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Biotech / Medical : Biotech Valuation

CRSP 55.08

-2.9%

Dec 26 9:30 AM EST

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To: Biomaven who wrote (1385)	8/4/2000 2:51:39 PM
From: Harold Engstrom	Read Replies (2) of 52153

Peter, how can you capitalize R&D? If you do capitalize it, does it have any tangible value? A building has a tangible value that decreases over time. But, R&D's intrinsic value is in the drug itself. The drug is the value, not the process of creating it. If you spent $100MM on R&D for EPO ($2.5B/yr) then doesn't EPO itself capture the value of the R&D? It seems to me that capitalizing R&D is like capitalizing construction labor and tools used to build buildings that are expected to either fall down and be worthless or, in 15% of the cases, stay up and grow like a weed. Please enlighten this value neophyte.

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