Charly Travers is a very clear-eyed observer of the pharmaceutical investment world, and after mentioned Bayer and Onyx yesterday, I'd like to recommend his take on the situation:

"So while sorafenib looks like a promising therapy for kidney cancer, I'm not sure there is much upside remaining for investors looking to buy into a good drug program on the basis of this market alone. With approximately 35,000 new cases per year in the United States, this is a small market. Because profits are split with Bayer, those profits retained by Onyx may not be sufficient to increase the value of the company to a degree that warrants the risk inherent in biotechs at this stage.

The wild cards here are that sorafenib is also in late-stage trials for liver cancer and melanoma. If those trials come out positive, then Onyx is very likely going to be a long-term winner. Cancer drugs often don't work in all cancer types, so despite the encouraging results in kidney cancer, success in these other indications is far from a sure thing."

All true, although there is that factor we were speaking of yesterday, of off-label use. But is that something you want to bet the farm on? It's very important, if you're an investor, to decouple a company (and its drug portfolio) from its stock. They don't always move in synch. I've never been a fan of investing in something just because it's going up, and you have to decide if a company's shares already have most of the good news priced in.

As Travers goes on to point out, you're better off owning smaller companies with earlier-stage drugs that haven't gone up yet. Of course, you really need to own several of those guys, because it's for sure that a majority of them aren't going to work. But that's the kind of portfolio we own inside each drug company, with our own development candidates. Welcome to the club!