We examine the determinants and drivers of 112 mergers and acquisitions (M&A) activities exceed 50 million values in the pharmaceutical industry using COMPUSTAT, SDC and FDA data during the period 1980-2010 with random effect logit model. We find direct evidence on the relationship between an acquisition activity of a firm and its pipeline productivity and qualities. For the acquiring firms, the mergers are motivated by the decreasing trend in the pipeline productivity which is measured by new molecular entities (NMEs) approvals and the fewer top-sale drugs before merging. In the meantime, the research & development and advertising expense are having fewer impacts. For the target firms, the firms which are having higher drug quality and higher drug sales are more popular in the mergers and acquisitions target market. In addition, a higher research and development expense is also a significant indicator on the firm's "quality" which signals the higher possibility to be targeted.
