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The Impact of the Launch of a New Drug on Pharmaceutical Companies' Stock Performance

Student: Innokentiy Genokhov

Supervisor: Victoria V. Dobrynskaya

Faculty: Faculty of Economic Sciences

Educational Programme: Joint HSE-NES Undergraduate Program in Economics (Bachelor)

Year of Graduation: 2018

In this paper, I analyze investors’ reaction to the registration of new original drugs by pharmaceutical companies. These companies invest a lot of resources in the production of new medicines, while bearing huge risks. In this paper, on the example of the American pharmaceutical industry, I show that the successful registration of a new chemical molecule by the FDA is a strong signal that positively influences the excess return of pharmaceutical companies’ shares. Also this work shows which factors influence investors’ behavior. In particular, I argue that the registration of new drugs associated with the development of a new chemical molecule has a greater impact on the return of shares than the registration of new drugs based on existing substances. Also, I analyzed the effect of the reviewing priority of a registered drug given by the FDA. The drugs that received the priority status of examination have the potential to improve current therapies, which also has a stronger positive effect on the return of shares of a pharmaceutical company.

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