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.
Regulatory ineptitude. No surprise.
Punish the people who are trying to save our lives? That makes sense?
What’s more, we’re driving more and more of our (previous) competitive R&D advantage to Europe.
Depressing.
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.