Investing for Success: Finding the Right Launch Balance - Pharmaceutical Executive

Investment

Investing for Success: Finding the Right Launch Balance – Pharmaceutical Executive

Published

3 years ago

September 14, 2021

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

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Investment

How Can I Invest in Eco-friendly Companies? – CB – CanadianBusiness.com

Published

2 hours ago

April 24, 2024

Welcome to CB’s personal-finance advice column, Make It Make Sense, where each month experts answer reader questions on complex investment and personal-finance topics and break them down in terms we can all understand. This month, Damir Alnsour, a lead advisor and portfolio manager at money-management platform Wealthsimple, tackles eco-friendly investments. Have a question about your finances? Send it to [email protected].

Q: It’s Earth Month! And… there’s a climate crisis. How can I invest in companies and portfolios funding causes I believe in?

Earth Day may have been introduced in 1970, but today it’s more relevant than ever: In a 2023 survey, 72 per cent of Canadians said they were worried about climate change. Along with carpooling, ditching single-use plastics and composting, you can celebrate Earth Month this year by greening your investment portfolio.

Green investing, or buying shares in projects, companies, or funds that are committed to environmental sustainability, is an excellent way to support projects and businesses that reflect your passions and lifestyle choices. It’s growing in favour among Canadian investors, but there are some considerations investors should be mindful of. Let’s review some green investing options and what to look out for.

Green Bonds

Green bonds are a fixed-income instrument where the proceeds are put toward climate-related purposes. In 2022, the Canadian government launched its first Green Bond Framework, which saw strong demand from domestic and global investors. This resulted in a record $11 billion green bonds being sold. One warning: Because it’s a smaller market, green bonds tend to be less liquid than many other investments.

It’s also important to note that a “green” designation can mean a lot of different things. And they’re not always all that environmentally-guided. Some companies use broad, vague terms to explain how the funds will be used, and they end up using the money they raised with the bond sale to pay for other corporate needs that aren’t necessarily eco-friendly. There’s also the practice of “greenwashing,” labelling investments as “green” for marketing campaigns without actually doing the hard work required to improve their environmental footprint.

To make things more challenging, funds and asset managers themselves can partake in greenwashing. Many funds that purport to be socially responsible still hold oil and gas stocks, just fewer of them than other funds. Or they own shares of the “least problematic” of the oil and gas companies, thereby touting emission reductions without clearly disclosing the extent of those improvements. As with any type of investing, it’s important to do your research and understand exactly what you’re investing in.

Socially Responsible Investing (SRI) and Impact Investing

SRI and impact investing portfolios hold a mix of stocks and bonds that are intended to put your money towards projects and companies that work to advance progressive social outcomes or address a social issue—i.e., investing in companies that don’t wreak havoc on society. They can include companies promoting sustainable growth, diverse workforces and equitable hiring practices.

The main difference between the two approaches is that SRI uses a measurable criteria to qualify or disqualify companies as socially responsible, while impact investing typically aims to help an enterprise produce some social or environmental benefit.

Some financial institutions use the two approaches to build well-diversified, low-cost, socially responsible portfolios that align with most clients’ environmental and societal preferences. That said, not all portfolios are constructed with the same care. As with evaluating green bonds, it’s important to remember that a company or fund having an SRI designation or saying it partakes in impact investing is subjective. There’s always a risk of not knowing exactly where and with whom the money is being invested.

All three of these options are good reminders that, even though you may feel helpless to enact environmental or social change in the face of larger systemic issues, your choices can still support the well-being of society and the planet. So, if you have extra funds this April (maybe from your tax return?), green or social investing are solid options. As long as you do thorough research and understand some of the limitations, you’re sure to find investments that are both good for the world and your finances.

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MOF: Govt to establish high-level facilitation platform to oversee potential, approved strategic investments

Published

7 hours ago

April 24, 2024

Anne Joseph

KUALA LUMPUR: A meeting with 70 financial fund investors and corporate members at the recently concluded Joint Investors Meeting in London has touched on the MADANI government’s immediate action to stimulate strategic investment in important technologies, according to the Ministry of Finance (MoF).

In a statement today, it said that the government is serious about making investments a national agenda through the establishment of a high-level investment facilitation platform to ensure the implementation of potential and approved strategic investments through a “Whole of Government” approach.

Minister of Finance II Datuk Seri Amir Hamzah Azizan (pix), who led the Malaysian delegation to the Joint Investors Meeting from April 20 to 22, said that the National Investment Council (MPN) chaired by the Prime Minister is an integrated action that reflects how serious the government is in making Malaysia an investment hub in the region.

Among the immediate actions taken by the government is establishing the National Semiconductor Strategic Committee (NSSTF) to facilitate cooperation between the government, industry players, universities, and relevant stakeholders to place the Malaysian semiconductor industry at the forefront and ensure the continued growth of the electronics & electrical industry, especially the semiconductor sector, as a major contributor to the Malaysian economy.

The government also aims to empower Malaysia as a preferred green investment destination as well as remove barriers and bureaucracy in the provision and accessibility to renewable energy, especially for the new technology industry, including data centres, said Amir Hamzah.

He also said that the country’s investment prospects have reached an extraordinary level, with approved investments surging to RM329.5 billion in 2023 from RM268 billion in 2022.

He said about 74 per cent of manufacturing projects approved between 2021 and 2023 have been completed or are in process.

In addition, Amir Hamzah said the greater initial stage construction work completed in 2023 (RM31.5 billion) and 2022 (RM26.3 billion) shows a positive trend for future investment opportunities.

“From a total of 5,101 investment projects approved in 2023, as many as 81.2 per cent or 4,143 projects are in the services sector, 883 projects in the manufacturing sector, and 75 projects in other related sectors,” he said.

Before this, Amir Hamzah met with international investors in New York and Washington to clarify the direction of the implementation of the MADANI Economic framework to improve investors’ confidence in Malaysia’s economic level and strengthen the perception and investment sentiment of foreign investors towards the country.

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Want $1 Million in Retirement? Invest $15000 in These 3 Stocks

Published

13 hours ago

April 24, 2024

Anne Joseph

Compound interest is a thing of magic. It’s also one of your best bets if you’re looking to retire rich.

It might take time and patience but there’s not a whole lot of heavy lifting when it comes to a buy-and-hold investment strategy. What matters most is having decades of time in front of you, which will allow you to maximize the benefits of compounded returns. And, of course, choosing the right investments is equally important.

The magic of compound interest

With a decent return, building a million-dollar portfolio might not be as hard as you think. An initial investment of $15,000, returning 15% annually, would be worth just shy of $1 million in 30 years.

First off, 30 years is a long time, which means you’ll need to be planning your retirement far in advance. However, all it takes is one initial investment of $15,000 and the right stocks to build a $1 million portfolio.

Additionally, it’s important to remain realistic and acknowledge that a stock returning 15% annually is not exactly common. That being said, the TSX certainly has its share of dependable companies with track records of returning far more than just 15% per year.

I’ve put together a list of three Canadian stocks that are perfect for hands-off investors who are looking to retire rich.

Constellation Software

It will require a steep initial investment, but Constellation Software (TSX:CSU) is well worth its nearly $4,000-a-share price tag. When it comes to market-crushing returns, the tech stock has been in a league of its own over the past two decades.

Even as the company is now valued at a massive market cap of close to $80 billion, the impressive returns have continued. Shares are up more than 200% over the past five years. That’s good enough for a compound annual growth rate (CAGR) of 25%.

At a 25% annual return, a $15,000 investment would be worth a whopping $12 million in 30 years.

Descartes Systems

Descartes Systems (TSX:DSG) is another tech stock that’s no stranger to delivering market-beating returns. The company is also only valued at a market cap of $10 billion, leaving plenty of room for growth in the coming decades.

There’s a reason why Descartes Systems is one of the few tech stocks trading near all-time highs today. This stock is a proven winner, with lots of growth left in the tank.

Over the past five years, the stock has had a CAGR just shy of 20%.

goeasy

The last pick on my list is a beaten-down growth stock that’s trading at a serious discount.

The consumer-facing financial services provider has been hit by short-term headwinds from sky-high interest rates. With potential rate cuts around the corner though, now could be an excellent time to be loading up on goeasy (TSX:GSY).

Even with shares down 25% from all-time highs, the stock is still nearing a return of 300% over the past five years.

goeasy was crushing the market’s returns before the recent spike in interest rates, and there’s no reason to believe why the company won’t continue to do so for years to come.

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