Data-Driven Classification of Pharmaceutical and Biotechnology Companies

Abstract

This study presents a novel approach for classifying biopharmaceutical companies from 2000 to 2023. We use fundamental financial data, 10-K filings, and company drug development data to develop this new classification scheme. Return correlations are used to measure the similarity of companies within a cluster, and our analysis demonstrates that this data-driven improves upon industry standards. Additionally, we evaluate the risk-return characteristics of the clusters developed from this classification scheme as consideration for investment opportunities in these industries.