Comments on: Can securitization save medical R&D? http://blogs.reuters.com/felix-salmon/2012/10/01/can-securitization-save-medical-rd/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: traduceri daneza http://blogs.reuters.com/felix-salmon/2012/10/01/can-securitization-save-medical-rd/comment-page-1/#comment-53563 Mon, 29 Sep 2014 13:58:54 +0000 https://blogs.reuters.com/felix-salmon/?p=18443#comment-53563 Reporters tried to interview the Ying Ying, but all immersed in the new joy in the hope to keep some personal space, did not accept interview

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By: Knonymous http://blogs.reuters.com/felix-salmon/2012/10/01/can-securitization-save-medical-rd/comment-page-1/#comment-43602 Wed, 03 Oct 2012 06:59:58 +0000 https://blogs.reuters.com/felix-salmon/?p=18443#comment-43602 The SPV concept makes sense in a small biotech setting when the strategy is to partner the compound after ph 1 or some efficacy readout. The idea is to push the compounds that are most likely to succeed and get them into the hands of big pharma, which can then foot the development risk. Hence the shorter payout period.

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By: TFF http://blogs.reuters.com/felix-salmon/2012/10/01/can-securitization-save-medical-rd/comment-page-1/#comment-43585 Tue, 02 Oct 2012 13:18:59 +0000 https://blogs.reuters.com/felix-salmon/?p=18443#comment-43585 The beginning of the end was the Vioxx scandal/lawsuit. The FDA is demanding higher safety standards, more testing, which simultaneously increases the cost of developing a drug and makes it less likely that the drug will actually get approved.

Moreover, the bar is continually raised. Most of the common conditions have already been addressed, so your new drug will only find a market if it is better than existing drugs. Even if it is similarly effective with reduced side effects, you may see doctors/patients beginning with the cheaply available generic drug before (to see how well it is tolerated) before they move on to the high-priced brand name.

The cost has recently been estimated at $4B per new drug approval, yet that doesn’t fully take into account the DECLINING pace of new investment. If you take a backward-looking analysis, the actual cost may be higher than that.

Does the average new drug approval have $6B-$10B potential? If not, then pharma investment may now be unprofitable. Forget that pie-in-the-sky hope of a 10% annualized ROI, it might not even be positive.

Over the past five years, I’ve been investing in pharma companies that are putting their cash into non-pharma businesses. Devices, OTC and consumer divisions, generic drugs, and so forth. Those are likely to show a positive return going forward. But the legacy big-pharma businesses were slaughtered by the FDA, by the courts, and ultimately by the public expectations of perfection.

Perfection is an impossible standard, and even near-perfection is very costly to achieve.

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By: dWj http://blogs.reuters.com/felix-salmon/2012/10/01/can-securitization-save-medical-rd/comment-page-1/#comment-43584 Tue, 02 Oct 2012 12:53:41 +0000 https://blogs.reuters.com/felix-salmon/?p=18443#comment-43584 If you think the problem is short-term thinking in the public securities markets, it would seem that endowments might be the place to try to fund this. Harvard, Yale, and MIT could, just the three of them, fund maybe not 100 projects but 30, and perhaps use some of the expertise of their own molecular biology and med types.

Still, like you, I’m not sold that there’s a good reason going in to expect a lot better results than big pharma is generating. If all you need is, essentially, a tolerance for illiquidity, endowments would seem a good source of funds, but if projects are simply unlikely to be profitable, that’s not going to fix that.

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By: Foppe http://blogs.reuters.com/felix-salmon/2012/10/01/can-securitization-save-medical-rd/comment-page-1/#comment-43578 Tue, 02 Oct 2012 05:52:11 +0000 https://blogs.reuters.com/felix-salmon/?p=18443#comment-43578 “And for all that the pharmaceutical industry has doubled its R&D spending over the past decade, from $68 billion in 2002 to $127 billion in 2010″

How much of an increase is that after inflation?

Anyway, so long as big pharma keeps spending 3x as much on advertising as it does on R&D, I’d say the industry has bigger issues than ‘attracting funding’.

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By: klhoughton http://blogs.reuters.com/felix-salmon/2012/10/01/can-securitization-save-medical-rd/comment-page-1/#comment-43577 Tue, 02 Oct 2012 02:37:30 +0000 https://blogs.reuters.com/felix-salmon/?p=18443#comment-43577 So they’re proposing exactly what Big Pharma is doing right now: giving seed money to firms (read: a small group of individuals) that then try to get their discoveries through Stage 2 and Stage 3 testing?

Great news, guys, PFE, MRK, and LLY have been doing that for years. (And, no, I am not suggesting JNJ et al. aren’t doing it; just don’t track them so much.)

What’s that you say? “Pharmaceutical companies are doing a very bad job at turning R&D expenditures into profits.” Oh.

Well, I’m certain a bunch of investors who don’t know 3′ from 5′ DNA will make better decisions.

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By: TFF http://blogs.reuters.com/felix-salmon/2012/10/01/can-securitization-save-medical-rd/comment-page-1/#comment-43566 Mon, 01 Oct 2012 22:23:15 +0000 https://blogs.reuters.com/felix-salmon/?p=18443#comment-43566 I’m skeptical… Hard enough for Pharma companies to turn a profit at this, and they are working with established teams on a larger scale than what is proposed here. (The biggest companies spend $6B/year. This $15B fund would presumably run for 5-10 years before developing or cashing out, for a R&D budget half that size.)

My guess is that the Pharma companies aren’t investing more because they haven’t found it profitable to do so. It requires a ridiculous amount of money to develop a new drug, so if you can’t sell it a billion times then you won’t turn a profit. Thus the pressure to cut corners on the sales end of the business…

If we want more basic (i.e. not directly profitable) R&D, then fund it publicly. $100B is a drop in the bucket for global health care expenditures, yet that annual expenditure would do wonders to advance medical progress. Even if the eventual profits were given away freely.

But instead we are squeezing the NIH budget. Go figure.

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