A brilliant drug is not necessarily a brilliant investment

Drug development is one of the few industries in which you can transform patients’ lives, secure regulatory approval and still discover that you have built a disappointing business. A molecule can be clinically brilliant and commercially awkward.

Medicine and finance ask different questions. The distance between them explains why a therapeutic breakthrough does not automatically become an attractive investment.

The cure paradox

Hepatitis C offers a striking example. Gilead’s Sovaldi and Harvoni helped turn a chronic infection associated with cirrhosis, liver cancer and transplantation into a disease that could often be cured with a short course of tablets. Commercially, the initial success was spectacular.

Competition and lower prices mattered. So did the curative nature of treatment: successfully treated patients no longer needed another course for the same infection. The initial backlog of patients was not an indefinitely recurring market.

A cure can create enormous value precisely by eliminating its own future demand.

This does not make cures bad investments. Gilead generated tens of billions of dollars from hepatitis C. It illustrates a more useful distinction: value created for society and the duration of cash flows captured by a company are related, but different.

Revenue has a duration

Medicines for large chronic conditions can have very different economics. Treatment may continue for years, new indications can widen demand, and manufacturing capacity becomes a strategic asset.

Rounded reported figures. Obesity care is a portfolio, not a single medicine. Currencies differ; these figures are not a like-for-like ranking.

Imagine one medicine that cures a condition after a single treatment and another that controls a common disease through repeated use. Both may deliver substantial clinical benefit, but their revenue patterns differ. Valuation depends on price, patient numbers, costs and the length of time cash flows can continue.

This is not an argument that companies deliberately prefer chronic illness to cures. It is an argument that duration matters — and that the commercially ideal medicine and the medically ideal medicine need not be the same.

Biology is not a business model

Drug discovery celebrates the molecule. Investors must understand the system around it: diagnosis, eligibility, reimbursement, specialist capacity and patient uptake. All must work at scale before competition or patent expiry erodes the opportunity.

“Ten million patients have this condition” is therefore a starting point, not a revenue forecast.

Hypothetical example for illustration only; these are not observed data or a forecast for a particular medicine.

The PowerPoint market can be enormous. The investable market can be surprisingly small.

Approval is only the beginning

Alzheimer’s treatments make the distinction tangible. Medicare’s coverage framework for Leqembi requires an appropriate early-stage diagnosis, evidence of amyloid pathology and a physician participating in a qualifying registry with suitable follow-up care. Each step adds demands on the pathway around the drug. [4]

Biogen reported approximately US$134 million in global in-market LEQEMBI sales in the fourth quarter of 2025, up 54% year on year. Growth is real, but so is the work needed to build diagnostic capacity, clinical pathways and access. Disease prevalence is not immediately monetisable demand. [5]

When a lifetime of benefit is paid for today

Gene therapy makes this challenge sharper. Small patient populations, complex manufacturing and specialist delivery can sit alongside a large upfront price. A payer may have to fund today benefits that could unfold over decades.

BioMarin’s ROCTAVIAN, a gene therapy for severe haemophilia A, illustrates the difficulty. After seeking a buyer without success, the company announced its voluntary withdrawal from the market. This does not mean gene therapy has failed; it shows that scientific achievement alone does not guarantee a sustainable delivery model. [6]

The scientific question is “Can we treat the underlying disease?” The commercial question is “Can we build an economically sustainable way to deliver that treatment?”

The investor is buying a stream of probabilities

A clinician may read an impressive Phase II study and see an extraordinary medicine. An investor must also ask whether Phase III will confirm the result, regulators and payers will accept it, manufacturing will scale and enough exclusivity will remain after launch.

Development costs include more than the successful product. Failed programmes and the cost of tying up capital for years also matter. A billion pounds received fifteen years from now is not worth a billion pounds today.

Markets measure one kind of value

Healthcare creates value that does not necessarily appear in a manufacturer’s accounts: avoided admissions, independence, time returned to families and the ability to work. Commercial difficulty does not make those gains less real.

As cell therapies, gene therapies and precision medicines advance, their financing may need to evolve alongside their science. The question is how to pay for benefits that are uncertain, long-lived or spread across different budgets.

These approaches have practical challenges of their own. But sometimes the problem is not that an innovative medicine creates too little value; it is that the financial arrangements struggle to recognise the value it creates.

A great business can still be a poor investment

There is a further distinction: the quality of a medicine, the quality of its business and the attractiveness of its share price are three separate questions. Even a commercially successful drug can disappoint investors if its success was already more than reflected in the price they paid.

Imagine a company valued on the assumption that its medicine will dominate a market for a decade. The medicine launches, helps patients and produces substantial revenue. But a rival arrives earlier than expected, or the achievable price is lower. The business may be growing while the investment loses value, because expectations were growing faster.

Investors do not earn a return simply because the science succeeds. The price paid for that success matters too.

The argument in favour of paying a premium is credible: genuine differentiation, a strong pipeline and exceptional execution may justify it. The counterargument is that a valuation can leave almost no room for ordinary setbacks. A persuasive scientific story should sharpen scrutiny of assumptions, not replace it.

The strongest counterargument: cures can be exceptional businesses

The contrast between cures and chronic treatment is useful, but it can be taken too far. A cure may command a substantial price, attract strong demand and avoid years of competing for each repeat prescription. New patients may continue to develop the disease even after an initial backlog has been treated.

Chronic treatment, meanwhile, does not guarantee a durable revenue stream. Patients may stop taking it, payers may restrict access and competitors may offer better outcomes or lower prices. Repeated dosing is a commercial opportunity, not an entitlement to recurring income.

The better question is therefore not “cure or chronic treatment?” It is “what cash flows are plausible, over what period, at what cost and with how much uncertainty?”

Good value is not the same as affordable today

A therapy may offer good value over a patient’s lifetime while creating a difficult immediate budget decision. Paying for it today may mean postponing another service today, even when future benefits are substantial. NICE’s economic evaluation framework makes the opportunity cost of using finite health resources central to assessing value. [10]

From the manufacturer’s perspective, higher prices can reward risk-taking and help fund the next generation of treatments. From the payer’s perspective, rewarding innovation is only one responsibility: it must also consider the health lost when spending displaces other care.

Neither side can settle the argument merely by pointing to development costs or clinical benefit. Development spending does not establish what a health system can afford, while an insistence on low prices without regard to future incentives may weaken investment in areas where new treatments are needed.

There is also a limit to clever financing. Instalments change when money is paid; they do not automatically reduce the total cost. Outcome-based agreements require measurable outcomes, reliable follow-up and rules for disputes. A contract can share uncertainty, but it cannot make uncertainty disappear.

The deeper lesson

Biotechnology investors finance science, but also the attempt to turn science into an economic asset. That requires patients who can be found, clinicians willing to use the treatment, payers willing to fund it and enough time for the resulting cash flows to repay the risk.

A brilliant drug is not necessarily a brilliant investment. The more important question may be the reverse:

If a medicine creates extraordinary value for patients and society but struggles to create an investable return, is the problem with the drug — or with the way we finance innovation?