>There are plenty of 50-100M pharma startups; they wouldn’t exist if your number was right.

Isn't there a selection bias in that the startups that got to 50-100M survived because they were lucky with a candidate treatment. The ones that failed were the ones that never found a candidate in time? The difference being that large pharmaceutical companies have to swallow ALL the failures, whereas startups can "just" die.

Not to say that pharma companies don't have some fat that can be trimmed...

>which covers r&d and marketing but also the failed attempts that lead nowhere in between.

How do you account for the failed attempts?

As yomly alludes to, pharma startups exist because they don't own the risk - their investors bought it when they were funded. Big pharma does own the risk.

You sum the expenditure and divide by number of successes, with some accounting for the delay. It is actually much easier than trying to figure out the cost of a specific drug, because research is sometimes shared.

"Pharma start-up" is a broad definition which might not only be drug development and there might already be work done on their product before they look for funding

A company that is spun out from a PhD project in a research group, that has done a lot of the groundwork on grants will need less funding

Same goes for a start-up that for instance make non-invasive assays for diagnosis, since the documentation requirements are lower for such products

Producing something that has to be injected into humans is an entirely different league, since the amount of documentation required for such products is staggering

The cost for marketing will vary significantly depending on your definition of the word, and I suspect that it might be misconstrued as only being "commercials and paid holidays for doctors"

90% of start ups fail, so the numbers in that case would be about correct.

No.

GP said idea to product costs 1B just for r&d. That and 1B amortized over failures (and including marketing) cannot be true at the same time unless there are no failed attempts and unless marketing cost is zero.

I've seen you mention marketing several times. What expenditures would you include as a marketing expense?

I'm also not sure what you would define as a failure. Drug development often starts with several candidates for a target. Over the cause of development the list is trimmed, as candidates show lack of affinity for the target or have side-effects that make them unviable. Would you consider each of the excluded candidates a failure?

> I've seen you mention marketing several times. What expenditures would you include as a marketing expense?

I don't get to define that, companies do, but basically it includes everything that does not involve a lab, technician, doctor, nurse, statistician/programmer, etc. The US and the rest of the world are quite different here - if you've ever watched US broadcast in the evening, you'd see TONS of ads for prescription only medicine ("suffering from foo? Ask your doctor about bar"); that's marketing. Taking three hundred cardiologists on an all-expenses-paid 7-day cruise with one 30-minute "purely informative lecture about our new drug" and 7 days of fun? That's marketing too. Lobbying to congress? That's also marketing.

Outside of the US, the marketing budgets are smaller and less overt - but the cruise-style legal bribe-like events are prevalent everywhere.

> Would you consider each of the excluded candidates a failure?

Possibly. You've described one style, but it's not the only one. Many times, it's a weird result from some other research (how Viagra was discovered, how DCA tests were started).

But many things are essentially complete and utter failures - you have a line of research where no viable compound was found at all. BiondVax just failed a 15-year mission trying to develop a universal flu vaccine. Remdesivir is essentially failed even though it is FDA approved (It failed for Ebola; if you look at the data critically, it failed for SARS-COV-2 -- which the WHO's recent studies show even more clearly).

There is some benefit from this research - new techniques, often new devices - but the drug itself is a failure in the sense that it will not generate any income to the company.

Edit: just saw your earlier comment about marketing. It is those things (which you and I mentioned) and a lot more, but it is basically for the company to define in their books and a rule of the thumb would be “an expense a university department developing this to completion without expectation of profit would not have to spend”

The usual course for a biotech is multiple raises as the drug progresses through trials and an early IPO. At each step investors see it as a surer shot.