Regulatory Approval and Biotechnology Product Disclosures*^†

Abstract

This study examines the effect of regulatory approval on a firm's voluntary product-level disclosures. We focus on the US biotechnology industry, a setting that allows direct observation of whether firms disclose more information as products proceed through well-defined-though successively more complex and costly-regulatory hurdles. Consistent with predictions motivated by biotech firms' need to repeatedly raise capital, we find that firms disclose more as their products move to later stages in the development process, both when the products receive regulatory approvals as well as when they receive regulatory denials. In addition, these findings are consistent across phases of development as well as product disclosure categories and are accentuated for firms without internal sources of capital (i.e., lacking product revenue). Collectively, these findings reveal that biotechnology firms respond to the considerable incentives to provide enhanced product disclosure and thus facilitate their ongoing need for capital to proceed through subsequent stages of product development.

Corporate R&D Investments Following Competitors’ Voluntary Disclosures: Evidence from the Drug Development Process

“…7 Prior studies have documented that the extent of R&D disclosure (in IPO prospectuses, annual reports, new product press releases, patent disclosures) is either not associated, negatively associated, or positively associated with various measures of competitive pressure (Guo, Lev, and Zhou [2004], Merkley [2014], Cao et al [2018], Glaeser and Landsman [2021], Enache, Li, and Riedl [2022]).…”