Determinants for Acquisition Premia in the Pharmaceutical Industry

By Klaus B. Zensen

Pharmaceutical mergers are on the rise and so is the consolidation in the pharmaceutical industry. A critical aspect in takeover transactions is the premium above the target's market value paid by the acquiring firm. While prior research has examined general determinants of acquisition premia for samples across industries, very little research has been done on industry-specific determinants of acquisition premia. It was hypothesized that therapeutic deepening of pipeline or marketed portfolio will increase acquisition premia. Results of the multiple regression analysis showed that deepening is important to the acquiring company. Higher premia were paid to targets that have overlapping therapeutic categories in pipeline or marketed portfolio with the acquirer, providing support for this hypothesis. It was further hypothesized that therapeutic broadening will also increase acquisition premia. It was found that pharmaceutical acquirers can be motivated to acquirer targets that compete in different therapeutic classes than the acquirer. However, results were inconsistent. While there was evidence of a relationship between therapeutic broadening and acquisition premia, overall this hypothesis was not supported. Additionally, it was hypothesized that targets with blockbuster drugs will increase acquisition premia. Results were consistent and showed negative and economically significant coefficients in all analyses, rejecting this hypothesis.

• Format: Paperback
• Language: English
• ISBN: 152047718X
• ISBN13: 9781520477183
• Release Date: January 2017
• Publisher: Independently published
• Length: 122 Pages
• Weight: 0.53 lbs.
• Dimensions: 9.0" x 0.3" x 6.0"