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<p>The corporate cost of pharmaceutical failures can be high since failure indicates a reduction in expected future cash flow and can alter a firm’s corporate control market activity. We identify 282 pharmaceutical failures from 2000 to 2017. Paused or canceled drug trials represent the costliest failures. We document a positive relationship between past pharmaceutical failures and the likelihood of a merger offer. Targets suffering pharmaceutical failures receive lower takeover premiums than other targets. Acquirers of these targets have lower post-merger buy-and-hold abnormal returns. Our results indicate that acquirers are justifiably wary about bidding on firms with pharmaceutical failures.</p>

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Bad Medicine: Pharmaceutical failure and the corporate control market

  • 期刊论文

  • 发表日期：

    2026年3月17日

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  • Omer Unsal,
  • Reza Houston

摘要

The corporate cost of pharmaceutical failures can be high since failure indicates a reduction in expected future cash flow and can alter a firm’s corporate control market activity. We identify 282 pharmaceutical failures from 2000 to 2017. Paused or canceled drug trials represent the costliest failures. We document a positive relationship between past pharmaceutical failures and the likelihood of a merger offer. Targets suffering pharmaceutical failures receive lower takeover premiums than other targets. Acquirers of these targets have lower post-merger buy-and-hold abnormal returns. Our results indicate that acquirers are justifiably wary about bidding on firms with pharmaceutical failures.