Abstract
The significance of the pharmaceutical and commercial sectors in the national economy has noticeably intensified, as a result of the COVID-19 pandemic. The main objective of this study was to gain a better insight into the main management characteristics of the actors in the sector. It was assumed that more efficient management of financial investments (acquisitions, loans) caused higher risk financial investment decisions in the pharmaceutical industry in order to place companies in a better position in view of equity investors, illustrated best as the profitability of equity (ROE). This paper examined one possible means of covering the extremely high indirect costs (R&D, marketing) of pharmaceutical companies, also justified by the restructuring of the industry and the effect of investments in long term financial instruments on the ROE of the same business entities. Built on the EMIS database, the analysis only used the indicators of those companies operating in the pharmaceutical industry in Visegrad countries for 2019. The authors sought to draw conclusions about possible management characteristics of the entire pharmaceutical sector of these countries using cluster analysis and linear regression. The initial assumption, or main hypothesis of the study, was that in one of the countries studied or for those businesses operating above a certain revenue category, the impact of a company’s risk-taking (which can also be expressed in terms of asset-based financial income) on profitability, may appear or intensify. The performed studies did not show a strong correlation between the explanatory and profit variables either at the national level or at the level of groups formed by regional market position. In other words, the extremely high level of indirect costs were mostly covered by sales of successful cash products, and companies not indebted to suppliers undertook significant risks in the field of financial investments, thereby offsetting the positive impact of the latter on earnings.
Highlights
IntroductionThe pharmaceutical sector includes, in addition to pharmaceuticals, the manufacture and sale of medical, biotechnological and medical devices, vaccines, and over-the-counter (OTC) medicinal products, which is taken as a reference in this paper
This can certainly be said for only a quarter of the Hungarian and Polish pharmaceutical companies on the basis of the results calculated in this way, half of the companies in the sample still did not invest in securities to an extent higher than 0.1% in Hungary and 3% in Poland
Since statistical relationship is not detectable between the return of equity (ROE) expressing dividend expectations and the financial income per asset indicator, it is not typical for pharmaceutical companies to make higher risk decisions in the financial investment market in order to achieve a better position in view of equity investors
Summary
The pharmaceutical sector includes, in addition to pharmaceuticals, the manufacture and sale of medical, biotechnological and medical devices, vaccines, and over-the-counter (OTC) medicinal products, which is taken as a reference in this paper. This industry has a number of characteristics that distinguish it from other economic sectors, both in their nature and in their contribution to key macroeconomic performance indicators. According to Malerba and Orsenigo (2015), through acquisitions and mergers, these companies were able to seize more than 10% of total market turnover, and this achievement was partly due to the innovative processes of new product development, patent protection, and the low cumulative nature of technological development. There have been serious doubts since the turn of the millennium about the innovative performance and sustainability of traditional business models of industry players that already showed exceptional economic performance by the 1990s (Malerba and Orsenigo 2015), regardless of the specific nature of the pharmaceutical products and their manufacturing processes (Munos 2009)
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