Final

Report
Biosimilar R&D Co.
Budget
Cost of Obtaining FDA Marketing
Approval

By: Camilo Pascual

Date: 12/09/15

Page 1 of 20

Index for Figures & Tables

#

Title

Page

Figure 1

WBS Level 2 Costs (in millions)

Figure 2

Total Costs per Year (in millions)

Table 1

Project Cost Types Breakdown

Figure 3

Direct/Indirect Costs

Table 2

Project Costs by Estimating Methodology

Figure 4

Work Breakdown Structure

Table 3

WBS Dictionary

Table 4

Cost Estimate Assumptions/Ground Rules

Figure 5

Budget Schedule

Table 5

Reorganized Total Costs

Table 6

Direct/Indirect Costs (excluding WBS 1.5)

Table 7

Breakdown of Costs for each WBS Level 2 Elements

Table 8

Excel File Description

Table 9

Range of Clinical Trial Costs

Table 10

Range of Preclinical Parameters

Table 11

Sensitivity Analysis for the Comparative Testing

10

Figure 6

Manufacturing Department Costs

10

Table 12

Range of Resin Costs

10

Table 13

Range of Number of R&D Lots

10

Table 14

Range of Material Overhead Parameters

11

Table 15

Sensitivity Analysis for Low Resin Cost

11

Table 16

Sensitivity Analysis for Middle (Expected) Resin Cost

11

Table 17

Sensitivity Analysis for High Resin Cost

11

Table 18

Cost by Estimating Methodology

12

3-5

8-9

Page 2 of 20

1.0

EXECUTIVE SUMMARY

The objective of this project is to estimate the budget for an R&D organization that is
attempting to achieve FDA marketing approval for a biosimilar. The total budget for this 10year project was estimated to be $224.063 million. The following figures and tables are a
breakdown of the project costs.

Figure 2: Total Costs per Year (in millions)

Figure 1: WBS Level 2 Costs (in millions)

Table 1: Project Cost Types Breakdown

Figure 3: Direct/Indirect Costs

The non-recurring costs total is $112.513 million (50.21%) and the recurring costs
per year, while assuming the production of 4 lots, is $16.885 million.
The major cost drivers identified are the Comparative Testing activities (WBS 1.5), which
is almost 30% of the total budget, and the chromatography resin material (WBS 1.3.2),
which is almost 75% of the material cost for the Manufacturing department (WBS 1.3). A
sensitivity analysis of the cost model was performed on these cost drivers and related
parameters.
The project costs were compiled by
the
estimating
methodology
employed, as shown in Table 2. A plusminus error percentage was assigned
to each methodology to generate a
range. Based off this analysis, Im 90%
confident that the actual project costs
will fall within the estimate range of
$224.063 $281.804 million.

Table 2: Project Costs by Estimating Methodology

In conclusion, this cost model is a good starting point in identifying the major cost drivers
and plan to achieve FDA marketing approval for a biosimilar, but further refinements
(quotes/actuals) are needed to reduce the estimate uncertainty.

Page 3 of 20

2.0

INTRODUCTION

The objective of this project is to estimate the budget for an R&D organization that is
attempting to achieve FDA marketing approval for a biosimilar. The estimate will include the
research and development of a biosimilar that will require pre-clinical testing, clinical trials
for comparability purposes, and approval by the FDA and also, the operation of a facility to
produce, manufacture, and test the biosimilar.
The estimate will be used to learn and understand the process of achieving FDA-approval for
a biosimilar and to determine potential cost drivers.
The cost model designed as part of this project is expected to address most of the budgetary
items (some exclusions were made) that should be considered when attempting to develop
a biosimilar for FDA approval. This is a general model, so once a particular biologic is
identified quotes or actuals for the required materials and clinical trial costs by therapeutic
area can be included to further refine the accuracy of the model.

3.0

WORK BREAKDOWN STRUCTURE & DICTIONARY

As can be seen in Figure 4, the Work Breakdown Structure (WBS) is made up of 31 bottom
level work elements (highlighted yellow). Each of the WBS elements are defined in Table 3.

Figure 4: Work Breakdown Structure

Table 3: WBS Dictionary
Lev
el

WBS
Code

Element Name

Biosimilar Development Project

1.1

GMP Facility

1.1.1

Lease

1.1.2

Clean Rooms

1.2

Research & Development

1.2.1

Establish Cell Line & Master Cell Bank

1.2.2

Manufacturing Process

Definition
All phases and items required to develop, test, and achieve FDA marketing
approval for a biosimilar.
The facility where the R&D, Manufacturing, and QA testing for the
biosimilar will take place.
The cost to lease a facility of 10,000 ft2 in Florida.
The manufacturing suites and filler cover at various air quality
classifications.
The R&D phase of the organization, which is made up of the items listed
and also includes the optimization and scale-up of the manufacturing
process and establishment of procedures.
The genetic modification of a cell line, which is considered the starting
point for successful protein production.
The procurement of the manufacturing equipment and the establishment
of the upstream and downstream manufacturing process.

Page 4 of 20

Lev
el

WBS
Code

Element Name

1.2.3

Quality Specifications

1.3

Manufacturing

1.3.1

Culture Cell Line & Cultivate for Protein

Production

The upstream of the manufacturing process, in which the cell line is given
a media mix to allow for a consistent protein production.

1.3.2

Separation/Extraction of Protein through

Purification Process

The downstream of the manufacturing process, in which the required

proteins are extracted from the mix using a chromatography system.

1.3.3

Formulation, Filling, & Finishing

1.4

Quality Assurance

The Quality Assurance phase/department of the organization.

1.4.1

Raw Material Testing

The tests required for incoming raw materials that are used as part of the
manufacturing process.

1.4.2

In-Process Testing

Definition
The procurement of the laboratory equipment, the characterization of the
biosimilar and innovator drug, and the establishment of the raw material,
in-process, and release tests.
The Manufacturing phase/department of the organization.

The final downstream of the manufacturing process, in which a buffer and

other non-active components are formulated and combined with the
protein (drug) and filled into a finished product (i.e. syringe).

The tests that characterize the drug at various stages of the manufacturing
process to confirm its quality and characteristics.
The tests required on the finished product to confirm its quality and
efficacy to allow for its release. The stability tests confirm that the drug is
stable and maintains its quality characteristics over a long period of time
(i.e. 2 years).

1.4.3

Release & Stability Testing

1.5

Comparative Testing for Application

1.5.1

Preclinical Program

The lab tests and animal studies that need to be completed before testing
the biosimilar in humans.

1.5.1.1

Analytical Similarity Testing

The lab tests that compare the structure and function of the biosimilar with
the innovator drug.

1.5.1.2

Animal Studies

1.5.2

Clinical Program

1.5.2.1

Phase I PK/PD Comparability Studies

1.5.2.2

Phase III Safety and Efficacy

Comparability Study

1.5.2.3

Phase IV/Post-Approval Studies

The large study that may be required by the FDA after approval to further
monitor the safety and efficacy of the biosimilar.

1.6

Regulatory User Fees

The biosimilar user fees that indicate communication with the FDA and are
required to receive FDA approval.

1.6.1

IND Submission / Annual BPD Fee

An IND needs to be submitted to proceed with clinical testing. The Annual

BPD fee is applicable from the IND submission to when the biosimilar
application is submitted.

1.6.2

351(k) BLA Application Fee

The biosimilar application, which will include the CMC package, Preclinical
data/results, and the Clinical trial data/results.

1.6.3

Annual Establishment Fee for Approval

The fee for the facility after the biosimilar is approved.

1.6.4

Annual Product Fee for Approval

The fee for the product after the biosimilar is approved.

1.7

Program Management Support

1.7.1

R&D Project Management

1.7.2

Manufacturing Project Management

1.7.3

Quality Assurance Project Management

The PM support for the QA phase/department.

1.7.4

Preclinical Program Project Management

The PM support for the Preclinical Testing phase.

1.7.5

Consultants for CMC Project Management

1.8

Overhead

The main tests that are used to demonstrate biosimilarity to the FDA.

The comparison of the toxicity, safety, and efficacy of the biosimilar with
the innovator drug in animal models.
The clinical studies which require the testing of the biosimilar in human
subjects.
The multiple early trials, including one pivotal study, to compare the safety
of the biosimilar with the innovator drug.
The pivotal large study that will compare the safety and efficacy of the
biosimilar with the innovator drug. I believe it needs to only show noninferiority to the innovator drug.

The program management support for various phases/departments of the

organization.
The PM support for the R&D phase.
The PM support for the Manufacturing phase/department.

The consultants (third-party) that are expected to assist the organization in

compiling the CMC package and potential guidance to receive FDA
approval.
The expected overhead costs of the organization.

Page 5 of 20

Lev
el

WBS
Code

1.8.1

R&D Material Overhead

1.8.2

Manufacturing Material Overhead

1.8.3

Quality Assurance Material Overhead

1.8.4

Maintenance, Qualification, & Validation

Overhead

1.8.5

G&A

1.8.6

Legal Support

4.0

Element Name

Definition
The material burden for the materials in the R&D phase.
The material burden for all of the materials in the QA phase/department.
The material burden for all of the materials in the R&D phase.
The expected maintenance and qualification costs for the facility and
equipment and the validation of the processes.
The general and administrative fees/costs.
The lawyers that may be necessary for potential clinical trial issues and
patent issues/disputes with the innovator drug company.

ASSUMPTIONS/GROUND RULES

The assumptions/ground rules for this cost estimating exercise, as well as the WBS elements
affected by and the rationale for these assumptions are listed in Table 4. (Note: These
assumptions/ground rules can probably be expanded upon).
Table 4: Cost Estimate Assumptions/Ground Rules
Ground Rules / Assumptions

WBS Element(s)
Affected

Rationale

The biosimilar development project is

expected to last 10 years, so will account for
inflation. (will need to account for material
inflation in future estimate)

1.2, 1.3, 1.4, 1.5.2,

1.6

Estimates state it will take 7-10 years to receive

FDA marketing approval, so being conservative in
my scheduling.

The cost to achieve FDA-approval for a

biosimilar is projected to be $75-$250 million
(excluding the cost of a GMP Facility), so the
model parameters and budgeted items are
made to fit within this expectation.

All

There are a lot of research articles that report this

estimate value (with one indicating that it excludes
the GMP Facility cost). This base range gave the
model direction and gave some ideas to how the
parameters must be set.

I excluded Marketing/Sales Support, which

would need to be considered for the pursuit
of Fee/Profit.

N/A

This is an Indirect Cost and I didn't have enough

time to compile data for this type of cost element,
and I really don't know enough about it to attempt
a Direct estimate.

The GMP Facility will be leased in Florida and

thus will be treated as a Recurring Cost.

1.1

Construction of a new facility will take a very large

initial investment and a long lead-time (2+ years).

The labor costs are calculated as a total

annual compensation per employee (Annual
Wage 0.65), with the assumption that
there is 1,880 available working hours per
employee per year.

1.2 - 1.4

Assume the R&D phase will be completed in

3 years.

1.2

The Material cost per Lot will be determined

and then the number of Lots
manufactured/tested per year will be
assumed. The production rates (Lots per
year) is expected to increase over the 10year span.

1.3, 1.4

Assumptions are made regarding the clinical

testing required based off some of the
approval data from Zarxios application.

1.5.2

5.0

Based on the complexity of the tasks and lack of

available data for the manufacturing and testing
processes, makes it difficult to estimate the
process down to labor hours.
A SME confirmed this was achievable.
This allowed for the design of an adaptable model,
with the number of projected lots being a business
decision. The production output has to be at a
reasonable level to account for the demand after
achieving FDA approval.

The data is available.

PROGRAM SUMMARY COST ESTIMATE / COST TYPES BREAKDOWN

The budget schedule for this project is shown in Figure 5. The top row of data shows the
project cost per year and the total cost per element is shown in the right column. The green
boxes indicate the milestone starting year for the element and the red boxes indicate the
milestone completion year for the element. The elements that have orange boxes in the FY

Page 6 of 20

2025 column, were considered for the calculation of Recurring Cost ($16.885 million per
year, assuming 4 lots produced), except for WBS element 1.5.2.3, which is a Post-Approval
study, and half of its cost was put toward the budget of FY 2025.

Figure 5: Budget Schedule

The costs by WBS Level 2 elements are shown in Figure 1. Some of the Program
Management Support (WBS 1.7) and Overhead (WBS 1.8) can be aligned in the other WBS
Level 2 elements. This is shown in Table 5, with the Other category including WBS elements
1.7.5, 1.8.5, and 1.8.6.
Table 5: Reorganized Total Costs
Cost

GMP Facility

$24.553

10.96%

Research & Development

$34.590

15.44%

Manufacturing

$52.393

23.38%

Quality Assurance

$30.066

13.42%

Comparative Testing for Application

$64.962

28.99%

Page 7 of 20

Regulatory User Fees

$3.336

1.49%

Other (Consultants, G&A, Legal)

$14.164

6.32%

The Total Costs for each year of this 10-year project is shown in Figure 2. I need to more
research regarding how an R&D organization should be allocating its fund to determine
whether this is a successful trend or if the costs should be distributed in some other fashion
across the schedule. The last 3 years of the project have the highest total cost of the project,
which is to be expected since they include Phase 3 and 4 clinical trial costs.
The Project Cost Type Breakdown is shown in Table 1. The ratio of Labor to Material costs
over this 10-year project is approximately 28% to 72%, respectively. As can be seen in the
table, the subcontracted material costs, which is mainly from the Preclinical and Clinical
Programs, makes up approximately 30% of the total budget, which is a good sign as per our
Cost Estimating textbook, which notes that it is not cost-effective to subcontract more than
60 percent of an organizations work.
The Direct/Indirect costs of the project are shown in Figure 3. If we exclude the Comparative
Testing (WBS 1.5), the Direct to Indirect costs is close to a 60% to 40%, which is shown in
Table 6. This is much closer to that 50/50 split we expect to see for a business.
Table 6: Direct/Indirect Costs (excluding WBS 1.5)
Direct

Indirect

$96.319

$65.791

59.42%

40.58%

Note: excluding WBS 1.5

The Fixed vs. Variable costs is the same as the Non-recurring vs. Recurring costs reported in
Section 1.0.
I did not include Travel or Marketing/Sales Support as part of the budget, but those two
elements should probably be included if considering the generation of a Fee/Profit.
Further configuration of the cost model is needed in order to organize the costs in the
following manner: controllable vs. non-controllable, engineered vs. managed, R&D and
administrative.

6.0

COST SUMMARY BY ELEMENTS OF COST

Each cost element is summarized in this section and in the models Excel file. The cost
elements are defined in Table 3. The estimating methodology employed and data acquired
for each element is noted in the Excel file. A breakdown of the costs for each WBS Level 2
and two Level 3 elements is shown in Table 7.

Table 7: Breakdown of Costs for each WBS Level 2 Elements

WBS Elements
Cost Types

1.1

1.2

1.3

1.4

Total Budget

$10.390

$29.212

$41.787

Initial
Acquisition

$4.390

$6.940

Fixed

$4.390

$29.212

1.5

1.6

1.7

1.8

$41.890

$3.336

$13.603

$38.717

$0.000

$0.000

$0.000

$0.000

$0.000

$20.062

$41.890

$2.571

$9.397

$4.990

1.5.1

1.5.2

$25.066

$20.062

$0.000

$0.000

$0.000

$0.000

Page 7 of 20

Variable

$0.600

$0.000

$7.490

$4.152

$0.000

$0.000

$0.765

$0.526

$3.351

Direct

$4.390

$26.247

$36.962

$19.793

$20.062

$41.890

$3.336

$5.592

$0.000

Indirect

$6.000

$2.965

$4.826

$5.273

$0.000

$0.000

$0.000

$8.011

$38.717

(per
year assuming 4
lots)

$0.600

$0.000

$7.490

$4.152

$0.000

$0.000

$0.765

$0.526

$3.351

Non-recurring

$4.390

$29.212

$0.000

$0.000

$20.062

$41.890

$2.571

$9.397

$4.990

Labor

$0.000

$8.471

$13.787

$15.066

$0.000

$0.000

$0.000

$8.603

$16.662

Direct Labor

$0.000

$5.506

$8.962

$9.793

$0.000

$0.000

$0.000

$5.592

$0.000

Labor Burden

$0.000

$2.965

$4.826

$5.273

$0.000

$0.000

$0.000

$3.011

$8.498

G&A

$0.000

$0.000

$0.000

$0.000

$0.000

$0.000

$0.000

$0.000

$8.164

Material

$10.390

$20.740

$28.000

$10.000

$20.062

$41.890

$3.336

$5.000

$22.055

Direct Material

$0.000

$13.800

$28.000

$10.000

$20.062

$41.890

$3.336

$0.000

$0.000

Material
Burden

$6.000

$0.000

$0.000

$0.000

$0.000

$0.000

$0.000

$5.000

$22.055

Equipment

$4.390

$6.940

$0.000

$0.000

$0.000

$0.000

$0.000

$0.000

$0.000

Subcontract

$0.000

$0.000

$0.000

$0.000

$20.062

$41.890

$0.000

$5.000

$1.000

Recurring

7.0

ELECTRONIC ESTIMATE

In this section I will outline the makeup of the Excel file that was used to electronically put
together the cost estimate for this project. The descriptions of each sheet of the Excel file
are shown in Table 8.
Table 8: Excel File Description
Sheet
#

Name

Description

WBS

Ground Rules
(Assumptions)

The project scope and Work Breakdown Structure for the project.
The ground rules/assumptions made for this estimate model (may not have listed every
assumption so it can be expanded upon).

Point Estimate

The budget schedule for this project and the data is linked to various sheets throughout
the Excel file.

Cost Types Breakdown

Sensitivity Analysis

Contains data and parameters used to perform the Sensitivity Analysis of the cost model.

Uncertainty - Risk
Analysis

The estimating methodology is noted for each bottom-level WBS element and the costs
associated with that element. The total cost for each estimating methodology is compiled
and the data is linked to various sheets throughout the Excel file.

Model Limitations

The known limitations of this cost model will be listed here (still need to clearly identify
most of the limitations).

Labor Rates

A compilation of the labor rates data and the calculation of the wage inflation rate for
various skills.

Labor Costs

The staffing method used to quantify the labor costs for the R&D phase and the labor
costs per year associated with the Manufacturing/QA departments.

10

1.1 GMP Facility

Cost data, estimating methodology, and types of costs for WBS 1.1.

11

1.2 R&D

Cost data, estimating methodology, and types of costs for WBS 1.2.

12

1.3 Manufacturing

Cost data, estimating methodology, and types of costs for WBS 1.3.

13

1.4 QA

Cost data, estimating methodology, and types of costs for WBS 1.4.

14

1.5.1 Preclinical Program

Cost data, estimating methodology, and types of costs for WBS 1.5.1.

15

1.5.2 Clinical Program

Cost data, estimating methodology, and types of costs for WBS 1.5.2.

16

1.6 Regulatory User Fees

Cost data, estimating methodology, and types of costs for WBS 1.6.

17

1.7 PM Support

Cost data, estimating methodology, and types of costs for WBS 1.7.

18

1.8 Overhead

Cost data, estimating methodology, and types of costs for WBS 1.8.

The breakdown of the cost types including the definition of each cost type. The data is
linked to various sheets throughout the Excel file.

Page 8 of 20

Sheet
#

Name

19

Schedule & CPM

8.0

Description
The Gantt chart and my attempt at an AON network diagram for this project (requires
some revisions).

COST DRIVERS / SENSITIVITY ANALYSIS

The major cost drivers of this model are the Comparative Testing activities (WBS 1.5), which
makes up approximately 30% of the total budget, and the chromatography resin material
cost (WBS 1.3.2), which makes up approximately 75% of the material cost for the
Manufacturing department (WBS 1.3). A Sensitivity Analysis was performed on both of these
cost drivers and is described as follows.
The Clinical Trial costs data was obtained from a cost estimation report that had a model and
obtained data from around 7,000 studies for NDA/BLA trials. The costs were associated with
the testing of new drugs, therefore an Analogy estimating methodology was used to assign
costs to these comparative clinical tests. Since the safety and efficacy of the innovator drug
is known it was assumed that the cost of the clinical trials would be less than the reported
cost in that cost estimation report.
The range of costs and parameters that are related to this cost are shown in Tables 9 and 10.
The percentage multiplier in WBS 1.5.1.1 indicates that its cost is a percentage of WBS
1.5.2.1 and the factor for WBS 1.5.1.2 is a percentage of WBS 1.5.2.2. The percentage
multiplier for WBS 1.7.4 indicates its cost is a percentage of the costs of WBS 1.5.1.1 and
1.5.1.2.
Table 9: Range of Clinical Trial Costs
Clinical Trial Costs
1.5.2.1

1.5.2.2

1.5.2.3

Low (Expected
Cost):

$13.800

$15.000

$16.000

Middle:

$16.400

$17.445

$17.975

High:

$19.000

$19.890

$19.950

Table 10: Range of Preclinical Parameters

Preclinical Parameters
1.5.1.1

1.5.1.2

1.7.4

Low %:

50%

30%

5%

Expected
%:

75%

50%

15%

High %:

90%

80%

20%

The Sensitivity Analysis for the Comparative Testing (WBS 1.5) is shown in Table 11. As can
be seen from the data in the table the total project cost is very sensitive to the clinical trial
costs and the preclinical parameters, which indicates that more research/data is necessary
to further refine these costs.
Table 11: Sensitivity Analysis for the Comparative Testing
Total Project Cost
Low

Difference

Middle

Difference

High

Difference

Low %:

$214.079

$9.984

-4.46%

$223.336

$0.727

-0.32%

$232.594

$8.531

3.81%

Expected %:

$224.063

$0.000

0.00%

$235.084

$11.02
1

4.92%

$246.105

$22.042

9.84%

Page 9 of 20

Total Project Cost

Low
High %:

$234.371

Difference
$10.30
8

Middle

4.60%

$247.161

Point
Estimate:

Difference
$23.09
8

10.31
%

High
$259.950

Difference
$35.887

16.02%

$224.063

As is shown in Figure 6, the material for WBS 1.3.2, which is the chromatography resin, is a
major cost driver of the Manufacturing departments costs, and note that this is without
considering material which may drive up the associated costs.

Figure 6: Manufacturing Department Costs

The cost of the resin material was set to what my SME suggested, so there is definitely a lot
of uncertainty based around that elements cost. The number of lots of material for the R&D
of the manufacturing process, was also assumed and the factor was set based on the idea
that various materials may need to be tested out and potentially the acquisition of a supply
of the innovator drug, which is needed for comparison.
The range of costs and parameters that are related to this cost are shown in Tables 12-14.
The factor for WBS 1.2.2 is for the cost of all the material associated with manufacturing a
single lot. The percentage multiplier for WBS 1.8.1 is the material burden for all of the R&D
material in WBS 1.2 and for WBS 1.8.2 is the material burden for all of the Manufacturing
material in WBS 1.3.
Table 12: Range of Resin Costs
Cost of Resin
(1.3.2)
Low :

$500,000

Middle (Expected
Cost):

$1,000,000

High:

$1,500,000

Table 13: Range of Number of R&D Lots

# of Lots (1.2.2)
FY
2016

FY
2017

Low
(Expected):

Middle:

High:

Table 14: Range of Material Overhead Parameters

Page 10 of 20

Overhead
Parameters
1.8.1

1.8.2

Low %:

15%

15%

Expected
%:

30%

30%

High %:

50%

50%

The Sensitivity Analysis for the various Resin costs are shown in Tables 15-17. As can be
seen from the data in the tables the total project cost is very sensitive to the Resin Costs,
fairly sensitive to the Overhead parameters, and less sensitive to the number of R&D Lots,
which indicates that more research/data, such as quotes/actuals, is necessary to further
refine the Resin Costs.
Table 15: Sensitivity Analysis for Low Resin Cost
Total Project Cost at Low Resin Cost
Low Lots

Middle
Lots

Difference

Difference

High
Lots

Difference

Low %:

$202.343

$21.72
0

-9.69%

$204.413

$19.65
0

8.77
%

$202.343

$21.720

-9.69%

Expected %:

$206.513

$17.55
0

-7.83%

$208.853

$15.21
0

6.79
%

$206.513

$17.550

-7.83%

High %:

$212.073

$11.99
0

-5.35%

$214.773

$9.290

4.15
%

$212.073

$11.990

-5.35%

Point
Estimate:

$224.063

Table 16: Sensitivity Analysis for Middle (Expected) Resin Cost

Total Project Cost at Middle (Expected) Resin Cost
Low Lots

Middle
Lots

Difference

Difference

High
Lots

Difference

Low %:

$217.868

$6.195

-2.76%

$221.088

$2.975

1.33
%

$224.308

$0.245

0.11%

Expected %:

$224.063

$0.000

0.00%

$227.703

$3.640

1.62
%

$231.343

$7.280

3.25%

High %:

$232.323

$8.260

3.69%

$236.523

$12.46
0

5.56
%

$240.723

$16.660

7.44%

Point
Estimate:

$224.063

Table 17: Sensitivity Analysis for High Resin Cost

Total Project Cost at High Resin Cost
Low Lots

Difference

Middle
Lots

Difference

High
Lots

Difference

Low %:

$233.393

$9.330

4.16%

$237.763

$13.70
0

6.11
%

$242.133

$18.070

8.06%

Expected %:

$241.613

$17.55
0

7.83%

$246.553

$22.49
0

10.04
%

$251.493

$27.430

12.24%

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High %:

$252.573

$28.51
0

12.72
%

Point
Estimate:

9.0

$34.21
0

$258.273

15.27
%

$263.973

$39.910

17.81%

$224.063

ESTIMATE UNCERTAINTY

I did not have enough time to set up a Monte Carlo simulation for my cost model, so instead
I decided to quantify the total cost attributed to each estimating methodology I employed,
which is shown in Table 18. An appropriate plus-minus error percentage (see the highlighted
column) was assigned to each methodology based on the potential uncertainty introduced
by that method.
Table 18: Cost by Estimating Methodology
Range
Estimating Methodology

Total Cost

% Error

Low

High

Direct

$6.000

2.68%

100.00%

$0.000

$12.000

Direct w/ Parametric

$18.500

8.26%

75.00%

$4.625

$32.375

SME

$4.500

2.01%

50.00%

$2.250

$6.750

SME w/ Parametric

$59.762

26.67%

35.00%

$38.845

$80.679

Analogy

$6.000

2.68%

25.00%

$4.500

$7.500

Analogy w/ Parametric

$64.962

28.99%

15.00%

$55.218

$74.706

SME w/ quote

$15.514

6.92%

7.50%

$14.351

$16.678

Parametric

$45.489

20.30%

5.00%

$43.214

$47.763

Actuals

$3.336

1.49%

0.50%

$3.319

$3.353

$224.063

100.00%

$166.322

$281.804

Based off this simple analysis, Im 90% confident that the actual project costs will fall within
the estimate range of $224.063 $281.804 million. The high side was chosen based off
the projection that the cost to receive FDA approval for a biosimilar will be $75-$250 million,
and I have found some reports that indicate that this projection does not include the
operation of a GMP Facility, which is expected to be very costly.

10.0

RISK ANALYSIS

A more thorough risk analysis of the overall project and organization needs to be performed
in order to better understand the process and determine in more detail potential schedule
delays and cost escalations.
The most obvious and biggest risk is with the FDA review process for the biosimilar
application, as the FDA can outright reject it or may require more testing and data for
approval, which can add a lot more to the overall cost and was not really addressed as part
of this budget.

11.0

ANALYSIS/CONCLUSIONS

Based off the analysis that was performed and the current data that has been collected, I
believe this cost estimate is a good starting point in identifying the major cost drivers and
outlines a plan to achieve FDA marketing approval for a biosimilar.
There is large uncertainty in the estimate due to the fact that a lot of the data was obtained
from a SME, so further refinements can be made by obtaining more quotes/actuals. Although

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I noted that I excluded Travel and Marketing/Sales Support, I do believe that my indirect
costs may be a little low. These excluded items should be added to the estimate when
considering the generation of a fee/profit after the biosimilar has been approved.

Page 13 of 20

12.0

REFERENCES

[1] Cost Estimating, Second Edition, Rodney D. Stewart (1991)

[2] Subject Matter Expert: Ben Woodard, Director of Bioprocess Scale-Up Facility at the
University of Maryland. The SME also provided a cost estimation report (2015), which
contained some quotes for the required facility and manufacturing equipment for vaccine
production
[3] Wages per skill, labor burden (total compensation percentage), and employment cost trends
(wage inflation) were obtained from http://www.bls.gov/home.htm
[4] Sandoz, FDA Advisory Committee Briefing Document, Zarxio (January 7, 2015)
[5] Biosimilar User Fee Rates for Fiscal Year 2016, Department of HHS, Docket No. FDA2015N
0007
[6] http://www.fdalawblog.net/fda_law_blog_hyman_phelps/2015/08/fda-publishes-fiscal-year2016-user-fee-rates-only-a-modest-increase-in-pdufabsufa-rates-but-signifi.html
[7] Examination of Clinical Trial Costs and Barriers for Drug Development, Eastern Research
Group, Inc., Task Order No. HHSP23337007T (2014)

[8] Direct Estimating was performed by me based off my experiences in the pharmaceutical
industry

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