Many investors know Novartis (NYSE:NVS) for its robust dividend, a diversified business that ranges from vaccines to generic drugs, and the discovery of the revolutionary chronic myeloid leukemia, or CML, drug Gleevec. This multibillion-dollar product was a breakthrough for patients when it hit the market more than a decade ago, but many investors may not know that its development was almost stopped in its early stages due to low sales expectations. So, why did the company charge ahead with the drug's development anyway? Why did Novartis decide to forget the forecasts and focus on the science instead?

In the video below, analyst Max Macaluso and Bernard Munos, founder of the InnoThink Center for Research in Biomedical Innovation, discuss why forecasts in the pharmaceutical industry can be dangerous to follow and how Novartis has focused on the development of breakthrough drugs. A transcript follows the video.

Bernard Munos: The first company that realized that something was amiss and needed to change was Novartis, with the Gleevec experience. When the Novartis planners were trying to kill Gleevec because it was a product that was supposed to peak at $50 million of sales -- and now Gleevec sells about $5 billion, which is about the accuracy of those new product forecasts.

Daniel Vasella, who was a physician, knew in his guts that Gleevec was a cure for cancer -- the first cure to ever hit mankind, literally, for cancer. To his credit, he was determined that he was not going to be the CEO to kill the first cure for cancer.

Then he did the obvious, which was look at the reliability of those new product forecasts, that all the pharmaceutical companies use to determine which product they're going to move forward and which products are they going to kill, and realized -- which was not hard to do -- that those forecasts had basically zero reliability. The notion of using bogus forecasts to determine what you're going to invest in was sheer nonsense.

Max Macaluso: So, instead of forecasts, what did they do?

Munos: We know now -- we didn't quite understand back then -- but we know now that, mathematically, you cannot forecast anything in this industry. It's not that we're bad, but eventually we will be good. It's that we're bad and we'll never be good, because you cannot forecast anything in this industry, so you have to do something that they don't teach you in business school; how to run a business without the benefit of a forecast.

Unfortunately, a lot of the senior leadership in the industry went to business school -- I went to business school -- and that's what they teach you, so if you don't have benefit of a forecast, you're clueless; and I think that's what you saw across the industry.

Novartis did it the clever way. They basically said, "OK, forecasts aren't reliable, so we're not going to use them. Now, on the other hand, scientists are usually pretty good at identifying a breakthrough when they see one and me -- Vasella speaking -- as a scientist, I can recognize a breakthrough in Gleevec, and therefore this is a standard that we will be using. We'll look at this thing, and we will only move to the clinic things that can change the status quo, that will cause physicians to abandon what they've been doing, and embrace that new therapy."

This is actually something worth thinking about. I'm often asked -- because I've been advocating the development of breakthrough therapies -- I'm often asked, "How do you define a breakthrough?"

Max Macaluso, Ph.D. and Bernard Munos have no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.