Replies to post #50693 on Biotech Values

[DewDiligence]

>As I suggested before, #3 suggests Big Pharma is resizing itself commensurate with a smaller revenue stream. That means they may be throwing less money around the sector (pharma and biotech) via in-licensing and acquisitions, which is bad for everybody else.<

A lower expected top line for Big Pharma is bearish, but lower Big Pharma SG&A expenses for a given level of sales is very bullish, IMO.

I think it’s fair to say that the aggregate Big Pharma layoffs reported by BI go well beyond the anticipated percentage falloff in aggregate Big Pharma sales, which should make the net effect of these transactions bullish for healthcare investors. Regards, Dew

[DewDiligence]

Why Big Pharma Has Been Downsizing R&D

Here's another take (from #msg-47480410):

[haysaw]: Big Pharma is changing and devoting fewer resources to scientists, for various reasons. Drug companies have woken up to the idea of licensing agreements, where they can pay smaller biotechnology companies to develop potential treatments at a fraction of the cost.

[Dew]: I think it’s more apt to say: Big Pharma has recognized that it makes economic sense to offload some of the cost of research failures to bagholder biotech investors, who have a nearly unlimited appetite for chasing the promise of newfangled technologies.

This is not a completely novel viewpoint, of course, but I haven’t seen it expressed in exactly this way.