Acquiring Biopharmaceutical Research: Is Market Approval a Deal Breaker?

Abstract

This paper empirically investigates the profit impact of externally sourcing technology through acquisition. Specifically, it questions whether biopharmaceutical acquirers benefit from taking over technologies which are pre-marketed more than those that have already been approved for market. This paper utilizes the resource-based view to determine that the decision depends on the relative value chains of the acquirer and target. We assert that companies with lower research and development (R&D) intensity than their targets benefit from acquisitions of pre-marketed drugs more than they would with marketed drugs because of a complementary combination of competitive assets. Estimations from the U.S. biopharmaceutical sector in the 1990s show that acquirers that take over pre-marketed drugs from targets with higher R&D intensity than themselves have post-acquisition returns between 2% and 11% higher than if they took over marketed drugs.

Citation

Ruckman, K. (2007), "Acquiring Biopharmaceutical Research: Is Market Approval a Deal Breaker?", Cooper, C.L. and Finkelstein, S. (Ed.) Advances in Mergers and Acquisitions (Advances in Mergers and Acquisitions, Vol. 6), Emerald Group Publishing Limited, Leeds, pp. 171-187. https://doi.org/10.1016/S1479-361X(07)06008-5