M&A of Generic Pharmaceutical Companies Increases Productivity

Abstract

This paper analyzes the impact of M&A activities in generic pharmaceutical companies. Specifically the role of lagged R&D expenditure, lagged profitability, and R&D intensity on firms’ productivity, which is firms’ amount of total approval of drugs in pharmaceutical industries following M&A activities were examined. The model was estimated using annual data, gathered from six large generic pharmaceutical companies in the world post-merger & acquisition, during the period 2003 until 2010. The regression analysis method uses a pooled regression, with generalized least square (GLS) method. The result further shows, following M&A activities, firms’ one-year lagged R&D expenditure (t-1), one-year lagged profitability (t-1), and R&D intensity to be positive in increasing significantly the firms’ amount of total approval of drugs in generic pharmaceutical industries.