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Stargazing in biotech

How to spot the stars of your development portfolio and identify the winning products of the future


There is no question that research and development in the pharmaceutical arena has been hugely successful. It has delivered a stream of innovative products over the past 50 or 60 years. But we all know that that production line is slowing, and there are now huge challenges in the success rates of products progressing from conception to launch.

Interestingly, where the biggest drop-off occurs in the flow is from phase 2 to phase 3. Of every product that gets to the pre-clinical stage, just 3 per cent make it to registration; that's a 97 per cent failure rate. Of those that get to phase 1, the failure rate is still 95 per cent, and even those that get to phase 2 will still see an 88 per cent failure. But once a product gets to phase 3, 54 per cent will make it to registration.

This level of failure is costly, particularly for most biotechs who have only limited funding with which to work. That means it is vital to try to push forward only those products (or more likely, that product) which stand the best chance of succeeding - the portfolio stars. So how do you work out how to focus your R&D so that you concentrate on the products with the best chance of success?

A key question is this: at what stage should you even be attempting to spot the stars? For too many biotechs, this type of decision is a question of looking at what is already in the development chain and trying to work out with which to persevere. There is nothing intrinsically wrong with this approach - and pragmatically it will always exist - but how much better to try to work out what is likely to succeed at the start of the process. 

Does it have the x-factor?
Simon Cowell has a bank balance the size of a small country because he has a talent for creating acts which will appeal to future tastes. Unlike the A&R man of old, who would listen to hundreds of existing acts in the hope of finding the elusive star turn, Cowell creates them from scratch. If we could do the same in the pharmaceutical world, how much time and resource could we save in pursuing ultimately doomed R&D projects?

Cowell, of course, always seems to know what the public taste will be at some stage in the future. That is a real talent, but at least in the music industry that future is generally only a matter of months away. In pharma the average time from conception to market is about 14 years, which means that peak sales will be 20 years after initial conception. That means you need to be making key R&D decisions with a view to what the market will look like a full two decades into the future.

It is understanding that market which is key. What are the stakeholder needs going to be? What are payers going to be saying? What will the regulatory hurdles be? What patient opportunities are going to present themselves? What will the competitive landscape look like?

You shouldn't start any R&D process without knowing where it is taking you, and what the market opportunity is. Too often R&D projects are started simply on the basis of scientific need, and this more than anything is why the failure rate is so high.

If anything that failure rate has increased in recent years. Partly that can be explained by the hurdles to gaining approval being much higher (true added value has to be demonstrated today more than ever before), but perhaps another factor is that much of the scientific innovation we have seen over the past decade has come from small biotechs rather than big pharma - and it is the latter which are much better at assessing future market need. 

Bringing planning and commercialisation skills to biotech
If biotech is where the innovation is going to come from, the sector needs to learn the kind of future planning and commercialisation skills that big pharma has honed over time.

So how on earth do you predict the future? The answer is that nobody can. But, as the old proverb goes, it is better to be broadly right than precisely wrong. You have to base your predictions around trends, because trends don't generally change. Then you can start to forecast the future around key areas in the marketplace.

These trends include looking at where the science is going, and this is possibly one area where you can be more accurate in your forecasting by examining the current scientific debate, and looking at today's forefront trials.

Product portfolio evaluation

Product portfolio evaluation 

But you will also have to consider what regulatory hurdles you are going to have to overcome, what the competitor landscape is going to be and therefore evaluate what exactly you will need to win, from both a product and company perspective. You may be looking for areas that are less competitive - not just from a product profile perspective of what you are going to need to do to win scientifically, but also how you are going to be able to gain access to markets, and to gain funding.

You need to make key R&D decisions with a view to what the market will look like a full two decades into the future

One such trend might be biomarkers, for example. If you see this as a trend within a given therapy area, you can start to build this into your R&D early on. If you can be successful here, you can be more confident of winning in a certain patient population, because you have focused on it from the outset.

Some trends you can be fairly certain of; others will be less clear. So then you have to 'pressure test' your vision of the future by building scenarios around these trends to help you understand how the future could pan out. This is similar to the way that you might use scenarios in strategic marketing planning, except that what is coming out from the process here is more of an R&D decision than simply a commercial marketing decision.

But you can't divorce the scientific decisions from the commercial ones. Despite the fact that many biotechs have traditionally been science- and innovation-led, the key is to innovate in a commercially viable way; it's not about stopping innovation, it is about focusing that innovation from an early stage.

But what about those biotechs who already have a pipeline portfolio, and need to know which assets with which to persevere? How do you assess that portfolio and spot the stars within?

In essence, it is a very similar process, however you have the luxury of assessing 'real' products against the future market need. You still need to assess how the future will play out, to understand the market opportunity and the product fit, and overall accessibility of that market to you.

You shouldn't start any R&D project without knowing where it is taking you and what the market opportunity is 

Armed with this information you can use various tools, for example the grid above, to evaluate your product portfolio and identify those potential stars. Only by understanding the market size and potential, what you need to access it, and the risks attached can you truly assess your R&D portfolio effectively.

Spotting the stars of your current development portfolio is important, but if you are really going to ensure you focus your R&D portfolio in the right place, you ideally need to be doing it before you even have that portfolio in place. Perhaps the question should really be: how do you create a portfolio full of stars? We may not want to wear high-waisted trousers, but perhaps we do have something to learn from Simon Cowell after all.

Article by
Dan Heapy

associate partner at Cello Health Consulting. He can be contacted at

25th March 2014

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