$40 billion a year wasted because trials are late

Based on my calculations, trial delays cost pharmaceutical companies $40 billion each year. That is the equivalent of a company with a $40 billion a year wasted because trials are latemarket capitalization equal to Shire disappearing each year.

I believe these calculations are pretty conservative, but you decide. Regardless of what you believe are the correct numbers, it is hard to debate whether the industry is letting significant value slip through its fingers each year. Maintaining commercial and clinical silos is costly!

CALCULATIONS:

Trials first registered in clinicaltrials.gov in 2014

Phase 2:
• There were 1,692 Phase 2 trials initiated by industry in 2014.
• The average number of days Phase 2 trials are late = 108
• The average cost per day of delay = $180K*.
• Probability of Phase 2 compounds reaching the market = 22%

(1,692*108*180,000*.22) = $7.2 billion for Phase 2

Phase 3:
• There were 1,150 Phase 3 trials initiated by industry in 2014.
• The average number of days Phase 2 trials are late = 216
• The average cost per day of delay = $215K*.
• Probability of Phase 3 compounds reaching the market = 62%

(1,150*216*215,000*.62) = $33.1 billion for Phase 3

Total = $7.2 + $33.1 = $40.3 billion

* These account for the time value of money. I used 8% discount rates. I assumed the opportunity cost equals $500,000 in nominal dollars. The lost opportunity was assumed to occur 13 years later for Phase 2 compounds and 11 years later for Phase 3 compounds.

Ross H. Weaver, PharmD, MBA
Co-Founder
Clinical SCORE
Phone: 610-256-5623
Email: ross.weaver@clinical-score.com
www.clinical-score.com

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