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Investigating investment in biopharmaceutical R&D

Author(s)
Carter, Percy H.; DiMasi, Joseph A.; Berndt, Ernst R; Trusheim, Mark
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Abstract
Recent studies have highlighted a reduction in projected financial returns associated with biopharmaceutical R&D, owing to decreased productivity, increases in costs and flattening revenue per new drug, prompting calls for dramatic revisions to R&D models. On the basis of previous financial modelling, the simplest hypothesis would be that new investment in such R&D should be minimal and focused on biologics in preference to small molecules, as the internal rate of return on investment for biologics projects has been reported to be higher (Nat. Rev. Drug Discov. 8, 609–610; 2009). We sought to discern how investors have been acting in recent years, and so examined investment trends in nascent public biopharmaceutical companies located in the United States by constructing a database of such companies that had US initial public offerings (IPOs) between 2010 and 2014 (see Supplementary information S1 (box) for details). We then analysed the characteristics of the 113 companies that met our inclusion criteria, including their corporate strategy and therapeutic modality focus. Here, we present the key findings from this analysis and discuss its implications based on our own financial modelling.
Date issued
2016-10
URI
http://hdl.handle.net/1721.1/108622
Department
Sloan School of Management
Journal
Nature Reviews Drug Discovery
Publisher
Nature Publishing Group
Citation
Carter, Percy H.; Berndt, Ernst R.; DiMasi, Joseph A. and Trusheim, Mark. “Investigating Investment in Biopharmaceutical R&D.” Nature Reviews Drug Discovery 15, no. 10 (September 2016): 673–674.
Version: Author's final manuscript
ISSN
1474-1776
1474-1784

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