Monday, July 11, 2016 6:39:41 AM
Rolling out a drug is indeed very expensive, that part I agree with. the part you claim "profit margins for pills like Rexista are very high" I do not agree with unless you specify what you what you mean by long term. it usually takes quite a few years of marketing (5 to 10) to before profit margins improve. I also disagree that royalty payments would be based on sales not profits. Milestone payments are indeed based on sales and hitting sales records but royalty payments are most times most times based off the Profits. now that statement is quantified by the following. They can ink a deal based on either. they just adjust the percentage. the precentage they would recieve would say be 50% if based on profits. however if they do base on sales they would be more closer to 20% as a top figure. also if IPCI is to do manufacturing, it would make more sense to royalty off Profit rather than sales. ensuring IPCI would do its part in maintaining cost of manufacture. why would any partner allow IPCI to manufacture without any regard given to their cost and then still pay out a royalty payment based on sales? inking a deal based on splitting on profits ensures both partners do their best to control costs.
of course we will never find out who is right as most times the terms of agreements are never disclosed. one doesnt find out until earnings are released and thats when price shares tank and people get surprised with lower than expected results and its not do to bad sales but people over estimating the anticipated agreement and what it truly means. hence why it becomes important for company guidance in regards to earnings.
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