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Biotech / Medical : Biotech Valuation
CRSP 56.76-2.3%3:59 PM EST
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To: Spekulatius who wrote (5240)12/26/2001 1:50:58 PM
From: Biomaven  Read Replies (2) of 52153
 
<biotech vs. pharma>

Good article.

Part of what's going on here is that there is a difference between an investor's viewpoint and a manager/employee's viewpoint. From an investor's perspective, a company that has a 1 in 5 shot at a huge drug can be a great investment as part of a basket of similar gambles. However, from a CEO's or employee's perspective, a 4 in 5 likelihood that your company is going to implode is not quite so attractive a proposition.

Aside from this, there clearly are some economies of scale. Detailing three drugs to the same set of doctors is more efficient than detailing one. Whether there really are economies of scale on the research side is less clear. Clearly there should be some - just the opportunity to kill off the least promising drugs in your early-stage pipeline without the market throwing a fit is worth quite a lot. But on the other hand, developing drugs at present is a lot like writing great software - a handful of top-notch people can do a much better job than armies of mid-range folks.

There certainly is a school of thought that feels that drug discovery is going to become more industrialized and sheer scale will ultimately win. I personally don't feel we are anywhere close to that point yet.

Peter
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