Technology shifts: Delivering the Life Sciences and Healthcare 2030 predictions

Developing and implementing a successful launch strategy has become increasingly challenging for pharmaceutical companies. Today’s drug launches require all manufacturers to have more resources, deeper clinical expertise, better cross-functional coordination, and greater agility than ever before. This is especially true for larger pharma companies. This week’s blog explores the findings of the US Center for Health Solutions’ latest report, Drug launches reflect overall company performance, which calls upon pharma organisations to rethink the usual ways of doing business that often contribute to poor launch performance. 

Headline Findings

According to research conducted by the Deloitte Center for Health Solutions, of the 284 drugs launched (new indications for both small molecule drugs and biologics) in the US between 2012 and 2021, a third missed their expected sales impact. The research compared the forecasts analysts made at the time of launch with actual sales. Consistent with Deloitte’s previous research, meeting industry analysts’ forecasts is an important measure of a successful launch and, in general, performance in the first year remains highly predictive of product performance in the two subsequent years.

Drug launches were analysed from small (launch year revenue less than US$1bn), midsize (launch year revenue between US$1bn and US$2.5bn) and large (launch year revenue greater than US$2.5bn) companies. Similar to Deloitte’s 2020 analysis, launches from midsize companies were more likely to perform better than smaller and larger companies regardless of the product characteristics. Large pharma companies relatively poorer performance suggests that there are lessons that could be learned from others performance.

The research suggests that asking three strategic questions could help pharma companies think more holistically and jumpstart their preparations for future launches:

• Is your operating model optimised for today’s market?
• Can you play the long and short games at the same time?
• Are you playing it too safe?

Is your operating model optimised for today’s market?

Midsize companies have consistently outperformed the industry average in meeting or exceeding analyst forecasts (except in 2019 and 2021), while large companies generally track the industry average but show the most variability (see Figure 1). The average revenue that launches generate in the first year varies widely: US$142 million for large companies, US$283 million for midsize companies, and US$40 million for small companies.

The reasons behind midsize companies more sustained performance include having the right numbers of people with diverse views to avoid tunnel vision, sufficient depth of expertise and access to resources, as well as being less burdened by bureaucratic organisational structures. Small companies, however, are constrained by their scale and access to resources and may a single asset, staff that are exceptionally knowledgeable but lack alternative perspectives due to small teams or having only a single expert. For large companies, matching the right expertise to the right project, moving with agility and coordination, and overreliance on legacy playbooks and processes are common pitfalls.

Figure 1. Launch performance by company size

Source: Deloitte analysis of EvaluatePharma data, 2023

Missing analyst expectations also suggests potential challenges with cross-functional coordination, especially at large companies. Larger companies also miss expectations more often due to an inadequate understanding of the market and poor product differentiation compared to their smaller rivals (see Figure 2). This can happen when clinical teams do not take account of important market insights from commercial colleagues, or it comes too late in the clinical development process. This is a particular risk when an asset is acquired or in-licensed, which is a more common scenario for large companies, as certain choices are already baked into the product development process. However, scale also has advantages, as market access is less likely to be a reason for missing expectations due to stronger relationships and greater negotiating leverage with large payers and institutional buyers.

Figure 2. Why companies’ drug launches miss expectations

Source: Deloitte analysis, 2023

Large companies therefore need to leverage the positive attributes of their size while being nimble like their smaller counterparts. Determining whether there is too much process complexity and competition for resources in existing operating models is a good starting point. Adjusting legacy operating models that are optimised for blockbuster mass-marketed drugs is also crucial especially as portfolios continue to shift to specialty and rare disease products. Indeed, many companies have moved their oncology and rare disease assets into separate business units with dedicated resources and encouraging earlier collaboration; an approach that could potentially benefit other therapy areas.

Can you play the long and short games at the same time?

Launching general medicines has become particularly challenging, with the majority (58 per cent) of launches missing expectations rather than meeting or exceeding them (figure 3). A higher number of competitors, low willingness to pay, coupled with a high threshold for safety and efficacy has led to a rising hesitation in developing general medicine products. But even with general medicine products, midsize companies consistently do markedly better (46 per cent) than large companies (38 per cent). 

This seems somewhat counterintuitive as the commercial models of larger companies should be more suited to competitive and commoditised general medicine products, especially given the scale of their relationships, sizeable sales forces, and contracting expertise. This trend is echoed across the other three therapeutic archetypes (oncology, rare diseases and high-volume specialty medicine) with midsize companies consistently outperforming both small and large-sized companies.

Figure 3. How different company segments perform by therapeutic archetype

Source: Deloitte analysis of EvaluatePharma data, 2023

Deloitte believes that midsize company’s performance in all four therapeutic areas is due to their more defined clinical focus, stemming from reduced diversification. Some larger companies, tend to dilute their clinical focus, which is among the factors affecting their performance in these areas.

However, a strategy of diversification does not have to be contradictory to a clinically focused approach. Balancing both is possible by clearly defining the portfolio strategy and operating model in line with the company's goals - be it prioritising core products for the long-term or seizing short-term opportunities with opportunistic products.

Core products represent a company's brand and clinical specialisation that reflect their vision, and are typically developed in-house or acquired at an early stage. This strategy is supported by a relatively flexible operating model capable of accommodating inefficiencies in the pursuit of that vision. In contrast, opportunistic products require a distinct operating model that prioritizes data-centricity, agility, and efficiency to ensure the company can achieve high short-term profits.

Are you playing it too safe?

Small companies often experience less favourable clinical outcomes, resulting in a higher likelihood of falling short of expectations compared to their larger counterparts. Unfavourable clinical findings may stem from the following factors:

• Limited resources and the reliance on outsourcing in small companies can result in a shortage of capabilities and experience, potentially leading to unanticipated clinical outcomes. In contrast, larger companies benefit from greater expertise and experience along with more sophisticated technologies that help in estimating outcomes, increasing the likelihood of favourable results.
• Small companies tend to prioritise meeting specific customer needs, often taking greater risks in their product development. Conversely, larger companies generally pursue less risky and more conservative product approaches, thus faring better in clinical trials, but at the expense of meeting market needs and product differentiation.

This raises another strategic question - how might companies strike a strategic balance between developing less risky products that guarantee more predictable clinical outcomes but may not align with market demands, versus pursuing customer-centric products with ambitious clinical endpoints that come with greater uncertainty?

Launch success: an organisation-wide effort

Over the past decade, the launch performance of drugs has shown minimal improvement, and the underlying reasons for drugs falling short of expectations have remained largely unchanged. Our interpretation is that while the market has continued to evolve, companies' traditional organisational structure and approaches have not kept pace. Moreover, a company’s overall performance is reflected in the way their drug launches perform. Companies therefore have an opportunity to critically rethink their operating model, portfolio strategy, and research and development, as well as ways of working and collaborating; especially if they are to stay in sync with evolving market dynamics. Specifically, large companies shouldn’t treat launches as isolated events that are the sole responsibility of brand teams. Instead, companies should think of their launch strategy as an organisation-wide effort that involves all functions, diligent planning and synchronised collaboration.