Challenging the Assumptions Behind CDx Avoidance

Let’s break down the most common concerns that prevent teams from implementing a CDx strategy early - and pressure test those assumptions.

1. Cost: “Why invest $15–25M in something that may never launch?”

   The headline number is real: full CDx development can cost $15–25 million [1] or much higher, depending on assay type, platform maturity, and sample variability. When compared to a median pivotal trial cost of ~$19 million [2], it can feel like doubling your development budget.

   Layer on top of that the reality that the probability of success from Phase 1 to approval is only ~14% (range: 8–22%) [3], and the hesitation becomes clear. Why invest heavily in a diagnostic when the drug itself may not succeed?
   However, this framing misses two critical points:

   First, CDx development doesn’t need to be a full upfront commitment. There are milestone-based strategies that allow for staged investment and align assay development with clinical data generation. This enables teams to defer major spend until there is sufficient evidence to inform whether a CDx will be required (I’ll cover this in more detail in a future post).

   Second, the real cost driver in drug development isn’t execution - it’s failure.
   With total drug development costs now estimated at ~$2.23 billion [4], the largest financial burden comes from programs that fail. Biomarker-targeted therapies consistently achieve higher success rates than non-targeted approaches. For example, success rates with CDx versus without were 62% vs. 31% in NSCLC [5].

   What appears to be a high upfront investment is a potential hedge against a far more expensive outcome.

   
   

2. The Tradeoff: Smaller Market vs. Better Outcomes

   A common concern is that a CDx reduces the eligible patient population. Actionable biomarkers are present in 42% of NSCLC with some, like NTRK1/2/3 gene fusions in as low as <1% of the patient population [6].
   That’s true. But this reduction is typically offset by three key advantages:

   • Higher probability of success: Enrichment for responders improves clinical trial outcomes
   • Stronger pricing power: Precision therapies often command premium pricing [7]
   • Improved adoption: Clinicians are more likely to prescribe when a diagnostic identifies the right patients [8]

   
   

3. The Variables That Actually Determine ROI

Whether a CDx strategy creates or destroys value depends on a few key variables:

• Biomarker prevalence

  If only ~10% of patients are eligible, for example, the reduced market size can be difficult to overcome—even with premium pricing. At ~40% prevalence, CDx strategies deliver net present value (NPV) more consistently.

  
  

• Trial success rate uplift (the most important lever)

  CDx-enabled therapies historically achieve Phase 3 success rates of ~40–60%, compared to ~15–25% for unselected populations [9]. Because R&D costs are risk-adjusted based on the probability of success, even modest improvements here dramatically reduce the effective cost of development.

  
  

• Price premium

  Regulators and payers have historically supported price premiums of 20–40% for targeted therapies [10].

  
  

• Market penetration

  In many cases, particularly in oncology, physicians are more likely to adopt therapies supported by a diagnostic test that guides patient selection [7].

The Core Takeaway

The highest cost in drug development isn’t running trials - it’s failing them.

CDx-enabled programs fail less often.

Every percentage-point increase in the probability of success translates into significant value in risk-adjusted terms. While reducing the addressable population may seem like a drawback, the financial impact of failure is so large that improving success rates often outweighs the loss in market size.

This is why the industry has steadily shifted toward precision medicine over the past 15 years. It’s not just better science, it’s better economics.