Biotech Values

[poorgradstudent]

THLD:

Poor grad, any thoughts on why Merck would obligate themselves to pay 70% of all future development costs and give a small bio company with very little money a pretty strong royalty rate? I would think Merck would have a little reassurance that results would be okay to put themselves financially on the line. I guess we will see soon

Not to be flippant, but if we wanted to generally assess these deals in hindsight, a reasonable conclusion would be that big pharma enters them because they're ok with losing money.

As for the "70% of all future development costs," I think big pharma simply considers that as a retainer in these situations where pivotal trial results are pending. I'd be willing to wager that Merck won't significantly ramp up the "development" of the drug until they see strong proof of efficacy.

I think there is a newbie biotech investor rule or two embedded in your question