Jorge Pérez-Rodríguez

Beatriz G Valcarcel

Jorge ; Pérez-Rodríguez

Jorge V Pérez-Rodríguez

Beatriz Gl Valcarcel

C22 -Time-Series Models < C2 -Econometric Methods: Single Equation Models < C -Mathematical and Quantitative Methods, G14 -Information and Market Efficiency|Event Studies < G1 -General Financial Markets < G -Financial Economics, I11 -Analysis of Health Care Markets <

Keywords: Abnormal daily returns, Stock prices and GARCH, GARCH, pharmaceutical, biotechnology, clinical trials, FDA approvals, FDA approvals Abnormal daily returns, stock prices, GARCH, pharmaceutical, biotechnology, clinical trials, FDA approvals JEL codes: C22, G14, I11

Do product innovation and news about the R&D process produce large price changes and overreaction? The case of pharmaceutical stock prices

Introduction

The economic literature has profusely documented the positive correlation between innovation and company profitability [START_REF] Geroski | The Profitability of Innovating Firms[END_REF][START_REF] Roberts | Product Innovation, Product-Market Competition, and Persistent Profitability in the U.S. Pharmaceutical Industry[END_REF]Grabowski et al., 2002, among others).

However, empirical evidence linking individual new products and company performance is not so generally available. Recent studies empirically examined the effects of new product development outcomes (approval or rejection of new drugs, or the expression of serious concerns about their application) on the overall commercial performance of pharmaceutical companies [START_REF] Sharma | Linking Product Development Outcomes to Market Valuation of the Firm: The Case of the U.S. Pharmaceutical Industry[END_REF]. Others have highlighted the financial impact of new product presentations and the supporting role of company resources and organizational structure, by analyzing business sectors such as agriculture, food manufacturing or pharmaceutics [START_REF] Lee | The Immediate Impact of New Product Introductions on Stock Price: The Role of Firm Resources and Size![END_REF]. However, these studies have only analyzed the impact of product approval on stock prices on or around the announcement or commercialization date. Our aim is to generalize them to the whole R&D process.

The pharmaceutical industry is a good setting for that research; managers and investors in pharmaceutical and biotech firms might be expected to be particularly sensitive to the R&D process. In all R&D processes there are two particularly significant moments, those of discovery and innovation.

In the case of the pharmaceutical industry these tend to be considerably separated in time, because the R&D of new drugs is a very lengthy (and costly) process. Unlike product developments in most other industries, the R&D process in the pharmaceutical industry contains clearly separated but highly correlated sequential phases. R&D in the pharmaceutical industry is riskier than in many other hightech industries, the process is lengthy, expensive and very uncertain in terms of human physiological [START_REF] Trusheim | Stratified medicine: Strategic and economic implications of combining drugs and clinical biomarkers[END_REF]. Moreover, there is intense global competition, and strict government regulations are applied [START_REF] Xu | R&D strategy and stock price volatility in the biotechnology industry[END_REF]. This paper contributes to the literature on product innovation by empirically analyzing the relationships between large stock price changes and news produced during the drug R&D process. We study, on the one hand, whether drug innovation (the approval of a new drug) and other news items produced during the drug R&D process (i.e., other scientific news such as pre-and partial clinical trial results, recalls and withdrawals of new products) are related to extreme stock price changes, and on the other, whether there are short-term price movements in the opposite direction following an extreme one-day price movement (the overreaction and backlash hypothesis), that is, whether there exist systematic, and therefore predictable, patterns before and after such events.

Knowledge of these extreme prices could be important to pharmaceutical managers responsible for new products, who need to create realistic expectations about new products [START_REF] Sharma | Linking Product Development Outcomes to Market Valuation of the Firm: The Case of the U.S. Pharmaceutical Industry[END_REF] and so could be interested to know whether large price fluctuations accurately reflect new and unexpected scientific information or whether stock prices overreact to such information. Managers of multinational pharmaceutical companies, which generally have high liquidity and a diversified drug portfolio, could also be interested in knowing whether other news during the drug R&D process could affect their stock prices. A better understanding of the market overreaction effect has important implications and could be useful not only for managers, scholars and professionals, but also for the investors who wish to design investment strategies.

Our paper also contributes to the literature on large price changes by introducing a new method based on dynamic trigger values aimed at detecting abnormally large returns. In contrast to the approach taken by [START_REF] Wong | Abnormal Stock Returns Following Large One-day Advances and Declines: Evidence from Asian-Pacific Markets[END_REF], our method allows us to consider the conditional risk associated with stock prices. The model used in this study is an ARMA-GARCH type dynamic econometric model for the daily market-adjusted percentage change in stock price, aimed at identifying abnormal spikes and drops. In Section 2 we briefly describe the empirical literature on large price changes and the linear R&D process in the pharmaceutical industry, and we formulate our hypothesis. In Section 3 we describe data and methods we used to identify abnormal daily returns, and then test the overreaction hypothesis. In Section 4 we provide the empirical results obtained, and these are discussed in Section 5.

Extreme price changes and the drug R&D process

Large price changes in the economic and financial literature

In general, large one-day price changes are caused by unexpected firm-specific or market information, for example, operating results or unanticipated governmental decisions [START_REF] Atkins | Price reversals, bid-ask spreads, and market efficiency[END_REF]Bremer et al., 1997, among others). In addition, unanticipated changes in the regulation of a business sector may cause a concurrent and abnormal change in stock prices, positive or negative [START_REF] Dowdell | The Tylenol incident, ensuing regulation, and stock prices[END_REF]. Empirical financial literature has analyzed these events in two ways: on the one hand, event study methodologies assess the share price impact of firm-specific events, thus allowing the researcher to measure the effects of a given economic event on the company's value. The usefulness of such a study comes from the fact that, given rationality in the marketplace, the effects of an event will be reflected immediately in stock prices [START_REF] Mackinlay | Event Studies in Economics and Finance[END_REF]. Studies have been devoted to investigating abnormal returns following large price changes, and some studies have examined whether short-term price movements in the opposite direction or price reversals occur following a one-day extreme price movement (i.e., the overreaction hypothesis). The issue of stock market overreaction is not a new one [START_REF] Beaver | Note on the behaviour of residual security returns for winner and loser portfolios[END_REF][START_REF] Debondt | Does the stock market overreact?[END_REF], and two measures for large price changes have been established: firstly, daily rates of returns are greater/less than or equal to predetermined trigger values (for example, ±10%). Using this methodology, authors such as [START_REF] Atkins | Price reversals, bid-ask spreads, and market efficiency[END_REF], Bremer and Sweeny (1991), [START_REF] Cox | Stock returns following large one-day declines: evidence on short-term reversals and longer-term performance[END_REF], [START_REF] Bremer | Predictable patterns after large stock price changes on the Tokyo stock exchange[END_REF], [START_REF] Challet | Limit order market analysis and modelling: on a universal cause for over-diffusive prices[END_REF], [START_REF] Farmer | What really causes large price changes?[END_REF], [START_REF] Weber | Large stock price changes: volume or liquidity?[END_REF] and [START_REF] Zawadowski | Short-term market reaction after extreme price changes of liquid stocks[END_REF], all daily rates of return that were significantly greater/less than their sample mean returns of about 2.5% as large price increases/decreases over the period.

The drug R&D process and abnormal returns in the pharmaceutical industry

The formal R&D process of a drug is its movement through the pipeline towards final approval.

The process, which is strictly regulated at every stage by the corresponding governmental authority, can thus be viewed as a linear model [START_REF] Hara | Innovation in the Pharmaceutical Industry: The Process of Drug Discovery and Development[END_REF] (Figure 1).

From the discovery of a new drug (patent) to the innovation (approval) time, some 12-15 years may pass. After product approval by governmental authorities, commercialization may then begin. Clinical trials will continue to be performed, and the drug may be found to have serious side effects, forcing the authorities to have it withdrawn from the market. Each stage/phase takes an average of 2-3 years, and exhibits a differential success rate [START_REF] Dimasi | Success rates for new drugs entering clinical testing in the United States[END_REF]. With respect to product innovation, a small number of studies have used event studies to examine the impact of new products on company value. The results obtained have been mixed. For example, [START_REF] Eddy | New product announcements and stock prices[END_REF] found no evidence that announcements of new products changed monthly stock returns. [START_REF] Woolridge | Stock market reaction to strategic investment decisions[END_REF] found that the stock market reacted positively to the news of product and/or market diversification, while [START_REF] Chaney | The impact of new product introductions on the market value of firms[END_REF] found new product announcements were expected to generate positive abnormal stock returns. All three studies focused on positive announcements, but ignored the consequences of negative ones related to the non-delivery of a new product that had been anticipated. In this sense, [START_REF] Sharma | Linking Product Development Outcomes to Market Valuation of the Firm: The Case of the U.S. Pharmaceutical Industry[END_REF] highlighted the importance of the effects of new product development successes and failures on overall pharmaceutical company performance.

Other studies analyzed overall R&D progress: [START_REF] Chan | The Stock Market Valuation of Research and Development Expenditures[END_REF]; [START_REF] Shi | On the trade-off between the future benefits and riskiness of R&D: a bondholders' perspective[END_REF]. [START_REF] Xu | R&D strategy and stock price volatility in the biotechnology industry[END_REF] studied the effects of R&D progress on the dynamics of stock price volatility of biotech companies and the post announcement drift. And on the other hand, by analyzing just certain aspects within the R&D process.

For example, some studies have focused on the effects of regulatory decisions on stock prices (fundamentally, by the Food and Drug Administration, FDA) such as drug approvals [START_REF] Sharma | Linking Product Development Outcomes to Market Valuation of the Firm: The Case of the U.S. Pharmaceutical Industry[END_REF][START_REF] Ahmed | The market return to pharmaceutical product approval[END_REF] or drug recalls and withdrawals (Jarrell and Peltzman, 1985; Marcus et al., 1987; Dowdell et al., 1992; Dranove and Olsen, 1994; or Ahmed et al., 2002; among others). 1 According to the efficient market hypothesis (EMH), stock prices reflect the correct valuation of a company and its future cash flows, in view of currently available public information. Large, abrupt changes in prices are the market reaction to unanticipated news that surprises the market. Are unexpected R&D news related to large price changes, and there exist short-term price movements in the opposite direction following an abrupt, extreme price movement? Our paper explores these questions.

1 Some studies have analyzed the effects of strategic alliances between pharmaceutical and biotech companies [START_REF] Nicholson | Biotech-Pharmaceutical alliances as a signal of asset and firm quality[END_REF] or company strategies [START_REF] Oberholzer-Gee | Merck's recall of rofecoxib. A strategic perspective[END_REF][START_REF] Efremidze | Firm Strategies and Stock Market Values in Biotechnology Industry[END_REF]. H2: There is a short-term backlash market reaction following extreme price variations of pharmaceutical stock prices related to drug innovation and other scientific news produced during the R&D process. Long-term traders profit from the predictable patterns identifiable in stock returns in such events. These two hypotheses are set against the null hypotheses that the market in pharmaceutical stocks does not respond abnormally to drug innovation news, and that the stock market does not feature an overreaction/backlash pattern with respect to drug innovation news (i.e., price reversal in the market does not take place).

Material and methods

Data

In our study we matched two databases, the first containing stock prices and stock market indexes, and the second, the launching of new products and news about scientific fundamentals in the pharmaceutical sector.

Stock prices and indexes

Our primary data set consisted of the daily closing prices adjusted for dividends and splits of various stock indexes and stock prices (Table 1). The specific firms we modelled were the largest ones

1) Approval of new drugs

Class 1 (or priority) "good news": approval of any new drug classified by the FDA as a "priority review drug", that is, any "drug that appears to represent an advance over available therapy," an innovation that promises to be disruptive. The FDA terms as priority review drugs those that fill an unmet need or that work better than competing drugs on the market. Priority review takes an average of six months, compared with the twelve-month standard review. In the database, the approval date was registered as the date of the event. We also included as class 1 "good news" the approval of biologics.

The approval of any other new drug (standard review) was considered class 2 "good news" and included in our database. Between 1989 and 2007, a total of 1721 new drugs were approved, of which 67 were biologic and 1654 chemical. Of the latter, 1297 (78.4%) were classified as standard and 357

(21.6%) as priority. The 17 companies in our study developed 620 new drugs, including 104 priority drugs that we consider class 1 "good news".

For a comparison based on the market rather than on medical innovation, we created an additional list of the approval dates of the top 200 drugs by sales in 2007 in the US market (Source: IMS Health Inc.). The top ten by sales are listed in Table 2.

3 Our interest is in relating medical innovation to short term changes in stock prices. What scientific drug results surprise or frighten the market? To find out, we compared changes in the stock prices of pharmaceutical companies with the composite index for each stock market, taking into account that good news for one company can be bad news for others.

2) Other "good news" on advances in medical knowledge

Another kind of good news related to medical innovation is the publication of promising partial results of clinical trials. We searched the clinical trial database (http://clinicaltrials.gov/) and major medical journals (through Medline) for scientific news related to experimental drugs that were published on or around the day of an extreme abnormal return.

3) "Bad news"

Bad news includes unexpected bad results of clinical trials, and alerts, warnings and withdrawal decisions taken by regulatory agencies. Bad news about a specific drug typically begins with a negative result -adverse effect-in a medical journal, followed by one or more warnings from the FDA or other regulatory agency. During the period under study, several severe, well-publicized safety issues alarmed consumers.

Some warnings are specific to a particular company (as with Bayer's Baycol), and others are more general. Examples of the latter were the warning about the risk of child and adolescent suicide due to antidepressants (Summer, 2006), evidence of serious adverse effects of hormone substitution therapy, withdrew 41 drugs, 18 of them sponsored by firms in our study. We checked for any match between the withdrawal dates and the dates of abnormal price falls.

3. Other sources: The National Library of Medicine database clinical alerts on drugs, media sources (Archives of The New York Times, The Financial Times and The Wall Street Journal), and the relevant company websites.

Methods

Detecting extreme returns with dynamic trigger values based on standardized abnormal returns

In this paper, we identify extreme abnormal daily returns by using dynamic trigger values determined by analysis of each company's standardized market-adjusted returns. For this purpose, a dynamic econometric model for market-adjusted changes in daily stock prices was constructed, in order to detect extreme observations (outliers). A simple algorithm based on standardized abnormal returns 4 Recalls are "actions taken by a firm to remove a product from the market. Recalls may be conducted on a firm's own initiative, by FDA request, or by FDA order under statutory authority". A Class I recall is "a situation in which there is a reasonable probability that the use of or exposure to a violative product will cause serious adverse health consequences or death" 12 was then used to determine whether or not each of these trading days was an outlier. 5 When extreme observations were detected, they were matched with the news databases.

Let mt R and it R be the market index return and the stock return, respectively, for security i

( N i ,.., 2 , 1 =
, where N is the number of shares) for day t ( T t ,.., 2 , 1 =

, where T is the sample size or the number of daily observations in the estimation period).

Our approach for identifying outliers is based on the following steps:

Step 1. Estimate an ARMA(p,q)-GARCH(1,1) model for the market-adjusted returns

( it it mt AR R R = -
). These models can be written as:

( )

1 1 1 1 2 1 2 2 2 1 1 ... ... , 1,..., ~0, , it it p it p it it q it q it t it it it it AR AR AR t T N w µ φ φ ε θ ε θ ε ε ψ σ σ αε βσ - - - - - - - = + + + + - -- = = + + [1]
where µ is a constant term; , 1,..., ; , 1,..., Step 2. We calculated the standardized residuals (re-scaled abnormal returns) as

it it it A z σ= , where it it it R A AR A - =
is the abnormal return ( it R A ˆis the market-adjusted return), and it σˆis the conditional standard deviation.

Cumulative abnormal returns (CAR) following large price changes

In order to investigate whether abnormal returns are present, the returns on days following a large price change were compared with the expected return, estimated using the market model. We used the Filson ( 2004)'s event study methodology to calculate the cumulative abnormal return around the large abnormal return detected, and to test the overreaction hypothesis. The regression equation is written for the i-th stock as

it J j jt i ij mt i it u D R R ∑ = + + + = 1 , γ β α
, where J is the number of events for company i, jt i D , is a dummy variable which takes the value of one during the event window j (which includes 1 τ days before the event and 2 τ days after it), i α , i β and ij γ are estimated coefficients, and it u is the error term on date t.

( )

2 1 ,τ τ ij CAR
of event j for the i-th stock is calculated by multiplying ij γ by the length of the event window, which is 1 2 τ τdays. Therefore, ( ) ( )

1 2 2 1 , τ τ γ τ τ - × = ij ij CAR . Its variance is equal to ( ) ( ) ( ) ij ij CAR γ τ τ var , var 2 1 =
and, therefore, the t-statistic value of event j is the same as that of ij γ .

Overlapping events are ranked by importance and only the highest ranking event is included. This estimation method eliminates double counting of abnormal returns on overlapping events. The mean cumulative abnormal returns for all companies ( ______ CAR or cross-section mean CAR) with respect to the pre and post-event periods ( ( )

1 , 1 ______ - -τ CAR and
( )

1 1 ______ , τ τ + - CAR
, respectively) are calculated. Simple cross-sectional t-statistics are used to test the significance of the mean CAR for different periods. Other 7 Taking directly stock returns (and not standardized abnormal returns), [START_REF] Bremer | The reversal of large stock price decreases[END_REF], [START_REF] Cox | Stock returns following large one-day declines: evidence on short-term reversals and longer-term performance[END_REF], [START_REF] Park | Market microstructure explanation for predictable variations in stock returns following large price changes[END_REF] and [START_REF] Bremer | Predictable patterns after large stock price changes on the Tokyo stock exchange[END_REF] consider as triggers values around 10 ± percent. [START_REF] Wong | Abnormal Stock Returns Following Large One-day Advances and Declines: Evidence from Asian-Pacific Markets[END_REF] uses dynamic trigger values around 2.5.

CAR AR ≡

) and after one day ( ( ) ( )

1 , 1 1 ______ ____ + + ≡ CAR AR
).

Matched samples to search for predictable patterns

We matched the database containing the dates of outliers with the database of news items describe in section 3.1.2. Although there may be some delay in the circulation of news to patients and doctors [START_REF] Embi | Responding 24 rapidly to FDA drug withdrawals: design and application of a new approach for a consumer health website[END_REF], market watchers tend to get information quickly. We therefore assumed that market reactions began on the same day as news disclosures, but we also checked for possible leads and lags of two trading days.

Overreaction hypothesis

We analyzed both pre and post-event periods. Pre-event periods are interesting because they may indicate insider's information held by some agents, and post-event periods shed light on matters such as market efficiency. The overreaction hypothesis implies a violation of the Efficient Market Hypothesis (EMH), suggesting that, in some circumstances, future stock prices cannot be predicted from past stock prices. We tested this hypothesis by analyzing whether there are short-term price movements in the opposite direction, i.e. whether price reversals occur, following a one-day extreme price movement.

Under the EMH, a large price change should not be a trading signal after which a systematic, and potentially profitable, pattern is present in the data. If there are large stock price increases and

Large abnormal returns during the R&D process

We identified a total of 261 outliers in the market-adjusted returns of the 17 pharmaceutical companies. 8 The average number of extreme abnormal returns per company in the period under study was 15.3 (Takeda with 7.3 had the fewest, Roche with 24, the most). From our documentary sources, a plausible cause was found for 62% of these outliers. 9 51 (21%) of the extreme abnormal returns correspond to causes identified as new scientific information, while 43% were economic in nature. Of the scientific news items, 20 were good and 31 bad. Most of the abnormal price changes occurred on the same day or the day after the news item, but occasionally the price spike or drop anticipated the news by a day.

Approvals of new drugs

The approval by the FDA of innovative priority drugs in few cases has a significant impact in the 2 ± days interval around the approval date, whether on the stock price of the innovative company or on those of its competitors. Innovations and clinical good news appear to be factored into stock prices well in advance of the approval date, so that approval "news" fails to surprise the markets. The same holds for the approval days of the top ten drugs in the US market.

Only 9 approval dates among those for the 620 priority and standard new drugs were associated with positive abnormal spikes in the stock prices of the companies in question (Figure 2). Of these 9 drugs, 4 were biologics, all targeted at cancer, and the others were on the list of the 200 drugs most sold in 2008. 8 As we suspected that the residuals were not conditionally normally distributed, we computed the quasi-maximum likelihood covariance and standard errors by the method in [START_REF] Bollerslev | Quasi-maximum likelihood estimation and inference in dynamic models with time varying covariances[END_REF]. 9 A detailed table with links to online sources is available on request. (Period 1989(Period -2008)).

Clinical trials results, recalls and withdrawals

In some cases, extreme abnormal price spikes prior to the approval of a new medicine corresponded to better than expected results of clinical trials. An example of this is ReoPro (Abciximab), a monoclonal antibody marketed by Eli Lilly and produced by Centocor Inc. It was first approved on May 11, 1997. On that date no outlier was detected, but a year and a half earlier, on October 25, 1995, unexpectedly good results from a clinical trial boosted Eli Lilly and Centocor stocks. Another example is Eli Lilly's Zovant, the tentative name for the first drug against sepsis. It was ultimately approved by the FDA on November 21, 2001 (no abnormal price spike) with the name Xigris. The market had earlier acknowledged the success of clinical trials with abnormal returns on June 29, 2000. New biotech drugs to treat cancer and other conditions did surprise the markets. We identified 10 positive outliers (4 from Genentech) associated with the announcement of clinical trial results for cancer treatments (Figure 3). The greatest extreme returns were those of biotech monoclonal antibodies for cancer treatment.

Avastin, a treatment for colon and colorectal cancer (May 19, 2003) provided an abnormal spike for Genentech of +39%; two years later, positive results for a lung cancer medicine (March 14, 2005) led to a +21.8% abnormal spike; and a month later, on April 15, the results of the preliminary trial of a treatment for breast cancer gave Genentech another price spike, this time of 18.3%. Because Roche owned a majority of Genentech, Roche's price also soared.

Negative results of clinical trials, the withdrawal of drugs from the market, delays and FDA recalls were responsible for 31 negative outliers, 8 of them with abnormal drops greater than 15%, and 9 others between 10 and 15%. These three types of results affected almost all the companies under study.

Thus, the withdrawals from the market, voluntary or imposed, of Omniflox (Abbott, June 8, 2002), Baycol (Bayer, August 8, 2001), Leukine (Bayer, January 22, 2008), Propulsid (Janssen, a subsidiary of Johnson & Johnson, announced March 24, 2000), and Vioxx (Merck, September 30, 2004) led to extreme abnormal drops in stock prices. The market tended to fall lower than the expected loss to cash flow, not just because of an expected drop in sales, but also because of the risk of litigation and the loss of goodwill affecting the company as a whole.

Price reversal: are there predictable patterns? Testing the EMH

Table 3 has two panels: Panel A shows results based on all large price changes (negative and positive). Panel B shows the results for large price changes attributable to plausible causes related with drug innovation, presented in section 4.1 above. Both panels show pre and post-event periods related to large price changes, together with the mean abnormal returns (i.e.

( )

0 ____ AR
or mean abnormal return on event time 0) for the event date.

Mean returns for the event date are 7.03% (positive large abnormal returns) and -8.06% (negative large abnormal returns), respectively, with both values being statistically significant (see table 3 , respectively)

are not statistically significant. No clear (i.e. statistically significant) signal was found, after a significant price change, in the direction opposite to the trend. In other words, the prices continued to move in the direction of the large price movement for some time. Similar results were found by [START_REF] Cox | Stock returns following large one-day declines: evidence on short-term reversals and longer-term performance[END_REF], who reported that abnormal longer-term returns are negative after a large one-day fall. Hence, our main conclusion is that, for the stocks considered, which feature high market liquidity, overreaction did not lead to subsequent price reversals, either in the short or the long term. Therefore, large price changes of the type examined are not systematic and thus not potentially profitable. On the other hand, the mean cumulative abnormal returns between 2 ± days is statistically significant for positive and negative large abnormal returns, at 9.85% and -12.76%, respectively, and it is greater for negative large price changes than for positive ones. approval). Abnormal returns for the event date were positive for FDA approvals, good scientific news and positive extreme price changes related to other news. These results are in line with [START_REF] Woolridge | Stock market reaction to strategic investment decisions[END_REF] and [START_REF] Sharma | Linking Product Development Outcomes to Market Valuation of the Firm: The Case of the U.S. Pharmaceutical Industry[END_REF]. The effect of good news released before the innovation date is larger than the effect of good news release after that date. However, no price reversal was observed. Although FDA approvals produced greater abnormal profitability than did good scientific news, the largest effects on profitability were produced by other media news. In fact, the largest spike was caused by positive other media news and the sharpest fall, by negative other media news. Drug innovation (FDA approvals and good scientific news) was always associated with positive abnormal stock returns.

Discussion

This paper discusses the relationship between innovation and other news produced during the drug R&D process, and the stock market price fluctuations of leading international pharmaceutical firms.

We examined extreme changes in daily stock prices to identify outliers; these outliers were then matched to approvals of new products, and other scientific and regulatory news. In all, we identified 261 abnormal market-adjusted daily returns. As a rule, these returns occurred on the same day as or the day after a significant news item, but on rare occasions they occurred a day before, or several days after, the news was published.

Our study concludes that there is a great deal of variability among recalls and withdrawals; some have considerable effects while others have none at all. All drugs, of course, are not equal; some 22 develop a high level of demand, or account for a large share of the company's total sales, while some have only small sales.

Since the FDA generally makes its withdrawal announcements some time before its European equivalent, the EMEA, abnormal returns generally occur on the day of the FDA announcement and not when the EMEA notifies the same drug's compulsory recall from the European market.

In summary, of the 261 extreme abnormal price movements found, only 10 (3.8%) corresponded to the launching of new products. Those 10 represent only 0.6% of the 1721 new drugs approved in the US during the period in question (620 of the 1721 were manufactured by the firms in our sample). The R&D process and the approval of new drugs are highly regulated and standardized, and so investors are able to take positions in the market on the basis of the partial information published regarding previous clinical trials. On the negative side, 31 of the 261 abnormal returns (11.9%) corresponded to recalls of drugs because of unacceptable side effects.

We found no evidence of market overreaction or backlash. Therefore, we conclude that large price changes do not lead to subsequent price reversals, either in the short or the long term, for the pharmaceutical stocks. There was no overreaction in the shocks associated with the introduction of new products. The efficient market hypothesis, thus, is fulfilled, preventing traders from being able to take advantage of knowledge of systematic patterns in market reactions following events related to innovation.

Our study has some limitations and potential biases. The media give more play to bad news than to good, and possibly the fact that there were 31 items of scientific bad news as outliers, as opposed to 20 good ones, is due to that publication bias. Another potential bias is temporal, since the companies' websites include press releases only for recent years and hence the detection of attributable causes for outliers is more likely for recent years than for the 1990s. This bias applies in particular to companies that resulted from mergers during the period under study, like Novartis and Sanofi-Aventis. A third potential bias is related to size and place. The press in general is more likely to publish news about big

  price reversals during the first three post-event days on all stock markets investigated, including NYSE, AMEX, NASDAQ and TSE. Secondly, other studies have used dynamic trigger values based on a company's expected returns and volatility; for example,Wong (1997) defined

Figure 1 .

 1 Figure 1. Formal drug R&D process.

  Some extreme price movements reflect unexpected scientific new information produced during the drug R&D process, and affect the daily close-to-close stock prices of pharmaceutical firms.2

  market according to the Forbes ranking of 2005 (www.forbes.com/lists). The data were obtained from Reuters (American composite indexes) and Bloomberg (US and European stock prices and European composite indexes). The time period covers 18 years in which there were important discoveries and advances in therapy, as well as withdrawals of drugs from the market and serious warnings of adverse effects. All data are collected toMarch 25, 2008.

  the i-th stock, where ω, α and β are unknown parameters, and α+β<1 is the persistence condition. The estimation was made by maximum likelihood (by using the Berndt, Hall, Hall and Hausman algorithm).

  6

  specifically, we considered as outliers for the i-th company those which exceeded 4 ± standard deviations from the mean of

  significant and their signs are negative, then there exists price reversal or overreaction. If there is a large fall in the stock value and significant and their signs are positive, then there exists price reversal or overreaction. Otherwise, no overreaction is found.

Figure 3 .

 3 Figure3. Extreme abnormal returns associated with scientific news(Period 1989(Period -2008)).

  with company news announcements concerned the failures of clinical trials. This was the case of AstraZeneca's clinical trialNXY-059 (October 26, 2006). The most dramatic stock price fall was Merck's Vioxx (31.3% drop in a single day), followed by the July 9, 2002 publication of a study of the risk of breast cancer associated with the hormone substitution drug Prempro (Premarin) (a 25.4% drop for Wyeth); third place corresponded to the April 19, 2000 postponement of the approval process of Vanlev following poor clinical trial results (Bristol fell 24%); and fourth place to Bayer's withdrawal of Baycol (17%).Several other bad news items are related to FDA decisions, for example FDA restrictions on the use of Aranesp in cancer patients(May 10, 2007); the FDA's delay in granting approval of Eli Lilly´s Duloxetine(September 3, 2003); the FDA's rejection of the anti-obesity drug Rimonabant (Sanofi-Aventis, June 14, 2007); the FDA's warning about cardiac events caused by Pioglitazone HCl (marketed as Actos and Actoplus, Takeda, August 14, 2007); and the FDA's rejection of the Wyeth drug Pristiq for treatment of hot flushes and other menopausal symptoms(July 24, 2007).

  ones, and the American press is more likely to publish news about American companies than European or Japanese ones. For this reason we found only one plausible scientific cause for a Takeda outlier, while the great majority of abnormal returns of the large American companies Merck and Roche are amply reflected in The New York Times Business section.

Table 1 .

 1 Indexes and top pharmaceutical companies included in this study.

	Name	Market	Since
	NYSE COMPOSITE	NYSE	January 3, 1966
	NASDAQ Global Select Market	NASDAQ GS	February 4, 1985
	SMI	VIRT-X	July 1, 1988
	FTSE	LSE	January 3, 1984
	CAC	Euronext Paris	July 9, 1987
	NIKKEI	TSE	January 1, 1980
	ABBOTT LABORATORIES	NYSE	July 28, 1980
	AMGEN INC	NASDAQ GS	January 3, 1984
	ASTRAZENECA PLC	LSE	May 12, 1993
	BAYER AG-SPONSORED ADR	NYSE	May 9, 1995
	BRISTOL-MYERS SQUIBB CO	NYSE	July 28, 1980
	GENENTECH INC	NYSE	July 19, 1999
	GLAXOSMITHKLINEPLC	LSE	October 28, 1991
	JOHNSON & JOHNSON	NYSE

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Table 2 .

 2 Top ten 2007 drugs, ranked by sales in the US market. The data sources are IMS Health Inc and FDA. Chemical types are 1= new molecular entity, 2= new ester, new salt, or other noncovalent derivative, 4= new combination; and B= biologic; and the review classifications are P= priority review drug ("A drug that appears to represent an advance over available therapy"), and S= standard review drug ("A drug that appears to have therapeutic qualities similar to those of an already marketed drug").

				Chemical	Review
	Number Brand name	Approval date	type	classification Company
	1	Lipitor	December 17, 1996	1	P	PFIZER
	2	Nexium	February 20, 2001	2	P	ASTRAZENECA
	3	Advair Diskus	August 24, 2000	4	S	GLAXOSMITHKLINE
	4	Plavix	November 17, 1997	1	P	SANOFI AVENTIS
	5	Seroquel	September 26, 1997	1	S	ASTRAZENECA
	6	Singulair	February 20, 1998	1	S	MERCK
	7	Enbrel	November 2, 1998	B		INMUNEX
	8	Prevacid	May 10, 1995	1	S	TAP PHARM
	9	Aranesp	September 17, 2001	B		AMGEN
	10 Epogen	June 1, 1989	B		AMGEN
	Note:

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  /www.fda.gov/cder/aers/extract.htm). The FDA usually publishes one or more new items every week, and almost every working day there is an entry in the database. We restricted our search to Class I recalls. 4 2. The European Medicines Agency database of withdrawals from July 7, 2000 to January 31, 2008 (http://www.emea.europa.eu/htms/human/withdraw/withdraw.htm). During this period the EMEA

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	and the FDA public health advisory notice to limit the use of Cox-2 inhibitors, issued in December
	2004, due to the risk of cardiovascular events.
	We used three sources of data for bad news:
	1. FDA Recalls, Market Withdrawals and Safety Alerts information
	(http://www.fda.gov/medwatch/safety.htm), including the Adverse Event Reporting System Quarterly
	Data Files (http:/
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  Extreme abnormal returns associated with FDA approvals

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  panel A). The values corresponding to pre-event periods are not statistically significant, and thus we conclude there is no reflection of any insider's information held by agents. Furthermore, there was no clear

	evidence of a short or long-term stock price reversal following a sharp one-day price fall or rise. Our
	analysis shows that the average cumulative abnormal returns for one, two, five and ten days following a
	large price increase or fall (	______ CAR	( +	, 1	) 1 +	,	______ CAR	( +	, 1	+	2	)	,	______ CAR	( +	, 1	+	5	)	and	______ CAR	( +	, 1	10 +	)
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Table 3 .

 3 Overreaction tests for large stock price changes.

	____ AR	( ) 0	and	______ CAR	( ) 2 1 ,τ τ	between day 1 τ and 2 τ for large price changes (%). Period from September 1989 to January 2008.
						Panel A.

Price reversal for all large price changes Panel B. Price reversal for large price changes attributable to plausible causes

								Negative	Positive
									large	large		Good		Bad	Other
								abnormal	abnormal	FDA	scientific		scientific	media
									returns	returns	approvals	news		news	news
	Sample proportions on total abnormal returns			0.0352	0.0371		0.1216	0.4066
											[0.04]	[0.00]		[0.00]	[0.00]
												Before	After	Before	After	Negative	Positive
												approval	approval	approval	approval
	Pre-event periods	______ CAR	( -	, 10	) 1 -		-8.6400	-1.9441	-2.6600	1.7359	2.1827	-2.7770	-14.5748	-4.4020	2.5930
									(-1.66)	(-0.10)	(-0.58)	(0.32)	(0.43)	(-0.59)	(-1.19)	(-0.65)	(0.08)
	Event period (or large price change period)	( -( ) ______ CAR 0 ___ AR F ) 1 , 5 -o r	-3.8717 (-0.96) -8.0671 (-11.47)	1.8538 (0.79) 7.0341 (12.26)	-6.2470 (-1.02) 7.2995 (17.90)	1.3982 (0.03) 9.3570 (11.25)	2.2236 (0.63) 7.5726 (7.01)	-3.2768 (-0.85) -6.1305 (-4.39)	-8.1243 (-1.40) -8.6893 (-15.83)	-1.9955 (-0.34) -7.4894 (-19.77)	-2.4525 (0.13) 8.3406 (11.55)
	Post-event periods ( ) 2 , 2 ______ + -CAR Number of events	______ CAR ______ CAR ______ CAR ______ CAR	( + ( + ( + ( +	, 1 , 1 , 1 , 1	) 1 ) 2 + + ) 5 + 10 +	)	-0.5897 (-0.77) P 0.0323 (0.86) e e r -0.0634 (-0.31) 0.1517 (0.14) -0.4821 0.4455 (-0.50) (0.31) -0.8170 0.4130 (0.44) (0.25) -12.7618 9.8559 (-4.99) (3.85) 138 123 R e v i 0.1806 (0.09) 1.3464 (0.81) 2.6910 (0.95) 3.2560 (0.62) 6.9005 (2.53) 10 e w	0.6936 (-0.12) 2.5189 (0.05) 8.2609 (0.71) 9.0933 (0.20) 15.1325 (1.32) 7	4.7789 (16.46) 2.9121 (0.64) -8.2222 (-0.85) 16.1545 (0.74) 15.1393 (1.20) 4	0.1019 (-1.19) 2.6598 (0.26) 3.6073 (0.35) 1.9710 (-0.09) -11.6563 (-1.38) 16	2.3432 (0.62) 3.8541 (0.36) -10.2993 (-0.58) -11.4086 (-0.17) -12.9115 (-1.65) 16	-0.9800 (-1.66) -1.1948 (-0.75) -0.8150 (-0.28) -2.2360 (-0.48) -11.698 (-2.05) 66	0.9140 (0.92) 2.2318 (1.50) 2.1460 (0.25) 0.7590 (0.11) 12.9505 (2.08) 45
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Note: Sample proportions are obtained by using FDA approval news, positive abnormal returns (good news), negative abnormal returns (bad news) and significant economic news from The New York Times, The Financial Times, the Wall Street Journal, company web pages and Internet general searches. Between parentheses appear t-statistics and between brackets appear p-values.

Table 3 (

 3 Panel B) shows the following possible causes of large price fluctuations; FDA approvals, good news from medical publications and clinical trials, bad news related to scientific knowledge, and other media news (distinguishing between positive and negative abnormal returns). Moreover, for both good and bad news we analyse separately those occurred before/after the innovation date (FDA

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For example, announcements or news about clinical or scientific developments; new knowledge about drug efficacy and adverse effects; and FDA or European Medicines Agency (EMEA) decisions and regulations on the commercialization of a new medicine, among others)

March 3, 1977 ELI LILLY & CO NYSE July 28, 1980 MERCK & CO. INC. NYSE July 28, 1980 NOVARTIS AG-REG VIRT-X October 23, 1989 PFIZER INC NYSE July 28, 1980 ROCHE HOLDING AG-GENUSSCHEIN VIRT-X October 23, 1989 SANOFI-AVENTIS Euronext Paris October 2, 1989 SCHERING-PLOUGH CORP NYSE July 28, 1980 TAKEDA PHARMACEUTICAL CO LTD TSE January 31, 1984 WYETH NYSE July 28, 1980 Source of prices: Bloomberg.3.1.2. Approval of new drugs and scientific newsWe created a database with information on all FDA-approved new drugs from 1989 to 2008. We also created a database with news related to the efficacy and therapeutic value of drugs, including items reported by the press and information released by the companies. Our sources were the FDA, the

There are other methods to detect abnormal price fluctuations, such as event studies, which we have also used, as a complementary method.

If the model is correctly specified, the standardized residuals should be independent, and have identically distributed random variables with mean zero and variance one. If the standardized residuals are also normally distributed, then the estimates are maximum likelihood estimates that are asymptotically efficient. However, even if the distribution of the residuals is not normal, the estimates will still be consistent under quasi-maximum likelihood assumptions.

Vicente Ortún and Jaume Puig for their comments and suggestions. We gratefully acknowledge Bill Christian for his help with the English text. We also gratefully acknowledge financial support from the Spanish Ministry of Science and Technology (SEJ2006-07701/ECON) and from the unconditional grant of the Merck Foundation to the CRES, University Pompeu Fabra, Spain.

Editorial Office, Dept of Economics, Warwick University, Coventry CV4 7AL, UK Submitted Manuscript Editorial Office, Dept of Economics, Warwick University, Coventry CV4 7AL, UK Submitted Manuscript Editorial Office, Dept of Economics, Warwick University, Coventry CV4 7AL, UK Submitted Manuscript Editorial Office, Dept of Economics, Warwick University, Coventry CV4 7AL, UK Submitted Manuscript Editorial Office, Dept of Economics, Warwick University, Coventry CV4 7AL, UK Submitted Manuscript Editorial Office, Dept of Economics, Warwick University, Coventry CV4 7AL, UK Submitted Manuscript Editorial Office, Dept of Economics, Warwick University, Coventry CV4 7AL, UK Submitted Manuscript


Simon Hallsworth

Then They Came for the Dogs 1 !

This paper examines the British state's desire to liquidate the Pit Bull as a breed. It examines the moral panic that brought the Pit Bull Terrier to public attention and traces the government's knee-jerk response that resulted in the Dangerous Dogs Act (1991), the legal instrument that mandated Britain's first attempt at canine genocide. Though public protection was the stated justification of this exercise in state violence, there was and is no evidence to support the case for canine killing through the indiscriminate blanket medium of breed specific legislation. Far from conceiving the dog an aggressor and humans its victims, this paper precedes on the assumption that the dogs are the victims and humans the inhuman aggressor. The paper concludes by examining the factors that provoked the UK's descent into mass dog killing.

, various 'moral entrepreneurs and right thinking people'.

; while those allowed to live under the subsequent revised Act (1997) are compulsorily neutered. As I write this paper, these dogs are still being seized and many are still being killed. Not, it must be emphasised, on the basis that they have bitten anyone, or indeed pose any risk to humans. Their death is rather justified on the fascistic principle of what they are. Like the Jews in Nazi Germany, the Pit Bulls' ultimate crime is that they have the wrong imputed characteristics and are associated with crimes not of their making.

Canine extermination is justified on the basis that 'breed specific' legislation would rid the country of a uniquely atavistic and violent predator that has no place in the British way of life [START_REF] Baker | Why the law should bite back[END_REF]. This dog, it has been claimed, is essentially different from other 'respectable' members of the canine family. It is unstable and more violent and as such poses a real threat to anyone and everyone around it [START_REF] Malthouse | Muzzles are not enough: dogs are weapons[END_REF]. The British public are victims and it is in the name of public protection that the seizure and killing of these dogs is justified.

This paper presents an alternative and diametrically opposed interpretation. The Pit Bull Terrier is no villain, nor is British society the victim of this breed. The victim here is a dog that has found itself subject to a staggering degree of inhumanity on the part of society that has lost all moral bearings in relation to its relations with non-humans. This is not, in other words, the story of how a victimised society took the necessary steps to confront and tackle a real social problem. This is a sad story about violent, ill-informed and ignorant people who, on the basis of limited evidence (albeit a rich and disturbing fantasy life), elect to squander considerable social resources in pursuit of dog killing.

The paper begins by exploring how the Pit Bull first became an object of public attention. It explores the resulting moral panic, and then follows the path that would lead a government towards a legislative response that would mandate mass dog killing. The paper subsequently charts the changing response to the Pit Bull bringing the story up to the present where we face renewed calls to seize and destroy Pit Bulls along with other so called 'status dogs'.

As the paper will establish, there is no evidence to support the criminalisation and destruction of these dogs. Their construction as a public enemy owes more to an array of populist fantasies whipped up by an irresponsible media and law and order politicians than to any commitment to evidence. The paper concludes by examining why a society that claims to love 'man's best friend' came to embrace dog killing with such zeal and enthusiasm.

Let's kill dogs!

The original impetus and scene-setting events that would subsequently justify the criminalisation of the Pit Bull were three widely and sensationally reported dog attacks on humans that occurred between 1990 and 1991. The first involved a fatal attack on an eleven year old by two Rottweiler's in 1990, and this was followed by two non fatal dog attacks that were then attributed to Pit Bulls in 1991 [START_REF] May | The Dangerous Dogs Act[END_REF]. This provided the evidential basis for what became a moral panic. Within a few months of these attacks, Pit Bulls and their working class owners became identified as a new folk devil confronting innocent communities across the UK [START_REF] Jones | Criminology. Third edition[END_REF].

Represented in demonic imagery through the medium of a deviancy amplification spiral, the dogs were presented in categories stressing their essential difference from the rest of the (respectable) canine world. Various inflammatory labels quickly became attached to 'Other' them, such as 'weapon dogs' and 'devil dogs'. What had been an entirely legitimate and popular breed in the US2 was conceded an array of monstrous qualities by an array of selfcertified experts. The jaws of the pit bull, it was argued, were far stronger than other breeds and when they grabbed their prey their jaws would -it was claimed -uniquely lock3 . Pit bulls were said to be far more aggressive than other breeds and possessed an unstable temperament that made them impossible to train. In his biography Kenneth Baker, the Home Secretary of the time and subsequent architect of the Dangerous Dogs Act, claimed he had been 'reliably informed' by an unnamed 'dog expert' that 'all Pit Bulls invariably go mad' [START_REF] Baker | The turbulent years: my life in politics[END_REF].

To these fears about psychotic dogs were conjoined various fears, phobias and anxieties about their owners who were represented as workshy, tattooed, dole scrounging products of the underclass; the sub-proletariat that were being blamed for just about every social evil in the UK by the right wing Conservative government of the day. Unlike the middle classes who owned their pedigree dogs for entirely benevolent reasons, dog ownership in the case of the Pit Bull was simply considered in terms analogous to weapon ownership. These were 'weapon dogs' used either for criminal purposes or as the means by which street gangsters could terrorise an innocent public. Conceived in this sense, the dogs were seen to violate what it was to be a loyal and faithful companion and, as such were no longer worthy of being considered as a pet but as a species of vermin. As Podberscek observes pets we love, but once constructed as vermin the Pit Bull was effectively positioned as an outsider, in effect matter out of place whose killing appeared justified just as it is in the case of other animals constructed as vermin [START_REF] Podberscek | Dog on a Tightrope: The Position of the Dog in British Society as Influenced by Press Reports on Dog Attacks[END_REF]; see also [START_REF] Stephenson | The dog that could not bark[END_REF].

For a weak government tainted with sleaze and with ebbing electoral support, Kenneth Baker had no problem in relinquishing any sense of perspective and capitulated wholesale to the mass media and their rabid demand that the government act decisively on the 'dangerous dogs' issue. On the basis of no evidence at all being presented that attested to a social problem that required immediate legislative solutions; and on the basis of no evidence at all suggesting that the existing regulatory framework had failed, in 1991 Baker created (and in record time) what would become the Dangerous Dogs Act. This knee jerk legislation took no longer than six weeks to create and push through a parliament that, with bipartisan support, had no trouble voting it into law (legislation.gov.uk 1991) 4 .

What the Act did was to provide a legal mandate for the entire destruction of the Pit Bull breed (along with three other breeds). On the basis of the fascistic premise that you are what your genes have made you, the Pit Bull was to become subject to what would become the UK's very own attempt at engineering a canine genocide. For the sin of having the wrong parents, the Act allowed for all Pit Bulls to be seized and destroyed. By reconstructing the dog as a 'type' defined by various physical characteristics, many other dogs which were not Pit Bulls (but with the misfortune to have a preponderance of Pit bull features) were also placed at risk of being killed. This was 'pre-emptive criminalisation' with a vengeance [START_REF] Fitzgibbon | Pre-emptive Criminalisation; Risk Control And Alternative Futures[END_REF]. Ownership was also criminalised as was breeding, advertising and selling such dogs. Those who contravened these terms faced a jail sentence of up to 6 months, a criminal record and a fine of up to £5,000.

Given that the Pit Bull was not recognised as a breed, the architects of the Act had to find a suitable label that would allow its features to be recognised by the enforcement agencies mandated to seize and kill them. Eventually they decided that the Pit Bull was not a breed but a canine 'type' and it was as a type that it would be destroyed. To help the process of identification the British state had no option but to use the breed description for the Pit Bull which had been developed many years earlier by the Kennel Club of the US.

The British police had no difficulty whatever in adapting to its role as establishment canine killers and dutifully went about the grisly task of seizing people's pets, typically healthy dogs that had bitten no one, which various vets had no trouble killing. Within five years of the Act being passed into law around 1,000 dogs were hunted down and executed [START_REF] Kaspersson | On treating the symptoms and not the causes: Relections on the Dangerous Dogs Act[END_REF].

As the moral panic literature attests, such phenomena by their nature do not last long [START_REF] Cohen | Folk devils and moral panics: The creation of the Mods and Rockers[END_REF][START_REF] Goode | Moral panics : the social construction of deviance[END_REF]. Eventually the issue attention cycle shifts as new categories of folk devil are identified while interest in the old one gradually diminishes. The public eventually forgot about the Pit Bulls in their midst. However, other problems surfaced. To begin with, the courts where seized dogs were to be condemned demonstrated a healthy reluctance to do so, particularly with family pets. A number of people were also beginning to wake up to the fact that the Dangerous Dogs Act was a poorly thought through, not to say draconian, instrument of regulation. Though the Kennel Club had refused and continues to refuse to recognise the Pit Bull as a legitimate breed, even this august body came to recognise that it was deed rather than breed that mattered. Though the RSPCA, a body ostensibly in the business of saving dogs from cruelty, originally helped the government frame the Dangerous dogs Act, it also joined the chorus of dissenting voices -while allowing every Pit Bull that fell into their hands to be destroyed.

Eventually, in 1997, in the face of growing opposition, Parliament revised what had become seen as a badly flawed piece of legislation (see Legislation.gov.uk (1997) for details). Proscribed dogs were still banned and ownership could still result in a criminal charge, only instead of simply killing every Pit Bull seized, the courts were now given discretion to determine whether a dog could be allowed to live and be returned to its owner -if, that is, the owner in question was deemed acceptable to the courts. Despite this act of seeming benevolence things were to become increasingly difficult for the Pit Bull. The Act mandated having any proscribed 'dangerous dog' seized and kept in kennels by the police; a deeply traumatic event both for the dogs and their owners. Owners were not allowed to know where their pets were being kept and the police had no obligation to notify them about their state of health and wellbeing. Instead of the state having to prove beyond reasonable doubt that the dog was guilty of a crime, the Act reversed the burden of proof and expected the owner to demonstrate beyond reasonable doubt that the dog was safe to the public -a near impossible task. This marked the eviction of what had hitherto been considered a sacred principle of British justice: innocent until proved guilty. All 'exempted' dogs were also required to be neutered, micro-chipped, kept on a lead and muzzled at all times in public places (including in cars), tattooed and kept on a public register for 'exempted dogs'. If this was not vindictive enough, 'exempted' dogs were not allowed to be cared for by anyone other than those named on the exempted dog index.

'As a dog returns to its vomit, so a fool returns to his stupidity' and so it came to pass that the principle architect of the Dangerous Dogs Act, Kenneth Baker, unhappy at such revision wrote an article for the Guardian newspaper in 2007, bemoaning what he termed the 'watering down' of the Act [START_REF] Baker | Why the law should bite back[END_REF]). In the article he also went on to justify the 'success' of the Act on the absurd premise that there were many members of the public now alive who would otherwise have been mauled to death by the predominantly non-violent dogs his Act had consigned to death. He ignored the fact that the very small number of human fatalities caused by dogs each year did not change with the enforcement of the Dangerous Dogs Act.

Up to the early years of the new century fears about so called 'dangerous dogs' by and large diminished in the UK. The press did not spend that much time reporting the issue and the police did not actively enforce the Act. Within the last six years however, the press have again started to report cases involving so called 'dangerous dogs' using the same prejudicial language that accompanied their first exposé. What has made the reporting rather different this time round is that the dogs are now being conjoined with another contemporary moral panic; one that holds that organised American style gangs are now on the rise and bringing terror to the streets and estates of our fair cities [START_REF] Hallsworth | Gangland Britain: Realites, fantasies and industry[END_REF]. According to Acting Deputy Assistant Commissioner Steve Allen: "Pit Bull-type dogs had become a weapon of choice for gang members, drug dealers and street corner thugs" (BBC News 2006).

This narrative is now being mediated routinely through the mass media and has, in turn, been picked up by an array of 'right thinking' people who, like Kit Malthouse the Mayor of London's adviser on crime and policing, has in effect declared outright war on what he defines as 'the problem of snarling weapon dogs in London'5 .

There is a new weapon of intimidation terrorising the streets of London. Using a weapon dog is no different to using a gun or a knife to attack, maim and even kill. More and more people are choosing specific types of breeds as their weapon of choice and choosing them for a reason. Certain types of dogs are inherently more aggressive than others. At the top of the list are bull breeds, developed for one purpose: to attack and fight. It is no longer valid to look solely for solutions which rely on responsible ownership; there is something in the dogs which must be considered [START_REF] Malthouse | Muzzles are not enough: dogs are weapons[END_REF] In response to what has been considered a serious escalation in the dangerous dog situation in the UK, the British police have returned to enforcing the conditions of the Act. The police have also developed new initiatives to confront the perceived problem. In the case of the Metropolitan Police Service in London, this has involved creating the Status Dogs Unit, an organisation populated by a group of police officers with a mandate to seize and destroy Pit Bulls along with other so called 'status dogs' (in practice Bull Terrier breeds owned by working class people). Since its inception this unit has seized over 1,000 dogs which have been kept at an annual cost to the taxpayer of £3 million [START_REF] Greenwood | Police Unit Takes 1000 dogs off the street[END_REF] 6 .

In the face of spiralling operational costs, largely attributable to the Status Dogs Unit, the Metropolitan Police Authority (MPA) requested £10.6 million in 2010 for kennelling and care costs for the dogs involved. Far from questioning whether the escalating costs to the public was justified by the evidence, Lord Toby Harris, the former chair of the police committee which deliberated the request responded by saying 'Why should we kennel these animals in the first place, why don't we just put them down' and subsequently 'why don't we kill them when they are seized' (Endangered dogs.com 2010). Meanwhile, the police in Liverpool introduced a new front in the war against dogs by taking the expedient step of introducing 'dog amnesties' on the working class estates where Pit Bulls were likely to be found. The amnesty however, was not for the dog but for the owner who the police undertook not to prosecute if they agreed to hand over their pets -which were then summarily executed (BBC, 2007).

Evidence?

For the supporters of breed specific legislation the Dangerous Dogs Act was passed on the basis that the UK was facing a novel threat from a dog that was in some terrible way essentially different in temperament and aggression than other dogs. In a rigorous attempt to find out if there was any truth to claims that Pit Bulls 'invariably go mad' and 'bite differently' to other dogs, [START_REF] Kaspersson | On treating the symptoms and not the causes: Relections on the Dangerous Dogs Act[END_REF] recently reviewed the epidemiological literature on dog bites and found that dogs like Pit Bulls were certainly dangerous, but their bite was no more dangerous than many legal breeds such as the Rottweiler and German Shepherd. Pit Bulls did not bite the most and nor were they the most aggressive of dogs. She concludes:

The answer to the question whether 'dangerous breeds' bite at a rate justifying singling them out for breed-specific legislation is therefore 'no.' 'Dangerous breeds' do not bite at significantly higher rates and their singling out for bans is therefore not justified. Instead, there are adverse effects of breed-specific legislation as it gives the illusion of tackling a problem, when it in practice only addresses a limited number of symptoms (Kaspersson 2008: 219).

While fatal dog attacks make headline news, the reason they do so is that such attacks are very rare. Since 2005, nine (human) dog bite fatalities have occurred in the UK, with 12 dogs involved, an annual rate of almost two people killed. Hardly significant when you consider that over 20 people are killed each year by horses and over 3,000 annually by cars (O' Neill, 2007). Fatal attacks on humans invariably occur in homes, where the dog involved was most often a family pet (see Kaspersson forthcoming). Fatalities have not occurred in public places where groups like the gangs supposedly using these dogs are typically found. It is worth noting that Pit Bulls were involved in only two of the cases where a fatality has occurred, legal breeds were implicated in the rest. In all of these cases the dogs had been neglected or abused by their owners, allowed inappropriate unsupervised access to small children, or left in the control of incompetent adults. The dog is often the victim of inhumane treatment; yet, the dog is always blamed and killed. Unfortunately, these rare cases are also used as an excuse to target the breed, in what Delise appropriately terms 'the Pit Bull placebo' [START_REF] Delise | The Pit Bull Placebo: The Media, Myths and Politics of Canine Aggression[END_REF]: in other words, 'a dog bites so lets kill them all and things will be better'.

While accusations continue to be made about the rise of 'status dogs' and the use of such dogs by gangs, what is noticeable is that there is no compelling evidence ever cited to support the claims made. Let us consider some examples. In the words of a recent RSPCA briefing paper on the problem of 'weapon dogs':

Dangerous dogs are widely used by gangs and criminals to intimidate and cause injury to other people and also some animals. The possession of them is often closely associated with other worrying elements of ASB and gang culture, including knife violence and drugs (RSPCA 2010).

Similarly in the publication 'Weapon dogs: The situation in London' produced by the Greater London Authority we are told:

There is no doubt that a proportion of Pit Bulls and other 'weapon dogs' are being deliberately trained to attack people and for dog fighting [START_REF] Monks | Weapon dogs: The situation in London[END_REF].

Evidence to support these claims, like Macavity the mystery cat, is never present when you look for it. The RSPCA paper provides no evidence at all to justify the claims it makes. All we are left with is assertion 7 . The GLA report presents information regarding police and RSPCA activity pertaining to dog related cases, but activity alone cannot be taken as evidence of wider trends in dog related incidents. For example, we are told in the GLA report that 'the number of dogs 7 I contacted the RSPCA in 2010 and asked them for their evidence. I was told that the gang connection was very clear and that they were now breeding 'bad Pits'. These are apparently dogs bred to be human aggressive (Pit Bulls, it could be noted are bred to be human friendly, an essential trait in breeds bred for dog fighting). The women I spoke to also claimed the bites of these dogs were far worse than that of any other dog. When I pointed out that these 'facts' were not supported by the epidemiological literature on dog bites she claimed 'we don't need research to tell us how dangerous these dogs are'. When I asked her where her facts came from she replied 'Pit Bull experts'. These included the head of the MPS Status Dog Unit and an ex member of the unit -in other words, people with a vested interest in Pit Bull seizure and killing.

seized by the MPS has increased 44% between 2007 and 2009', this is considered as evidence of a growing problem with 'dangerous dogs'. As the reasons for this growth has much to do with policy changes (i.e. the decision to create a specialist unit with a mandate to seize dogs and a policy shift to seize more dogs as opposed to fewer), it may be as much the police response to rising concerns about 'dangerous' dogs, than changes in dog ownership or gang behaviour, that explains the extent of the 'dangerous dogs' problem.

The only other evidence supplied is of the anecdotal form, and as such, cannot be treated as credible. For example, in the GLA report we are informed that: anecdotal evidence suggests that many residents do not want to leave their houses or make use of their local parks because of the intimidation and threats posed by dangerous and aggressive dogs and irresponsible owners (Monk 2009).

Or quotes such as this reported by the BBC:

It is well known, anecdotally, that there is an increasing problem of dogs being used like this, as 'tools' of crime, or in the commission of crime. We have spoken to the RSPCA, Metropolitan Police Authority, dog warders and vets, who all back this up (BBC, 2006) .

What is actually occurring here is a continual self referential feedback loop whereby various control agents, including the police, journalists, practitioners and politicians, end up quoting each other about a problem everyone takes for granted and which must be serious (because everyone keeps telling everyone else it is). By evoking a colourful inflated rhetoric about 'weapon dogs' it is easy to see how a sense of proportion can so easily be evicted. By failing to commission serious research that might fill in some of the information deficits, it is easy to see why fantasies about dangerous dogs come to prevail instead 8 .

So what is the nature of the threat posed by so called 'dangerous dogs' and what, if anything, has this to do with gangs? Without systematic research it is difficult to answer this question. If we apply common sense to the available evidence then the picture that emerges is rather different from the alarmist headlines the public typically receive.

At first sight it might appear that the relationship between 'dangerous dogs' and gangs is very real given the widely reported gang related violent incident in London in 2009 9 . In this case a dog was used to attack two people, one of whom received a number of dog bites. It was human inflicted stab wounds, however, that were ultimately responsible for the victim's death. While this case attests to a gang connection, it was also reported that this was the first case of this kind, which is also why it received so much media attention. This case alone certainly should not be used to reduce the problems posed by 'dangerous dogs', to a question of gangs, or to establish that 'gangs are now using weapon dogs' to 'solve their conflicts' in the UK today, as claimed by the RSPCA.

While many gang-affiliated men may own or aspire to own 'status dogs' like Pit Bulls and Staffordshire Terriers, many other young people in working class estates in the UK (including a number of young women) do as well. So do a number of adults [START_REF] Kaspersson | On treating the symptoms and not the causes: Relections on the Dangerous Dogs Act[END_REF]. This suggests that these breeds are popular in working class areas (just as Whippets are popular among many northern communities). Many people want to own such dogs, not just gang members. The population of 'status dog' owners, in other words, is much wider than the gang 10 .

While Pit Bull ownership may occur because of the breeds associated 'hard' image (its extrinsic appeal), these dogs make devoted pets and are by nature very tractable with humans (their intrinsic appeal). Indeed, a significant number of young gang affiliated men interviewed in recent research by Maher and Pierpoint (see article herein) claimed that it was specifically the issue of companionship that defined their relationships to their dogs. Interestingly none of the dog 'experts' interviewed in this research made any reference to this relationship.

Rather than define the many real problems posed by dogs like Pit Bulls as a gang problem, a less sensational interpretation probably has greater explanatory power. The problem here is likely to be one posed less by innately psychotic dogs trained to attack humans on command by organised gangs settling their conflicts; the issue is more likely to be posed by young, immature owners of powerful dogs that are under exercised, badly trained, often neglected and which are not kept under effective control by their owners. While humans can certainly be intimidated and bitten by such dogs, the problem here is not 'gang dogs' but the irresponsible ownership of such dogs by a growing number of young people who consider them a fashion accessory.

Unfortunately, the problem with less sensational interventions such as this, is that they run the very real risk of being ignored in a world where sensational headlines and inflated rhetoric have far greater currency. By continually posing the many real problems posed by dog ownership in terms such as 'weapon dogs' so a discursive space is created where totally disproportionate responses come to appear justified, while more measured and responsible approaches to what remain real problems get sidelined. And so the dogs like Pit Bulls get seized and killed.

While criminals may use dogs, the context in which they do so varies. To begin with, they may use them to protect criminal property. In fact, the motive here is no different from that applied by legal businesses who also employ guard dogs to protect valuable goods. It could also be the case that the ownership of dogs like Pit Bulls occurs, not because of a desire to own a 'weapon dog' to 'terrorise a neighbourhood', but because it is part of the wider cultural fabric of the criminal fraternity. Like wearing branded clothing, it is something you do to affirm and elevate your status relative to others. It could be remarked that legal dogs like German Shepherds are better equipped with the instincts that allow them to be trained as human aggressive, rather than dog fighting breeds like Pit Bull Terriers which have historically been bred to be human friendly 11 .

Rather than invoke the organised gang to explain why Pit Bulls persist despite the State's attempt to kill them, more can be gained by looking at the wholesale failure of the Dangerous Dogs Act to achieve its stated purpose which was to kill the dogs and deter people from owning them. The problem with deterrence strategies however, as [START_REF] Kaspersson | When deterrence works -and when it doesn't: a comparison of Sweden's prostitution law and UK's Dangerous Dogs Act[END_REF] (drawing upon the work of Mathieson (1990)), points out, is that deterrence only works if you are likely to be deterred. As many people continue to own banned breeds like Pit Bulls, a good case could be made for suggesting that this is not a population for whom deterrence appears to have worked. Indeed, by criminalising dogs like Pit Bulls, it is arguable that the Dangerous Dogs Act has paradoxically worked to enhance their reputation and increased their appeal to the very people the state is actively trying to discourage from owning them12 . At the same time, in what has become a demand led economy for these dogs, the Act has created the preconditions for an illicit market that trades in these breeds.

Why kill dogs?

How can we explain the lurch towards dog killing which the UK has embraced? I would suggest the intersection of a number of factors. We can begin with the media. Media driven moral panics by their nature are fantasy production machines. As moral panic theory shows, they work to transform often innocuous incidents into events that provoke mass hysteria. Within them the atypical become normalised, the exception becomes the rule and what is small and often insignificant assumes momentous importance. The deviance amplification spiral that accompanied the discovery of the Pit Bull is testimony to the disproportionate power to define enemies that the mass media commands.

Britain is also a society whose State, in recent decades, has been transformed. What was once a Welfare State is withering whilst, ominously, a far more coercive Security State is evolving (Hallsworth and Lea 2011). Unlike the welfare state which sought to include its excluded margin, the security state may be defined as a formation that wages war against it. The disproportionate response to the rise of 'dangerous dogs' in this sense can be understood as a direct manifestation of the Security State and the punitive turn in which it is engaged. This is evidenced both by the exceptional and disproportionate nature of the response to the dogs which, as we saw, invoked pre-emptive criminalisation and the reversal in law of the burden of proof.

Once an industry of dog seizers and killers have been assembled, so in Nils Christie's terms, an industry is formed which has a vested interest in creating the preconditions for its own employment [START_REF] Christie | Crime control as industry: towards gulags, Western style[END_REF]. To put this another way, if you are paid to seize dogs like Pit bulls, then it pays to talk up the menace that these dogs allegedly pose in order to justify an ongoing flow of resources. Consider, for example, the Metropolitan Police Service Status Dogs Unit, it justifies its existence on the grounds that its officers are involved in the fight against organised criminal groups like gangs. On one hand this could be explained on the basis that seizing people's pets and picking up dogs who have bitten other dogs is low status work and by recasting this as the fight against organised crime it assumes a significance and status such activity otherwise lacks. But there is an industrial logic to this; by continually talking up the Pit Bull menace, the Unit continues to justify its employment and the huge resources needed to fund its murderous activity.

Working class men predominantly own Pit Bulls and this is also an important contributory factor in their destruction. Their owners were understood, indeed interpreted from the very beginning, through the gaze of underclass thinking which enjoyed wide circulation in the UK where it was being mediated by commentators like Charles Murray (Murray and American Enterprise Institute for Public Policy Research. 1999). He had singled out, in the 1980s, (to widespread media, not to say political, acclaim and acceptance) the explosive growth of what, evoking older Victorian terminology, he termed the 'unrespectable poor'. This section of the working class was not, he claimed, a product of poverty and exclusion; he considered it instead a feckless author of its own misfortune. They constituted, he suggested, a permissive criminal class who could only be confronted through an array of coercive measures that the right wing government of the day was quite happy to implement. Dog killing, in this sense, was part of the wider class war that was being fought at the time and Kenneth Baker was quite aware of this fact when in his biography he observes that his single aim was to rid the country of Pit Bulls, while not upsetting what he termed 'the green welly brigade': in other words middle class conservatives like himself [START_REF] Baker | The turbulent years: my life in politics[END_REF].

As Routine Activity Theory shows, crime occurs not only because offenders offend, but also because there is no capable guardian around to protect the victims [START_REF] Felson | Crime and everyday life: insights and implications for society[END_REF]. With this in mind the lurch towards dog killing can also in part be explained by the fact that dogs like Pit Bulls lack capable guardians. The eugenically infatuated Kennel Club would not even accept the Pit Bull Terrier as a breed and, its middle class organisers did nothing to oppose the Dangerous Dogs Act whose target, after all, were dogs owned by a despised section of the working class. While condemning the Act today, it could be noted that the RSPCA did not oppose the Act when it was being framed. The RSPCA also continues to put out inflammatory rhetoric about Pit Bulls and has too intimate a relationship with police dog killing units. Far from protecting dogs it continues to cooperate with a State that continues to kill them.

Finally, the dog-killing spree can be understood as a direct expression of the disproportionate and unequal power relations that humans exercise over the animals in their care. Dogs in this sense might be sentient creatures, affectionate to humans, but their existence is only ever justified on the basis that they are means to our ends, not ends in and of themselves. They exist as they have always existed outside of the social contract [START_REF] Sollund | Causes for speciesism: Difference, distance and denial[END_REF][START_REF] Svard | Protecting the animals? An abolitionist of animal welfarism[END_REF]. They are secondary beings, creatures that cannot advocate for themselves. As animals with no rights, and as creatures wholly at the mercy of humans, the suspension of the Pit Bulls rights to breed and live was simply an extension of power relations that work to oppress non-humans everywhere [START_REF] Beirne | Issues in green criminology: confronting harms against environments, humanity and other animals[END_REF]. And it is this stark imbalance in power that explains how easy it would be to gain mass support for breed specific legislation based on a 'kill them all' philosophy.

Conclusion

In this paper I have tried to identify one class of harms that humans are involved with in relation to what is often referred to as Man's best friend. This study of the social response to the Pit Bull has sought to show how a society of 'animal lovers', without evidence, came to demonize a dog and second, create the means to slaughter it. Unfortunately such killing is still, shamefully, part of UK government policy even while the Dutch government recently repealed its own version of breed specific legislation on the basis it achieved nothing (Endangered dogs.com 2008). Sadly, the Dutch remain the exception, while the UK continues to act as a source of inspiration to a range of other societies who also want to exterminate the Pit Bull. Australia implemented the British Act without anyone actually being attacked by a Pit Bull. Several other 'civilized' European societies have also followed the UK's lead and introduced variations on the theme, including Germany, France, Denmark, Norway and Italy. The murder of the Pit Bull Terrier unfortunately looks set to continue, a sad reflection on the punitive societies in which we live.

The author would like to thank Maria Kaspersson, Ragnhild Sollund and the co-editors of this special issue for their helpful and incisive comments.

The Pit Bull Terrier has a long and illustrious history in the US where its intelligence, loyalty, strength and tractability with humans established it as one of its most popular breeds throughout the twentieth century. 'In the first world war the breed was used to represent the US in artwork. Popular companies like RCA and the Buster Brown Shoe Company used the breed as their mascots. A Pit Bull named Petie starred in the popular children's television series, Our Gang; a Pit Bull mix named Stubby became a decorated WWI hero. Pit Bulls accompanied pioneer families on their explorations. Laura Ingalls Wilder of the popular Little House books owned a working Pit Bulldog named Jack. Famous individuals like Theodore Roosevelt and Helen Keller owned the breed'(Bulldog breeds.com 2010)

For some contemporary examples of this demonization process seeDoward, J. (2007a[START_REF] Doward | The "family pet" bred to be trained as vicious fighter[END_REF]

See also[START_REF] Lodge | Barking mad? Risk regulation and the control of dangerous dogs in Germany[END_REF] discussion around 'knee-jerk' policy making in relation to high profile dog incidents.

In a further statement Malthouse argued that 'weapon dog owners should face knife crime jail terms'[START_REF] Watts | Weapon dog owners should face knife crime jail terms[END_REF]. Writing in the Times Malthouse went so far as to say 'we should be bolder about removing all status dogs from circulation altogether. Taken at face value this means the end of all bull dog breeds in the UK. Despite the fervor of his crusade there has been a noticeable absence of public support for this dog killing fanatic.

In this respect it will be interesting to see if the research that the RSPCA have recently commissioned from Cardiff University might make a difference to the low quality public debate about so called 'dangerous dogs' that has laregely prevailed.

To gain some sense of the sensational way this case was reported see[START_REF] Cahalan | Dog gang admit terrifying school attack[END_REF] and Metropolitan Police (2010).

Surveys indicate that membership of gangs is typically between 5-8% of the populations sampled where most surveys are typically conducted in high crime areas or among high risk groups such as young offenders See[START_REF] Hallsworth | Gang Talk and Gang Talkers: A Critique[END_REF].

The reason for this is that in the context of a dog fighting arena it would be lethal to have aggressive dogs present which may attack the dog man or indeed the audience. It could be noted that the fact Bull Breeds like Pit Bulls are human friendly is not a fact typically discussed by the media.

In a recent paper Kaspersson compared the consequences of the Dangerous Dogs Act with the consequences of Sweden's attempt to ban the purchase of sexual services. The Dangerous Dogs Act failed for the reasons cited above which is derived from Kaspersson's argument. The Swedish Act however succeeded. In her attempt to explain this difference she argued that in the case of Sweden, many of the men who purchased sexual services were middle class and married and, as such, had a reputation and status to lose if they were prosecuted under the law. In other words deterrence worked for this constituency in ways it did not for Pit Bull owners. See[START_REF] Kaspersson | When deterrence works -and when it doesn't: a comparison of Sweden's prostitution law and UK's Dangerous Dogs Act[END_REF].