Target-to-hit Hit-to-lead Lead optimization Preclinical PhaseI Phase ll Phase IⅢ Submission to launch Launch P(TS) 80% 75% 85% 69% 54% 34% 70% 91 WIP needed for 1 launch 24.3 19.4 14.6 12.4 8.6 4.6 1.6 11 Cost per WIP per Phase 525 10 $5 515 S40 S150 540 Cycle time(years) 1.0 15 2.0 1.0 15 25 25 15 Cost per launch (out of pocket)$24 549 5146 562 S128 5185 5235 544 5873 %Total cost per NME 3% 6% 17% 7% 15% 21% 27% 5% Cost of capita % Cost per launch(capitalized) 94 s166 5414 5150 5273 5319 S314 548 S178 ☐Discovery☐Development Figure 2|R&D model yielding costs to successfully discover and develop a single new molecular entity.The model defines the distinct phases of drug discovery and development from the initial stage of target-to-hit to the final stage,launch. The modelis based on aset of industry-appropriate RD assumptions(industry benchmarks and data from Eli Lilly and Compamy)defining the performance of the RoD process at each stage of development(see Supplementary information S2 (box)for details).RD parameters include:the probability of successful transition from one stage to the next(p(TS)),the phase cost for each project,the cycle time required to progress through each stage of development and the cost of capital, reflecting the returns required by shareholders to use their money during the lengthy R&D process.With these inputs(darker shaded boxes),the model calculates the number of assets(work in process,WIP)needed in each stage of development to achieve one new molecular entity(NME)launch.Based on the assumptions for success rate,cycle time and cost,the model further calculates the 'out of pocket'cost per phase as well as the total cost to achieve one NME launch per year(US$873 million).Lighter shaded boxes show calculated values based on assumed inputs.Capitalizing the cost,to account for the cost of capital during this period of over 13 years,yields a'capitalized'cost of S1,778 million per NME launch.It is important to note that this model does not include investments for exploratory discovery research,post-launch expenses or overheads (that is,salaries for employees not engaged in RoD activities but necessary to support the organization). 8 NATURE REVIEWS DRUG DISCOVERY VOLUME 9 MARCH 2010 2038