[lotsofpulp]

VC investors are not the only investors. If developing a medicine was so guaranteed, the total returns of pharma stocks (all of them) would reflect that.

If the above poster is correct, then one should be able to invest all their money in just pharma stocks, and make a killings.

But you wouldn’t. You can’t pick the winners after the fact and claim the risk wasn’t there.

[throwup238]

At this point pharmaceutical companies don’t do a lot of their own research - Novo Nordisk is a bit of an exception, largely because it’s the commercial arm of a diabetic foundation.

Pharmaceutical companies acquire the winners when it’s obvious they’re winners and they pay a lot for the privilege. That’s how biotech investing has worked for decades now. The risk of drug development is spread among several layers from publicly funded grants to VCs to public investors and finally pharma pays for the winners.

VCs fund the early stage, once the startup has something promising that can go to clinical trials they IPO (VCs often fund phase I), then when it’s cleared phase III a pharma company acquires it. Sometimes its so obvious that a drug will work and there’s so much competition that they acquire them early like Sofosbuvir for $11 billion, years before its approved.

You can’t make a killing investing in pharma because everyone before them takes all the risk and gets a lot of the profit. Pharma makes a commensurate profit for providing an exit for public investors and the expertise to mass manufacture and distribute the final product, not all the windfall from developing the drugs.

[lotsofpulp]

> Sometimes its so obvious that a drug will work and there’s so much competition that they acquire them early like Sofosbuvir for $11 billion, years before its approved.

Then why doesn’t someone else pay $12B?

Clearly there is a limit, and it must be related to risk. The risk of the drug failing to sell at the price you hope it will sell in the quantities you need it to sell to earn the desired ROI.

[throwup238]

The value is easily calculated by taking the potential number of patients times how much their insurance will pay, which is itself easy to calculate based on historical information and quality of life improvements. Adjust for risk based on the stage of development etc.

This is all really really basic stuff. Please just google the rest yourself: https://www.baybridgebio.com/drug_valuation.html