New drug discovery and Hedonic Q: A new interpretation

Abstract

Valuing intangible assets is crucial for both shareholders and stakeholders. This study revisits the Hedonic Q approach in the context of new drug discovery, employing a heterogeneous, time-varying difference-in-differences methodology to examine its effect on Hedonic Q. The findings suggest that new drug discovery has a positive and competitive impact on Hedonic Q, albeit with a lagged effect. Products in the early phases of drug discovery, including Phases I, II, and III, do not yield a positive impact on valuation in the short term. This study introduces an innovative framework to analyze the effect of new drug discovery on firm valuation in the pharmaceutical sector.