Blog | 11/6/2018

Drug Launch Performance

By Dean Giovanniello, Vice President

 To better understand the importance of early launch dynamics and overall performance, Health Advances analyzed the actual sales performance of products versus pre-launch investor expectations, and found that 38% of products overperformed in the first year following launch. Of those, 57% overperformed in subsequent years (see Figure 1 below). Similarly, we found that 32% of drugs underperformed in the first year following launch. Of those, 58% underperformed in subsequent years. Overperforming drugs were defined as those in which actual sales exceed pre-launch equity analyst forecasts by: (a) ≥$10MM on an absolute basis, and (b) ≥10% on a relative basis. Similarly, we defined underperforming drugs as those in which actual sales fell short of pre-launch equity analyst forecasts by: (a) ≥$10MM on an absolute basis, and (b) ≥10% on a relative basis. The stickiness we observed here occurs because customer perceptions rapidly form following launch. Customers’ perceptions are most malleable when products are new: they are more willing to invest time in learning about new products. However, this window in which pharma companies can create a favorable impression closes rapidly after launch as customers form their opinions. Customers are more recalcitrant about re-considering products with which they are already somewhat familiar. Not surprisingly, our analysis shows that almost a third of launches underperformed relative to expectations.

Figure 1: Performance of assets following launch: comparison of actual vs. forecasted sales performance in years 1 and 3 following launch

Note: We evaluated 74 drugs launched between 2010-2014 using EvaluatePharma data to determine if the drug under- or overperformed based on actual sales performance compared to pre-launch equity analyst forecasts. Over/underperformance was defined as drugs with minimum absolute sales difference of $10MM and minimum relative sales difference of 10% between actual sales and pre-launch sales forecasts. Health Advances recognizes that equity analyst forecasts are imperfect for measuring underperformance and overperformance. Nonetheless, we feel they are the best metric for a large-scale analysis like this. Equity analysts, presumably, are incentivized to provide the most accurate forecasts to their customers to inform their investment decisions (although conflicts-of-interest with sell-side work can enter into the picture. For this analysis, we selected the forecasts that most immediately preceded launch to minimize the effect of unexpected pivotal clinical trial data. For any one drug, our forecast data may incorporate one or multiple forecasts. Source: Health Advances analysis, EvaluatePharma, SankeyMATIC. We also note that our analysis is conservative in this regard: others have suggested that approximately two-thirds of launches underperform. For any given launch, the reasons for underperformance are complex and manifold. However, we believe inadequate launch planning is a contributing factor in many of these launches. Too often, we see tired launch strategies that lack the nuance required to differentiate products in today’s demanding market environments. Similarly, stumbles in execution reflect rote application of one-size-fits-all launch plans in which pharma companies complete activities perfunctorily rather than carefully orchestrating and prioritizing activities to serve broader strategic objectives. In conclusion, launch is a very large investment and a key opportunity to start early to set a therapeutic on the path to long-term success. During launch, companies have the unique opportunity to set lasting impressions of their product with customers, which (for better or worse) can be difficult to dislodge. Our experience is that launch excellence is truly a once in a life cycle opportunity, and we suggest several best practices:

• Start Early. Effective launch planning takes two to three years with considerable market development investment required.

• Know your market. Capture nuanced market insights to enable a compelling value proposition and effective launch strategy.

• Develop a strategy that provides direction to the organization which clearly outlines critical success factors that are shared across key functional areas.

• Develop a flexible and detailed tactical plan that executes on the strategy.