How GCEA stopped us from sandbagging our pricing and peak sales estimates for Cidara’s flu drug

And why biotech leaders must use Generalized Cost-Effectiveness Analysis to defend the value of novel therapeutics like CD388 – before others undervalue them.

By Peter Kolchinsky, Laura Tadvalkar, and Richard Xie

FINANCE | BIOTECH

Photo by CDC on Unsplash

August 20, 2025

If you read our recent article ​“Can AI Get the Flu and Take My Job?, you’ll know that we’ve been spending time thinking about Cidara, one of our larger holdings, and their drug CD388, a once-a-season pan flu antiviral injection that dramatically cuts down on your risk of getting the flu, regardless of what strains are circulating. That article tasked AI with valuing Cidara’s stock. In this article, we’ll show you how we valued CD388 itself to establish plausible ranges for pricing and peak sales (which, of course, factor into valuation of the stock).

Valuation of a stock vs a medicine 

Finance spreadsheet jockeys debate the value of a stock by plugging in defensible values that impact its valuation. Such DCFs, NPVs, or Monte Carlo simulations can be useful in deciding whether to buy or sell stock at a particular price.

But how should we value a medicine (or any product) not in terms of what you’d pay for the stock but what society should be willing to pay for the product itself? What peak sales are justified by the value to society given all that the medicine can offer? 

In most cases, we look to similar products already on the market. If an effective drug sells for $200,000 per patient for the treatment of an orphan disease with 20,000 patients in the US and generates about $3B in sales, then we assume that a similarly effective drug for a similar sized patient population might command a similar price and generate similar peak sales. That’s how market-based pricing works; past is precedent.

But what happens if we have a drug with few precedents? That’s Cidara’s CD388. It’s not a vaccine, but it achieves an arguably better result – in a recent 5,000 subject, placebo controlled Ph2b study, CD388 provided 76% protection against flu infection at the highest dose. By comparison, vaccines vary in effectiveness year to year, between ~20 – 60% protection. 

There’s really no product quite like CD388 out there; the closest might be anti-RSV antibodies that protects newborns and infants from RSV infection. Everyone is at risk of contracting the flu. And CD388 appears not only more effective than vaccines (not that it’s meant to be used in isolation) but is more reliable in its efficacy because it works against any flu strain. That’s particularly handy if you consider that some flu strains can cause catastrophic pandemics, which we’ve not seen with RSV. So while benchmarking to other marketed products such as flu vaccines and anti-RSV antibodies is not a bad start when trying to value CD388, we can do better.

This is where Generalized Cost-Effectiveness Analysis (GCEA) comes in. GCEA isn’t just a tweak on the traditional cost-per-QALY (quality-adjusted life year) models that ICER and NICE use to justify their claims that many medicines are overpriced. It’s a fundamentally broader approach that tries to capture the full societal value of a medicine – medical savings (e.g., reduced hospitalizations and ER visits), quality-of-life gains for patients and caregivers, productivity gains for patients and caregivers, peace of mind for everyone who won’t fear a disease as much knowing there’s a good treatment available, and broader economic and social ripple effects, particularly that a medicine will someday go generic. We’ve discussed the value of medicines in the context of GCEA quite a bit around here. Here’s our GCEA animation from 2022. And here’s our GCEA calculator story from earlier this year.

To start quantifying the benefits of CD388, we focused on the 65+ population (though there is utility for all ages). To evaluate a range of possibilities we ran two different models using the No Patient Left Behind (NPLB) GCEA Calculator. 

We will note that the GCEA Calculator is not a full-on model, but it provides a user-friendly interface that allows users to perform back-of-envelope calculations to appreciate the potential size of societal value and which elements contribute the most to the product’s value proposition. Anyone who then wants a proper GCEA model would need to commission it; our team’s experience has been that while such models are more formal and fit for academic publication, they do not yield meaningfully different values. 

A reasonable ​“bottom up” model

Our first model, a ​“bottom-up” approach, extrapolates from a wide range of public data and published literature on the burden of flu specific to Americans age 65+ given the current standard of care (SOC). This model isn’t just about counting flu-related hospitalizations. It’s about broader medical savings due to outpatient visits, quality-of-life gains, and the broader impact on the healthcare system of preventing flu. 

Figure 1: Value-based Price (VBP) for CD388 (Reasonable Bottom-Up Model)

The figure shows the upper bound of the VBP calculated using GCEA inclusive of the value elements shown (see Figure 3 below to get a sense for all the value elements that could be included in a GCEA model) and then shows through a waterfall how much each value element contributes to the VBP, ultimately resulting in the low VBP that a traditional CEA would calculate based on static cost-savings and health benefit at one point in time. For individual value elements, the figure reports both the running total and the marginal contribution from that value element. For example, incorporating caregiver burden resulted in an increase in VBP of $74 dollars from $2,108 to $2,182. Abbreviations: TCEA, traditional cost-effectiveness analysis; GCEA, generalized cost-effectiveness analysis. 

This model revealed that CD388 would be cost-effective at a price up to $7,314 per dose. We should clearly caveat that just because a model supports a price doesn’t mean the market has it in its budget to pay that ($7k * 60M people over 65+ would be over $400B/​year), but we’ll get to that later. The point is that this model suggests that society would not be overpaying for value if it paid a price as high as $7,314 for CD388 while it’s on-patent.

To get to this value, we assumed that all patients would receive CD388 on top of standard of care (i.e., whether they’d normally get the flu vaccine or not), and that CD388 would then confer an additional 75% reduction in infections (based on the magnitude of effect observed in the Phase 2b study), translating to 75% improvement in key health outcomes (e.g., mortality) and reduction in costs to patients and society (e.g., productivity loss due to caring for loved ones). 

We extended the model out into the future, well beyond the drug’s patent life, adjusted for inflation, considered hospitalization rates and rising hospitalization costs, and factored in the ​“peace of mind” that comes from knowing CD388 will protect you regardless of whether you were destined to catch the flu in that particular season. This peace of mind is an important benefit that traditional cost effectiveness analysis (TCEA) ignores but GCEA tries to capture and is captured in our model under ​“Risk Reduction.”

We took into account that CD388 will benefit society forever, yet it will only be branded for 13 years, after which Medicare Negotiation or a biosimilar will force its price down (this is the ​“Dynamics” component). We even count productivity gains (both paid and unpaid work) for the elderly (most aren’t working, though an increasing number of people over 65 will likely need to work as society figures out how to pay for increased longevity in an aging society, and many perform unpaid work such as volunteering and childcare); it’s worth Cidara doing more work to quantify the productivity benefits of CD388 in case we’re underestimating this value (a GCEA is only as good as its inputs). We estimated the reductions in caregiver burden, specifically hours away from work to care for an elderly loved one. We were conservative in our assumptions and inputs, and only accounted for a subset of the value elements for which we have the best evidence. Therefore, the true societal value is likely higher than our estimate. 

As Figure 1 shows, while counting all these values yields a value-based price of $7,314/dose, stripping away one element at a time until we get to just the immediate health benefit to the patient and savings to the healthcare system in the present (i.e., ignoring the long-term benefits of the drug and pretending it won’t ever go generic) – which is essentially all that a simplistic Traditional CEA model looks at – yields an upper value for the drug of only $238 per dose, a 97% underestimate relative to the broader societal perspective that GCEA quantifies.

An ultra-conservative model

We have to assume that once the drug launches, someone (who is likely working for Canada or the UK) will try every trick in the book to claim that the drug is worth little and isn’t worth paying for, so we want to see how they might do that.

So after building our model using inputs from published literature, we wanted to run an ultra-conservative model that considered only the reduction in medical costs from a very narrow count of hospitalizations (lab-confirmed flu hospitalizations as reported by CDC) and assuming a smaller reduction in price following loss of exclusivity. Basically, the bare minimum value you could assign. 

Figure 2: Value-Based Price for CD388 (Ultra-Conservative Model)

The figure shows the upper bound of the VBP calculated using GCEA inclusive of the value elements shown (see Figure 3 below to get a sense for all the value elements that could be included in a GCEA model) and then shows through a waterfall how much each value element contributes to the VBP, ultimately resulting in the low VBP that a traditional CEA would calculate based on static cost-savings and health benefit at one point in time. For individual value elements, the figure reports both the running total and the marginal contribution from that value element. For example, incorporating caregiver burden resulted in an increase in VBP of $74 dollars from $2,053 to $2,127. Abbreviations: TCEA, traditional cost-effectiveness analysis; GCEA, generalized cost-effectiveness analysis.

This model still landed at $5,656 per dose. But when we strip away key elements of this model, such as the fact that the drug will someday go generic and that it confers peace of mind to everyone who gets the shot even if they weren’t destined to actually get sick (i.e., ​“risk reduction,” which is also known as ​“peace-of-mind” and ​“insurance-value”), then we end up with a traditional CEA assessment of CD388, which yields only $183 per dose. That price really undersells the value of CD388. Were such simplistic math the way that the US actually set prices (as other countries do), it might talk the world out of investing in the development of what are actually highly valuable drugs.

This ​“societal value war gaming” shows us that there are ways that some payors and health economists might do their math to justify denying coverage of a medicine on the basis that it’s overpriced. The math shows us the importance of making the value proposition clear in time for commercial launch and pricing negotiations. For example, probably more could be done in parallel with Phase 3 development to quantify productivity gains and caregiver benefits.

We also know that flu is credited with killing 20,000−60,000 people in the US each year. We’ve assigned conservative value in our models to CD388’s ability to prevent flu-related deaths. Understanding the number of life-years gained from a drug like CD388 will require us to parse the extent to which flu was the primary driver (did they die of flu or with flu?) and how many more years a 65+ year old would have enjoyed if not for that one flu infection. We will tackle that down the road and continue to refine our estimates.

What about kids and adults under 65?

The value of averting flu infections is even clearer in children. The CDC reports there were 216 pediatric deaths due to flu during the 2024 – 25 flu season; it seems reasonable to assume that these kids could have enjoyed an average life expectancy if only they survived their deadly flu episode. So if CD388 could have prevented ~75% of those 216 deaths, it would have preserved maybe ~75 years of life for each of 162 children, which at a $/QALY threshold of $150k/​year would be worth around $1.8 billion.

Preventing 75% of the estimated 20,000 flu-related hospitalizations of children under 5 years old would bring up that value to $2B. Tacking on the lifetime productivity of the kids whose lives are saved would boost the number to closer to $2.5B. 

Flu causes a lot of kids to miss school; it was hard to find recent data but national stats from 1996 indicated that there were 42M days lost due to flu, which means parents also lost a lot of time at work. And adults who get sick sometimes miss work. The CDC Foundation estimated in 2014 that the total economic burden of flu in the US was $87B. That year, US GDP was $17.6T. By 2030, the US GDP is projected to be more than twice as large, suggesting that the economic burden of flu would also likely be twice as large ($176B). 

So a drug that averts three-quarters of flu infections stands to offer the US a huge bargain even if the drug’s sales exceed those of Humira or Keytruda. And yet, traditional CEA or any health system-focused value assessment methodology only focuses on direct medical costs and might convince others to share this myopic view of its value.

When numbers seem too high, do GCEA before you sandbag them

GCEA models help us see how important it is not to leave valuable attributes out of one’s presentation of a drug’s value. If you tried to price this drug at $300 (~5% of the conservative value-based price limit) without making the case for its value proposition, a buyer might say ​“I think it’s only worth $183” and refuse to buy it. And yet, $300 might actually be a steal. 

Now some people might say “$300 is crazy! If all 60 million Americans over 65 years old got this drug, it would cost America $18B per year.” That would put it among the highest-selling drugs ever. And yet, what GCEA tells us is that this drug likely has a societal value to America that would justify spending 10x that.

Spending $18B for 13 years and then much less per year thereafter means spending about half a trillion dollars over 70 years but getting over $23 trillion of benefit (based on our conservative GCEA model: $5656*60M*70=$23.7T) over that time. 

Consider also that COVID-19 cost the US trillions in lost economic activity; a flu pandemic would likely also be profoundly expensive. But since CD388 works on all strains, it would protect anyone who already got their seasonal shot. And if we stockpiled it or at least could count on rapidly scaled-up production and distribution for everyone, this drug would functionally nip a pandemic in the bud. A rough estimate is that we have a 1% per year chance of a flu pandemic erupting, so assuming CD388 averts most of that cost, this insurance policy is worth tens of billions per year. But we’re not counting that here. Consider it a freebie on top of the bargain that just paying anything under $5,600/dose (based on the conservative model) to prevent seasonal infections would represent. 

Ultimately, this is not a question of value to society. It’s a question of budget. And one can hardly say America’s $4.5T/year healthcare budget can’t absorb $18B per year (especially since a lot of that $18B would be offset by reduced healthcare costs elsewhere from averted flu infections) to treat everyone over 65 for $300 each. We’re talking about around $5 – 6 per month for every American, and then even less once the drug goes biosimilar, in exchange for dramatically reducing the impact of flu on our lives forever. America can afford $18B. It could afford more. 

But affordability isn’t just about the national healthcare budget – it’s about what payers and plans decide to cover. So while CD388 may be worth over $5,000 per person as a branded drug, plans will have their own sense of the price at which they are willing to cover the drug and it’s going to be based on a very self-serving assessment of what members value and on the economic impact covering the drug will have on the plan.

Plans don’t simply absorb a drug’s costs into their margins and keep premiums flat. Instead, they’ll pass the costs on by increasing premiums. Some plans may consider not covering the drug and therefore not having to increase their premiums. If plans feel emboldened to not cover a drug at one price point, innovators will often negotiate by lowering their price (through rebates) until plans agree. If innovators hold out, they basically force the plan to admit to its members that it isn’t covering a drug for them. Ultimately, the market of insurance buyers, both individuals and employers, decides whether they want to pay a bit more for more coverage or a bit less for less. That’s how the US market values and prices just about every treatment. 

When covering a drug at a given price saves a plan money within its budgetary period, it’s an easy coverage decision since covering it would both make the plan look like a better, more generous plan, and will save money and therefore lower premiums, which again attracts customers. But when a drug is too expensive to be cost-saving in the current budgetary period, a plan will still cover it if it thinks that not covering it would cause it to lose market share. 

Consider that no plan is forced to cover Trikafta for cystic fibrosis at $300,000 per patient, and there are no neat cost-offset economics to justify that spend for a plan. Yet virtually every plan in the country covers it. Why? Because the reputational and competitive cost of not covering a transformative drug even at that price far outweighs the incremental bump in premiums. Plans know that excluding a miracle medicine makes them look like they are offering second-rate insurance, sparking outrage and member attrition. 

So when a drug won’t save the plan money, think of the coverage decision as a marketing expense meant to retain and attract healthy members. The plan covers the drug to show the high-margin mostly-healthy members that make plans profitable that it can be counted on to cover what they might someday need. Otherwise, what would be the point of buying insurance? 

So, would society view CD388 as a game-changer and vilify plans that opt to not cover it at particular prices that investors are counting on for a return on investment? Would individuals and employers switch away from those stingy plans? That’s the question that drives investment in R&D.

It helps to look for market comparables. For evidence of what plans consider reasonable for a drug like CD388, one can look at the anti-RSV antibodies Beyfortus (Sanofi) and Enflonsia (Merck) — which also last a whole season like CD388 — and are priced at ~$500/ dose. While there isn’t a market precedent for charging $5,000 for CD388 for tens of millions of patients, prices around $500 have precedents. Above we modeled a more modest $300, so even though that yielded massive peak sales, both GCEA and market comparables suggest we shouldn’t be shy about considering the possibility that CD388 could get there.

GCEA quantifies a drug’s value on paper and comparables help establish how decision makers have reasoned through other purchasing decisions, but the degree to which plans feel market pressure to cover it will be shaped by how convincingly Cidara makes its case. That’s where good marketing matters.

There’s no market without demand and there’s no demand without information. Flu is the kind of problem that most people can relate to. They know what it does to them, to their kids, and to their productivity. They know that keeping everyone protected means less disruption to their lives. Just knowing that the drug exists may be enough for many people to see its utility and advocate for coverage. 

But some may not realize that flu can put people in the hospital and even be deadly. They need to know that. They may not appreciate that having a drug like CD388 could help protect against bird flu or swine flu, but they should be informed. They may not appreciate that someday CD388 will go generic (biosimilar) and continue to protect generations to come from all kinds of flu, and that too is worth sharing. These may not all be messages that are suitable for a DTC ad, but CD388 is newsworthy well beyond standard DTC ads. 

The bigger the difference between a GCEA value-based price and the market price, the easier it should be for marketing to convey what a bargain a product is. If the product sells poorly, either the marketing of the drug’s true benefits wasn’t effective or the benefits modeled in the GCEA weren’t true. And if the drug sells well, it wasn’t the GCEA that convinced everyone — no one buys a product because of some complex formula — but how useful people deemed CD388 to be (economists call this the ​“revealed preference” of the market). The market is the ultimate calculator of value and it has an uncanny ability to suss out a bargain when given enough information.

So if you hear people balk at peak US sales estimates in the tens of billions for CD388, remember this: if the drug actually gets there, it’s not a sign of excess. It’s a sign that CD388 is delivering value on a scale that dwarfs even those numbers. The GCEA math makes that clear. This windfall for the company would be a bargain for society and affordable for all of us (as long as insurance charges low out-of-pocket costs, as is typical for a preventative care drug). That’s exactly how market-driven biomedical innovation is supposed to work.

And a windfall is exactly what it takes to drive investment in biomedical R&D, because, should Cidara succeed, its profitability would pay for a lot of other shots on goal, giving us hope of more breakthroughs on the scale of Cidara’s, each one a bargain even at prices that some mistakenly think are too high.

The Takeaway for Biotech: Showcase your value proposition with GCEA

GCEA isn’t a tool for setting a price – no more so than an NPV that says a stock is worth $20/​share will guarantee that the market will value that stock at $20/​share. 

The market sets prices. Everyone negotiates; plans haggle with innovators. But GCEA can be a reality check for industry and policymakers when they want to know if it makes sense that the market is paying what it’s paying. If someone else does that math on your product and portrays it as worth little, that narrative won’t necessarily be true but it could impact sales by making buyers doubt the drug’s value.

If you’re developing a drug, you should be running this kind of analysis before ICER, NICE, or someone else gets their hands on your data and undervalues your work. Don’t let them set the narrative. Show your math. Make the case that your drug isn’t just worth its price but offers society a bargain, even at peak sales that make headlines. CD388 is a textbook example of why this is so important.

Another way to interpret the cost-effectiveness findings we showed in Figures 1 and 2 is to examine another output from our models, the incremental cost-effectiveness ratios (ICERs, not to be confused with the name of the organization ICER that likes to calculate ICERs using skimpy traditional CEA), which represent the additional cost for each unit of QALY gained. In this case, you plug in a particular price of a dose and the output tells you how much you’ll spend for a QALY of benefit. If it’s below the upper limit of what you consider reasonable, then you would say that it’s worth paying for. If it’s above, you might not consider it worth paying for. In the US, $150,000 is typically cited by health economists who do CEA as a threshold for cost effectiveness. It’s basically the value they place on a life when they value medicines. In the UK, that threshold is closer to £50,000. Not surprisingly, with their lower thresholds and reliance on traditional CEA, organizations like ICER in the US, NICE in the UK, and CADTH in Canada commonly declare that a medicine isn’t worth paying for at the US market price. Thankfully, in the US, payors largely ignore ICER’s judgements. But in other countries, the verdict of a traditional CEA can be tantamount to a coverage decision.

Table 1 below summarizes the ICERs for CD388 under two different pricing scenarios ($300 and $500 per dose) from our two models. Traditional CEA ignores a lot of CD388’s value and therefore computes that, at a price of even $300/​dose, it’s not cost-effective. But GCEA tells a very different story. GCEA shows that the ICER for CD388 at $300 – 500/​dose is actually negative when using the bottom up model. In the conservative model, the $300 price yields a negative ICER and $500 yields a low but slightly positive number ($2,724 is very low compared to even the UK’s threshold for cost-effectiveness). 

When the ICER is positive but below the threshold, it means a drug represents a bargain and you should incentivize its invention by being willing to pay that price. But when the ICER is negative, it means it will actually save society money and you would be crazy not to incentivize its invention by paying that price.

Table 1: Comparison of Incremental Cost-Effectiveness Ratio (ICER) Under Different Modeling and Pricing Scenarios

The table summarizes the incremental cost-effectiveness ratios (ICERs), the additional cost (in USD) for each additional unit of QALY gained, for both models (Bottom Up and Ultra-Conservative) under two different pricing scenarios for CD388 ($300/​dose and $500/​dose). The color scheme compares each ICER to the commonly used cost-effectiveness threshold in the US, $150K USD per QALY, and indicates which ICERs are negative, which are positive but still cost-effective, and which are positive and above the threshold. The lower the ICER, the more cost-effective a drug is at a given price, and negative means it’s cost-saving. The negative ICERs indicate that relative to SOC, CD388 not only improves health and economic outcomes for patients and loved ones but also is cost-saving to society. The table illustrates that (1) while CD388 would have been deemed not worth covering under TCEA, GCEA showed that it is worth covering under all four scenarios, (2) in 3 of the 4 scenarios, not only is CD388 worth covering, it is delivering better outcomes while reducing total costs to society. Keep in mind that the GCEA we have done still ignores some values of CD388 and likely underestimates other values (e.g., benefit to caregivers and productivity gains), so if CD388 is even more valuable, then $500/​dose even in the conservative model that only counts confirmed flu-related hospitalization reduction might flip the ICER to being negative. This table makes it clear why no one should cede the valuation debate to opponents wielding traditional CEA; do a GCEA on your own drug before someone undervalues it using TCEA. Abbreviations: TCEA, traditional cost-effectiveness analysis; GCEA, generalized cost-effectiveness analysis.

Putting up with flu infections every year and relying on hospitals, with their rising costs, is like living in a crappy apartment with rising rent. Now imagine that someone offers to build you a better home of your own that gets you out of that apartment (a drug that prevents the flu and keeps you out of the hospital) but you have to pay a mortgage that’s higher than your rent for the first 13 years. After that, you’ve paid off the mortgage and you get to enjoy your home forever for just the cost of maintaining the home (drug goes generic). A terrible financial advisor would just compare the mortgage payments to the rent and tell you the new home isn’t worth it. A good one would point out you’ll ultimately save a ton of money since your eternal rent is only rising (i.e., hospitals don’t go generic, but drugs do). So which financial advisor are you going to listen to? Better still, do your own GCEA math and make the right decision.

If CD388 delivers on its promise of reduced flu infections, reduced suffering, reduced costs, and the rest of the values that GCEA captures, tens of billions in sales per year during its short on-patent branded period isn’t excessive. It’s what a bargain looks like when you do the math right. It’s the mortgage society can afford to pay (and would be crazy to refuse to pay) to own a highly cost-effective and even cost-saving public good forever – one that, like a home, gets passed from one generation to the next.

This kind of analysis can validate your confidence, prepare you for the inevitable fights with payers, and – most importantly – remind everyone that, given the cost of disease, society can’t afford not to keep incentivizing investment in the development of better and better medicines.

Doing that math also allows you to write a far better launch press release; here is an exemplar from ARS Pharma when they launched their intranasal epinephrine neffy last August (see if you spot the paragraph that speaks to societal value; it’s a quote from a leading health economist).

Here is a more detailed report on the CD388 GCEA that one of us (Richard Xie) did using the No Patient Left Behind GCEA calculator (which Richard helped build). It includes the full set of assumptions and analysis behind the numbers above.

And here is a User’s Guide written by leading health economists explaining how to conduct your own GCEA and mathematically account for each petal of the value flower; this is advanced reading so if you decide to do a robust GCEA of your product, you’ll want to hire consultants who understand how to implement this math. 

Figure 3: GCEA Value Flower 

So whether you are an executive or investor or payor or policymaker wondering whether any given market price is appropriate, GCEA will help you quantify the value of a medicine or any other product or even a procedure or a service. So far, in the case of all the blockbuster drugs we have modeled with GCEA, the math confirmed that the market was getting a bargain. 

Similarly, if CD388 makes it to market and becomes a blockbuster, we’re confident that rewards to shareholders will be far outstripped by its value to society.