Kapitalmarktreaktionen auf Rückschläge in der Produktentwicklung – Evidenz für pharmazeutische Unternehmen

New product developments are regularly associated with considerable risks for a research-based company, which, in the event of failure, can also have consequences for the capital market valuation of equity securities. Compared to other industries, the process of new product development in the pharmaceutical industry is very transparent, especially with regard to setbacks. This provides an opportunity to examine changes in share prices as an effect of such setbacks, which usually form the (temporary) end of a costly investment process. The more negative a capital market reaction is, the greater the losses suffered by equity investors. A narrow product portfolio represents a particular risk here, so that such failure events have a much weaker effect on the capital market valuation of large pharmaceutical companies than of smaller ones. To analyze the capital market valuation of published setbacks, we use an event study and a hand-selected new, very large data set with 224 setback announcements from the years 2010 to 2017. As a result, we observe extremely negative share price reactions averaging -23.7 % in the period of the announcements, with losses varying according to the size of the company. Although both small and large companies show significant negative wealth effects, the effect is much stronger for small companies. In addition to size, measured as market capitalization, potential explanatory factors for the amount and direction of the value effect include return on equity and the development in cooperation. Accordingly, the amount of the wealth effect can be explained both by company key figures and by the content of the publication or the status of the drug development.