· Roche maintains top spot in brand ranking, following 8% growth to US$6.9 billion
· Merck’s brand bounces back from last year’s struggles, growing 29% to US$4.1 billion and jumping into the top 5
· Bayer is world’s strongest pharmaceutical brand with AAA- rating, improving score despite association with Monsanto
Roche has defended the title of the world’s most valuable pharmaceutical brand, as its brand value increased 8% to US$6.9 billion, according to the latest report by Brand Finance, the world’s leading independent brand valuation and strategy consultancy. Roche was able to stay ahead of second-ranked Bayer (brand value up 11% to US$6.2 billion) although the gap between the two has narrowed slightly.
Roche’s brand value increase was driven by strong performance in the United States, where it benefited from a 14% growth in sales. Elsewhere, results were not so strong, particularly in Japan (sales steady) and Europe (sales down 8%), where Roche is challenged by generic drugs undercutting sales.
David Haigh, CEO of Brand Finance, commented:
“Roche remains the most valuable pharmaceutical brand as a result of its continued investment in world-leading drug development. While it will always face challenges from generic competitors, the purchase of Foundation Medicine in 2018 is a great opportunity to enable Roche to leverage its brand by deploying its personalised healthcare strategy. Roche is in a strong position to lead the industry in genomic profiling to develop new cancer treatments and improve patient care.”
Merck makes speedy recovery
Merck (brand value up 29% to US$4.1 billion) is the year’s biggest mover, with the brand achieving the fastest growth amongst the industry’s top ten. Merck has jumped two places in the rankings, overtaking both Sanofi (brand value up 2% to $3.4 billion) and Novartis, to enter into the top 5.
Merck’s brand value bounced back strongly after it saw a decline last year, following a cyber-attack in June 2017 which both undermined customer confidence and reduced production of Gardasil 9 drugs. The resilience of the company in the face of challenging circumstances and ability to rebound strongly is testament to the strength of the brand.
Bayer strengthens despite association with Monsanto
In addition to calculating overall brand value, Brand Finance also determines the relative strength of brands through a balanced scorecard of metrics evaluating marketing investment, stakeholder equity, and business performance. Along with the level of revenues, brand strength is a crucial driver of brand value.
According to these criteria, Bayer has maintained its position as the world’s strongest pharmaceutical brand and is the only brand in the industry to post a AAA- rating. Bayer’s Brand Strength Index (BSI) score improved to 83.1 from 81.2 out of 100 over the past year, despite the brand’s latest association with Monsanto – a new acquisition by Bayer’s chemical business.
The Monsanto brand has fallen from favour after long-term mainstream criticism based on health concerns over its products, such as Roundup, and their influence on the food industry and the environment. Bayer is planning to retain the various names of individual products but terminate the overarching Monsanto brand, whose reputation is proving problematic for the future of Bayer’s business.
David Haigh, CEO of Brand Finance, commented:
“Bayer is the world’s strongest pharmaceutical brand because it has been able to strategically protect its reputation from various contentious public and political issues. It is no different with the acquisition of Monsanto, where the leadership are clearly taking the right steps to reinforce stakeholder trust.”
The questions concerning the treatment of a changing brand portfolio are not just pertinent to Bayer. The transfer of the consumer healthcare business of GSK from a Novartis joint venture last year, into a new deal with Pfizer, and eventually into a separate business within three years, is a symptom of an industry where rising costs of development pipelines have caused a lot of businesses to experiment with acquisition and divestment. This can create confusion among customers, doctors, pharmacists, and other stakeholders, and presents new challenges for brand managers regarding positioning and strategy.
Note to Editors
Every year, leading valuation and strategy consultancy Brand Finance values the world’s biggest brands. The 10 most valuable pharmaceutical brands are included in the Brand Finance Pharma 10 2019 report.
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 the efficacy of a brand’s performance on intangible measures relative to its competitors.
Additional insights, more information about the methodology, as well as definitions of key terms are available in the Brand Finance Pharma 10 2019 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 rankings 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.
Brand Finance is the world’s leading brand valuation consultancy. Bridging the gap between marketing and finance for more than 25 years, Brand Finance evaluates the strength of brands and quantifies their financial value to help organizations 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 over 100 reports which rank brands across all sectors and countries.
Brand Finance also operates the Global Brand Equity Monitor, conducting original market research annually on over 5,000 brands, surveying more than 150,000 respondents across 38 countries and 31 industry sectors. Combining perceptual data from the Global Brand Equity Monitor with data from its valuation database enables Brand Finance to arm brand leaders with the data and analytics they need to enhance brand and business value.
Brand Finance is a regulated accountancy firm, leading the standardization 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.
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 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 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.
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.