RE: It seems...This was always the stated business strategy: To use all the earnings from the core business for R&D to create large products with large earnings.
Ie. to leverage small earnings into very big earnings.
That is why the earnings are always around zero: They are using all the money they can on R&D.
It is no different with oil and gas companies that are growing -- they use all their cash flow (plus borrow money, plus sell shares) to buy more properties and drill more holes so their future earnings will be big.
A lot of oil and gas exploration companies have good cash flow, but very small earnings because they spend their cash on new exploration and development.
Most small biotech and tech companies are the same. First they need to develop a product(s), then they can sit back and enjoy the earnings.
Notice that QLT is spending $80 million of its earnings on R&D, instead of having a larger EPS, because they are afraid of the day that a new competing product takes away Visudyne sales.
For 2004, Pfizer had earnings of only $11 billion because they spent $7.6 billion on R&D. Pfizer could have stopped R&D, and upped their earnings by 69%, and presumably upped their stock price by 69% too.
But these companies know they need the R&D to grow. And investors look to the future earnings to determine stock price. Almost every Canadian biotech has zero or negative earnings, but the stock prices are not zero. Again, the oil and mining stocks are similar -- if they make a discovery, it could take them years to develop it into production, but investors price the stock based on future earnings estimates.
With MBX, any one of their new products could make their stock look like a rocket. That's what investors should be pricing in -- the large future earnings. Any sign of success that gets the company closer to actual earnings should send the stock higher.