Syneos Health conducted a survey and executive roundtable of more than 300 industry leaders across biopharma, finance, and advisory executives in small-to-midsized companies to better understand their experiences in launch investment strategy, including launch forecasting; breakeven expectations; timing, levels and drivers of launch and Selling, General & Administrative (SG&A) spend; and key areas of spend. We explored potential reasons why executives tend to underspend, how spend expectations differ by role and experience and how companies can course correct.
Existing experience in SG&A launch spending
We previously published an in-depth analysis of pre-launch/launch-year SG&A spend in a sample of emerging companies launching their first product to understand the threshold of SG&A investment needed to increase the probability of a successful launch. As shown in Figure 1 below, the study found that companies that spent a minimum of 75% of their launch-year forecasted revenue in their pre-launch year (L-1) had higher rates of launch success as defined by achieving analyst consensus forecast.
Not a single company that spent less than 75% of their launch year forecasted revenue in L-1 achieved a successful launch. Excessive overspending didn’t necessarily help either. Less than half (40%) of the companies that spent more than 250% of their launch-year forecasted revenue in L-1 failed to achieve their forecasted revenue potential. The study revealed an L-1 launch spend “sweet spot” in the 75% to 250% range. While companies frequently underspend, investors and advisory professionals who guide biopharma executives on these exact SG&A decisions consider higher levels of spend more appropriate.
Underspending is the norm, but finance/advisory professionals expect more. Company executives are more conservative in their spend expectations than are financial/advisory professionals.
Three years prior to launch, a little more than one-third (38%) of the biopharmaceutical executives expect to spend greater than 50% of projected launch-year revenues, compared to more than two-thirds (68%) of finance and advisory professionals—a 30% gap between the two groups.
Two years prior to launch, slightly more biopharmaceutical executives (49%) expect SG&A spend at the greater than 50% level, compared to three years prior to launch. The finance and advisory professionals spend at L-2 stays roughly the same (67%), which reduces the gap slightly between the two groups (compared to L-3) but remains significant—in this case, 18%.
This difference may be due to an inclination on the part of biopharmaceutical executives to hedge development risk by tying spending to expected development and financial milestones, such as clinical program progression, fundraising and partnering agreements, and regulatory filing acceptance/ approval. Stage-gating is an industrywide practice, and a high proportion of biopharmaceutical executives in our survey (78%) indicated they have delayed launch spend due to a stage-gating strategy. However, it can be challenging to “catch up” in spending after milestones are met, potentially resulting in an inefficient use of resources and a shorter planning window available around launch. The runway from investment to approval might be as short as six months, leaving little time to sufficiently lay the groundwork and prepare the market for product entry and market access, especially for more innovative or potentially practice-changing therapies.
Executives may have low pre-launch spend expectations for other reasons, too—for example, if they perceive there will be difficulty making the business case for investment; if they experience challenges in their ability to demonstrate cash management abilities to the company’s board and investors; or if they have other priorities given their assessment of product potential or its place in their overall corporate strategy.
More launch experience associated with higher spend expectations
We also assessed to what degree biopharmaceutical executives’ pre-launch spend expectations might be influenced by their previous launch experience. As shown in Figure 2 below, we found those who had launched at least three products are not only willing to spend more each year pre-launch than their less experienced counterparts, but also tend to invest more appropriately. Specifically:
Launch Experience: Executives with experience launching just one product do not expect to spend enough to meet the >75% threshold in L-3 and L-2 prior to launch; just 6% of them expect to spend sufficiently in L-1.
Launch Experiences: Executives with two launch experiences expect to spend more, but less than still is optimal because they are not starting to spend sufficiently until L-2.
Launch Experiences: Executives with three launch experiences expect to spend more optimally by doing so earlier in L-3 as they begin engaging with and preparing the market, and they continue to invest through L-2 and L-1.
Course-correcting for optimal pre-launch investment
Our research suggests that it is wise to challenge assumptions and reset expectations when it comes to pre-launch SG&A investment, both with regard to the timing of certain activities and levels of investment needed to increase the odds of commercial success. Strategies include:
Clearly define the opportunity and critical success factors: This is critical, and yet companies often lack the robust insights required to build a strong business case to use with investors. To address this, companies should look to gain a firm understanding of the market by conducting a scenario-based opportunity assessment, conducting it early and updating it as conditions change.
Align launch investment with corporate strategy and product potential, earlier in the process: Have a good sense of market dynamics and product potential in order to make targeted investments to pull forward the strategy. Certain market-shaping activities, such as disease-state education and awareness programs, conducting appropriate and early primary and secondary market research with KOLs, HCPs, payers, and patients, as well as peer-to-peer programs, require a longer runway, and the efforts and investment can pay dividends at launch.
Reassess pre-launch investments over time: Be prepared to challenge assumptions about what spending levels should be at key clinical, regulatory and financial milestones, backed by comprehensive market analysis and launch expertise.
Explore synergistic partnerships: Teaming up with other organizations can help secure additional funding while offsetting any perceived development risks and supports the sharing of critical knowledge and resources. This could include partnerships with other companies in similar therapeutic areas with common interests.
Surround yourself with launch experience and expertise: Build a team that is experienced in the market and has launch experience in a similar therapeutic area. Look outside the company for third-party perspectives and partners who can bring in best practices and case studies from other launches in order to avoid costly missteps early on.
Invest more resources upfront in breaking down silos and integrating strategic planning across functions: Plan to integrate strategic imperatives across the various functions and key stakeholders in the market. Clearly identify how each activity can be mapped back to the strategic imperatives and outline the level of resourcing required to successfully complete those activities.
Define the impact of delaying spend: It is critical to clarify the strategic choices the organization is making in delaying spend and what tradeoffs are taking place as a result. This will help identify priority areas for investment and create transparency if the product does not capture full value.
Schedule formal check-ins with your executive team and Board: Having formal check-ins to review the spending strategy can help identify potential reasons for deviation, such as changes in the competitive and market access landscape or new market research insights, and support investment to take corrective action.
Conclusion
Risk is inherent to the business of drug discovery, and clinical-stage companies launching their first product have an acute awareness of this fact. This, in part, helps explain why many companies either underfund launches while hedging bets on their product’s potential, or attempt to play catch-up too late in the game and end up incurring unnecessary costs that add little incremental value. Keeping the above strategies in mind—which will involve thoughtfully challenging a few assumptions about pre-launch SG&A spend along the way—can help emerging, clinical-stage companies spend more appropriately and strategically, thus increasing their potential for launch success.
Naveen Murthy, Senior Managing Director, Head of Product and Franchise Strategy, Sachin Purwa, Michael Sarshad, Directors, Scott Coons, Launch Manager, all with Commercial Advisory Group, Syneos Health Consulting
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
