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Market Value | Market Volume | Epidemiology | Clinical Trials | Patent Landscape | Regulatory Approvals | COVID-19 Impact Analysis

Revenue Forecasting Techniques for New Pharmaceutical Drugs

Three prevalent ways of estimating market size (product revenue) for pharmaceutical drugs include bottom-up approach, analyst insights, research reports, and analogue markets for similar products.

The best approach would be to have a good bottom up model and cross checking the market estimation results with the external reports and similar product revenues.

In case of new pharmaceutical drugs, the market size and revenue estimation (bottom up approach) involves the following steps:

  • Potential Market Size Estimation
    • Total Population vs. Population in Target Markets
    • Incidence and Prevalence of Disease or Condition
  • Addressable Market Size Estimation
    • % Diagnosed Patients
    • % Patients Treated for Disease
  • Penetration, Pricing Studies, Competitive Analysis, Compliance Analysis, Reimbursement Analysis and Utilization Patterns Analysis.
    • % Prescription or Dosage Pattern of Drug
    • Price per Day of Drug
    • Actual Average Days of Drug Treatment Used

There are four important ways in which a novel drug can take up considerable share in the market:

  • Better efficacy and/or safety than current treatments.
  • Synergistic with existing treatments.
  • Better outcomes in certain patient subgroups.
  • Better marketing in the face of generics.

Defining Pharmaceuticals New Drug Market

1. Estimation of Incidence and Prevalence of Disease or Condition

  • Prevalence:
    • Total number of potential patients at any one point in time.
    • Best for products purchased by same patients on a recurring basis (e.g. chronic Rx).
  • Incidence:
    • Number of new potential patients each year.
    • Best for products treating one time acute event (e.g. heart attack).

2. Identification of Segments

  • All potential customers are not alike.
  • Segmentation helps refine penetration and share forecasts.
  • It also allows to refine estimates and focus efforts by identifying “early adopters”.
    • For example:
      • Severely affected patients (25% of the market).
      • Moderately affected patients.
      • Mildly affected patients.

3. Analysis of Change Over Time

  • Customer base and segmentation are influenced by factors that change over time.
  • Growth drivers analysis provides insight into changing and/or emerging markets.

Building Penetration Scenarios

Penetration is usually the main driver of revenue forecasts. There are a few different means to estimate the peak penetration that a new product can be expected to achieve:

  • Historical penetration of comparable products.
  • Objective comparisons versus currently available treatments (efficacy, safety, convenience).
  • Physician interviews to gauge acceptance and potential use versus competing treatments (preference share analysis).
  • Analysis of likely reimbursement and factors related to achieving reimbursement from key payer groups.
  • Mapping of commercial effort into physician prescribing behavior (companies often use IMS analysis).
  • Almost all “bottoms up” approaches to penetration analysis tend to overestimate penetration in practice. Preference analysis tends to do a poor job of predicting actual prescribing behavior in the face of detailing and sampling.
  • Comparison versus pipeline products and relative timing to market.

Research Methodology for Market Size Estimation and Market Penetration Analysis

  • Primary market research (structured Interviews) to determine usage and dependence on pricing patterns.
    • By Physician Segment.
    • By Disease State (e.g., first line, second line of treatment).
  • Historical analysis of impact of order of entry.
  • Penetration Analysis to understand prescriber concentration, sales force design, prescribing behavior and reimbursement positioning.

Valuation of Pipeline Drug Candidates (including for rare diseases)

  • Epidemiology/Patient-based Sales Forecasting
  • Drug Utilization and Pricing Patterns Analysis
  • Global Market Valuation of Pipeline Drug Candidates
  • Global Market Valuation of Orphan Drug Candidates

Read our research methodology on data collection, data analysis and calculation, and data adjustment (top-down and bottom-up approaches). The epidemiology-based forecasting model for pharmaceutical, biotechnology and medical device products is based on prevalence and incidence data.

References:

  • Kalyanaram,”The order of entry effect in prescription (Rx) and over-the-counter (OTC) pharmaceutical drugs,” International Journal of Pharmaceutical and Healthcare Marketing, 2008, pp. 35-46.
  • Hans Bauer and Marc Fischer, “Product life cycle patterns for pharmaceuticals and their impact on R&D profitability of late mover products,” International Business Review, 2000, 703-725.
  • Establishing a Reasonable Price for an Orphan Drug. Office of Health Economics, UK (2018).
  • Estimating the clinical cost of drug development for orphan versus non-orphan drugs. Orphanet Journal of Rare Diseases 14:12 (2019).
  • Evaluation of Specialty Drug Price Trends Using Data from Retrospective Pharmacy Sales Transactions. Journal of Managed Care & Specialty Pharmacy, Vol. 22, No. 9 (2016).
  • Trends in clinical success rates and therapeutic focus, Nature Reviews Drug Discovery 18, 495-496 (2019).
  • Clinical Development Success Rates 2006-2015, BIO Industry Analysis (2016).
  • Clinical development success rates for investigational drugs. Nature Biotechnology volume 32, pages 40–51 (2014).
  • Launch Excellence V Surviving and thriving when launching in an increasingly specialized world. QuintilesIMS (2017).
  • The Current Status of Drug Discovery and Development as Originated in United States Academia. Clin Transl Sci. 11(6): 597–606 (2018).

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