May 19, 2012

Facebook vs Merck, Sanofi, Gilead, Medtronic

Facebook vs Merck, Sanofi, Gilead, Medtronic.

Matthew Herper Forbes lamenting on why investors are not valuing healthcare companies as highly as Facebook. 
Think about it for a second: a single tech company, launched in 2004, is worth more than most makers of medicine. More than that, this single company has done as much to create very rich people as, basically, the entire medical device and drug industry.

Among the drugs launched since Facebook sprang out of Mark Zuckerberg’s dorm room: Atripla, the first once-a-day single-pill HIV drug cocktail; Merck’s vaccine against strains of human papilloma virus, which causes cervical cancer; the first medicines to extend survival in metastatic melanoma; new drugs that dramatically increase the number of people who can be cured of hepatitis C, a liver virus that afflicts three million Americans; and the first drug to treat the genetic cause of cystic fibrosis, at least in some patients.

So, why are investors valuing Facebook so highly –
  • a product that is used (and can affordably be used) by 800 million+ customers
  • incredible growth

Healthcare companies continue to operate on a broken business model – complicated products that require billions of dollars for development, take years/decades to come to market and when successful are useful to only a few people at exorbitant prices – are bounded in their success.

For Facebook like success, healthcare companies need to figure out simpler products that can be built quickly, inexpensively and are useful to lots of people and do not have exorbitant prices. Maybe genomics companies will bring such products some day.

Like healthcare, semiconductor industry is another one that operates on a broken business model, which limits its reach and success. A discussion for another day.

Tags: Facebook vs Merck, facebook vs health care companies, facebook market cap vs pharma companies, biotech billionaires, facebook vs biotech billionaires