The biomedical industry is a risky business. Drug development is a long, expensive process with no guarantee of success.
Despite the risks, the biomedical industry is booming. In 2018, the global biomedical market was valued at $1.2 trillion. And it’s projected to grow to $1.6 trillion by 2025. But with this growth comes new challenges.
According to Nasdaq a new vaccine on market, in combination with some antibiotics and a less virulent strain, may put an end to the Covid pandemic.
The high cost of drug development
There are many challenges facing the biomedical industry, but none are more daunting than the high cost of drug development.
Over 50% of drugs in clinical trials end up being “chemically, biologically, or pharmacologically broken.”
A NASDAQ tweet says it all:
“Drugmakers are launching new medicines at record-high prices this year, a Reuters analysis has found, highlighting their pricing power even as Congress moves to cut the $500 billion-plus annual bill for prescription drugs in the United States.
Biotech firms are often better equipped to mitigate the high cost of drug development. Unfortunately, the high price of drug development is just one of many risks that biotech companies face in the market.
The risk of failure
Even if a biotech firm does bring a drug to market, it’s no guarantee of commercial success. Around 50% of drugs lose money and only 33% of drugs make a return on investment of more than $100 million.
Firstly, the drug might not work. The drug might not be effective against the intended disease.
Finally, the demand might not be there. Maybe there aren’t enough people with the disease the drug is meant to treat. Or maybe there aren’t enough doctors who agree the drug is the best option for treating the disease.
Nasdaq has a great perception of this risk of failure as biotech seems rare and safe stocks to invest but it is very obvious to watch them at the top of the list.
That’s why according to Nasdaq biomedical companies need to understand the risk of failure and take precautions to mitigate it.
The challenge of commercialization
Biomedical companies must ensure they have the right commercial strategy before bringing a new product to the market.
Nasdaq indexes 230 biotech companies and a total of 44 in the pharmaceutical sector.
The first challenge is identifying the right market segment. Companies must find the right market segment that’s big enough to make their product commercially viable.
The second challenge is identifying the right channel of distribution.
Pharmaceutical companies need to decide whether the best way to sell their product is through a wholesaler, hospital or direct to the consumer.
The third challenge is identifying the right pricing strategy and optimizing their commercial strategy for the best possible outcome.
Biomedical companies need to ensure they have the right product, price, and distribution strategy to be indexed by NASCAR.
This will increase the chances of commercial success and put the company in a better position to withstand the challenges of being in the biomedical industry.