I should reply to your queries since there are several issues that require me to provide a substantially different perspective. I must start off by saying that I have followed INCY for some time, and never bought in until yesterday. It was my first third of a full position.
Is INCY making an error in getting into drug development, you ask? Absolutely in no way in my mind. If they have the IP on any prospective therapeutic protein, the best way to (massive) profits in the long run is to do the development in house. This should be the major way for this biotech company to maximize shareholder value IMO. Do some research on the background of Paul Friedman. Impressive as he has been involved in several major developmental programs at Merck, DuPont Merck and at DuPont. He knows several therapeutic areas well, is a clinician by training, and is highly driven and will bring drugs to the market.
Should the situation of a biotech drug development company like INCY be compared to the MSFT and boxmaker situation, you ask? Under no circumstance is my perspective. Two big differences. In biotech and pharma, marketed drugs usually have high margins and a long exclusivity period is the IP is adequately protected. The obvious examples are EPO and NEUPO, but it holds for small molecules as well.
Continuing license revenues of $56M per Q, you ask? I can only hope so from my perspective. Now you can have the revenues from the genetic databases, as well as any longer term royalties from the great deals made by the INCY business people. Perhaps INCY can get out of additional revenue sucking ventures that were of limited long term potential. I hope so. They also have to start thing of production facilities for research purposes. Maybe they will even go on a well-crafted, strategic acquisition spree to get into small molecule discovery. Having IP in both the target as well as molecule categories (protein and/or small molecule) would be a major position of envy throughout the industry IMO.
Perhaps INCY should get taken over in order to get into drug development you ask? How many good drug development companies do you think exist out there? This area of drug development is a highly competitive and tough business, and expertise is an experiential process. Friedman in my opinion is a safer bet than getting bought out. The board and company is still in control as well. Look at the composition of many from the current board of INCY. Several of them are quite experienced in this business, and I believe that they want to maximize shareholder value. By not selling out and by bringing in the right people, and sharing the development vision with shareholders and then executing such will take this stock to a value 10 to 50 times of what it is now. That is also IMHO.
These are some of the reasons that I am looking to completely fill my position in INCY.
BJ |
