Saturday, April 28, 2018

Profit before Cures

A Goldman Sachs analysts suggests medical cures could be bad for business.
"Is curing patients a sustainable business model?" analysts asked in an April 10 report entitled "The Genome Revolution."
"The potential to deliverone-shotot cures' is one of the most attractive aspects of gene therapy, genetically-engineered cell therapy and gene editing. However, such treatments offer a very different outlook with regard to recurring revenue versus chronic therapies," analyst Salveen Richter wrote in the note to clients. "While this proposition carries tremendous value for patients and society, it could represent a challenge for genome medicine developers looking for sustained cash flow."
Richter cited Gilead Sciences' treatments for hepatitis C, which achieved cure rates of more than 90 percent. The company's U.S. sales for these hepatitis C treatments peaked at $12.5 billion in 2015, but have been falling ever since. Goldman estimates the U.S. sales for these treatments will be less than $4 billion this year, according to a table in the report. "...the success of its hepatitis C franchise has gradually exhausted the available pool of treatable patients," the analyst wrote. "In the case of infectious diseases such as hepatitis C, curing existing patients also decreases the number of carriers able to transmit the virus to new patients, thus the incident pool also declines … Where an incident pool remains stable (eg, in cancer) the potential for a cure poses less risk to the sustainability of a franchise."
Yes, a capitalist has said outright that curing people will hurt their cash flow and steered clients away from investing in cures. To rephrase his financial advice more directly he said “We don’t want to cure diseases because that will be bad for our bank balance. We want people to suffer for as long as possible to make more profits because human suffering enriches us.”
How brutal is the market economy 


Tim Hart said...

I think Goldman Sachs are being alarmist about the dent in cash flow and earnings with the advent of gene therapy cures. I suspect that the likes of McDonalds, KFC, Burger King et al will continue to accelerate ill-health amongst the general populus and thus help maintain profits amongst the health care corporations.

ajohnstone said...

Even if government health warnings are heeded and sugar taxes imposed, they will simply follow the tobacco industry example and focus on the developing and undeveloped parts of the globe. For investors, tobacco is still offering goo returns.