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Pinches of Stock Market Salt for News of Drug Copies

18 June 2007 - Features - Editor

Generic pharmaceutical manufacturers from the emerging world are so keen to impress their stock market masters that even initial and provisional regulatory clearances in the United States to sell copies of drugs going off patents, are touted as major news stories! Some of these provisional clearances run in to hurdles down the road to market, causing hurtful stock market turbulence for the uninitiated.

The discovery of new molecules, the processes of establishing safety and efficacy performance standards, and the mass production methods of chemical engineering, are distinct enterprise competencies. It is true that some pharmaceutical companies integrate all along this value chain, but that is not mandatory to do justice to a corporation; stock market stake holders.

The best and most innovative companies are never unaware of when their patents will expire. They protect their stock market obligations by strong branding activities and by keeping product development pipelines fully stocked with new candidate drugs. New patents are daily affairs for top pharmaceutical companies.

It is true that patented drugs are sold with incredible margins. Most of the resultant cash flows are reinvested in sustained research and development, much of it is exploratory without guarantees of returns. Generic producers may excite some stock market quarters by dramatic price cuts for their copies, but how many new molecules have they invented and developed?

Generic producers face uncertainties on the product liabilities front. There are a number of instances from drugs being withdrawn because of adverse long-term effects, which are not always known at the time of launches. Generous dividends from short-term returns of genetic marketing belie the essential building of reserves which may be required to meet exigencies of litigation judgments.

This is why the securities of research based pharmaceutical companies are always better in stock market safety terms, than the glitter of making some hay from the routine matter of drug patents expiring. Protect the long term value of your portfolio by backing innovation capability and sound organization over the low value addition of copying manufacturing processes.


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