Forecasting Drug Sales: Har, Har.

You're running a drug company, and you have a new product coming out. How much of it do you expect to sell? That sounds like a simple question to answer, but it's anything but, as a new paper in Nature Reviews Drug Discovery (from people at McKinsey, no less) makes painfully clear. Given the importance of forecasting, we set out to investigate three questions. First, how good have drug forecasts been historically? And, more specifically, how good have estimates from sell-side analysts been at predicting the future? Second, what type of error has typically been implicated in the misses? Third, is there any type of drug that has been historically more easy or difficult to forecast? The answer to the first question is "Not very good at all". They looked at drug launches from 2002-2011, a period which furnished hundreds of sales forecasts to work from. Over 60% of the consensus forecasts were wrong by 40% or more. Stop and think about that for a minute - and if you're in the industry, stop and think about the times you've seen these predictions made inside your own company. Remember how polished the PowerPoint slides were? How high-up the person was presenting them? How confident their voice was as they showed the numbers? All for nothing. If these figures had honest error bars on them, they'd stretch up and down the height of any useful chart. I'm reminded of what Fred Schwed had to say in Where Are the Customers' Yachts about stock market forecasts: "Concerning these predicti...
Source: In the Pipeline - Category: Chemists Tags: Business and Markets Source Type: blogs