<<Beginning to reconsider the drug discovery trickle category; if the pie is that small and that many blackbirds are eating. >>
1) I don't think that the 10% figure cited in the Fool article is large enough. My read of the situation is that the figure is higher, and GROWING. There are always new deals being made, and not always at the expense of existing deals. Just look at the research deals being done by big pharma: they simply cannot spend money fast enough internally to keep themselves happy. Where does that money go? Some to mid-size to larger biotechs (Vertex did another deal today, for the life of me I don't know why), but the rest is throw-away money to "platforms". I believe at many companies the funds for such deals are separate from internal research funds, so it's not a matter of "spend it on our guys or send it to Rosetta", but rather "send it to Rosetta or lose it at the end of the year and don't get the same amount in next year's budget cuz we obviously didn't need it this year". Which do you think will happen?
2) The "trickle" category as I understand it does not only include platform companies but also supply-house & equipment type companies. Thus, it does not matter (much) where the research is done; either at big pharma, large biotech, small biotech, or a "platform" company. In fact, the more the merrier: we'll only have to worry about the equipment re-surfacing on "http://www.biobid.com" in a few years down the road as some of these places go under. But I have never met a scientist who does not want shiny brand new equipment and their own bottle of butyllithium (or ethidium bromide or Ringer's lactate or whatever). So used stuff generally goes to the landfill or local university labs.
3) The real downfall of the Fool article is ignoring the "platform" companies that take a piece of the drug pie. Sure, the upfront money isn't great, but taking a 1-2% royalty on 50-100 different drugs has the potential to pay off down the line in expense-free royalty checks.
I think the trickle concept is sound and the pie is plenty big. It just has different pieces, and some of them taste funny. |
