Early-stage biopharma companies typically have a range of strategic options for realizing value from their assets. At the most basic, there are a few types of options that a company can consider:
- “Go alone” and build the necessary infrastructure to commercialize an asset without any partner
- Partner some or all commercialization responsibilities with one or more partners
- Fully out-license an asset (or even sell the company), ceding commercial control to another entity and earning royalties or similar payments over time
Additional complexity can come into play since the preferred approach may differ by geography.
Many times, a company will try to leave its options open for as long as possible, which can result in organizational swirl while the team isn’t clear on which one to plan around. Furthermore, waiting too long to begin preparing for one of those options can cause a company to fall behind, either putting the launch at risk and/or decreasing its valuation.
This article in our series on 7 “make or break” factors for emerging biopharma companies addresses Factor 5: Choosing the Right Commercial Path Forward. We don’t have the space here to outline a comprehensive process for evaluating strategic options, but we will aim to provide a high-level framework for leaders to approach this decision. Ultimately, the best approach will quickly narrow down the range of available options, which can help provide clearer direction to the rest of the organization.
Start With What’s Tried and True
Considering the last decade of companies that have launched their first product, two trends become immediately apparent: companies tend to go alone in the US and outsource or out-license ex-US. This model can serve as a great starting point—particularly for single-product companies—but it’s important to understand the rationale, as well as when to take a different approach.
First, let’s look at launching in the US. Typically, the US is the largest market for a product, and this potential can be unlocked with one go-to-market approach. Taken together, these two factors can often lead to a positive return on investment, which is further compounded if a company expects future launches of additional indications and/or products.
On the other hand, ex-US markets can have smaller potential and be highly heterogeneous, requiring a greater investment in diverse capabilities and resources to successfully launch. A company trying to launch in many different markets with many different requirements may end up spending significant investment that would yield greater return elsewhere.
While the above mental model serves as a good starting point, leaders should think through a number of considerations to help determine their optimal path forward:
Organizational Factors
Considering the broader organizational context often ends up at two simple questions:
- Do we have the desire to become a fully-integrated commercial company?
- Do we have the financial ability to do so?
For the former, some leaders ultimately know that they strongly prefer to become a commercial-stage company (or not!), which can push a company towards a particular direction.
For the latter, leaders should consider the company’s current cash reserves and fundraising ability against the required investment in capabilities and activities (determined by Factor 4: Knowing What It Will Take To Commercialize). The grandest commercial vision cannot become reality without the necessary resourcing, so companies that aren’t financially positioned to go alone may opt to partner their first launch(es) until they are in the financial position to launch on their own.
Product & Portfolio Factors
Product and portfolio factors essentially boil down to two core questions:
- What are the other potential launches after this first launch? (either line extensions of the same product, or new product launches)
- When will these launches occur?
- What other products might we in-license to maximize the commercialization infrastructure that we build?
Typically, companies that have larger portfolios or a first product with many future indications will be more inclined to go alone since the investment to build infrastructure can be spread across multiple launches. In fact, this can be a primary driving factor for companies who choose to go alone in key ex-US markets (especially Europe).
Conversely, imagine a scenario in which the first launch is in a relatively small opportunity, and future launches would happen a few years after. In this situation, a company may want to outsource or out-license the first launch – even in the US – if the investment to maintain commercial infrastructure until the next launch is too significant. Alternatively, a company in this situation may decide to in-license new products to take advantage of the newly-built commercial infrastructure while waiting for the next launch from the existing portfolio.
Market Factors
To put it simply, market factors tend to fall into one of two buckets:
- How big is the opportunity in this indication? (e.g., number of patients, pricing potential)
- How easy is it to capture that opportunity? (e.g., patient or prescriber concentration, competition)
Markets that have a smaller and/or more difficult-to-capture opportunity may require outsourcing (or even out-licensing) to create the optimal return on investment. For example, a company launching in a rare disease that has patients dispersed throughout academic and community settings may consider a model in which it hires field teams to address key accounts with the greatest concentration of patients, but then partners with a larger pharma company or contract field team to address community accounts with lower potential.
Tying back to our prior article (Factor 4), knowing what it will take to commercialize in a specific indication will go a long way to informing whether it might be beneficial to find a partner.
Parting Thoughts and Looking Ahead
Regardless of the preferred path forward, leaders of an emerging biopharma company should always have a good understanding of what it would take to commercialize by “going alone”.
Why? First, key activities that help set up a successful launch—such as insights gathering, KOL engagement, market shaping, and supplemental evidence generation—often need to happen well before deals are made (especially before pivotal data readouts).
Second, things don’t always go as anticipated. A company that prefers to partner still needs a backup plan to continue preparing for launch in case they are not able to find the right partner with the right terms, or if a partner that initially seems “all in” later backs out.
Finally, delaying launch preparations for too long while waiting for a partner can put the company in an unfavorable negotiating position once they are at the table with potential partners. In other words, if a company can demonstrate that it is well positioned to go alone, it will be more empowered to walk away from unfavorable deal terms. Conversely, a partner that knows it will need to invest significantly in the launch – and knows that the company in question won’t be able to launch on its own without them – is in a strong position since the emerging company has few remaining options.
In our next installment, we’ll look at Factor 6: “Right-Sizing” Your First Launch. For those companies that decide to build commercialization capabilities and launch a new therapeutic, investing the right amount in the right places is critical. Taking the resource-intensive “Big Pharma” approach can waste money and expose the company to undue risk, while under-resourcing the launch can result in delays and rework, potentially costing the company much more in the longer run. We’ll explore how emerging companies can avoid those pitfalls.
