Robert W. Baird & Co. Analyst Brian Skorney says there is a concern about pricing in the current biotechnology market. For example, he says there is “sticker shock” for oncology and orphan drugs, and if the government decides to push back on pricing for those drugs, he believes pricing will come down hard and fast. But, he said that is not the case for Cempra Inc (CEMP), which focuses on antibiotics.
“Antibiotics in contrast have already gone through that,” Skorney says. “Pricing has been decimated. Hospital administrations have really been able to leverage price down to very, very low levels, and we’re actually seeing the legislators out there in the U.S. trying to get pricing up and find ways to incentivize antibiotic drug makers.”
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Skorney says there has been a realization that antibiotic drug development and innovation has halted. If the pricing environment becomes increasingly difficult, he says antibiotic makers could thrive.
“You can do a decent valuation and be pretty confident in the price of a drug,” Skorney says. “Cempra is one of those; it has a late-stage antibiotic for community-acquired pneumonia.”
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