Blog | 4/11/2023

One-Hit Wonders: The Second Product Problem in Biotech

By Nathan Williams, Alfonso Barrios, Rushi Patel, Anne Fogarty, and Balazs Felcsuti

Executive Summary

  • A biopharma company’s first commercialized product is a significant milestone, and one that should be celebrated.
  • Only a small percentage of biopharmas ever reach this landmark event, so singular focus on the first launch is warranted.
  • However, companies that invest in costly commercial infrastructure to support just one product without the prospect of follow-on products or indications are in danger of becoming “one-hit wonders” and risk financial inefficiency, stalled growth, and investor pressure to reorganize or sell the business.
  • To mitigate these risks, companies need to plan not only for the launch of their first product, but for long-term revenue sustainability after that initial success.
  • Key strategies include improvements in sales force efficiency through partnerships, accelerating internal R&D, indication expansion, in-licensing additional assets, or a strategic transaction with a partner who can promote the product more efficiently.


The development of a new drug is an incredibly complicated and risky process. Only about 10% of drugs entering Phase I trials will ever receive FDA approval, and that doesn’t include the numerous others that fail before reaching the clinic. With these long odds, getting even one drug approved and commercialized is an enormous achievement.

Therefore, a pharmaceutical company’s first commercialized product is a milestone typically accompanied by euphoria and well-earned congratulations. It is also a turning point for the business, in which the company transitions from clinical-stage to commercial-stage and begins to collect revenue from its product. This exciting, resource-intensive transformation can easily consume management’s attention. But once a commercial organization forms and sales begin, another daunting question emerges: what next?

By this point, a company has likely invested a significant amount in its commercial infrastructure. The product’s adoption is increasing, but not yet at peak penetration. Their stock price may have increased after the approval and launch of the product, but soon may plateau as investors quickly price in future revenue growth. There may be limited new clinical data coming out to support promotion, expand the label, or drive additional revenue upside. And perhaps most critically, the company might have just a few assets in its pipeline, with no immediate prospects to drive growth beyond the first product and defray commercial spending.Companies in this situation can be in a vulnerable position. Running a large commercial organization to support just one product is financially inefficient, even if profitability is achieved. With a flat stock price, they may also have trouble raising money or face pressure from investors to improve financial performance. A depressed stock price could also make the company a takeover target or force it to enter other sub-optimal transactions. These doldrums between the first and second product are a critical period for strategic thinking, and one that the management team must consider carefully (Figure 1).




In this article, we discuss both the challenges these companies face and their strategic options through two case studies—Ironwood Pharmaceuticals and Actelion Pharmaceuticals. These case studies illustrate how the period after a first approval can not only be a challenge, but also an opportunity for growth and differentiation on the road to becoming a full-fledged pharmaceutical company. While Actelion has objectively performed better in terms of value creation, we caution against oversimplified conclusions about either company. Instead, we aim to highlight some of the factors in play, indeed including luck, and draw some conclusions for companies in a similar situation.

Case Study 1: Ironwood Pharmaceuticals

Ironwood Pharmaceuticals is a publicly-traded pharmaceutical company based in Massachusetts. After nearly a decade in development, in Q3 2012 the company launched its first product, LINZESS®, a breakthrough therapy for irritable bowel syndrome with constipation (IBS-C). The product was co-developed and co-commercialized in a 50-50 joint venture with Forest Laboratories (now part of Abbvie).

Despite the momentous achievement, within six months of launch, the company reported widening losses as it supported its part of a broad sales effort to primary care physicians and gastroenterologists and continued to invest in R&D. Even as sales grew steadily, Ironwood’s stock drifted sideways as Wall Street had largely priced in future product sales and analysts saw no near-term growth drivers beyond LINZESS®.

With a pipeline perceived to be years away from delivering a second product or an expansion of the LINZESS© label, the company aimed to leverage its commercial infrastructure by signing a couple of co-promote agreements. In 2015, Ironwood announced partnerships with Forest Laboratories and Exact Sciences to co-promote VIBERZI®, Forest’s IBS-D drug and Cologuard®, Exact’s colorectal cancer screening test. With call-point synergies among both PCPs and GIs, these products gave Ironwood’s sales force a fuller bag of products to sell without additional R&D spend. However, they did not drive significant additional revenues for the company.

With no near-term revenue driving prospects in the pipeline and two co-promote deals with only modest economics, Ironwood looked to in-licensing. In 2016, the company announced a licensing deal for AstraZeneca’s gout drug ZURAMPIC®. However, it exited the agreement just two years later due to lackluster commercial performance.

As a result, six years after launching LINZESS®, Ironwood found itself in the second product conundrum: owning 50% of a single product with a costly infrastructure to support it, an early-stage pipeline far from delivering a second product, suboptimal in-licensing prospects, and a valuation with LINZESS® largely priced in (Figure 2). In April 2018, after years of sub-par stock performance, activist investor Alex Denner announced his intention to take a seat on Ironwood’s board to push for changes at the company. Denner advocated for a reorganization in June 2018 that led to the spin-out of Ironwood’s R&D unit as an independent entity, Cyclerion, in order to separate the early-stage R&D activities from the commercial company. Ironwood’s founder, Peter Hecht, stepped down as CEO to lead development focused Cyclerion, and was replaced by Mark Mallon of AstraZeneca, an executive with deep commercial experience. The spin-off relieved Ironwood of its R&D cost burden, but still left it without new near-term commercial prospects, except for a late-stage GERD asset (IW-3178) which eventually failed in the clinic.



Today, despite finally turning a profit in 2019, Ironwood remains in a challenging situation with no late-stage pipeline assets, stagnant stock performance for over a decade, and continued reliance on a middle-aged commercial product. While no doubt some of Ironwood’s challenges were due to bad luck, strategic missteps also played an important role. Even with a 50/50 joint venture, Ironwood had to take on large costs for mass-market commercialization of a product that, while posting solid sales, did not turn out to be the multibillion-dollar blockbuster it hoped for. The resultant financials left the company unable to accelerate R&D or acquire assets with large enough sales to drive growth beyond LINZESS©. Ironwood may also have missed opportunities to consider a strategic transaction to monetize its half of LINZESS© (which could have fueled R&D) or sell the company outright, which could have created value for shareholders.

Case Study 2: Actelion Pharmaceuticals

Actelion Pharmaceuticals was a publicly traded pharmaceutical company based in Switzerland and focused on developing drugs for rare diseases. They faced some of the same initial challenges as Ironwood, but emerged successfully with a $30B acquisition by Johnson and Johnson in 2017. A few key differences in their story help explain this positive outcome.

Actelion was founded in 1997 by Jean-Paul and Martine Clozel with a focus on rare diseases and went public in 2000. Their first product, TRACLEER®, was approved in 2001 for the treatment of pulmonary arterial hypertension (PAH) and went on to become a billion-dollar blockbuster drug. The company continued to invest in its pipeline, but its other programs were in relatively early stages. That potential gap in revenue posed significant problems.

To help close this revenue gap, Actelion executives decided to bring in products to expand their portfolio. Between 2002 and 2009, they in-licensed or acquired three late-stage drugs which quickly generated revenues: ZAVESCA® for Gaucher’s disease (in 2002) and VENTAVIS® and VELETRI® for PAH (in 2007 and 2009, respectively). But despite management’s hopes, the combined sales from these drugs never exceeded 15% of Actelion’s revenue, and the company continued to be powered primarily by TRACLEER®.By 2010, Actelion was in a difficult position. Despite continued investments in their pipeline, the company had failed to produce another blockbuster. Multiple high-profile late-stage trials failed, including trials for VELETRI® in CHF, TRACLEER® in IPF, and clasozentan in subarachnoid hemorrhage. To make matters worse, Actelion was staring down a patent cliff for TRACLEER® in 2015, with uncertain hopes of any approval before then. As these challenges mounted, major investor Elliott Advisers began pressuring Actelion to replace its board, restructure the company, and consider a sale of the firm. However, Actelion’s management, supported by still bullish analyst sentiments, successfully withstood this attempt. A representative analyst report notes:

“Management still has 5 years to optimize its strategy ahead of the patent expiry and is therefore under no great pressure to overpay in M&A. [Additionally,] Actelion has arguably been successful in completing bolt-on acquisitions/in-licensing at relative modest cost and we expect management to continue this strategy. [Furthermore,] the overall profile of Actelion’s late-stage pipeline now has a more balanced risk profile, with high-risk opportunities such as its allergy program … offset by significantly lower risk PAH lifecycle opportunities … and programs addressing validated targets.”

Sure enough, management’s confidence in their pipeline soon paid off. In 2013, the FDA approved OPSUMIT®, followed shortly by UPTRAVI® in 2015. Both went on to become multi-billion-dollar blockbusters and drove the eventual acquisition of Actelion by Johnson and Johnson in 2017 for $30 billion.

Case Study Analysis

So why was Actelion more successful in escaping the second-product trap that Ironwood had so much difficulty with? The answer is a mix of good strategic decisions and some good old-fashioned luck.

  1. Cash to spend: Actelion was in a stronger cash position following its first product launch due to the very strong commercial performance of TRACLEER®, which left them with greater resources to invest in expanding their portfolio and their pipeline.
  2. Orphan call point with higher margins: Actelion was able to commercialize more efficiently since TRACLEER® had a focused orphan disease call point served by ~140 sales reps across the US and Europe (as of one year after launch.). In contrast, LINZESS® had a broader call point in both primary care and gastroenterology, so Ironwood and Forest had a much larger combined salesforce of over 1500 reps in the US alone* and supported commercialization with costly direct-to-consumer ad campaigns. As a result, Ironwood’s P&L was burdened with a large amount of SG&A spend which limited its ability to spend on R&D without weakening the company’s financial position.
  3. Persistent in-licensing: While ZAVESCA®, VENTAVIS®, and VELETRI® did not prove to be major commercial successes, Actelion’s strategy of in-licensing synergistic products while waiting for the next blockbuster was important in diversifying their portfolio and defraying investor concerns about overreliance on TRACLEER® for revenue. In contrast, in a similar period Ironwood, who focused on the functional GI space with a relative dearth of innovation, managed to in-license just one product with imperfect sales force synergies and limited commercial success (Figure 3).


  1. Steady pipeline investment: Actelion was able to continually invest in their internal pipeline, including the acquisition of clasozentan in 2003, the in-licensing of UPTRAVI® in 2008, and steady spending of ~25% of revenue on R&D (Figure 4).


Over time, this enabled them to build a much larger pipeline than Ironwood, which would eventually relieve them from dependence on TRACLEER® with OPSUMIT®’s approval in 2013 (Figure 5).



The case studies above teach us several important lessons.

First, as with all things biopharma, some luck is required for success. Actelion was lucky that its first product was so commercially successful with a focused sales effort, allowing for sustained investment in their pipeline. They were lucky again when OPSUMIT® and UPTRAVI® proved to be blockbusters as well. Conversely, the Ironwood story might have been different if their late-stage GERD drug had succeeded in the clinic, giving them a second product that overlaps with the LINZESS® call point.

However, what appears to be luck is not simply chance. Biotech companies that make the right strategic decisions can increase the odds that they survive long enough to capitalize on future opportunities and pipeline successes, or reduce the risk that they end up in investment doldrums with no clear way out.

So what are the right strategic decisions? How can a single-product company become a diversified pharma company rather than a one-hit wonder? There are a few strategic options to consider (Figure 6).

  1. Consider multiple commercialization options: Building a costly commercial infrastructure for one product is not the only option. Contract salesforces, co-commercialization partnerships, or even out-licensing can improve financial efficiency.
  2. Increase commercial efficiency: Once an infrastructure exists, aggressively defray costs and increase revenues, through co-promote agreements and in-licensing. Highly synergistic call points are key to avoid having to expand the salesforce, and thus incurring even more costs, to promote the new product.
  3. Accelerate R&D: Easier said than done, but closing the gap between the first and second product (or a meaningful label expansion) is critical. Invest consistently, and consider partnerships to share the risk and increase shots on goal.
  4. Explore a sale or another strategic transaction: When all else fails, it may be in the best interest of shareholders to explore ways to monetize / sell the product (or even the company) to a partner who can commercialize more efficiently, either because they have a larger commercial footprint and/or by promoting a portfolio vs. a single product.


One-hit wonders are indeed wonders, as bringing even one product to market is an elusive milestone for most biopharma companies. However, it is a precarious category that is fraught with long-term challenges and vulnerabilities. As companies think about their transition from clinical-stage to commercial-stage businesses, they need to carefully consider whether commercializing internally makes sense. They need to create long-term plans aimed at generating regular value inflection points to enable additional fundraising. Successfully executing these plans can allow them to prevent stagnation after the initial product launch and avoid the serious threats that accompany it. Otherwise, the euphoria of a first approval can quickly turn into a years-long hangover of stalled growth.


Nathan Williams, Engagement Manager and member of Health Advances’ Biopharma Practice

Balazs Felcsuti, Partner and co-lead of Health Advances’ Biopharma Practice

Alfonso Barrios, PhD, Senior Analyst and member of Health Advances’ Biopharma Practice

Rushi Patel, Team Leader and member of Health Advances’ Biopharma Practice

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