Reguliavimo agentūrų sprendimų įtaka vaistus vystančių kompanijų akcijų vertei ; Regulatory announcements and stock price reactions of drug developing companies

Abstract

The purpose of this thesis was to analyse market reaction to announcements from the governmental regulatory authorities after the sponsoring pharmaceutical companies had filed during 2010-2015 for an approval of a newly developed medicinal product, more specifically – a drug. The pharmaceutical Research and Development process usually requires many years of dedicated work with substantial investments and the regulatory decision represents the final hurdle for the companies to market their new products. Event study is one of the most popular methods analysing such developments with calculated abnormal returns allowing to estimate the significance of the investor's reaction. Significant abnormal returns before the event were interpreted by some researchers in the past as a potential sign of the insider trading. Another method used in the study was the analysis of compounded stock price returns. The results of the study showed that the market reacts to the US regulatory announcements, but ignores the European counterpart. The information during the event window is reflected in the share price rapidly and efficiently and no clear signs of the insider trading were obtained during this study. Results also confirm the asymmetrical market reaction effect to important events, which was described a number of times previously in the literature. Findings of this study are important consideration aspects for managers of innovative companies. It is suggested that especially asymmetric reaction should be recognised as a risk, which should be properly incorporated into enterprise risk management systems.