Devaluing Biotech's Big Pharma Clientele

In part because of the 2000 investment bubble, in part because Wall Street has rewarded their growth prospects with comparatively high valuations, Small Pharmas and proto-pharmas increasingly have among themselves the financial power and technological diversity to furnish each other much of the resources Big Pharma used to provide almost oligopolistically. Just as important: they've got far more willingness and incentive to do so.

The math is pretty simple: all the drivers being allocated proportionally, it's a lot easier to grow a small revenue base faster than a large one. And since investors reward growth more richly than cash flow, the biotechs' ability to grow should trump Big Pharma's stability.

But because the resources haven't been remotely equivalent, the biotech industry has always positioned itself, somewhat uncomfortably, to serve the...

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