Table 7.

Cost of AD-modifying drug development with existing infrastructure

Eventual outcome for a compound entering Phase I	Out-of-pocket cost ($ millions)	Cost ($ millions) capitalized to date that development stops or drug is approved	Present-value cost ($ millions) at date of Phase I start (11% discount rate)	Probability
Development stops after Phase I	71	89	79	0.33
Development stops after Phase II	126	177	122	0.35
Development stops after Phase III	413	648	280	0.24
Drug is approved	413	765	280	0.07

Expected present-value cost = (79 × 0.33)+(122 × 0.35)+(280 × 0.24)+(280 × 0.07)	$157 million
Cost per new drug approval = $157 million ÷ 0.07	$2,087 million
Capitalized to date of drug approval = $2,087 million × e(109.4)(0.11/12) (Phase I starts an average of 109.4 months before approval)	$5,693 million

Numbers may not exactly replicate because of rounding. For example, $2,087 million comes from dividing approximately $156.5 million by approximately 0.075. Confidence intervals (provided in Tables 4 through 6) are omitted here, where the purpose is to explain the relationship between the perspective of the industry and that of an individual company.