Please be positive and upbeat in your interactions, and avoid making negative or pessimistic comments. Instead, focus on the potential opportunities.
- Manlobbi
Halls of Shrewd'm / US Policy❤
No. of Recommendations: 0
No. of Recommendations: 1
The company said external price estimates were based on assumptions of higher use of HIV prevention drugs than currently, or projected. It said global price planning was in progress and would take into account “nearly two decades of research and development, constant learning and iteration, and manufacturing investments to deliver lenacapavir at scale”.
While it's tempting to say "give it away", I wounder if you do a current-value, not only of the 20 year's worth of work on this drug, but also the prorated costs of dry runs which failed, how you would amortize the costs into the price.
Jeff
No. of Recommendations: 1
how you would amortize the costs into the price.
You don't because it is wild speculation at best. Remember: They have *already* recouped ALL the R&D money spent in previous years. So, recovering $0 *LOST* is still $0. That is why R&D expenses are allowed to be offset against profits (past/present/future).
No. of Recommendations: 0
They have *already* recouped ALL the R&D money spent in previous years.
jerryab,
How did they recoup? (Asking as someone who would like to learn more about this topic…)
No. of Recommendations: 0
How did they recoup?
US corporate federal (can't comment on state) tax law allows R&D to be FULLY deducted from income earned the same year. If business has a tax LOSS that year, they can "carry back" AND "carry forward" the loss until they recoup the entire amount lost from profits.
No. of Recommendations: 13
US corporate federal (can't comment on state) tax law allows R&D to be FULLY deducted from income earned the same year. If business has a tax LOSS that year, they can "carry back" AND "carry forward" the loss until they recoup the entire amount lost from profits.
No, you can't recoup the entire amount.
Not being taxed on an expenditure is not the same as getting back money equal to that expenditure.
Counting R&D as an expense when calculation profit makes perfect sense, same as it does for any other kind of expense.
The only fine point for tax purposes is which year you count which percentage of the expense. You might spend $100 on R&D in year 1 and expense it all for tax purposes in year 1, or you might spend $100 in year 1 and expense $20 in each of years 1-5, but it's still and expense and still gets counted as an expense, and that still makes sense.
It might be counted as a current expense that is deducted immediately or as a capitalized expense that is deducted in parts over time with a depreciation schedule, but it's still an expense. It might even be counted one way for GAAP or IFRS financial reporting and the other way for tax, but it doesn't really make much difference. This affects the timing of your tax bill (not its size) and your reported book value and the order of your headline earnings, but little else.
A shorter version: if you spend $100m on R&D and get no revenue from that product, even if you get it as a tax deduction like any other expense, you have still lost $100m.
If you hadn't done that R&D, your pre-tax profit would be $100m higher, and you'd be paying tax on that additional profit, so your tax bill would be higher. But a $21m lower tax bill on a $100m lower pretax profit and $79m lower after-tax profit isn't exactly making you whole.
Jim
No. of Recommendations: 8
If you hadn't done that R&D, your pre-tax profit would be $100m higher, and you'd be paying tax on that additional profit, so your tax bill would be higher. But a $21m lower tax bill on a $100m lower pretax profit and $79m lower after-tax profit isn't exactly making you whole.
Orthogonally, I have had this conversation with people more often than I can count:
“Oh, I don’t want to pay off my house, I’ll lose the deduction”
“You realize you’re paying $1 in interest to the bank so you get a 25¢ deduction from the government, right?”
Puzzled face.
No. of Recommendations: 5
Also many don’t consider the impact of the higher standard deduction.
Only if your mortgage deduction combined with other allowed itemized deduction exceeds the standard deduction, do you actually get any tax benefit. You should be counting only the itemized deduction exceeding the standard deduction and prorating across all itemized deductions to get the true tax savings you realized.
And the entire real estate obfuscates this point. Every one of their online calculators show the full benefit of the mortgage interest itemized deduction.
No. of Recommendations: 0
Only if your mortgage deduction combined with other allowed itemized deduction exceeds the standard deduction, do you actually get any tax benefit. You should be counting only the itemized deduction exceeding the standard deduction and prorating across all itemized deductions to get the true tax savings you realized.
True, but that’s a fairly recent development. During most of my mortgage paying lifetime the “deduction” seemed significant so I understand how people were seduced by it. The most recent revisions in the tax laws have changed things (and frankly I don’t pay attention anymore to such things because they don’t affect me.)
No. of Recommendations: 5
Unless I missed it, there's been no mention of the enormous, and essentially free to them, government-sponsored R&D that so many of these firms incorporate into their products, and then charge the customer for despite not having financed it.
Tom
No. of Recommendations: 2
government-sponsored R&D
I should have written "TAXPAYER-sponsored R&D"!
No. of Recommendations: 4
government-sponsored R&D that so many of these firms incorporate into their products, and then charge the customer for despite not having financed it.
Almost, not quite.
The key point is one nobody mentions: How much of the taxpayer-funded R&D done at colleges and universities does NOT pay off in a big payoff? Most of it. The firms do NOT incur those costs at all (for practical purposes). The firms ONLY will consider taxpayer-funded R&D that looks like it MIGHT be profitable. And they do not really pay a lot for the license to try it. They only pay the school--and the group that did the original R&D--if they actually "hit it big" with the new drug.
So, they privatize the profits and socialize the losses.
Sound familiar?
No. of Recommendations: 6
Also many don’t consider the impact of the higher standard deduction.
Many don't even know HOW to consider it!
Only if your mortgage deduction combined with other allowed itemized deduction exceeds the standard deduction, do you actually get any tax benefit. You should be counting only the itemized deduction exceeding the standard deduction and prorating across all itemized deductions to get the true tax savings you realized.
I've tried explaining this so many times to otherwise intelligent people, and even when they "kind of" get it, they don't really get it.
The best results I've gotten in getting people to understand is to run the actual numbers both ways and showing the difference between them. And even then, hen I show someone that their mortgage interest deduction of $34,000 (plus charity of about $6000, plus $10,000 for sales+property tax) is only worth about $4,750 in reduced taxes to them. ($50,000 itemized deduction compared to $30,000 standard deduction in the 22%/24% tax brackets) And even then, after I show the ACTUAL numbers, more than half of the people are doubtful, with many saying "but all the online calculators show different", and more recently, "my mortgage broker says different than this, and he's a professional!", and best of all, "my accountant who does my taxes says ..." Sometimes I just have to give up and surrender to the innumeracy.
No. of Recommendations: 2
"The best results I've gotten in getting people to understand is to run the actual numbers both ways and showing the difference between them"
And with tax software, it should be super easy to do this. I did this decades ago, with pencil and calculator,lol. Some people really, really don't want to think. Same with listening to advertising pitches to make an "informed" decision. Imo, advertising needs to show proof that their fantastical claims are true. I don't need that, I'm skeptical of everything being pitched. But a lot of Americans really want to buy into bullshit.
