Empirical Research On Valuation Drivers Of Pharmaceutical Industry

The pharmaceutical industry is a strategic industry that affects thenational interest and people’s livelihood. In recent years, with the development of China’s economy and the arrival of an aging population, the pharmaceutical industry showed rapid development momentum. Up to the end of 2013, China’s pharmaceutical industry sales reached 2.06 trillion Yuan, ten years’CAGR of 20.04%, much higher than GDP growth. The pharmaceutical industry is occupying a more and more important position in the national economy. As for the stock market, until March 2014, the listed pharmaceutical companies reach 188. Since 2006, the pharmaceutical industry index has increased by more than 646 percent. Pharmaceutical companies are getting more and more attention from people.Descriptive statistical methods, correlation analysis and Stepwise Regression methods are employed in the empirical researchon valuation drivers of pharmaceutical industry.The study found that the pharmaceutical industry has a significant correlation with the health insurance fund expenditures and aging population, while shows a weak correlation with the GDP growth rate, nor the inflation rate.That indicates the pharmaceutical industry has significant demand-driven effects and weak correlation with the Macroeconomic. The research constructs a multiple linear regression model includes 12 variables of the micro industry level, and selects a most significant regression model by Stepwise Regression methods. The study found the pharmaceutical industry PE ratio is significantly affected by the net profit growth, management expense ratio, accounts receivable turnover, the turnover of stock and the national policy,indicating that the pharmaceutical industry is a significant innovation-driven industries, while extremely sensitive to policies.