An integrated valuation model for payer and investor

Area of Science:

• Health Economics
• Pharmaceutical Market Access
• Biotechnology Valuation

Background:

• Early-stage drug development requires forecasting market access attractiveness to optimize positioning and pricing for payers and investors.
• Companies must consider payer constraints and minimum drug prices needed to satisfy investors.
• This paper addresses the need for a model integrating payer and investor perspectives for early-stage drug valuation.

Purpose of the Study:

• To introduce an Integrated Valuation Model (IVM) for assessing payer and investor perspectives on new drugs in early clinical development.
• To bridge health economics and economic valuation concepts for a comprehensive drug valuation.
• To illustrate the IVM's application using a hypothetical drug (Product X) for advanced breast cancer across different treatment lines.

Main Methods:

• The IVM integrates budget impact, pricing matrix, and cost-effectiveness models from the payer's viewpoint.
• These models are linked with a discounted cash flow model to incorporate the investor's economic valuation.
• The model's utility is demonstrated with a hypothetical advanced breast cancer drug (Product X) in 1-line, 2-line, and 3-line settings.

Main Results:

• For Product X in 1-line advanced breast cancer, the payer's maximum price is €269.7 and the investor's minimum price is €14.7.
• In 2-line treatment, the pricing corridor narrows, with the payer's maximum at €274.1 and the investor's minimum at €184.5, indicating market access attractiveness.
• In 3-line treatment, the investor's minimum price (€942.7) exceeds the payer's maximum price (€283.3), signifying no market potential.

Conclusions:

• The Integrated Valuation Model enables strategic optimization of drug positioning and pricing.
• It serves as a transparent tool for early-stage compound development by assessing market access attractiveness for both payers and investors.
• The model's application highlights Product X's market potential in earlier treatment lines but not in the 3-line setting.