Pakes, ArielYang, Leon2021-07-1920212021-06-172021Yang, Leon. 2021. Identification and Characterization of Post-Merger Pharmaceutical Innovation. Bachelor's thesis, Harvard College.28410953https://nrs.harvard.edu/URN-3:HUL.INSTREPOS:37368574With increases in both pharmaceutical transactions and innovation metrics in the 21st century, as well as the emergence of headline therapies such as CRISPR and regenerative medicine, a question arises: are transactions catalyzing or hindering innovation? With a dataset of pharmaceutical mergers and acquisitions from Capital IQ, I dive into this question and assess the effects of these transactions on innovation. By implementing my own synthetic control package in Python and using data on approvals from the FDA, R&D expenditure from Capital IQ, and clinical trial data from the Clinical Drug Experience Knowledgebase (CDEK), I construct synthetic controls and conduct both difference-in-difference analyses and placebo tests. I find that transactions are associated with a 0.597 increase in FDA approvals (in excess of controls) and a 13.0% increase in R&D expenditures (in excess of controls) three years post-merger. By characterizing acquired companies by their science, I find that many successful transactions involved the acquisition of oncology companies. Further, a large proportion of transactions are characterized by scientific overlap between the acquired and acquiring firms and a desire to capture later stage innovation. Additionally, I find that 6 of 11 gene therapy products were developed by companies/labs that were acquired by or partnered with larger pharmaceutical companies before FDA approvals. My findings suggest that pharmaceutical transactions may have a positive effect on innovation and that acquiring firms are motivated to capture and complete already promising therapies in later stages of development.application/pdfenConsolidationHealthcareInnovationEconomicsThesis or Dissertation2021-07-19