Peter,
<<For any biotech that aims to be a small or medium (or even in the case of MLNM large <g>) pharma, cheap pharmas cannot be good news.>>
This is a great concern of my. So, as layman, I tried to explain to myself what market see and how street value any comps (in our case bios) future. Several points to consider:
1. Bucks spent (and trend in spending) on basic R&D and new drug development?
---Several months ago fat pharma was out of limbo with their cash position. Each pharma was/is spending X$ BB annually (~15-20 % on bios collaboration). Now, bios as whole and as individuals can catch on. I never looked for numbers, but I am sure that someone did compare bios versus pharmas R&D spending.
2. Basic science and innovation?
---While pharmas are often silence about new break true science and innovations (bios did use this as promotion tools), it is clear that some significant discoveries come from bios labs and not from pharma. Recently pharma did take steps that may increase likehood of the new drugs from their labs. I am sure that they will try to catch up with bios. It is up to bios to hold lead and capitalize on current KNOWLEDGE.
3. Drug marketing and sales?
---I think that drugs marketing and promotions, as we know today, will change in near future. Pharmas advantage on this will not longer play dominant rule when bios look for partner/collaborator, and when we value any drug potential on market (based on marketing muscle).
4. Drug (bulk and final form) manufacturing?
--For years this was pharma advantage. However, custom manufacturing and outsourcing is trend which none can eliminate. Even pharmas diversified with significant capacity build-up in Asia and SA. New bio-technologies are equally distributed and any side can solve internal problems relatively with moderate investment in manufacturing capacity.
5. Generic competition
--This is and will be serious problem for both sides. However, because bio-technology know-how is in limited comps possession, generic competition will effect more pharmas than bios for while.
Market tend to overreact (one way or another), still there is some reasons why money are leaving pharmas. Pharmas an-efficiency on points 1. and 2. , as well as lost of the advantage on 3. and 4., and problem with 5., market did realize and project stagnation at pharma. So far progress was bios strength. Market did reacted accordingly (with lag of 16-18 months, imo).
Will bios continue with this trend and took advantage on booming pharmaceutical market remain to be seen. Market give them tools, and now is up to them to show who are in better position.
Bottom line is that until Market see positive change at pharmas money will be in side line. Cheap pharmas maybe isn't good news for bios (on a relative base), but it isn't as bad as we think on a *future* base.
Pharmas merge and acquisition only improve point 3. and 5., while most important progress on points 1. and 2. didn't deliver promise. Not by measures which were expected. I think that money in bios will be parked for a while, but at some point market will be critical if any side can't delivery on promise.
I am now bit conservative in my bios selection and investment. If I see more positive signs (like INCY-VRTX or CRXA-QTLF as later example) I will expand in my portfolio with new names.
Miljenko |
