Table 1.
Input parameters for the estimation of investment multiples and returns
| Mean | 95% CI | Source | σ | α | β | Distribution | |
|---|---|---|---|---|---|---|---|
| Company valuation ($ millions) | |||||||
| Pre-Clinic | 88 | (57–119) | a | 15.65 | 31.54 | 2.79 | Gamma |
| Phase 1 | 399 | (211–498) | a | 66.78 | 28.17 | 12.58 | Gamma |
| Phase 2 | 734 | (436–930) | a | 112.14 | 31.28 | 21.84 | Gamma |
| Phase 3 | 1656 | (996–2527) | a | 369.13 | 22.77 | 77.36 | Gamma |
| Approved | 2496 | (1582–3355) | a | 432.58 | 32.57 | 75.80 | Gamma |
| Success rate (%) | |||||||
| Pre-Clinic to Phase 1 | 32.0 | (28.8–35.2) | [15] | 1.60 | 271.68 | 577.32 | Beta |
| Phase 1 to Phase 2 | 75.8 | (68.2–83.4) | [11] | 3.79 | 96.04 | 30.66 | Beta |
| Phase 2 to Phase 3 | 55.6 | (50.0–61.2) | [11] | 2.78 | 177.04 | 141.38 | Beta |
| Phase 3 to Approved | 67.7 | (60.9–74.5) | [11] | 3.39 | 128.52 | 61.32 | Beta |
| Development period (years) | |||||||
| Pre-Clinic to Phase 1 | 1.00 | (0.75–1.25) | [16] | 0.13 | 64 | 0.016 | Gamma |
| Phase 1 to Phase 2 | 1.50 | (1.13–1.88) | [16] | 0.19 | 64 | 0.023 | Gamma |
| Phase 2 to Phase 3 | 2.50 | (1.88–3.13) | [16] | 0.31 | 64 | 0.039 | Gamma |
| Phase 3 to Approved | 2.50 | (1.88–3.13) | [16] | 0.31 | 64 | 0.039 | Gamma |
Distinct company valuations and success rates by orphan designation status, number of indications, molecule type, and disease area are enclosed in Supplementary Table e1. Company valuations include up-front and milestone payments and were inflation adjusted to 2020 values
aMean company valuations were calculated from our dataset of 311 Biopharma acquisitions