Medical Devices – evaluating R&D investments

A multination leading provider of drugs and medical device technologies wished to improve and streamline its evaluation of R&D investments for its medical device business. To facilitate portfolio decisions, the client needed the financial evaluation to be consistent with R&D investments of its drug business, while allowing for the uniqueness of medical devices. The client previously had to work with about 20 different models to forecast device sales and cash flows.

In close collaboration with the client EpiX Analytics first developed a blue-print of the device R&D evaluation model. The template model needed to have the ability to forecast device sales across five regions in the world. Medical devices often require additional opportunities such as pumps, software and consumables. In addition, potential cannibalization of existing products was important. Finally, the client wished to reflect all relevant risks and uncertainties into its R&D financial evaluation.

EpiX Analytics developed a comprehensive risk-adjusted template model for the client’s device business. The model reflected the important relationship between sales of each device and possible follow-on sales (also called ‘pull-through’ sales).

The risk-adjusted R&D evaluation model developed by EpiX Analytics was considered a great improvement over the previous (~20) models and provided a consistent and easy-to-use template that greatly simplified and streamlined the process of evaluation of the client’s medical device R&D opportunities.

The model delivered by EpiX Analytics is now used by the client as their main valuation model for all their R&D investments in medical devices.

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