This week’s links 1/27/19

How Companies Like Apple Sprinkle Secrets in Earnings Reports – NYTimes

  • Three economists downloaded every quarterly and annual corporate report of every publicly traded American company from 1995 to 2014. Using a text analysis program, they tracked wording changes, the volume of which they found to indicate a significant, often negative, impact on ensuing share prices.
  • How to make practical use of the insights: “First, always download the previous version of a corporate report as well as the current version, so you can compare the language. Focus on the differences from year to year. Second, focus on one section, the ‘risk factors section.'”

Big Pharma Faces the Curse of the Billion-Dollar Blockbuster – Bloomberg

pharma

  • Revenue performance for big pharma companies can hinge upon the success of one drug, but not for long; drug patents will expire and open the gates in the market for cheaper copies (generics). In anticipation, shareholders want to ensure the preservation of the company’s returns that have thus far been riding off of the blockbuster drug, and therefore management is pressured to produce another blockbuster performance, hence the race to fill pipelines via acquisitions of next-gen big drugs.
  • There’s been a shift over the last two decades towards specialty medicines with big-ticket price tags and difficult-to-copy compounds like biologics, particularly focusing on cancer and auto-immune drugs. Because of accelerating time-to-peak sales times, drugs even in the experimental phases are being increasingly scrutinized for potential market performance and competitive effects.

When Software Eats Bio – A16Z (2015)

  • Like Moore’s law, the cost of sensors is plummeting, hence the cost of things like genomic sequencing (analyzing DNA from blood tests) is also going to zero.
  • Importance of the cloud: In 2000, a software startup needed to spend tens of millions to build a server farm in order to scale. Cloud computing dropped the price tag by an order of magnitude, allowing today’s software startup to launch a product and begin to scale before returning for their next Series A. In traditional biotech, you needed $100M and five years before a clear signal of product-market fit had taken place, but with cloud resources replacing lab build-out costs, there are efficiencies to be gained, not to mention the additional computational power that previously was unavailable.

The Hidden System That Explains How Your Doctor Makes Referrals – WSJ

  • “Insurers have been working to steer patients toward doctors’ offices and other non-hospital locations for many types of care, because they are generally less expensive. The same service often costs twice as much or more when delivered in a hospital setting, compared with a doctor’s office […] Hospitals often have the clout to negotiate higher rates with insurance companies, including extra fees that they often receive […] Patients often pay more out-of-pocket as a result.”

 

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