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Biotech / Medical : Munch-a-Biotech Today -- Ignore unavailable to you. Want to Upgrade?

To: smh who wrote (199)	2/24/1999 12:21:00 PM
From: Biomaven	Read Replies (1) \| Respond to of 3158

smh, The pooling issue you raised is very significant for biotech acquisitions. The reason is that there is usually considerable goodwill in any biotech acquisition, partly because all the R&D costs have already been expensed. In a pooling acquisition, you just get to continue as if the companies had always been merged. If they further restrict or abolish pooling as seems likely, then the alternative is purchase accounting, which means the goodwill has to be written off somehow. The SEC has now cracked down on the immediate huge write-offs that we used to see for "in-process R&D." This means that companies will instead be forced to write-down the goodwill over many years, impacting earnings for years to come. Sometimes I wish biotechs used the same accounting methods as oil and gas explorers - capitalize the cost of drilling an exploratory well and then write it all off if it turns out to be a dry hole. I'll discuss this issue further on the new valuation thread when I get the time. Peter