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A New Approach to Assess Drug Development Performance

Rosiello, A   Dimitri, N   Fiorini, F

March 2012

Innogen working paper no. 99

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Abstract:

The paper provides an empirical analysis of the drug development performance of biopharmaceutical companies by going beyond the usual innovation inputs – investments in research and development (R&D) and outputs - patents or new molecular entities (NMEs) -measures. We use a comprehensive database on therapeutic categories that allows the actual development process to impact the construction of the performance variables under observation. Our main intuition is that innovation in biopharmaceuticals is strongly related to the ability of firms to move forward compounds in the drug pipeline, relative to other firms within the same therapeutic area. Taking this capability into direct account helps explain the lack of productivity of R&D at the firm-level which has worried the industry greatly in recent years. We study the effect of various factors on drug development performance, including R&D funds allocation across therapeutic areas; the firm’s size; and the proportion of biologicals in the drug development portfolio. Subsequently, we test the ability of our performance variables to predict the per capita growth of biopharmaceutical firms’ revenues.