Pharma's most-valuable brands? J&J, Pfizer and Merck. Valeant, not so much

J&J logo on building
J&J tops the brand valuation list of U.S. pharma companies, followed by Pfizer, Merck and AbbVie.

U.S. pharma brands jumped in value almost across the board in Brand Finance's annual look at the nation’s most valuable. The lone exception? Valeant Pharmaceuticals

While Johnson & Johnson, Pfizer, Merck & Co., AbbVie, Eli Lilly and Bristol-Myers Squibb all gained brand value—$500 million, on average—Valeant dropped almost $1 billion. The embattled pharma went from $2.67 billion last year to just $1.48 billion in this year’s tally.

That's quite a turnabout: Just one year prior, Valeant had soared to join Pfizer at the top of the pharma chart, based at the time on its strategy of buying in drug development, with takeovers of Salix, Mercury Holdings and Sprout Pharmaceutical in 2015.

Brand value is different from reputation, which is why pharma could gain industrywide amid the drug-pricing controversy that raged almost all the way through 2016.

Brand Finance also tallies global brand value, and its worldwide pharma report, the top 10 global pharma brands, saw value increase unilaterally. Roche led global growth with a 56% increase in value at No. 1 and a $6.09 billion value. The Swiss drugmaker took that top spot from Pfizer, which dropped to second place from last year, but still clocked a 10% value increase to $4.84 billion.

Although the valuation and strategy consultancy did not speculate why Valeant dropped, it doesn’t take a rocket scientist to chalk it up to the company's precipitous 2016. The company hunkered down amid a dissed drug pricing strategy, criminal investigations, retreating investors, fleeing executives, and angry payers.

Meanwhile, Bayer remained at No. 3, followed by Novartis and Merck & Co., to comprise the top five global list. Brand Finance does not include J&J, which also includes consumer healthcare, in its global pharma sector report. 

Brand Finance uses a royalty rate method to calculate brand value, which it defines as “the value a company would be willing to pay to license its brand as if it did not own it.” The consultancy also calculates brand strength based on marketing investment, familiarity, preference, sustainability and margins, and adding in what proportion of business revenue is contributed by the brand.

“Though the U.S. remains dominant, Switzerland’s Roche has overtaken Pfizer to become the world’s most valuable pharma brand,” the global report concluded. “New immuno-oncology drug Tecentriq achieved FDA approval for lung cancer and Roche expects almost €4.5 billion in revenues by 2021 as a result. A trio of breast-cancer therapies boosted earnings, offsetting sluggish sales of some older drugs.”

Overall, the long-term reasons for pharma's brand growth can be attributed to technology advances, rising demand for drugs from an aging population, improved healthcare globally—which creates a larger audience for pharma products—and fewer restrictions on trade, said a Brand Finance analyst via email.

In the short term, the reasons for growth, especially in the U.S., include the Trump presidency’s promise for innovation and product launches, along with overall industry changes in business operations. That includes “divestment and restructuring of non-core business segments in order to cut costs, streamline operations and focus on their area of expertise,” he said.

Among all U.S. brands, Google took the No.1 spot with a valuation of $109.5 billion, unseating Apple for the first time in five years. Apple fell to No. 2 with a $107.1 billion valuation. Rounding out the top five were Amazon, AT&T and Microsoft.