We examine the determinants and drivers of 112 mergers and acquisitions (M&A) activities exceed 50 million values in the pharmaceutical industry using COMPUSTAT, SDC and FDA data during the period 1980-2010 with random effect logit model. We find direct evidence on the relationship between an acquisition activity of a firm and its pipeline productivity and qualities. For the acquiring firms, the mergers are motivated by the decreasing trend in the pipeline productivity which is measured by new molecular entities (NMEs) approvals and the fewer top-sale drugs before merging. In the meantime, the research & development and advertising expense are having fewer impacts. For the target firms, the firms which are having higher drug quality and higher drug sales are more popular in the mergers and acquisitions target market. In addition, a higher research and development expense is also a significant indicator on the firm's "quality" which signals the higher possibility to be targeted.

This article examines predictors of the future market value of microcap pharmaceutical companies. This is problematic since the large majority of these firms seldom report positive net income. Their value comes from the potential of a liquidity event such as occurs when a key drug is approved by the FDA. The typical scenario is one in which the company is either acquired by a larger pharmaceutical firm or enters into a joint venture with another pharmaceutical firm. Binary logistic regression is used to determine the impact of the firm's drug treatment pipeline and its investment in research and development on the firm's market cap. Using annual financial data from 2007 through 2010, this study finds that the status of the firm's drug treatment pipeline and its research and development expenses are significant predictors of the firm's future stock value relative to other microcap pharmaceutical firms.