As everyone in the industry knows, the pharmaceutical business model is far more complicated than most. It is not simply a case of developing a product, making a cost analysis, researching the competition then bringing the product to market. In pharma, the R&D phase can last 10 to 15 years from inception and a drug coming to market does not forecast its exact profit margin or future. Following the R&D phase, pharmaceutical companies focusing on personalized medicine are increasingly pairing with diagnostic companies to improve the companion diagnostic tests that will propel their products into the marketplace.
For financial analysts in this very intense industry, the daily job may be forecasting solid revenue cycle development, but the priority always needs to be innovation. R&D needs to constantly move forward so that new therapies can continue to push the revenue stream and meet patient needs. This is made even more vital given that previous product patents will expire and diminish a company’s yearly income. There’s a lot of information from many different avenues to continually keep track of in terms of biotech and pharmaceutical financial analysis.
Tools to Consider
- R&D Management and Information. The largest investment in pharmaceuticals occurs in the research and development stage of clinical and pre-clinical research. It’s important that financial analysts have access to all the data accumulated across the various ongoing trials to better prioritize programs according to forecasted success rates.
- Analytics on Current and Future Biopharm Trends. Financial forecasts in this industry rely heavily on understanding the current market and how offerings from other pharma will impact the future treatment therapies associated with programs you have at the R&D stage, as well as the products your company currently offers.
- Full Access to New Developments and Drug Approvals. External developments can heavily impact projected profits for your own lines of therapy. These can include the release of data on new developments, drug approval announcements, full profiles of offerings from competitors and their potential impact, as well as projected release dates for new therapies.
- Strategic Development of Diagnostic Companion Testing. For pharmaceutical companies investing in personalized medicine, strategic development with diagnostic partners is essential. It helps to optimize the testing procedures and make sure the tests are effective as a companion to your therapy.
- Extended Sales Forecast. Using all the accumulated data as it pertains to each therapy and its respective disease, financial analysts should create an extended sales forecast to better mark the success of each individual program, as well as the company’s gains as a whole.
The pharmaceutical industry offers more challenges for financial analysis than many other businesses because of the difficulties in judging the landscape so far in advance. A continual inspection of current data for internal financial health as well as external changes in the industry, and diseases as they pertain to your own programs, is essential as you update your projections for a more informed investment strategy.