Biotech Values

[zipjet]

I am trying to say that the market treats ongoing earnings for longer periods of time differently than it does earnings that will only last for a few years. The market has a tendency to accord much higher PE's to long-term earnings. For whatever reason, the market is willing to assume profitable reinvestment for steady long-term earnings. We see this frequently in drug companies that have a patent cliff in 2, 3, 4 years.

I am also suggesting that when earnings come in very quickly, in huge amounts, that the reinvestment risk is greater. That will also result in a lower PE. The way to avoid that is to convince the marketplace and analysts that those funds can be reinvested profitably.

GILD played the buy-back card. The inference that I draw, is that there is no near-term M&A, and that the existing pipeline does not need the funds.