Estimating your therapeutic program value means estimating the expected profit it can generate over time. To do so, we must consider:
- The time value of money: Money available today is worth more than money received in the future, because it could otherwise be invested elsewhere (for example, in the S&P 500). - The risk of failure: Most drug discovery programs never result in approved therapies or commercial sales.
Both factors are explicitly accounted for by the risk-adjusted net present value (rNPV) method. rNPV is the gold standard for valuing drug discovery programs, as it discounts future cash flows by both time and probability of success.
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The rNPV framework emphasizes the value of early failure to save costs on late-stage trials, redirecting resources to better prospects. Phase 2 and 3 success probabilities are crucial, as failures here are costly. By providing early causal evidence in humans, genetics helps reduce this risk. Interested in how genetics help you choose drug-target-indication pairs with greater expected returns? Enter your details below to access our internal rNPV tool.
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