The value of outliers in consensus forecasting

Life science market intelligence firm Evaluate Ltd today released the first of a series of reports focused on Forecasting Excellence with an aim to improve the ability of the pharmaceutical industry to deploy capital more efficiently.

The paper analyses the portfolio strategy of the top 20 pharmaceutical companies (as of November 2016) by leveraging the maximum and minimum forecast within EvaluatePharma® consensus forecasts by leading industry equity analysts. The results give a thought-provoking perspective on how the forces at play in the market and balance among companies could shift significantly by looking at how risk and upside potential are spread across a company portfolio.

The analysis encourages forecasters to combine the value of consensus with its distribution, and not to underestimate the presence and value of understanding outliers. In some instances, the presence of outliers could help identify key signals to make better predictions on future trends as well as conduct more thorough portfolio analysis by weighting both risks and potential sources of upside.

The paper highlights strong empirical evidence in the value of aggregating different forecasts, and that consensus forecasts represent a robust tool to map market trends, reliably sizing therapy areas and formulate assumptions on the strategic direction of the industry. The analysis is meant to trigger a wider discussion on improving forecasting accuracy to drive more confident decision-making, allocate investment more efficiently and drive successful innovation.

“Evaluate remains committed to playing a key role in maximizing the value and utility of consensus in the pharmaceutical industry through continuous enhancements of our products and services, and in our role as a leader in providing forecasting excellence. We urge researchers in this field to raise the attention on predictions of earlier stage compounds where the availability of robust information is still lacking, and where billions of dollars are at stake and could potentially be re-directed to fund more promising streams of clinical research,” commented Antonio Iervolino, Head of Forecasting at Evaluate.

Additional themes of the paper include:

  • Exclusively using consensus forecasts vs. running the full range of the distribution within consensus may not create the same reassuring pictures for companies such as Roche and Merck.
  • The upside/downside ratio metric shows insights hidden behind consensus, and identifies companies such as Bristol Myers-Squibb and Celgene, that could either outperform in the coming years or are at risk of significant setbacks.
  • Companies that could follow a different trajectory compared to the scenario outlined by consensus forecasts, and are reviewed and discussed within three clusters (high, medium and low growth), based on 2016-22 CAGR.
  • More details on the value of a company’s pipeline for which forecasts are not yet available, since approximately 70% of products currently in development don’t have consensus forecasts attached to them.

The report can be downloaded at

About Evaluate Ltd

Evaluate provides trusted commercial intelligence for the pharmaceutical and medical device industries.

Our EvaluatePharma® online subscription services provides a seamless view of the past, present and future of the global pharmaceutical market in a single, standardised platform.

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