Application Of Price-to-R&D Ratio Model In The Valuation Of Innovative Drug Enterprises

This paper studies the valuation of China’s emerging innovative drug enterprises in the form of case study.Compared with generic drugs,innovative drugs refer to drugs that are not listed at home and abroad,have independent intellectual property rights,have new structures and clear pharmacological effects.Innovative drug enterprises refer to pharmaceutical enterprises with innovation as the core,which mainly focus on the R&D and commercialization of innovative drugs.R&D strength is its main competitive advantage.China is a large country of generic drugs.The market share of generic drugs once accounted for 97%.The domestic innovative drug industry started late and began to develop in the mid-1990 s.It mainly focuses on generic innovation.The technical strength of domestic innovative drug enterprises lags behind that of foreign developed markets,but grows rapidly.Under the background of aging population,increasing disposable income of residents,rising health awareness and domestic substitution of innovative drugs,the domestic innovative drug industry has ushered in a golden period of development.With the support of national macro policies,the drug evaluation and approval system is becoming more and more efficient,and the capital market is constantly reformed to support the listing and direct financing of high-tech enterprises,including innovative drug enterprises.Some domestic emerging innovative drug enterprises in the initial stage or growth stage have begun to be listed one after another.It is urgent to explore the evaluation method suitable for the valuation of innovative drug enterprises.Through macro environment analysis and industry analysis,this paper summarizes the characteristics of innovative drug enterprises,and finds that innovative drug enterprises generally have the characteristics of high-tech intelligence intensive industry,continuous loss,high R&D investment,long R&D cycle,great uncertainty,successful R&D and high profit.According to the characteristics of innovative drug enterprises,it is found that the traditional income method and market method are difficult to be applied to the valuation of innovative drug enterprises,while the market research rate method,which integrates R&D investment into the valuation system,has good applicability.In the existing research on the valuation of Price-to-R&D Ratio model,the Price-to-R&D Ratio model is too simple.The R&D investment directly selects the accounting book value,ignoring many problems existing in the Price-to-R&D Ratio model.Therefore,in the construction of Price-to-R&D Ratio model,this paper does not directly and solely use the value of R&D investment in the accounting book,but based on the characteristics of previous research and innovative drug enterprises,this paper puts forward three Price-to-R&D Ratio models:general Price-to-R&D Ratio model,adjusted Price-to-R&D Ratio model and effective Price-toR&D Ratio model.Among them,the R&D investment in the general Price-to-R&D Ratio model is the R&D investment in accounting commonly used in previous studies.The denominator of the adjusted Price-to-R&D Ratio model adds sales expenditure on the basis of R&D investment,and the R&D investment in the effective Price-to-R&D Ratio model is replaced by effective R&D expenditure.This is also the biggest innovation of this paper.Finally,this paper selects Bei Gene,Ltd,a representative company in the domestic innovative drug industry,as the case study object,respectively uses the three Price-to-R&D Ratio models to evaluate its actual valuation,and compares and analyzes the valuation results.It is found that the valuation result of adjusted Price-to-R&D Ratio model is the smallest from the market value,so the research conclusion is drawn,That is,the Price-to-R&D Ratio model can be used for the valuation of innovative drug enterprises,and the applicability of the adjusted Price-to-R&D Ratio model is better.However,adjusted Price-to-R&D Ratio model also does not consider the problem of effective R&D,which may still be inaccurate.Effective R&D expenditure plus sales expenditure can be used to replace R&D investment for further exploration.