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To determine whether investment in a novel pharmacologic agent for the treatment of dry eye would be worthwhile from a financial perspective.Estimates were made of the cost and time required to develop a novel pharmacologic treatment of dry eye and the potential revenues for the product. These estimates were used to compute the value of the investment, adjusting for the time value of money.Development was estimated to cost $42 million and to take 55 months from investigational new drug exemption filing to new drug application approval. The potential market for this treatment was estimated at $542 million per year at year 5. Adding in the cost of development and marketing as well as other costs, net present value was very positive at the 5, 8, 10, and 40% cost of financing. The internal rate of return was 90%.In summary, if there were a successful pharmacologic treatment of dry eye and if a firm could manage the cash flow during the development, then the market potential approaches that of other treatment of chronic ophthalmic conditions (e.g., glaucoma), and it would be a worthwhile investment.