Do Public Announcements of Drug Development Events Influence a Drug Company’s Market Value? A Study on Pfizer

Abstract

The circulation of money in the global pharmaceutical market is substantial and has been increasing annually. Moreover, the high requirements for new drugs and the procedures for verifying the quality of drugs are increasingly complex; thus, successful drug research and development are critical for drug companies. To identify fluctuations in stock prices during the drug research and development process, the event study model is adopted to capture abnormal returns in Pfizer stock resulting from the public announcement of various relevant events. The study aims to (a) examine whether events publicized by official databases or the media during drug research and development affect Pfizer’s stock price; (b) examine whether these events affect the stock price of Pfizer’s competitors; and (c) compare price fluctuations around the dates of these events. The event data are collected from official databases, including the US Food and Drug Administration’s Orange Book; clinicaltrials.gov; Web of Science; and media sources, such as the Wall Street Journal. The collected data span from the first date in each data source to December 31, 2018. The results reveal that Pfizer’s stock price is affected by drug approval dates and trial judgment dates prior to media reports. However, the stock prices of other competitors are not correlated with Pfizer’s stock price. Notably, a time gap between reporting from the Wall Street Journal and other data sources is identified. The results of this study can be useful for investors in the global stock market and for pharmaceutical companies exploring resource allocation in drug research and development strategies.

Keywords

• drug development process
• event study
• pfizer