Christian Schäfer
Baden-Württemberg Cooperative State University Mannheim (DHBW), Germany
Title: IDENTIFYING THE SWEET SPOTS IN MILESTON DECISION MAKING - MONTE CARLO SIMULATION OF NET PRESENT VALUE FOR PIPELINE PROJECTS IN PHARMA
Biography
Biography: Christian Schäfer
Abstract
Uncertainty is by definition an unpreventable aspect of all projects. In the pharmaceutical industry development projects for a new chemical / biological entity (NCE / NBE) are generally associated with low probabilities of success compared to other industries. Assessing the sweet spots of favourable risk-return-relationship in milestone decision making of pipeline projects – also under a portfolio point of view – is tricky but nicely achievable. At start of development, a project’s rate of success is only 4% to 7%, the time span of a project from start of development to the potential launch of a product being 10 years or even more. Thus, effective management of commercial risk and uncertainty becomes tremendously important. The Pharmaceutical Benchmark Forum in the United States collected industry-wide historical data on the drug development process (Harpum, 2010). The result of this research shows that the total project development costs for a NCE which reaches the market are in the range of $ 1 billion. The actual costs of a successful project are usually significantly lower, but every successful project needs to cover the costs of multiple other projects which did not in the end reach the market.