Pharma Mutuals


The state of the biopharmaceutical industry is such that the development of new drugs and therapies is hindered by the economic circumstances related to the high levels of risk associated with early stage testing. The payoff for advances in biomedicine is obstructed by high failure rates that detract potential investors from investing in individual products. In their paper “Commercializing Biomedical Research Through Securitization Techniques,” Fernandez, Stein, & Lo propose a “financial structure in which a large number of biomedical programs at various stages of development are funded by a single entity to substantially reduce the portfolio’s risk…by employing financial engineering techniques such as securitization” to raise greater amounts of capital for longer-term investment strategies. The authors have made available the source code and data sets with which they ran their simulations in order to invite academic scrutiny. We aim to understand the mechanics of the research and perform various scenarios-namely sensitivity analysis-with the simulation and visualize the stochastic processes involved. Our current progress with this undertaking will be presented.

Geneseo, NY
Michael Pilosov
(applied) math nerd on a mission.
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