re: "R&D expenditure is really more like a capital expenditure"
R&D spending in biotech is really more like a lottery ticket. You spend the money, and your ability to predict whether it leads to a profitable product, is nil. Sometimes you win the lottery. Mostly, you don't. Hard to say how spending on lottery tickets should be accounted for. R&D spending has zero value, as soon as it is spent. It does, however, have a (highly uncertain) potential future value. The stocks trade based on guesses of whether that R&D is going to produce anything. The stocks do not trade based on known revenue and profit streams from established uses for established products (that's already in the stocks). IMNX goes up and down based on guesses about what new uses will be found for Enbrel. So the stocks, too, are a lot like lottery tickets.
Since it is impossible to know what future uses will or will not be found for Enbrel, the safest thing to do is to buy IMNX when those expectations are very low. They are pretty low now. Certainly lower than when the stock hit 83.
BTW, JNJ overpaid. I hold WPI (another generic drug co.), and I hope someone decides to overpay for them, too. |
