Why Biotech and Not Big Pharma
by Michael Shulman
BiotechBlitz
I took one of my sons for his annual physical this morning at a seven-physician pediatric practice that provides great care, along with high fees. And, given what I do for a living -- writing ChangeWave Biotech Investor -- I looked around at everything in the office. Today I saw the great visual metaphor, and spoke to that metaphor, telling the story of why Big Pharma is declining and biotech is the place to invest.
While waiting for the pediatrician to finish his private conversation with my son, I spied a flier highlighting the Blue Duck Tavern, one of may favorite restaurants in Washington, D.C., and one of the better places to eat in the city. A drug company, GlaxoSmithKline (GSK) was promoting a new, one-treatment-for-all-allergies medication and was inviting the healthcare professionals in the practice to put on the feedbag and learn (from another physician), the value of the drug. Next to the flier were samples and next to the samples was a brochure for another asthma medication.
I had decided to write about this example of nineteenth-century product development and marketing when a young woman, obviously in sales, with her black rolling bag in tow behind her entered the practice. Since I am so shy, I moved forward, noticed she had a GlaxoSmitheKline (GSK) button on her jacket, and made a comment about the Blue Duck Tavern.
She was clueless about the restaurant, and it turned out she sold vaccines -- a big and growing business for GSK. Obviously, different drugs, different sales forces. She sounded a bit worn down by selling vaccines as her comments indicated that it was a tough business, which meant she was selling something not mandated by the CDC (Centers for Disease Control) or that had a lot of competition.
So, one target market, two sales organizations and three products -- all providing (a good assumption about the vaccines, I know it is true for the other medications) marginal and incremental benefits over existing products. Is this the kind of company that excites you?
Or even an outfit making another statin or asthma inhaler? Not me.
I like companies with new ideas and brand new kinds of treatments: Amylin’s (AMLN) Byetta for diabetes, Genentech’s (DNA) Avastin for various forms of cancer, Allergan’s (AGN) lap bad instead of full gastric bypass surgery, and so on.
If you want 5% growth, security, maybe a dividend -- then fine, invest in Big Pharma.
If you want aggressive growth, the occasional homerun and the very occasional, but still possible rocket ship stock, invest in companies that make new products that change the world -- or at least the life of the individual patient.
RELATED READING:
- The Risks of Small Biotech
- Valuing Biotechs
- Short Squeezing Biotechs
- Strategy for Investing in Small Biotechs
- The Biotech Industry: 30 Years of Failure
BiotechBlitz is a regular contributor to BioHealth Investor
_______________
BiotechBlitz
I took one of my sons for his annual physical this morning at a seven-physician pediatric practice that provides great care, along with high fees. And, given what I do for a living -- writing ChangeWave Biotech Investor -- I looked around at everything in the office. Today I saw the great visual metaphor, and spoke to that metaphor, telling the story of why Big Pharma is declining and biotech is the place to invest.
While waiting for the pediatrician to finish his private conversation with my son, I spied a flier highlighting the Blue Duck Tavern, one of may favorite restaurants in Washington, D.C., and one of the better places to eat in the city. A drug company, GlaxoSmithKline (GSK) was promoting a new, one-treatment-for-all-allergies medication and was inviting the healthcare professionals in the practice to put on the feedbag and learn (from another physician), the value of the drug. Next to the flier were samples and next to the samples was a brochure for another asthma medication.
I had decided to write about this example of nineteenth-century product development and marketing when a young woman, obviously in sales, with her black rolling bag in tow behind her entered the practice. Since I am so shy, I moved forward, noticed she had a GlaxoSmitheKline (GSK) button on her jacket, and made a comment about the Blue Duck Tavern.
She was clueless about the restaurant, and it turned out she sold vaccines -- a big and growing business for GSK. Obviously, different drugs, different sales forces. She sounded a bit worn down by selling vaccines as her comments indicated that it was a tough business, which meant she was selling something not mandated by the CDC (Centers for Disease Control) or that had a lot of competition.
So, one target market, two sales organizations and three products -- all providing (a good assumption about the vaccines, I know it is true for the other medications) marginal and incremental benefits over existing products. Is this the kind of company that excites you?
Or even an outfit making another statin or asthma inhaler? Not me.
I like companies with new ideas and brand new kinds of treatments: Amylin’s (AMLN) Byetta for diabetes, Genentech’s (DNA) Avastin for various forms of cancer, Allergan’s (AGN) lap bad instead of full gastric bypass surgery, and so on.
If you want 5% growth, security, maybe a dividend -- then fine, invest in Big Pharma.
If you want aggressive growth, the occasional homerun and the very occasional, but still possible rocket ship stock, invest in companies that make new products that change the world -- or at least the life of the individual patient.
RELATED READING:
- The Risks of Small Biotech
- Valuing Biotechs
- Short Squeezing Biotechs
- Strategy for Investing in Small Biotechs
- The Biotech Industry: 30 Years of Failure
BiotechBlitz is a regular contributor to BioHealth Investor
_______________
posted by Nico at
4:42 PM
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