Whether you are a biotech or a large pharma, a measure of your success, or even of your value, is your drug development pipeline which, essentially, is a portfolio risk that requires appropriate strategy and management. So what can be regarded as an acceptable risk? Large pharmas prefer 'blockbuster' drugs with peak sales in excess of a billion dollars, while specialty companies and some biotechs are happier with products with smaller peak sales. A strategy of selecting blockbuster drugs places an additional ‘risk’ factor on drug development, but, without a doubt, the rewards are higher. However, the outcome of these risks is clear for all to see, with quite a number of once mighty pharmaceutical companies now languishing as they still wait for that great blockbuster to come along.

Today, whether you are a biotech or a large pharma, a measure of your success, or even of your value, is your drug development pipeline. For example, we are all familiar with the drop in share value of companies who have announced their latest drug failure. And, of course, even established marketed drugs can fail – leading to even greater financial consequences. But what constitutes a ‘good’ drug development pipeline? We are all aware of the inherent risk of drug development, and the attrition rates that mean that less than 20% of drugs will make it to market. Pipelines are essentially portfolio risks that require appropriate strategy and management. The problem, essentially, is what can be regarded as an acceptable risk? Large pharmaceutical companies prefer 'blockbuster' drugs with peak sales in excess of a billion dollars, while specialty pharmaceutical companies and some biotech companies are happier with products with smaller peak sales. Attrition rates do not take into account the market size of a drug, but purely its inherent survival through clinical performance: in other words, a novel drug for a billion-dollar market is just as likely to fail as a drug for a hundred-million dollar market. "A strategy of selecting blockbuster drugs places an additional ‘risk’ factor on drug development but, without a doubt, the rewards are higher. However, the outcome of these risks is clear for all to see, with quite a number of once mighty pharmaceutical companies now languishing as they still wait for that great blockbuster to come along." In large pharma companies, clinically sound drugs are also 'unsuccessful' in clinical development for commercial reasons, because they failed to meet the required minimum NPV at the proof-of-concept stage. So is a company with a greater number of products in development but with low peak sales going to have greater commercial success than a company with fewer products in development but with high peak sales? In other words, should a company with a greater number of 'shots at goal' be more successful at getting products to market? (We are assuming here that both categories of peak sales have proportional clinical development costs.) Clearly, those companies with more shots at goal will require a critical minimum number of products at each stage of development – products that will ensure a smooth and regular launch of marketable drugs. In this case they will be better survivors – although they may be less spectacular ones. A strategy of selecting blockbuster drugs places an additional ‘risk’ factor on drug development, but, without a doubt, the rewards are higher. However, the outcome of these risks is clear for all to see, with quite a number of once mighty pharmaceutical companies now languishing as they still wait for that great blockbuster to come along. -Fintan Walton, Chief Executive Officer, PharmaVentures Ltd.