Research, Reports and Articles

Commercialization Path for Virtual and Semi-Virtual Pharma Companies

Ingrid Fernandes
May 12, 2021
  • Commercialization
  • Strategy
  • Virtual Pharma
Research, Reports and Articles

Commercialization Path for Virtual and Semi-Virtual Pharma Companies

Ingrid Fernandes
May 12, 2021
  • Commercialization
  • Strategy
  • Virtual Pharma

Bringing new therapeutic drugs to market is time consuming and costly.

This is especially true for small, virtual or hybrid pharmaceutical companies, as mentioned in our previous article. Therefore, no matter how established a company might be, by the time drug commercialization is considered, these companies must make choices and prioritize their limited budget, especially if they are keen to access different markets, as explained here [1]. Having spent a significant amount on R&D investment and third-party contractors, how can they maximize the valuation of an asset?  Complexities in today’s market entry mean partnerships for commercialization phases may be key to pharmaceutical companies maximizing research outputs. Therefore minimizing financial risks, and gaining global brand awareness.

It’s time for some new thinking.

In the past, startups with a strong asset would search for large partners or out-licensing deals. However, today, many have found other options.

Virtual or semi-virtual companies, have been taking advantage of outsourcing initiatives and “hybrid models” to take assets to market themselves. Companies who bring a product to market on their own without building an in-house organization, face two main challenges. Firstly, getting the drug through all the steps to a successful market launch. Then establishing an entire operational organization with all the obligations that are required for those activities [2]. You can read more in this de-risk article by the European Pharma Review. These challenges are exacerbated by the often extremely long hiring timelines found in many ex-US markets. These can often extend over a year to place key leadership. Irrespective of the management talent search, the operational build out must continue. And, it will often continue without a launch plan and with many blind spots on the horizon.

Finding the right partners

All these factors leave companies seeking interim management and local market expertise to support multiple functional developments. This includes; regulatory affairs, financials, tax, legal, intellectual property, and commercial strategy. We also have to consider the essential practical elements such as marketing, sales, and distribution, amongst others.

Consequently, forming partnerships with business experts and key functional contractors is crucial in preparing a new product for launch. This particularly applies to companies running leaner operations.

Our Principal, Pete Zaudtke says, “Hiring a cadre of consultants that boast big resumes of launching products at big pharma on the backs of thousands of local FTEs really does not help VPCs, small or niche companies.  Those resources do not exist in this environment.  There is literally no one for these executives to yell “Just Do It!”.  The key to success is establishing a launch plan. Plus, finding partners who have the established integrated resources necessary to execute and realize the true value of the assets.  Historically, we have found those that are able to do this successfully forecast an ROI up to 3 times that of out-licensing”.

Working with the right partner, a pharma company can retain its desired control over commercialization. They can also tap into the strategic and tactical experience a partner can bring to the table. This is because they have expertise in areas such as market assessment, due diligence, forecasts, national and international payer access, reimbursement, among other areas [3]. Read more about why now could be the right time to think differently.

Have you considered the benefits of outlicensing?

Another path considered by virtual or semi-virtual pharma companies for the commercialization phase is out-licensing.

A pharmaceutical company typically considers out-licensing to either secure a partner early in the product life cycle who offers resources to develop a drug (and ultimately commercialize), or to secure a partner who can handle the commercialization of the product more efficiently than dealing with it in-house [1]. With the partner managing all aspects of the product’s launch in the market, from the registration process and regulatory affairs to pre- and post-launch marketing activities, the owner can be ensured that everything will be managed [1].

Out-license to bigger companies enables small pharma companies to reduce financial burdens. They can then benefit from creating a source of passive income and revenue. This can help to sustain the asset’s profitability.

For some, these partnerships are the answer, but it is not without both soft and hard costs. These costs must also be included in the deal valuation calculation.

Pete Zaudtke says, “There is no doubt that out-licensing represents a de-risked option to fund pipeline development, secure an immediate cash injection, take cues on how to commercialize a product and continue to focus on the clinic which is the current management team’s strength.  But all of this comes with a cost.  Many companies new to commercialization vastly underestimate the amount human resources and financial capital still required in an out-licensing model.  Furthermore, niche products for example often require significant handholding with your partner leaving one to ask if out-licensing was all worth it”.

The Trade-off.

The trade-offs of the out-licensing approach must be carefully considered. “Ensuring a clear fit with the company’s overall strategy will safeguard a product that could create a tactical advantage in the future from being sacrificed for short-term income” [4].  On top of that, each organizational culture is unique, thus understanding the type of culture you are dealing with when attempting to out-license a drug to another pharma becomes critical as there will be many points of contact and transfer of information among functions such as medical, research, and business development that could potentially create communication and cultural issues during the process [5].

Therefore, it is important to establish mechanisms to manage the multiple communication channels. This guarantees everyone is on the same page when it comes to bringing the specific product to market.

The right strategy with the right Partner at the right time.

Whether one commercialization option outweighs the other will vary from company to company, however there is an increasing consensus that emerging companies do not always need a well-established pharma partner to commercialize [6].

In orphan drugs, for example, where patient populations are often small, treatment is delivered mainly at centers of excellence, and relatively few clinicians and payors control what gets prescribed [6].  That makes commercialization less of a large-scale enterprise. Likewise, independence puts the inventors and investors in more control of sales and marketing priorities than they would as small partners to big pharma.

Finding the right strategy and partner at the right time can make a huge difference for virtual and hybrid pharma companies.

Starting conversations earlier allows for greater insight about the marketplace, the competitive landscape, and where the asset best fits [6].  A minimum of 18 months prior to launch has become the new starting point; but 24-30 months allows for an optimal timeline. Many small companies and VPCs do not factor in the financing or planning time to do that. The ones that do, nonetheless, develop the strongest relationships and commercialization strategies to its asset [6].

How Solem can help you.

Solem Global support not only VPCs but also hybrid and fully integrated pharma companies when it comes to maximize the valuation of their asset. Our team of experts have years of experience of forming strategic partnerships and have the established local market infrastructure to execute. As an independent third party, we look at projects differently and evaluate factors that aren’t usually considered. We create the best strategy, and understand how to meet regulatory, market access, commercial and operational requirements for an optimal outcome.

  • Ingrid Fernandes

  • Business Analyst