Background and Challenge

A leading non-profit organization provided significant financial, scientific and clinical support to bring a new disease-modifying therapy to the market – the product represented a dramatic improvement over the previous standard of care and was the first to treat the underlying disease rather than just address the symptoms of the disease. As part of its assistance, the non-profit was entitled to a royalty stream based on sales of the product. Rather than wait for revenue to trickle in over time, the non-profit wanted to monetize the royalty stream and re-invest the proceeds back into R&D, hoping to identify and develop the next generation of treatments.

Approach and Recommendations

The organization engaged L.E.K. Consulting to help it assess the commercial potential of its product and understand how it could generate value by monetizing its future royalty stream. The key challenges in this evaluation were understanding how physicians and payors viewed the product and then quantifying their willingness to prescribe the product to their patients.

L.E.K. developed a rigorous segmentation of the patient population (by age, level of severity, and class of genetic mutation) and conducted extensive primary and secondary research in order to characterize the value proposition of the product. This included assessments of:

  • Epidemiology: How many patients suffer from the variants of this disease?
  • Current and future treatment paradigm: How do physicians determine which products to use for each patient and how might this change in light of the newly launched product?
  • Pricing, market and reimbursement: What is the expected price for this therapy and how will payers manage this product within their health insurance schemes? How will pricing, market access and reimbursement impact in the major markets in Europe in light of austerity measures?
  • Potential competition: Which drug candidates in the pipeline may pose a significant threat to this product in the future?

L.E.K. synthesized this framework into a year-by-year projection of U.S. and EU3 revenues. While product usage would be initially limited to a smaller segment of the patient population, physicians expected that positive results from ongoing clinical trials would significantly increase the addressable patient population, providing a large boost to the overall commercial potential of the product.

Results

As a result of the L.E.K. assessment, the non-profit organization was able to monetize the royalty stream, providing another successful example of “venture philanthropy” in the life sciences industry. Due in part to this transaction, the non-profit was able to establish new collaborations with major pharmaceutical companies, helping to guide future R&D in search of better treatments.