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St. Jude’s Acquisition Boosts Abbott’s Brand Value

23 August 2018
This article is more than 3 years old.

· Abbott breaks into the top 10 most valuable pharmaceutical brands ranking on the back of 77% year-on-year growth

· Roche defends the title of the world’s most valuable pharmaceutical brand, valued at US$6.4 billion

· Up 20% to US$5.6 billion, Bayer overtakes Pfizer in second place

View the full list of the world’s 10 most valuable pharmaceuticals brands here

Abbott has been ranked as one of the world’s top ten pharmaceutical brands for the first time, according to the latest report by Brand Finance, the world’s leading independent valuation and strategy consultancy. With a 77% brand value growth to US$3.7 billion, American pharma giant Abbott enters the Brand Finance Pharmaceuticals 10 ranking in 4th place following its acquisition and rebranding of medical device firm St. Jude Medical and diagnostic-testing company Alere, which were both successfully completed last year.

Abbott is now at the forefront of the medical devices and diagnostics markets, with a rapidly expanding presence in cardiovascular care, large and high-growth cardiovascular device generation. The brand’s largest business is its medical devices unit, which includes minimally invasive support for heart diseases, stroke, carotid artery disease. Abbott’s other significant segments span across nutritionals, point-of-care diagnostics and pharmaceuticals.

Meanwhile, Roche (brand value up 5% to US$6.4 billion) retains its title as the world’s most valuable pharmaceutical brand after a strong and stable year. The Swiss brand improved on all measures, with the Brand Strength Index (BSI) score climbing from 72.5 to 78.2 out of 100, and its brand rating a notch higher at AA+ from AA last year.

David Haigh, CEO of Brand Finance said:

“Abbott’s intelligent M&A activity combined with a clear strategy in extending the Abbott brand, has boosted its performance this year. Abbott enters the top ten ranking with an impressive 4th place debut, firmly positioning itself as a global leader in medical products. Whilst Roche has remained steady at the top of the ranking, Abbott is growing rapidly and may challenge for the top spots if it sustains this promising growth in the future.”

Bayer’s brand value on the up

Germany’s Bayer (up 20% to US$5.6 billion) is ranked the world’s second most valuable pharmaceuticals brand, overtaking Pfizer (down 15% to US$4.1 billion). Separate from Bayer’s brand activity in the pharmaceutical industry, Bayer is now integrating Monsanto’s chemical business following the $66 billion takeover. This will have limited direct impact on Bayer’s pharmaceutical business, though shedding the association with the detested agrochemical industry brand will be a challenge for all of Bayer’s operations. Brand strength might help Bayer pull through this difficult transition period. With a Brand Strength Index (BSI) score of 81.2 and a high AAA- brand rating, Bayer is the strongest of all pharmaceutical brands in the top 10 ranking.

David Haigh, CEO of Brand Finance said:

“Although Bayer has moved up into second place in this year’s ranking, its M&A activity – in contrast to Abbott’s – puts question marks over the future of its brand. Bayer’s share price sliding last week, when Monsanto was ordered to pay damages over cancer risks associated with their products, reveals the weight of the reputational liability brought in with the acquisition.”

Pfizer and Novartis lose brand value

Pfizer suffered a significant brand value loss, more than any other brand in the Brand Finance Pharmaceuticals 10 2018. Reduced revenues, lower forecasts, and a heightened sense of sector risk adversely affected Pfizer’s brand value. The drug maker has also been hit by significant legal fees after paying out against accusations that it violated the False Claims Act.

Novartis (down 12% to US$3.6 billion) fell one place since last year, as a result of Abbott’s new entry to the Brand Finance Pharmaceuticals 10 2018. In addition, Novartis endured a difficult year, with the departure of their CEO Joe Jimenez who was embroiled in controversy regarding signing off questionable payments to Donald Trump’s then lawyer Michael Cohen. The brand’s head of legal Felix Ehrat claimed responsibility for the scandal by resigning.

Novartis’s new CEO Vas Narasimhan has an opportunity to build the strength of the Novartis brand by returning to an innovative culture that takes advantage of new developments in data and technology whilst also focusing on its ethics and compliance functions.

View the full Brand Finance Pharmaceuticals 10 2018 report here

ENDS

Note to Editors

Every year, leading valuation and strategy consultancy Brand Finance values the world’s biggest brands. The 10 most valuable pharmaceuticals brands in the world are included in the Brand Finance Pharmaceuticals 10 2018 league table.

Brand value is understood as the net economic benefit that a brand owner would achieve by licensing the brand in the open market. Brand strength is assessed through a balanced scorecard of factors (such as marketing investment, stakeholder equity, and business performance) and used to determine what proportion of a business’s revenue is contributed by the brand.

Additional insights, more information about the methodology as well as definitions of key terms are available in the Brand Finance Pharmaceuticals 10 2018 report.

Brand Finance helped craft the internationally recognised standard on Brand Valuation – ISO 10668, and the recently approved standard on Brand Evaluation – ISO 20671.

Data compiled for the Brand Finance league tables and reports are provided for the benefit of the media and are not to be used for any commercial or technical purpose without written permission from Brand Finance.

Media Contacts

Konrad Jagodzinski
Communications Director
Brand Finance
Florina Cormack-Loyd
Associate Communications Director
Brand Finance

About Brand Finance

Brand Finance is the world’s leading brand valuation consultancy. Bridging the gap between marketing and finance, Brand Finance evaluates the strength of brands and quantifies their financial value to help organisations of all kinds make strategic decisions.

Headquartered in London, Brand Finance has offices in over 20 countries, offering services on all continents. Every year, Brand Finance conducts more than 5,000 brand valuations, supported by original market research, and publishes nearly 100 reports which rank brands across all sectors and countries.

Brand Finance is a regulated accountancy firm, leading the standardisation of the brand valuation industry. Brand Finance was the first to be certified by independent auditors as compliant with both ISO 10668 and ISO 20671, and has received the official endorsement of the Marketing Accountability Standards Board (MASB) in the United States.

Methodology

Definition of Brand

Brand is defined as a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos, and designs, intended to identify goods, services, or entities, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits.

Brand Strength

Brand strength is the efficacy of a brand’s performance on intangible measures relative to its competitors. Brand Finance evaluates brand strength in a process compliant with ISO 20671, looking at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance. The data used is derived from Brand Finance’s proprietary market research programme and from publicly available sources.

Each brand is assigned a Brand Strength Index (BSI) score out of 100, which feeds into the brand value calculation. Based on the score, each brand is assigned a corresponding Brand Rating up to AAA+ in a format similar to a credit rating.

Brand Valuation Approach

Brand Finance calculates the values of brands in its rankings using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in ISO 10668. It involves estimating the likely future revenues that are attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a brand owner would achieve by licensing the brand in the open market.

The steps in this process are as follows:

1 Calculate brand strength using a balanced scorecard of metrics assessing Marketing Investment, Stakeholder Equity, and Business Performance. Brand strength is expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.

2 Determine royalty range for each industry, reflecting the importance of brand to purchasing decisions. In luxury, the maximum percentage is high, while in extractive industry, where goods are often commoditised, it is lower. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database.

3 Calculate royalty rate. The BSI score is applied to the royalty range to arrive at a royalty rate. For example, if the royalty range in a sector is 0-5% and a brand has a BSI score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4%.

4 Determine brand-specific revenues by estimating a proportion of parent company revenues attributable to a brand.

5 Determine forecast revenues using a function of historic revenues, equity analyst forecasts, and economic growth rates.

6 Apply the royalty rate to the forecast revenues to derive brand revenues.

7 Discount post-tax brand revenues to a net present value which equals the brand value.

Disclaimer

Brand Finance has produced this study with an independent and unbiased analysis. The values derived and opinions presented in this study are based on publicly available information and certain assumptions that Brand Finance used where such data was deficient or unclear. Brand Finance accepts no responsibility and will not be liable in the event that the publicly available information relied upon is subsequently found to be inaccurate. The opinions and financial analysis expressed in the study are not to be construed as providing investment or business advice. Brand Finance does not intend the study to be relied upon for any reason and excludes all liability to any body, government, or organisation.

The data presented in this study form part of Brand Finance's proprietary database, are provided for the benefit of the media, and are not to be used in part or in full for any commercial or technical purpose without written permission from Brand Finance.

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