Unleashing the Potential of First-Time Launchers in Pharma

Innovation in the Pharmaceutical Industry

Within the pharmaceutical industry, first-time launchers play a crucial role as innovators. They are developing breakthroughs in new modalities that have the potential to revolutionize patient care. For instance, cell and gene therapies make up 22 percent of their portfolios, compared to just 12 percent for established launchers. These companies are also providing promising solutions for rare-disease patients who previously had few or no treatment options, ranging from Duchenne muscular dystrophy to amyloidosis.

Despite their innovative efforts, first-time launchers face unique challenges when bringing their products to market. The high cost of launching and building a commercial engine while maintaining R&D commitments can strain their resources. Additionally, the recent biotech downturn has led to increased competition for the funding needed to power commercial launches.

Financial Success and Portfolio Considerations

At the core of any biotech company is its portfolio. Assets targeting rare-disease or white space indications have a higher chance of launch and financial success. First-time launchers with assets in white space indications are 1.7 times more likely to exceed expectations than those in indications with three or more competitors. These companies have thrived in rare diseases, with a launch success rate of approximately 40 percent. About half of rare-disease first-time launchers also outperformed the S&P Biotech Index in total shareholder returns, as shown in Exhibit 3.

Innovative assets can pave the way to launch success, but they do not guarantee financial success. Over 30 percent of innovative assets from first-time launchers outperform expectations, compared to 20 percent of less innovative products. However, first-time launchers with innovative assets are no more likely to outperform the S&P Biotech Index than those with less disruptive products. A company's pipeline also plays a critical role in its financial success and future growth potential. First-time launchers with multiple assets have higher rates of financial success, with about half outperforming the S&P 500 Biotech Index over a five-year period, compared to roughly 30 percent of their single-product peers.

Commercial Launch and Funding

Any commercial launch requires significant SG&A investment in addition to funding for R&D. First-time launchers need to support investment throughout the launch period to achieve success. On average, they invest $80 million to $100 million annually in SG&A starting from the launch year and continuing for subsequent years. Those aiming to beat prelaunch forecasts or compete with established launchers typically spend much more. Companies that outperform commercial expectations invest 1.5 times as much on launch activities as their peers that do not, as shown in Exhibit 4.

Due to cash constraints, first-time launchers have historically struggled in larger indications. However, some have managed to succeed in highly competitive and expansive treatment areas dominated by established players. For example, some first-time launchers in neuroscience and primary care indications have leveraged a robust commercial engine and a large sales force to compete effectively.

Fundraising and Market Timing

The ability to finance a large-scale launch while maintaining a focus on R&D is crucial for first-time launchers. Most go public about six years before launch and seek follow-on fundraising. Successful first-time launchers raise significantly more funds, on average two to three times that of their less successful peers. They typically raise funds earlier and more aggressively in the years leading up to launch, as shown in Exhibit 5. Timing fundraising to critical moments in asset development, such as initial pivotal trial results and regulatory approval, can lead to greater success in today's competitive biotech fundraising environment.

Alternative Paths to Market

First-time launchers lacking funding or an asset mix can consider alternative approaches. Partnering with an established launcher or developing next-generation commercial capabilities can be viable options. Partnerships may reduce short-term revenues but provide long-term benefits by tapping into the partner's expertise. Companies can also invest in next-generation capabilities to become more precise at initial launch and across future commercialization efforts.

Next-Generation Commercial Capabilities

Commercialization needs have shifted across go-to-market capabilities. First-time launchers can meet these challenges by leveraging lessons from industry leaders. Data-driven, precise marketing techniques are crucial for them with limited resources. AI tools like "next-best action" models prioritize healthcare professionals based on factors such as historical behavior and patient demographics. First-time launchers can also maximize the impact of direct-to-consumer engagement by tailoring content to microsegments defined by patient needs and behaviors.

New channels like social media, connected TV, and revamped websites offer cost-effective reach for first-time launchers. Recruiting marketing roles early ensures that digital capabilities are ready for launch. With a digital, data-driven go-to-market strategy, these companies can set the stage for next-generation commercial engagement from the start.

Access and Distribution Strategies

Pharmaceutical companies face complexity in market access. First-time launchers often struggle due to limited portfolio breadth and payer relationships. They tend to delay onboarding their market access function, which leads to a late access strategy. However, by prioritizing access earlier in their launch planning and building in-house capabilities or contracting with external vendors when needed, they can set a sustainable access strategy.

A clear demonstration of high patient need with rapid volume growth can enable earlier coverage expansion. Companies can accelerate coverage by considering access in pivotal study design and generating early superiority data. Early engagement on access and an impactful evidence strategy can position a therapy for earlier coverage expansion.

First-time launchers should also consider the complexities in distribution strategies. A fit-for-purpose strategy is important for complex products like cell and gene therapies. Some select first-time launchers in broader indications have partnered with existing pharmacies or telehealth providers for direct-to-patient distribution. By determining their distribution strategy early, they can establish a clear pathway for patient access upon approval.

First-time launchers represent a growing and vital part of the pharmaceutical industry. By learning from their predecessors and crafting a tailored go-to-market strategy, these innovators can achieve their growth and performance aspirations while maximizing shareholder value and patient impact.