Background and Challenge

Biopharmaceutical companies increasingly deal with a host of alliances, partnerships, and licensing agreements and as a result, executives are constantly exploring the best way to capitalize on the revenue streams generated by their product portfolios.

One small specialty pharmaceutical company was entitled to royalty streams from its commercial partners for two products developed through its proprietary technology platforms. The company’s goal was to monetize the royalty stream up front, enabling it to reinvest the revenue in ongoing research and development for their key drug candidates. In order to accurately value the royalty stream, the company needed to understand the global revenue opportunity from the products, which had recently been approved by FDA and launched in the U.S.

Approach and Recommendations

The company enlisted L.E.K. Consulting to help it assess the commercial potential of the two products. The key challenge in this evaluation was characterizing the value proposition of these products to various physician specialties, evaluating the level of sales support provided by the commercial partners, and accounting for genericization of competing products in the long-term.

We developed a rigorous methodology for assessing the global revenue opportunity of each product and conducted extensive primary and secondary research in order to inform the worldwide market model. This included:

  • Disease overview: What is the epidemiology of each disease? How are patients currently being treated? What is the expected addressable patient population?
  • Potential value proposition: What are the greatest unmet needs in each relevant disease? How do these products address those unmet needs?
  • Market response: How will payers react to the new products? What level of pricing and market access can be achieved?
  • Sales force analysis: How are commercial partners currently supporting these products? Is the commercial infrastructure in place sufficient to capture the total revenue opportunity?
  • Potential competition: Which competitors are expected to go generic during the lifetime of our products? How might these genericizations influence physician usage of these products in the future?

We synthesized this framework into a year-by-year projection of global revenues for both products. Initial sales and physician feedback suggested the products had a significant worldwide commercial potential and should continue to grow strongly given the current commercial infrastructure.

Results

As a result of our assessment, the company was able to monetize the royalty streams and reinvest the outlay in ongoing research and development for its key drug candidates. Due in part to this transaction, the company was able to support clinical development and launch two additional products in the last four years.