholders seem to value the earlier stages of the drug development process and stress portfolio depth.
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U2 - 10.1016/j.ijresmar.2008.07.001
DO - 10.1016/j.ijresmar.2008.07.001
M3 - Article
AN - SCOPUS:55949097756
SN - 0167-8116
VL - 25
SP - 261
EP - 272
JO - International Journal of Research in Marketing
JF - International Journal of Research in Marketing
IS - 4
ER -