Well, if you used to do early-phase commercialization forecasting for a major pharma company then you perhaps can invest in such companies. I don't see how I or mostly anyone else can. IMHO, most people - and I exclude you from most people :) - investing in biotechs are speculators who have no clue and lose their shirts.
Just a comment about positive earnings. I can guarantee that none of the companies you mentioned have returned any capital invested during last 10 years. Actually it's easy. Just look at their balance sheets and find one with positive retained earnings. Which pretty much means that anyone who invested capital into the company would be still very much into red if they counted on cash from business. So, why would one buy a business that loses cash for 10 years? Perhaps, as you say, for the big cahuna profits at the end. Isn't it better to bet in the lottery though? (No, scratch that question, I know about the societal value of early stage investors who bet their farm on unproven concepts and usually lose. We need to celebrate their input into the progress of our civilization. :))).
You might be able to say which ones of the listed have gone over the crest and will generate cash/profits from here on. I cannot. I can only use historical results and they are not pretty.
The above does not mean that all pharmas are bad businesses. Far from it. The old big companies have been throwing off great earnings and cash flow. However, it is possible that golden age is past and will never return. Or perhaps there will be a paradigm shift to biologics and/or new gene-based therapies that will lead to another low-investment-big-returns boom. It's just impossible to outsiders to know.
I think I am with Buffett here: I have no clue which small pharmas are going to make it, so the only thing I can invest in is the long history of some companies to either R&D or buy their way into good products and great profits/cash flow. Such as JNJ, PG, maybe GSK, maybe SNY, maybe WYE. |
