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Author: sirajd Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 24974  
Subject: Re: Biotech Model Date: 11/2/2000 1:59 PM
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interesting post- a few comments, most of which are my own opinion, just so u r forewarned.
But first, some historic numbers. In terms of royalties, big pharma typically gives low single digit (2-4%) for a pre-clinical candidate, 5-10% for a drug thats completed Phase 1, 10-15% for a drug thats completed Phase 2.. dont know about out-licensing after Phase 3 completed, cpys dont usually do that.

Patent expiry assumption looks ok- the truth is that the data is so greatly varied that any assumption is equally valid/invalid. For example, check out the ACE market (Capoten) vs. oncology market (Cisplatin, or etoposide).

Drug sales are the big question mark. You can always get historic info from sources like PhRMA (pharma research and manuf. asscn) re. revenues per product class and by product, and extrapolate them. The danger here is that you will be looking at the new biotech products as an extension of the current pharma industry- whereas the premise for most of us is that healthcare will be revolutionized by biotech.
Another, less quantitative way (but more appropriate in my opinion) is to start with variables that are relatively predictable. And in my opinion- these are demographics and overall HC spend. For example, HC spending has been outpacing GDP growth consistently every year, so you can postulate that it will represent x% of GDP in say 2010. Then extrapolate total GDP in 2010, and you get HC spending. Then, factor in any changes to the relative mix between drugs and non-drugs
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