Valuation of Intangible Assets: Estimating Late-Stage Development Cost of Pharmaceutical R&D

Abstract:     
Policy makers need reliable estimates of direct costs of pharmaceutical R&D, in order to contain health-care costs and at the same time maintain a supportive environment for investment in research.

This paper evaluates the application of parametric estimating methods to the late stage clinical development of new drugs, in order to estimate the direct costs of clinical trials from the linear relationship of two non-cost variables: the standardised minimal significant clinical outcome and the sample-size required to reach statistical significance. The number of patients enrolled in clinical trials represents the closest proxy to the total cost of clinical research, as the protocol requirements of randomised studies minimise the cost differences among therapeutic areas.

The first example of randomised experimental research in Life Science cost accounting; this study can be duplicated by virtually anyone who can access a scientific library, without the significant constraint of obtaining proprietary information from pharmaceutical companies.

Number of Pages in PDF File: 52

Keywords: valuation, intangible, assets, pharmaceutical, development, cost

JEL Classification: L65, O32

working papers series