Reader feedback: FDA approvable letters and China outsourcing

Jim Davis at Sagient Research Systems wanted to follow up yesterday's piece on the trend at the FDA regarding approvable letters and the impact they have on biotech stock prices.

Davis writes: "The price changes that we cited were absolute. So, they take into account both up or down price movement. The stock prices do not get "bid up" around approvable letters as you mention; they in fact usually tank on the news. So, most of the price change we cite is actually to the negative side. (In 2007 16 out of 26 were actually negative price movements, and in 2006 15 out of 22).

The main point to note is that in 2006 the average absolute price change was 21.42 percent and in 2007 the average absolute price change was 12.89 percent. The fact that the stocks did not move as much in 2007 as they did in 2006, suggests that investors are getting more used to approvable letters. (Less price movement equals less surprise). If this does continue in 2008, it is a big change in the investor's mentality."  

There's been a lot of email coming out of the recent piece on the cost of scientists in China versus the U.S. and Europe. (The Chinese scientists cost a whole lot less, in case you missed it. And there are some sizeable implications.)

In response to yesterday's article Kathy Hagen writes: "It would also be a mistake to say that research scientists make great money in the U.S. If you look at most life science companies, many of the business or IT support people make more money than the scientists do. Sad, very sad, but true. It has to do with the way we rate comparative salaries and the marketplace, but even beginning to suggest we cut salaries for scientists sticks in my craw.

In addition, we have so much accumulated knowledge in the companies which now exist, that if leadership or investors decide to move the work to China, they would be in essence starting over again for much of the deeply held experiential knowledge the companies now own. There is a huge cost to that as well, in redundant errors, rework, innovation lost, etc. Yes, you could move the companies, but who is moving the knowledge?"

Stan Young writes: "Just suppose that the Chinese regulators, under direction from their government, made the large scale finance decision to be more risk tolerant than those in the US/EU. (All drugs are with risk and the case can be made that progress in finding new drugs is now largely a function of society risk tolerance.) With that in place, research and development will move to China, people will start their own companies, and, over time, the drug industry will move to China."

Thanks for all the feedback. I'd like to hear from more of you, so if you have something you'd like to share, send it in. - John Carroll