The Impact of Mergers and Acquisitions in Research-Based Pharmaceutical Companies on Productivity

Abstract:     
This paper analyzes the impact of mergers and acquisitions (M&A) activities in research-based pharmaceutical companies, specifically the impact of R&D expenditure, sales revenue, and R&D intensity on firms’ productivity, on drug approval in pharmaceutical industries following M&A activities. The model was estimated using annual data, gathered from eight large research-based pharmaceutical companies in the world post-M&A, during the period 2003 until 2010. The regression analysis method uses a pooled regression method with generalized least square (GLS) analysis. The result further shows that following M&A activities, firms’ one-year lagged sales revenue (t-1) and R&D intensity to be positive in increasing significantly the firms’ amount of total approval of drugs in research-based pharmaceutical industries, while, surprisingly firms’ one-year lagged R&D expenditure (t-1) have a negative impact in increasing significantly the firms’ amount of total approval of drugs in research-based pharmaceutical industries.

Number of Pages in PDF File: 20

Keywords: mergers and acquisitions (M&A), R&D expenditure, sales revenue, R&D Intensity, total approval, new molecular entity

JEL Classification: A10, C33, G34, L21, M21

working papers series