Merck and Forest Labs: Comparing Apples and Oranges?

How do you interpret key financial ratios for two pharmaceutical firms with very different growth strategies - one through innovation and one through acquisition?
Gil Sadka  | Spring 2012
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Centuries old Merck & Co., Inc., one of the top 10 pharmaceutical companies in the world, has built its reputation for developing and manufacturing a wide range of drugs - both prescription and over-the-counter - in its own labs and factories. In contrast, only 55 years old, fast-growing Forest Laboratories has risen largely through forming licensing agreements with small specialty drug companies. In this case, students analyze the two companies' R&D/Sales and Sales/Intangibles ratios in the context of their different business models to determine what these ratios reveal about the companies' future profit potential.

Case ID: 120101
Supplemental Materials: Teaching Slides, Solutions Spreadsheets , Merck Dataset

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