Why You Won’t Be Able to Get the Drug You Need, Part IV

Drug companies are more frequently concluding that the additional cost of continuing development of a drug is not worth its projected returns. In turn, they are voluntarily canceling late stage programs… As a result, drug programs are being cancelled in mid stage trials, when the profile of a new medicine starts to more fully emerge. At one time, it would have taken proof that a drug didn’t work or that it harbored a safety problem to prompt discontinuation. Now market considerations are leading to the abandonment of drug programs.

[This is Scott Gottlieb.]

More below the fold. See previous post here.

A 2003 analysis of more than 350 publicly traded biotech firms found that only seventy-three produced a positive return on invested capital (ROIC) for the preceding twelve months. Moreover, only half of the firms with a positive ROIC returned more than the weighted average cost of capital (WACC)—a figure used to gauge the opportunity cost of capital.

Comments (5)

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  1. Bruce says:

    Regulatory ineptitude. No surprise.

  2. Tom H. says:

    Punish the people who are trying to save our lives? That makes sense?

  3. Alexis says:

    What’s more, we’re driving more and more of our (previous) competitive R&D advantage to Europe.

  4. Nancy says:


  5. Devon Herrick says:

    When I took accounting in school we were taught that money invested and already spent was a sunk cost. Thus is should not be considered when making a decision about whether to continue with a project. In that regard, it appears that many drug makers are concluding the regulatory hurdles and the market potential of compounds already in late-stage development are not worth further investment. Increasingly, only drugs for the most prevalent chronic conditions are worth pursuing considering the high cost of developing a new drug.