UNIVERSITY OF PIRAEUS
The Department of Banking and Financial Management announces the upcoming seminar with
Seminar Organizers: Assist. Prof. Michail Anthropelos, Prof. George Skiadopoulos
Abstract: We analyze firms’ decisions to invest in incremental and radical innovation, focusing specifically on pharmaceutical research. We develop a new measure of drug novelty that is based on the chemical similarity between new drug candidates and existing drugs. We show that drug candidates that we identify as ex-ante novel are riskier investments, in the sense that they are subsequently less likely to be approved by the FDA. However, conditional on approval, novel candidates are, on average, more valuable—they are more clinically effective; have higher patent citations; lead to more revenue and to higher stock market value. Using variation in the expansion of Medicare prescription drug coverage, we show that firms respond to a plausibly exogenous cash flow shock by developing more molecularly novel drug compounds. This pattern suggests that, at the margin, novel drugs are perceived to be as more valuable ex-ante investments than me-too drugs.
Dimitris Papanikolaou is a Professor of Finance at the Kellogg School of Management of Northwestern University. His research interests lie at the intersection of finance and innovation. He works on a variety of topics including the measurement and valuation of intangible assets; the effects of technological shocks on asset returns, firm investment decisions, and income inequality; and the effects of financing frictions on investment and employment. He is an NBER and IFFR fellow (www.iffr.gr). Professor Papanikolaou holds a Ph.D. from the Massachusetts Institute of Technology, an M.Sc. in Finance, from the London School of Economics and B.A. in Finance from the University of Piraeus, Greece.