Biotech Values

[iwfal]

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.

FWIW I couldn't agree more. I tweeted as much several weeks ago to @VinayPrasad82

@matthewherper think u'll find high %age long term inv mostly agree w ur positions. Science is an edge. Chaos is bad.

— Clark H (@Clarksterh) October 25, 2016

Further thought is that, again as I tweeted (to @matthewherper in this case), I hope if we are going to swing to a too permissive FDA, that we go whole hog back to the 1950s. I think that likely has the least long term damage because it will crash and burn quickly (quickly is all relative - perhaps 10 years before it becomes apparent to the public that something is very very wrong)