Background and Challenge

A large pharmaceutical company was seeking to understand the market opportunity and commercial potential of the over-the-counter (OTC) formulation of a former blockbuster brand to inform decision-making on a potential licensing deal.  The client asked L.E.K. to conduct a detailed assessment of the OTC market dynamics in Japan, understand the likely uptake and pricing of the OTC-formulation of the brand in questions, and develop a 10-year revenue forecast for the drug including consideration of scenarios to reflect potential risks and upsides, as an input to the business case and financial valuation of the OTC rights.

Approach and Recommendations

L.E.K. developed a detailed assessment of the OTC market dynamics, regulatory environment, and strategic rationale for pursuing the OTC opportunity in Japan. Extensive L.E.K. research and analysis included key activities:

  • Validation of client’s current understanding of the OTC market dynamics in Japan
  • Assessment of the market potential for the OTC formulation of the brand in Japan, including addressable population, customer segmentation, competitive landscape,  value proposition, pricing potential and expected uptake rates
  • Forecast revenues for the OTC formulation of the brand and development of scenarios around the forecast to reflect upsides and risks
  • Identification of key risks associated with switch OTC, such as regulatory and brand risk, as well as cannibalization of other client’s product
  • Development of key costs inputs to support client’s financial modeling, in particular typical unit margins for OTC companies
  • Identification of typical deal terms and characteristics from an OTC partner when partnering in Japan

Results

Based on L.E.K.’s research and analysis, the client received a thorough understanding of the OTC market dynamics, as well as an understanding of drivers of the revenue forecast, including regulatory timing, typical margins for different go-to-market strategies, price sensitivity, and risk mitigation factors for going forward launching the OTC drug. The client was also able to leverage L.E.K.’s 10-year revenue forecast to assess the drug’s OTC opportunity and incorporate into the business case for decision-making around the deal and to inform negotiations with potential partners.