It’s a big, broad playing field for risk, and the game goes on for a long time. By necessity, the people who create the risk analysis models for pharmaceutical development have brought specialized sophistication to such analytical techniques as Monte Carlo simulation, sensitivity analysis, and decision trees. There are lessons from the pharmaceutical industry for you if, in your game, you want to play at all, you’re in it for the long haul.
A recent chat with Palisade customer Vertex Pharmaceuticals reinforced something I learned a few years ago when I was working with a biotechnology start-up: the development of a new drug begins with a bright idea and then enters a long, dark tunnel of uncertainty and risk. The odds that the idea will ever emerge in the marketplace are very long, 10 to 1, and the costs of development are gi-normous–from $60 to $100 million to get a new drug even as far as phase 2 clinical trials. But then. . . .the payout can also be gi-normous.
At every step in the development process, pharmaceutical risk assessment is crucial to a development company’s viability. The company has a pool of drug "candidates" in its so-called "pipeline," the pathway that leads a candidate from preclinical development through phases 1,2, and 3 of clinical trials and, with much luck and funding, into the market. At each stage, the pharmaceutical risk management process must weigh the probabilities and potential benefits of a drug reaching the market, factor into that calculation the optimal timing of investment in development, and decide whether and when to invest in further development.