Here's an interesting post from the HBR blog. It cites a recent research paper by Jie He and Xuan Tian, Indiana University, that says firms covered by large number of analysts generate fewer patents, and those that they do generate are worth less. It also says that when analyst scrutiny declined (say through merger) then innovation went up.
Think about that. The explanation proffered by the researchers was the hypothesis that as analyst attention rose then managers turned to short term goals and invested less in the long term. This also had the effect of making their company less valuable in the long run. The exact effect the analysts were presumably trying to prevent with their scrutiny. Conclusion? Analysts are an impediment to innovation.
Now apply that thought to big pharma where God knows we have more than our share of analysts making big bucks with their pontifications. These are the guys who generally get excited when a company cuts its costs by slashing R&D and marketing. They also tend to favor the 'me-too" sure thing revenue projects over the blue sky approach. They will tell management they should invest in R&D and blue sky until it doesn't work and then their is hell to pay with discussions of patentt cliffs and lack fo R&D productivity.
Given that mabe Merck, AZ and Lilly just need to get all their analysts fired or reassigned.
Posted by Bruce Lehr Oct 21st 2013.