Clinical probability and stage gating
The chance of reaching the market, and what it weights.
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: clinical probability and stage gating.Updated 30 September 2026
Part of healthcare financial models, with the models, labs and guides around it.
What it does
The probability that turns a pipeline into a valuation. Each stage has a chance of passing; the chance of reaching the market from where a programme stands is the product of the stages still ahead. The schedule applies a weight of one to cash flows inside the current stage, because that money is being spent regardless, and the probability to everything after it, revenue and later-stage costs alike.
Where it lives
The same schedule in each model that carries it, with the rows to open. Open a model in the browser, go to the sheet, and click the lines.
- Assumptions, rows 19–22: Phase 1 to Phase 2, Phase 2 to Phase 3, Phase 3 to filing, Filing to approval
- Programmes, rows 6–12: Current clinical stage, Last year of Phase 1, Last year of Phase 2, Last year of Phase 3…
- Programme A, rows 6–8: Cumulative probability of approval (PTRS), Year, Probability of reaching this year’s stage
- Programme B, rows 6–8: Cumulative probability of approval (PTRS), Year, Probability of reaching this year’s stage
- Programme C, rows 6–8: Cumulative probability of approval (PTRS), Year, Probability of reaching this year’s stage
What a reviewer looks for
- Risk-adjusting revenue but not the later trials.
- Using the probability of the next stage alone as if it were the probability of approval.
- Stage risk carried in the discount rate as well as the probability.
Learn it, then build it
Build · Lab · ~12 min
Biotech Readout
Multiply stage probabilities, risk-adjust a programme, value a company in each outcome with a cash floor, and read the implied probability of success off a share price.
Read · Guide · 12 min
Biotech Valuation: rNPV, Launch Curves and the Sum of the Parts
Vocabulary: Probability of Technical and Regulatory Success (PTRS), rNPV (Risk-Adjusted Net Present Value).