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Drug development risk and the cost of capital

Nature Reviews Drug Discovery volume 11, pages 347–348 (2012)Cite this article

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Here, we describe a framework for varying COC by development phase, and highlight discrepancies between this model and the current treatment of COC by practitioners. A better understanding of such frameworks could lead to improved R&D investment strategies to address gaps in drug pipelines.

Debate on appropriate COC use

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Figure 1: Cost of capital variations.

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Acknowledgements

We acknowledge D. T. Robinson and E. B. Rasiel for guidance on the methodologies for deriving COC estimates. We thank S. C. Myers for helpful discussions on time-varying discount rates and their use in drug development. We also thank K. Chenet for providing data on development phase for some companies in the data set.

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Authors and Affiliations

  1. Aris I. Baras and Kevin A. Schulman are at the Duke University School of Medicine, Durham, North Carolina, 27710, USA, and at the Health Sector Management Program, The Fuqua School of Business, Duke University, Durham, North Carolina 27708, USA.,

    Aris I. Baras & Kevin A. Schulman

  2. Aris I. Baras is also at Liquidia Technologies, Morrisville, North Carolina 27560, USA.,

    Aris I. Baras

  3. Alex S. Baras is at the Johns Hopkins Hospital, Baltimore, Maryland, 21287, USA.,

    Alex S. Baras

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  1. Aris I. Baras
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  2. Alex S. Baras
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  3. Kevin A. Schulman
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Correspondence to Kevin A. Schulman.

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The authors declare no competing financial interests.

Supplementary information

Supplementary information Box S1

Analysis methodology and data (PDF 212 kb)

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Baras, A., Baras, A. & Schulman, K. Drug development risk and the cost of capital. Nat Rev Drug Discov 11, 347–348 (2012). https://doi.org/10.1038/nrd3722

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