A key performance indicator of corporate health is how efficiently life sciences companies utilize capital as measured in return on capital employed (ROCE). This analysis focuses on how companies using transactions as a growth stimulator perform when compared with others that do not, and whether buying assets, selling assets or doing both are more effective in achieving capital efficiencies.
We analyzed approximately 5,500 buy- and sell-side transactions in the life sciences sector from January 2009 through March 2019. Subsectors included: pharma, biotech, medtech, life sciences tools, animal health, health care distributors and health care suppliers.
In total, there were 122 companies, with 52 headquartered in the US (43%) and 70 outside of the US (57%). Subsequently, we have analysed four cohorts of companies to compare their capital efficiency as measured in ROCE in this 10-year period.
Note: ROCE calculated as EBIT*(1–tax rate)/average total capital, where total capital includes total common equity, total preferred equity, total debt and minority interest.