Bristol Myers Squibb acquired Karuna Therapeutics, the company behind Cobenfy (formerly KarXT), for $14 billion earlier this year so that’s their break even for the drug and presumably what their investors thought was fair. I don’t think Karuna had anything else interesting in trials so they have to recoup all of that from Cobenfy before they’re in the black on the acquisition.
Pharmaceutical companies offload most of the risk onto institutional investors and the public (most biotechs IPO pre-revenue to fund clinical trials) but the flipside is that they have to pay eye-watering sums to acquire promising drugs.
In their last 10-K, Bristol Myers Squibb reported an operating income of $8.4bn on sales of $43.7bn, giving them a gross profit margin of just over 19%.
It seems like a previous comment pointing out how investors actually fund new drug development seems to track with the loads of pharma startups working on one thing each.
Run some stock screeners on your brokerage account. You have to work to generate a list without a pharma startup on it.
A big part of this businesses model is because only large Pharma companies are equipped to handle the regulatory barriers and large enough to negotiate with the PBMs
You shouldn't look at R&D on one product, since lots fail. Would be like saying a record label that funds 100 artists with 1 being profitable should have a strict 20% profit cap on the profitable one. That wouldn't allow ongoing funding of the broader pool of bets.
David Bowie, Mick Jagger and Keith Richards, John Lennon and Paul McCartney. The list of musicians who were “on the dole” to support their music careers before they made it big is huge. It’s almost a cliche at this point. And when they do make it big, their biggest concerts are usually held in stadiums that were heavily subsidized by tax payers.
Besides, Bristol Meyers Squibb acquired this drug for $14 billion which is bigger than the annual budget of the entire NSF. For a single drug. Tax payers weren’t the ones on the hook for that.
Do record labels in the UK get funding too? I'd imagine artists getting funding is like scientists getting funding, where as record labels getting funding is more like pharmaceuticals companies getting funding.
That's fine but even considering that, is 20% only on successes enough to fund the rest of the portfolio that fails? And will it pass the risk free rate of return you can get from money markets or treasuries or whatever?
Fundamental research slants towards public institutions, advertising and the clinical trials are the main spending the drug companies do, though they have research beyond trials too. Lots of acquiring university spinouts as well.
The gap between "one chemical that targets this thing" and a drug is massive. And basic research might not even end up with the first, just the target idea.
> That's kind of like saying hamburger buyers are funding McDonalds.
If Medicare and Medicaid cover hamburgers.
I could be wrong, but it looks to me like the fact that there's a built-in government-funded ('tax dollars') market is an aspect of pharma calculations.
> In what sense are you proposing pharma production is funded by tax dollars?
I am proposing that the pharma strategy of capitalizing on Medicare and Medicaid tax dollars is a significant component of pharma production. I think this is about executive decisions rather than customer decisions.
I would agree with with the word choice of capitalizing. Funding implies you are exchanging money for control. If I fund a company, I expect to get voting shares. When I buy from a company, I expect to get what I paid for.
It is literally the same exact pharma companies selling to the US Medicare, UK NHS, and communist China. What differs is the customers.
What would a price in line with recouping R&D and production costs and, say, a 20% profit margin be?