Objectives: Mergers and acquisitions (M&As) have been widely used as a business strategy to replenish the acquiror’s product pipeline and to compensate for the potential steep revenue loss due to expiring patents in the pharmaceutical industry. However, evidence of the impact of M&As on pharmaceutical companies’ financial outcomes has been inconsistent. The purpose of this study was to assess the financial outcomes of M&As on the largest pharmaceutical companies in the US.

Methods: The secondary financial data of the study companies were obtained from the Securities and Exchange Commission public database of filings. A convenient sample of the highest-value pharmaceutical M&As that were pursued by US acquirers between 2000 and 2017 was selected. The analyses were conducted in two steps. First, a case-by-case descriptive analysis was conducted to compare the percentage change in each financial ratio before and after the M&As. Then the group average of each financial ratio for the study M&As was compared between the pre- and post-M&A group. The statistical differences between the pre- and post-M&A average ratios of the sample were tested using paired sample t-tests.

Results: Twelve M&As were studied. The results showed that the debt-to-equity ratio increased, and the quick ratio decreased numerically after the M&As. The operating margin of the sample decreased significantly after the M&As. Most companies experienced a transition where the operating margin decreased immediately after the M&As due to the expanded operating costs, and rebounded in the second year following the M&As. However, some companies managed to contain the operating costs after the M&As; thus, increased the operating margin immediately after the M&As.

Conclusion: The results of this study provided data-informed evidence for economists, marketing personnel, and other professionals who are interested in the pharmaceutical industry on the financial viability of pharmaceutical M&As as a potential remedy for expiring patents.