(OK, I just understood that what I wrote reads as a horrible unintelligible mess, but I didn't yet grok this idea well enough to put it down elegantly.)
They ignore that if they had put their down payment in the market, they would have made $110k.
To your point, their $100k gain at 5x leverage kind sucks compared to a $110k gain at zero leverage.
For your incomplete example, if the summed cost of rentals was $10k higher than cost of owning the home, then they made a profit.
I disagree on this one.
Pay-to-delay is just the branded drug manufacturer and the generic company splitting the difference through negotiation. What you end up with something in-between the two potential outcomes.
Situation: branded drug has 2 more years of patent life, but generic company wants to challenge it; neither party is sure they will prevail.
Outcome 1: patent holds and branded manufacturer gets entire market for two years/generic company loses money on legal fees
Outcome 2: patent holder loses patent and money on legal fees/generic company gets entire market for two years (yes, typically this doesn't happen, trying to simplify)
Instead of each party going to court and paying a ton in legal fees with an uncertain outcome, the pay-for-delay is splitting the difference. The branded manufacturer pays the generic company $X to delay entry until year 1. Everybody gets something from the deal.
They call it "pay-to-delay", but that ignores outcome #1, where the generic is delayed for an even longer period.
Everyone except the patient, who continues to pay the exclusivity premium but would (assuming option 2) have paid less.
It's the gray area cases that end up in pay for delay deals. The ones that neither party is sure they will win. So they cut their loses and negotiate middle ground where each of them get a piece of the pie.
A classic example is GSK and TEVA with Lamictal. GSK priced the original drug at $465/dose with $1.5 billion in sales. Teva's Generic was $14/dose. TEVA happily agreed to be paid by GSK because if TEVA had won in court, entered the market, and captured 100%, they would only bring in 50 million a year
https://www.fiercepharma.com/regulatory/more-scotus-fallout-...
I'm not sure why TEVA would price at $14/dose at launch - most exclusive generics price at ~95% of the branded therapy, then drop once other generic entries happen. If the TEVA generic were to capture 50% of the market over 6 months, that's $600M+ in revenue, not $50M.
I'd imagine that many tend to think of a $X investment as a $X investment... but if that investor could get effectively compounded interest/returns, even at a single-digit rate, in another investment, they could be risking many times $X by forgoing that investment to take the one in question. Take a look at the chart and formulas in https://en.wikipedia.org/wiki/Time_value_of_money and https://en.wikipedia.org/wiki/Discounted_cash_flow . Important stuff to know regardless of how large a financial decision one wants to make.
And in the context of highly risky drug development, in a capitalist society it's a miracle that niche drugs are researched at all. It speaks to the passion of scientists like the author who endeavor constantly to develop tooling and processes to accelerate/de-risk drug research enough to be an attractive investment in today's increasingly optimized society.