The impact of external shocks on the performance and valuation of big pharmaceutical companies

Kyprianou, Maria (2022-01)


The twenty first century was full of surprises. A deadly virus called Covid-19 has risen that threatens the humanity and plagues each corner of the world. By the occasion of this current crisis many questions were raised such as what the real impact of this pandemic was and how the pharmaceutical companies which stand at the front-line against this enemy, experience this shock. Looking back at the past however, we can identify other external crises that surprised the business world and stood out; the Dot-com bubble of 2000-2001 and the 9/11 Terrorist Attack (DC911) as well as the Global Financial Crisis (GFC) of 2007-2008. Based on the analysis of the financial statement of six large pharmaceutical companies in Europe and United States and through the calculation of certain financial ratios as well as valuation methods that were conducted in this paper, it can be concluded that: the first crisis -DC911, did not affect in a significant level the pharmaceutical industry as compared to the GFC which it has severely affected the liquidity and solvency of the pharmaceutical companies under investigation. Moreover, the current pandemic, Covid-19 (C-19) had the most impact on the industry especially during the first year of its outbreak. The following year, 2021, can be described as an adaptive year for the sector and a milestone for their future operation and prosperity as the virus will continue to exist among us and the world should learn how to live and survive along with it.