You commission a study and spend a ton of bucks, you'd best have something to say.
The results fit the question that was asked...... "is conventional wisdom re. an increased number of targets correct?"
>> As noted here before, they give a "free pass" to a number of biotechs they've done underwriting for. <<
Yup, and that's very telling. The entire study is undermined. But let's go forward from there.
The "ticket to play" issue hit hard at SmithKline Beecham. That's a good choice, as they were an early player. However, they were largely playing with crude data, while the Millenniums of the world were digesting data and making it fit into a viable PROTEOMICS effort.
Another obvious "ticket to play" company is Bayer, and we've beaten this one to death...... no foresight, and they're paying for it. MLNM is a benefactor. The BIOLOGICS company will always be the benefactor in this game, and some of them will have the resources to play pharmachem on equal footing with the "ticket to play" companies.
Bayer is going to be muddled in mediocrity for some time to come. They deserve it. They've done some sensational deals, but they've done them from a position of weakness, from having shot themselves in the foot. Biotech (MLNM, CRGN) is the benefactor, and....... tada!!....... the benefactors get to keep many of the biologicals!
This report is quite hilarious. If the mid-cap players (Watson, Forrest et al.) don't have a ticket to play, they can merge with the MLNM's and HGSIs of the world to play big-time, while the SmithKline's of the world spin in their confusion of riches (targets, targets, and targets!!).
>> There is also some impact on a company like INCY that will ultimately receive royalties on these drugs. <<
A point that Levinson recently hit hard at! If you don't have information science hooked up to some good discovery biology, you're going to be relatively stagnant. The Lehman report is a clear signal to INCY, GLGC et al. Of course, it's a message that was delivered very clearly by others, and delivered some time ago.
If you've been asleep for five years or so, and if you have little vision, Lehman will sound intelligent.
Watch! Those mid-caps without a "ticket to play" are going to team up with the insightful biotechs, and the companies that Lehman focused on will be left behind, helping to fund their competitor's progress. This is going to be fun.
Lehman looks ten years into the future, focused on a given issue...... pharmachem and new targets. They see a static infrastructure. It isn't going to happen that way.
ADMET......... surprises are independent of whether the target is new or old.
Pharmacogenomics, in vitro measures of toxicity, etc........ these are built into some business plans. Millennium is a good example. Other companies, like ARQL are scrambling to be a player. The "ticket to play" pharmas just walk from one expense to the next, all of which are answered by innovative small companies, i.e., biotechs.
They have no choice. Deals are getting better all the time for a reason....... the "ticket to play" pharmas have no other route, aside from coughing up the huge premium to virtually swallow their perceived solution. Catch 22? They know damn well that they'd manage the "solution" into mediocrity, and that the innovative scientists would either leave or become mediocre, drowning in their frustrations.
Watch what happens when a mid cap, a "no ticket to play" pharma, merges with an innovative biologicals company. It's going to happen. MLNM only needs one more "Leukosite" (or, as Fool Tom Jacobs call it, one more Leuko-Cyte).
It's going to happen. Lehman should have spent their money trying to figure out what the competitive infrastructure of the future will look like, instead of trying to force a hypothesis into a static one.
>> Bottom line is that I think they have gotten carried away with one notion (higher failure rate in small molecules) and the overall consequences, even if they are right, are overstated for biotechs. <<
Yes. |
