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

To: scaram(o)uche who wrote (2063)	11/20/2000 3:31:28 PM
From: Biomaven	Read Replies (1) \| Respond to of 52153

I was visiting Washington DC over the weekend and drove past the VP's residence. About 75 protestors holding "stealing the election" signs. Not a long-haired hippy among them. <g> Seeing that it's too depressing to talk about stock prices today, people may be interested in the following accounting article from Barron's: Why an accounting guru wants to shake up some basic tenets of his profession interactive.wsj.com Baruch Lev is addressing the whole issue we've discussed before on the thread related to the accounting treatment of intangible capital: In Lev's view, the intangible nature of the value being created today is largely beyond the ken of traditional accounting methods. These intangibles can be product or service innovations arising from research and development, brand enhancements that allow companies to sell products at higher prices than their competitors, or advantages conferred by smarter business models or technological edges. <snip> "Transactions are no longer the basis for much of the value created and destroyed in today's economy, and therefore traditional accounting systems are at loss to capture much of what goes on," Lev argues. "When a drug passes a key clinical test, a software program is successfully beta-tested, great value is created without any transaction taking place. There's no accounting event because no money changes hands." Part of Lev's remedy is to stop expensing R&D, just as I have suggested is appropriate in the case of most biotechs. Conservative accounting would definitely frown on revaluing the R&D when you get FDA approval (I'm not sure he would actually suggest this), but would be consonant with writing it down if you get rejected. In practical terms, the best one can hope for is two sets of books - one that takes knowledge capital seriously alongside the present system. In a way we are already heading down that road - the non-cash write-offs of goodwill from purchase accounting are already being reported separately and ignored. Peter