Pipeline drug evaluation
Our client asked us to analyze the effect and value a drug currently in its development pipeline. The drug was in Phase II/III trials for the treatment of advanced malignant melanoma as well as a second indication, but the company was unsure if it could be profitable.
Our objective for the project was to conduct a full risk-adjusted valuation of the drug and make a recommendation for the development decision based on the clients ROI targets and risk aversion.
We worked to:
- Build a comprehensive view of the scientific, competitive, and regulatory context of the pipeline drug
- Develop a financial assessment that leverages the relevant key value drivers
- Highlight strategic considerations to maximize the probability of achieving returns on investment
- Combine this data with the stated goals of the company to determine whether further development justified risk/cost
We estimated the risk-adjusted NPV of the target drug to be $225MM, looking at the revenue potential, anticipated costs, competitive landscape and probability of regulatory approval.
Notably, our valuation weighs a low (~10%) probability of the drug achieving blockbuster results against a high (~90%) probability of moderate profits or a net loss, leading to a recommendation against significant continued investment in the drug’s development.