Mind The Gap: Different Views Of Success May Drive Large Differences In Estimates Of Pharma Value

01 Apr 2011

The success rates of late-stage molecules may prove to be higher than current analyst estimates; historical data suggests the biopharma industry has been fairly resilient in its ability to deliver its R&D pipeline while adapting to challenges.

R&D productivity is often linked to return on investment (ROI), rates of return and company value. Growing concerns around the industry's productivity challenges have, not surprisingly, precipitated a good deal of research on what drives R&D productivity. These studies have found that, in addition to cost, one of the most significant performance levers within pharmaceutical R&D is the probability of obtaining regulatory approval for a new drug. The fates of late-stage drugs in particular have a significant impact on determining new product flow, which in turn drives the future performance and value of companies.

One key metric analysts and investors use when building models of drug firms' future financial performance is an estimation of...