The relationship between intangible assets with financial performance of pharmaceutical firms / Amirah Ab Karim

The competitive advantage of Pharmaceutical industry determined by the firms' ability to generate new knowledge that can produce patents and new medicines turned into marketable products. This industry presents an asset-rich sample of company and high value of drugs. Furthermore, the industry has similar product life cycle, financial structure and operating expenses for the valuation of intangible asset. The imperfection reports of intangible assets of the Pharmaceutical firms create difficulties in future value creation. In order to makes a good investment decision and accurate cash flow forecasting, the largest Pharmaceutical firms voluntarily disclose drug product of sales revenue enabling calculation of future cash flow. The study aims to investigate the relationship between the financial performance indicators with the Intangible Assets of pharmaceutical firms globally. The period of research observation is over the past 10 year's period from 2007 to 2016. Furthermore, the 40 companies selected from the population of sample from Top 50 Global Pharmaceutical Companies by prescription sales and R&D spending in 2015 (in billion U.S dollars) sourced from The Statistics Portal. There are 10 companies excluded due to unavailable R&D Spending prescription and due to incomplete data from DataStream sources. Through this research, its help the investor in providing additional information about relationship between Intangible Assets (IA) with selected financial performance indicators which the Intangible Assets (IA) values has ability to measure the pharmaceutical companies' financial performance. The 5 selected financial performance indicators as well as for these research independent variables is Return on Asset (ROA), Return on Investment (ROI), Sales Growth (SG), Total Assets Turnover (TATO), and Free Cash Flow (FCF). For dependent variable, this study used Intangible Assets (IA) to value the company financial performance. Secondary data obtained from UiTM Databases as for all literatures review and DataStream collection in numeric form to test the hypothesis by using E-Views software. The data been analyzed by using descriptive test, correlation analysis, pooled ordinary least square (OLS) regression and lastly normality test to find out the relationship between the variables. The result shows that Return on Assets (ROA) has negative insignificant relationship with Intangible Assets (IA).