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Biotech / Medical : Biotech Valuation -- Ignore unavailable to you. Want to Upgrade?

To: Biomaven who wrote (1390)	8/4/2000 4:35:27 PM
From: nigel bates	Read Replies (1) \| Respond to of 52153

"The R&D expense ultimately has to flow through to the income statement at some point or another. The issue is whether it should flow through when you first spend the money (as it does now), or over some longer period (here the life of the drug)." Yes but how could one reasonably forecast the life of the drug these days. The pace of development is now such that the lifetime of a drug, even if approved, must be highly uncertain. I would prefer to retain the current situation. At least the P & L bears some relation to what's happening to cash. nig

To: Biomaven who wrote (1390)	8/5/2000 10:40:09 PM
From: Harold Engstrom	Read Replies (1) \| Respond to of 52153

Peter, I think my problem with it is fixing a value on that R&D. If it costs you $100MM to build a building right now, chances are that you can build another building just like it for $100MM, too - and both buildings will be worth $100MM. But, if you spend $100MM to discover and commercialize Epogen, there isn't much chance that you can duplicate that success with the next $100MM. According to the odds, most of the time you spend $100MM you get next to nothing in terms of an asset. On the other hand, if your $100MM gets you an approved treatment, then the asset is worth far more than your expensed R&D. I think I agree with the quality of earnings view that you wrote about. But I don't think the issue needs an accounting change, since, as you point out, the market seems to adjust for that (or not - as always). It hasn't been two days yet, so my brain hasn't had a chance to fully come around.