The valuation of pharmaceutical intangibles

Russell, Mark (2016) The valuation of pharmaceutical intangibles. Journal of Intellectual Capital, 17 3: 484-506. doi:10.1108/JIC-10-2015-0090

Author Russell, Mark
Title The valuation of pharmaceutical intangibles
Journal name Journal of Intellectual Capital   Check publisher's open access policy
ISSN 1758-7468
Publication date 2016-07-11
Sub-type Article (original research)
DOI 10.1108/JIC-10-2015-0090
Open Access Status Not Open Access
Volume 17
Issue 3
Start page 484
End page 506
Total pages 23
Place of publication Bingley, United Kingdom
Publisher Emerald Group Publishing
Collection year 2017
Subject 1400 Business, Management and Accounting
3304 Education
Formatted abstract
Purpose: The purpose of this paper is to value the patents of pharmaceutical companies using discounted cash flows, and compare the value-relevance of these assets against alternative intangible asset measures such as reported intangible assets and R & D capital.

The study values pharmaceutical intangibles using three methods: an income method; the sum of unamortised R & D expenditures; the firm’s reported intangible assets. Value-relevance tests use ordinary least squares regression and Vuong and Clarke tests.

Findings: First, the study finds that the discounted cash-flow valuation of pharmaceutical patents is value-relevant. Second, the value of pharmaceutical patents explains market value better than reported intangible assets but not R & D capital. However, the valuation of pharmaceutical patents is more consistent with the risks of R & D than the valuation of R & D capital which assumes recovery of R & D expenditure.

Originality/value: This is the first known study that values patents using an income method and compares those valuations with reported intangible assets and R & D capital valuation models.
Keyword Intangible assets
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status UQ

Document type: Journal Article
Sub-type: Article (original research)
Collections: HERDC Pre-Audit
UQ Business School Publications
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