Stockwatch: Cardinal rule adherence – HALO slips but Shire shines
This article was originally published in Scrip
Executive Summary
A cardinal rule in pharmaceutical drug development is that you never put the sales of an existing product at risk for a second generation product that may never exist. This is because you don't have to do much risk-adjustment for the sales of a product already on the market - it is real cash flow. However, because there are so many unknowns with a product early in development, you should significantly risk-adjust those cash flows, and not sacrifice the real ones, for the possible ones. Sure, you might get cannibalisation with both first and second generation products end up on the market, but that should be the only harm that one product does to another.
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