Biotech Values

[DewDiligence]

Is “FDA reform” bullish for drug/biotech companies?

There has been a lot of ink in the past few days asserting that Republicans want to see less FDA regulation and that this will lead to a lower bar for FDA approvals and is therefore bullish for drug/biotech companies.

The above reasoning is backward, IMO.

A lower bar for FDA approvals would actually be bearish for non-scam drug/biotech companies by weakening their economic moat. Higher-quality drug/biotech companies are the ones who have the talent and financial resources to conduct robust clinical trials, which are generally (SRPT aside) what is required for FDA approval. The last thing these companies want is a “loose” FDA that approves products willy-nilly and thereby erodes the companies’ competitive advantage.

Too low a bar 4FDA approval weakens economic "moat" of higher-quality drug/biotech companies, who have talent/$ 2run robust clinical trials. https://t.co/WOCngTfIbo

— Roy Friedman (@DewDiligence) November 11, 2016