Does R&D pay?

Pharmaceutical R&D is notoriously risky, lengthy and costly; moreover, it does not always produce products of blockbuster status. The conventional route of fully discovering, developing and marketing a new chemical entity is followed by the large pharmaceutical companies, whereas other organizations in the pharmaceutical sector--such as generic or specialty companies and biotechnology companies--only operate over portions of the full R&D process. Here, we compare the ten-year financial performance of these three subsectors through their price/earnings ratios and their return on capital metrics to understand which of these strategic alternatives offered the best return to investors. 2009 Elsevier Ltd. All rights reserved.