A Review: Model Used for Analyzing Pharmaceuticals Profitability

Abstract

This paper tried to introduce the model used for analyzing firm performance specific to the pharmaceuticals profitability presenting some company performance analysis models. Empirical evidences shows that firm performance is used as dependent variable represented by Return (R), Return on Assets (ROA), Return on Equity (ROE), Cumulative Abnormal Return (CAR), Profitability Index (PI) and Tobin’s Q. Corporate characteristics and macroeconomic variables are used as independent variables. Corporate characteristics variables are represented by: EBIT Margin, EPS, Net Profit Margin, Current Ratio, Quick Ratio, Debt to Total Assets, Book Value, Country Origin, Drug Type, R&D, Market Share, Imported Technology, Product Life and few dummy variables. Macroeconomic variables like: Inflation, Exchange Rate and Interest Rate. The majority of the studies used multiple regression models for the purpose of identifying the significant effect of independent variables on firm's performance and few studies found using sensitivity and ratio analysis for analyzing pharmaceuticals performance. The article also proposed a new model for analyzing pharmaceuticals profitability.