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The development costs of biotech drugs are steadily increasing.

October 2018

Will biotech drugs soon become unaffordable?

The development costs of new biotech drugs are rising steadily. Investors need to identify promising drugs quickly.

Determining the high price tag of biotech medication is the high price that is health insurance companies pay for a medicine. At the beginning of 2018, a American biotechnology company awarded the prize for gene therapy against a rare eye disease1 fixed at $850,000. It seems a matter of time before the first drug on the market comes in for which $1 million or even more has to be paid. To the on the other hand, the costs for the development of a successful drug also include to map these costs. In order to map these costs, the American research bureau has Tufts mapped out how many ten major biotech companies have spent in order to achieve more than 100 means on the market. The average price was over $2.5. billion2. In a similar study from 2000, that was just over $1 billion3.

Probability of success

The high development costs make it more important than ever to be in such an early stage. possible stage to find out whether a means has a chance of success and how high the are potential revenues', says Marie-Laure Schaufelberger, product specialist of the strategy Biotech. It is therefore a great advantage that our team, in addition to a lot of investment experience also has a solid medical background. Thanks to this knowledge we know, for example, that the increase in research costs is not something of the latter. is time. Since the 1950s, the number of medicines that come on the market per $1 billion investment in research and development, halved every nine years4. There are several reasons why it is becoming increasingly expensive to develop a new blockbuster'. 

Selectivity pays off

Medicines have already been developed for common conditions. Insurers and governments are only willing to pay a high drug price if a product is much more effective than existing drugs, has fewer side effects and easier The existing products can then be administered. In addition, supervisors become increasingly critical of new medication. Before a medicine gets the green light for a debut on the market, it must first be  demonstrated through years of testing that it in no way poses a threat to health. Companies in the Biotechnology is currently working on means against various forms of cancer such as Alzheimer's and Parkinson's.

Potentially, these drugs can handle billions of euros. generate turnover', says Schaufelberger. Investors can respond to this much better by letting specialists search for the winners within the sector. That is a promising strategy. More than opting for an investment product that biotechnology companies are lumped together, such as an ETF or index fund. In the indices that make up these investment products weigh the companies with the largest stock market value is the heaviest. These are the winners of the past, while the Pictet specialists, thanks to the combination of medical and investment knowledge, are on the right track. search for the winners of tomorrow.