Production Efficiency and Financial Performance in Pharmaceutical Industry: A Case of Top 24 Companies

20 Pages Posted: 20 Aug 2019

See all articles by Seyed-Reza Hashemian-Rahaghi

Seyed-Reza Hashemian-Rahaghi

University Putra Malaysia - Putra Business School

Cheng FanFah

University Putra Malaysia

Farnaz Abed-Ashtiani

University Putra Malaysia - Putra Business School

Date Written: August 4, 2017

Abstract

Contributing to the field of medicine, pharmaceutical industry plays a key role in development of the society’s health, an extremely important social and economic asset. Current study is of crucial importance as it applied data envelopment analysis and traditional accounting indicators to measure the production efficiency and financial performance of top 24 pharmaceutical producers over five years (2011-2015). Based on the results, major portion of the tested companies showed production efficiencies and profitability positions below the industry average. Overall liquidity and asset utilization position of the industry also was not satisfying. Only two companies i.e. Novo Nordisk, a company from Denmark, and Gilead Sciences, an American company, indicated overall pleasing financial and efficiency performances. Allergan, an American company, revealed lower financial and efficiency results than other pharmaceutical producers. Japanese companies notably Takeda showed no satisfying results particularly in terms of profitability. Bayer, a company from Germany revealed better efficiency performance than its compatriot, Merck-KGaA. Comparing two Swiss companies, Roche outpaced Novartis. AbbVie and GlaxoSmithKline needed to reduce their extensive reliance on debt financing. Financial results of AstraZeneca, Sanofi, Pfizer, Merck & Co., Bristol-Myers-Squib, and Teva were below the industry average. Amgen showed an extensive cash tied up in non-productive assets.

Keywords: accounting indicators, asset management, DEA, financial leverage, pharmaceutical companies, production efficiency, profitability

JEL Classification: G3

Suggested Citation

Hashemian-Rahaghi, Seyed-Reza and FanFah, Cheng and Abed-Ashtiani, Farnaz, Production Efficiency and Financial Performance in Pharmaceutical Industry: A Case of Top 24 Companies (August 4, 2017). Available at SSRN: https://ssrn.com/abstract=3437210 or http://dx.doi.org/10.2139/ssrn.3437210

Seyed-Reza Hashemian-Rahaghi (Contact Author)

University Putra Malaysia - Putra Business School ( email )

Universiti Putra Malaysia (Mosque)
Selangor, Selangor 43400
Malaysia

Cheng FanFah

University Putra Malaysia ( email )

Selangor Darul Ehsan
Serdang, Selangor 43400
Malaysia

Farnaz Abed-Ashtiani

University Putra Malaysia - Putra Business School ( email )

Universiti Putra Malaysia (Mosque)
Selangor, Selangor 43400
Malaysia

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