Biotech Values

[DewDiligence]

Quiz answer: You made another good catch, and it’s evident that this NYT article has an array of material errors.* The whopper of them all is this one:

At the end of November, Pfizer stands to lose a $10-billion-a-year revenue stream when the patent on its blockbuster cholesterol drug Lipitor expires and cheaper generics begin to cut into the company’s huge sales.

This makes it sound as though Lipitor will go from sales of $10B/yr to zero, which is very far from an accurate description. In fact, even after Lipitor is off-patent everywhere in the world, it will continue to be one of PFE’s biggest-selling drugs and will almost certainly have annual sales of more than $3B.

What the NYT author failed to grasp is the power of branded generics in emerging markets. If I were to reply to the article, I would respectfully suggest that the author read such pieces as the ones in #msg-39315651 and #msg-50473238.

The misunderstanding exhibited by the NYT author is one of the main reasons that the shares of Big Pharma’s stocks are undervalued today. Many investors just don’t get that Big Pharma has become, first and foremost, a play on The Global Demographic Tailwind.

*That a cover story—which one would presume to be better researched than a run of the mill story—has so many material errors does not reflect well on the NYT, but that’s a subject for another discussion.