Don't listen to these pump and dumpers trying to tell you to buy this stock so that they can sell at a higher price at your exspense, didn't you see what happened this morning. Get out now and put your money in a stock with a more positive earnings reports such as Ebay(EBAY).
Reasonable statement about the P/E of dotcoms or the incredible runup, if they had earnings at all. I am sure a lot of people (including you) wished that startups in the biotech/pharma saw that kind of "appreciation".
It was easier for some to run up those stocks: no overhead costs, pay in stock options and not salary/benefits, just need an office space and a computer, and bingo - Pets.com.
Most understand that this industry takes a little while, and it involves serious costs.
So if you look at the business model here, showing some revenue from contract work is a very rational plan. It slows down the burn rate, and helps inexperienced personnel gain experience.
If ARRY announces something entering clinicals, and if the announcement indicates a significant portion of future revenue moves into the company coffers, then one might expect a runup of some significance, after which point a split might make people happy. The vested or near vested insiders want it very badly, and this carrot should make the pain of the stick less painful.
Over time stock will track as the clinical goes. Using partnerships for clinicals does spread the cost risk, but it dilutes the potential earnings. Spreading the risk would be advisable, so partnering would make sense. This approach is seen here, and it seems to be a rational and attractive longer term approach. However, if the reward is a few million in milestone payments, then I'm not sure about the effort.
Appointing a legal cousel is intriguing news for sure and positive. It appears this person will be on site, and not paid by contract. His degree choice is logical - burned out of chemistry with a masters, and went to law school. The early nineties recession also sent a lot of Ph.D.'s to law school as well, and they work as IP attorneys doing very well. He'll command a hefty salary, but the options will be pretty good, and any early exit plan will probably give him full vesting.
Nonetheless, you have a lawyer with some appreciation of chemistry, and whether other lawyers say this makes no difference, I beg to differ. He should speak the language of chemistry and biology well, and communicate effectively with the scientists and businessmen at Array.
To me, this is a very encouraging announcement, or at least it was designed to be.
Look at how many start ups there are.....very
similiar to the dot.com bubble. The shakeout will be ugly and chemists will be analyzing the chemical reaction of hot boiling oil and frozen raw potatoes.
Mark my message and check back in a year or so.
You recall that the demand for software folks was high a couple of years back during the dot.com boom. Startups require bodies, and startups need bodies for their IPO's to hold up or even be created. Funding is still moving into biotech area to create companies - lots of startups means lots of redundancy in personnell - just like the tech or dot.com boom. The redundancy is short lived, and employees have a false sense of security. Funding creates huge amounts of cash for venture capitalists who take companies public, then get OUT.
There are a lot of venture capital firms out there, and they can't pull it off with dot.com swindles.
Talk to your pizza delivery boy or "mortgage specialist" and you may find he was making 6 figures with huge options just last year.
One would like to be in on the start of this boom, and not the crest. On the one hand, profitable pharma companies are streamlining, and on the other hand, high risk ventures are booming. The risk is being spread out to the investor - you and me.
This industry will shake out within 2-4 years, provided it still gets some income from pharma in the meantime.
Recall the "electronics" boom of the 1960's - this was high tech. Same result as always - lots of swindlers and dreamers, and an eventual shakeout. There will be a handful of players who survive, and some who will be bought for a winning lottery ticket only to be dismantled. Most will fail, and most do fail.
How about the recent telecom boom? OUCH.
Biotech pure plays need hands to get molecules built, because they cannot afford to buy them - chemists are cheaper. The capital outlays are huge, and they have to go public even before they have shown promise. All dot.coms and techies needed was a plug and a computer. Used to be venture capitalists wanted to see some cashflow before an IPO - not anymore.
You are astute.
If you look at the money pharma invests in sales and marketing and compare it to R&D you will find that it is their view, not mine.
That said, there are many offerings for each disease class by many companies - how does a patient choose. Most of them are knockoffs anyway. Used to be, he did not, but the doctor did - perks are great for M.D.'s and health care providers. Now comes direct marketing to the consumer - why?. Perhaps health care providers are happy with what they have in the formularies - proven drugs, low liability, lower cost, and great efficacy.
One solution: Don't try to compete in all markets - Lilly is known for Prosac class drugs, diabetes, but you don't see their name on cardio. Mergers are defined by eliminating competition along classes of drugs - merge with your direct competitor in cardio, or your direct competitor in diabetes - sell of the other divisions or fire them.
This isn't working well, although the industry is poised for more mergers - remember that Euoropean companies have been the buyers lately.
FDA testing is stringent in relative terms, the clinicals are highly structured, only monitored and not run by the FDA. The FDA does not have the resources. Serious side effects not specifically looked for usually come out after a few years - look up phen-fen, or check into Tylenol and its effect. Right now, liver and kidney damage is an issue. If you use a drug, you might consider using one which has been on the market for years. That is exactly what hospitals do - they do not want too many suprises. No one has beat Synthroid for thyroid, and this one is as common as aspirin, and still on the top selling lists by usage.
Pharma tried joint ventures such as DuPont Merck to toss costs off on partners - this failed. Pharma tried using fine chemicals companies for making clinical trial quantities and intermediate quantities with the promise that fine chem would get the profits when the drug hit the market - fine chemicals bought this ploy, and are on the skids in debt.
Finally, startups and contract research is on the table. If big pharma is seriously looking at the value of Ph.D.'s and R&D (they are), and outsourcing R&D to startups to save money (they are), what gives. They don't want them as their own employees. Well, this time the partners and chemical companies have wised up, so why not try to get something from investors. So just get contract reseach done for pennies on the dollar, and lose nothing when a startup folds.
This time, the investor foots the bill.
The real value is in the clinical trial and those willing to participate. Most drugs are "me too" or very similar in structure - issues with kidney or liver toxicity are pretty well known from previous analogues.
Those who study and understand disease states and subsequently put chemists to work are of real value as well.
Without chemists, and their molecules, we would have nothing. The issue is in placing value (cost v. return) on sales/marketing, clinical trials, molecular biologists, M.D.'s in a relative sense.
As for pharma, think of a world without drugs. Some are of real value, and some are quite questionable in value. Long term investment in reputable companies can pay off, you get a dividend, and you don't have to watch the stock daily.
So in your view, it is better to hire highly skilled sales reps than Phds in chemistry?
If you are truly accurate, I feel sorry for anyone taking any drugs for anything. Hell, it is all a sales ploy.
Doesn't the FDA mandate testing to make sure the efficacy of the drug is legit?
One thing I can say that I am against are all of the ads on pharma drugs we see on TV now.
If we didn;t have any research scientists that are skilled, we would never have any chance at curing many diseases that plague us.
12) Corporations are investing large amounts in lawyers - for agressive patent protection, or finding loopholes in other patents. Seems to be a better course than using R&D.
13) Increase use of foreign imports w/o U.S. citizenship for Ph.D. grad schools - law of supply and demand - no supply in U.S. for the grant machine U.S. universities now run.
14) Increase in collaboration with universities by chemical and pharma - cheaper, and an admission that its better than hiring Ph.D's - just use university kids. This trend should scare you if you have this degree.
15) Increase in licensing university patents - again cannot get it done in industry, or too costly.
16) The argument has been made that process chemists may be in demand - one has to mass produce the drugs. This argument has not panned out. As well the fine-chem work is increasingly being exported to China and India. This is certainly a risk/reward decision.
17) European enviro regulations have been hard on employment there, sending euros here to accept lower wages. Definitely dime a dozen over there.
18) Wage spike driven by biotech/pharma startups is over.
19) Supply/demand curve for Ph.D's with synthetic experience has been somewhat inflated due to all of the startup ventures formed - they need some bodies and advertisement. Recall the dot.com bubble - its in the cards for Ph.D.s in chem soon. You need bodies to form an IPO, and investors are increasingly wary of IPO's
20) Double whammy - new pharma mergers, and failure of startups near term - market glut of employees.
21) Most 5 year plus degrees, plus a traditional post doc give don't give much return on the investment. Why is someone willing to do this?
22) Post docs are the norm nowadays, no jobs available, so post doc - too many Ph.D.'s or they are just so worthless to industry that they must hang out in school even longer - often for many years.
23) In an effort to prop up the degree value, post doc positions are increasing at the top 5 schools. Although you did not go to Harvard, you hung out for a one-year postdoc, and people assume you know something. The one year trend is mere an oversupply of Ph.D.'s and a marketing attempt.
24) Engineers just get paid more, and have more opportunity in their future careers. Most Ph.D.s sit at the bench inhaling fumes for most of their lives.
25) In an effort to keep jobs, jobs are created by startup ventures by the very people who find themselves out of a job.
Hope that helps.
If you have any suggestions about potential companies to track in Research Triangle Park, let me know.
1) Industry unemployment rate - always higher than national norm by 2-3% or more.
2) Number of degree granting institutions, and number of degrees granted.
3) Talk to recruiters or visit recruiter sites to find which jobs are hard to find people for resumes - no problem with chemistry/pharma. Lots of rotation in the sector, few long term employees.
4) The chemical sector is declining as a whole - witness the dissappearance of major chemical companies.
5) THe pharmaceutical sector is declining.
6) The pharmaceutical sector went through one round of mega mergers a couple of years back, and is now poised for another - this means "synergy" and more people on the street by elimination of duplication. Perhaps this is what spawned the startups - hence the Research Triangle park density.
7) Salaries are highly variable within the sectors requiring Ph.D.'s.
8) Pharma has relied on massive sales/marketing campains - less emphasis on actual efficacy of drug.
9) New trends of TV direct marketing amid worries of patents running out, no pipeline.
10) Given 8, and 9 above, one wonders exactly what Ph.D.'s are worth nowadays - they seem to be less efficient at getting a drug to market.
11) Given 10 above, one wonders about the value of the degree - it seems to be harder to get out a new drug, taking longer, and more problems with side effects. Don't blame the FDA.