Trade & Channel Strategies 2024: Trends in Enterprise Value Growth and Value-to-Sales Ratios

PC: What specific trends have you observed in enterprise value growth and enterprise value-to-sales ratios among top biopharmaceutical companies?

Trombetta: In my article, I look at seven metrics. There could be as many as 5,200 metrics. Pick your own study that you want to look at as to who's the best. But I look at seven and the three metrics include enterprise value, which is what's the company worth. Did you create shareholder wealth, or did you destroy shareholder wealth? So that's critical. The second one is called nterprise value to sales, and that's a ratio that to make it as simple as I can, the higher that number is, the sky is the limit. The lower it's a good company and pays dividends, but perhaps maybe it’s at a point where they're kind of moving along, and they just need a bump to move up more in growth. The third one is return on invested capital. You take your total stock value and add into that debt, because debt is part of your value and then that measure is a return on invested capital. So those are the three basic metrics I look at in the in the study.

Full Interview Summary: The upcoming industry audit presentation will analyze key metrics and trends among top biopharma companies, focusing on financial and strategic performance. The audit, now in its 23rd year, has evolved from analyzing 25 to the current "nifty 15" publicly traded pharmaceutical companies, reflecting industry consolidation. Core metrics assessed include enterprise value, enterprise value-to-sales ratio, and return on invested capital (ROIC), providing insights into shareholder value, growth potential, and operational efficiency. High ROIC figures, such as Novo Nordisk’s 45%, underscore the sector's exceptional profitability compared to others, driven by innovative products like GLP-1 drugs for diabetes and weight loss.

Two broader themes contextualize the audit. First, Johnson & Johnson ranked sixth overall and fifth in innovation among 250 U.S. companies in the Drucker Institute's Best Managed Companies list, reflecting the growing recognition of pharma's management excellence. Second, diversity remains a focal point. Women now outnumber men in U.S. medical and law schools and achieve parity in MBA programs, signaling progress in advancing women into executive roles, though female representation among CEOs remains limited, especially globally.

Novo Nordisk stands out not only for its market value exceeding Denmark's GDP but also for its philanthropic initiatives, such as the world-leading Novo Nordisk Charitable Foundation. Such efforts illustrate how biopharma companies are increasingly integrating societal objectives into their strategies. In a shifting market, financial performance alone is no longer sufficient; long-term value creation must align profitability with stakeholder benefits and community impact. This balance, exemplified by companies like Novo Nordisk and J&J, will likely shape how the industry communicates its value to investors amidst uncertainties.