A few days ago, I reported on a piece done by Matt Herper that called into question Valeant's representaton of R&D in the whole of the biopharmaceutical industry. The obvious flaws were depicted and discussed. Today, Herper acknowledges some of their strengths. Here they are:
- Valeant doesn't budget R&D spending based on its current sales revenues. In other words a percentage of sales to spend is not a given.
- Proponents of R&D spending in Valeant have to make their case for why the spend will offer a good return --- again no money is automatically set aside for them to spend
- Valeant cuts unproductive R&D. And they use the money to buy other companies or to pay directly to their shareholders thus boosting their individual returns. That makes their shareholders happier than most.
But, one shouldn't draw the conclusion that all R&D spending is BAD. Or that every company just pours R&D money down a rathole. Like everything else, some people spend their R&D money more wisely than others, and achieve greater R&D productivity than others. The challenge is being able to discern good from bad. Allergan may not be the best model for the Valeant plan though.
It would however be interesting to see Valeant apply its model to one of the Big Guys to see what they'd deliver. Say to AZ, Pfizer, Merck, Lilly or the like........ See Forbes.
Posted by Bruce Lehr June 17th 2014.