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Originally Posted by nogle
Correct. Big Pharma acquires product by licensing from smaller R&D companies or purchasing the company outright. In either case, the cost is allocated to goodwill, not R&D. And in fact, Big Pharma is moving further from R&D; a decade ago, it would acquire a promising product after good phase I results. Now, they wait for a clear efficacy signal before purchasing; often waiting until the bulk of human testing is complete. This further shifts the expenses from R&D to goodwill.
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The question is, is this bad for R&D in the field? A lot of the small biotech companies couldn't survive on their own, many are running on the income generated by just one drug. Seems their goal is to make themselves attractive enough for just such takeover, they are not necessarily capable of adequately marketing the new drugs they have developed.