The Pharmagellan Guide to Biotech Financing and Valuation [PDF]

THE PHARMAGELLAN GUIDE TO BIOTECH FORECASTING AND VALUATION

Frank S. David Seth Robey Andrew Matthews

CONTENTS Foreword ..................................................................................................ix 1. Preparing to build a biotech financial model ........................................ 1 How to use this book—and how not to ................................................... 2 How to cite and use the information in this book ................................... 3 Looking ahead ......................................................................................... 3 INCOME 2. Addressable patient population ........................................................... 7 Incidence and prevalence ........................................................................ 7 Subdividing the patient population ......................................................... 9 Diagnosis rates ...................................................................................... 10 Treatment rates ...................................................................................... 10 3. Adherence and compliance................................................................. 13 Framework for accounting for adherence/compliance .......................... 13 Adherence/compliance in various settings ............................................ 14 Factors influencing adherence/compliance ........................................... 15 4. Pricing................................................................................................. 17 Key U.S. pricing definitions.................................................................... 18 Comparator pricing data ....................................................................... 19 Annual price increases ........................................................................... 20 Global pricing considerations ................................................................ 21 5. Market share ...................................................................................... 25 Defining TAM and competitors ............................................................. 25 Order of entry ........................................................................................ 26 Drug-specific factors .............................................................................. 28 Adjusting inputs from primary market research ..................................... 29

6. Launch curves ..................................................................................... 31 Time to peak .......................................................................................... 31 Shape of the uptake curve..................................................................... 32 Consolidated table of uptake by year ................................................... 33 7. Loss of exclusivity............................................................................... 35 Timing of competition ........................................................................... 35 Sales after patent expiration .................................................................. 36 Price after patent expiration .................................................................. 37 EXPENSES 8. Cost of goods sold ............................................................................. 41 Individual drug benchmarks .................................................................. 41 Industry benchmarks.............................................................................. 43 9. Sales, general, and administrative ...................................................... 45 SG&A for commercial-stage biotechs ................................................... 46 G&A for pre-commercial biotechs ......................................................... 47 Modeling SG&A from prelaunch to maturity ......................................... 47 10. Sales force ........................................................................................ 51 Sales force size ...................................................................................... 52 Primary care–focused............................................................................. 53 Cost per sales rep .................................................................................. 56 Timing and growth of sales force expenses .......................................... 58 11. Marketing ......................................................................................... 59 Industry-level data on marketing spend ................................................ 59 Pharma company benchmarks............................................................... 60 Product-specific adjustments ................................................................. 62

12. R&D ................................................................................................. 63 Research duration and cost before Phase 1 .......................................... 63 Clinical development duration .............................................................. 64 Clinical development cost ..................................................................... 71 Post-approval R&D duration and cost ................................................... 76 13. Regulatory ........................................................................................ 79 Regulatory duration ............................................................................... 79 Regulatory cost ...................................................................................... 80 VALUATION 14. R&D and regulatory probability of success ...................................... 85 Research before Phase 1 ....................................................................... 86 Clinical development ............................................................................. 86 Regulatory ............................................................................................. 91 15. Discount rate .................................................................................... 95 Relevant benchmark data ...................................................................... 96 Acknowledgments .................................................................................. 99 References ............................................................................................ 101 About the authors ................................................................................ 123