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

To: nigel bates who wrote (1391)	8/4/2000 5:08:06 PM
From: Biomaven	Read Replies (3) \| Respond to of 52153

I would prefer to retain the current situation. At least the P & L bears some relation to what's happening to cash. But it's often only a distant relationship, particularly if the company has a lot of goodwill on its books from an acquisition or has non-cash compensation charges. You don't really need the income statement to see what's happening to cash - it's all broken out in a separate table. It's not just the drug life that's uncertain (although the remaining patent life is a good place to start) - even harder is knowing whether your equivocal Phase II results mean that a drug candidate is dead or not. The current version does have the advantage of simplicity, conservatism and certainty. But the present system is still "wrong" in my view and makes it hard to compare PE ratios across companies and industries. You would certainly see a much higher correlation between quarterly earnings and stock prices than you do now, given that bad news on a drug would flow through to the income statement. Peter