Analytical Framework for Examining the Value of Antibacterial Products. 4.2.1 Real Opportunity Cost of Capital

04/15/2014

The real opportunity cost of capital represents the rate of return (net of inflation) that the vaccine developer would otherwise be able to earn at the same risk level as the investment in the new vaccine that has been selected.  The cost of capital we use in the model is based on information gathered during interviews with industry experts.  While vaccines are biopharmaceutical products, they are often developed and manufactured by divisions of big pharmaceutical companies.  Thus, even though the experts interviewed reported that biopharmaceutical companies use rates ranging from 18 to 24 percent, we selected the 11 percent rate deemed appropriate for pharmaceutical developers as was done for the analysis of antibacterial drugs in Section 3.2.1 above.


Table 19: Private ENPV Model Parameters and Assumptions (Point Estimates) for Vaccines

Parameter Point Estimate
Real Opportunity Cost of Capital 11.0%
Pre-clinical R&D Time (in Years) 4.3
Pre-clinical R&D Cost $73,901,395
Pre-clinical R&D Success Probability 57.0%
Sample Preparation for Animal/Human Studies $2,676,066
Phase 1 Clinical Trial Time (in Years) 1.6
Phase 1 Clinical Trial Cost $39,838,628
Phase 1 Clinical Trial Success Probability 72.0%
Phase 2 Clinical Trial Time (in Years) 2.4
Phase 2 Clinical Trial Cost $46,515,424
Phase 2 Clinical Trial Success Probability 79.0%
Process Research/Development/Design $26,760,658
Phase 3 Clinical Trial Time (in Years) 2.7
Phase 3 Clinical Trial Cost $118,590,265
Phase 3 Clinical Trial Success Probability 71.0%
Plant Design $13,380,329
FDA Biologics License Application (BLA) Review Time (in Years) 1.3
BLA Submission to Launch Cost $1,958,800
BLA Success Probability 96.0%
Plant Build $508,485,294
Total Time to Market (in Years) 12.48
Total Cost of Development $1,413,891,197
Time to Generic Entry upon FDA Approval (in Years) 12
% Reduction in Revenues due to Generic Competition 0.0%
Total Product Life (in Years) 20
Average Expected Price per Dose $63
Number of Doses 4
Product Launch Success Probability 60%

Because this parameter value heavily influences private ENPV outcomes, we assign a triangular probability distribution with a lower limit of nine percent, an upper limit of 24 percent, and a likely point estimate of 11 percent for sensitivity analysis purposes.

 

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