We have seen fewer novel first launches this year, due in part, perhaps, to the biotech financing bear market that began in 2021 and has persisted into 2022. In “Growth and trends in US emerging pharma first launches: 2011-2021,” we reviewed first launches through 2021, a year that saw the highest number of any year in the past decade. In this piece we extended our prior analysis by including novel first launches through mid-November 2022. We will review 505b2 first launches separately.
We define a first launch as either a solo first launch or a co-promote first launch in which one partner is a first-time launcher. Through November of this year, we have seen nine such launches in the U.S. market. The vast majority of these companies (eight) launched solo, while just one launched with a partner.
FIGURE 1: US novel first launches 2011-2022
Segmenting biopharma first launches by peak sales
For the 81 novel U.S. first launches that occurred between 2011 and 2022, we segmented products by actual or expected U.S. peak sales and then placed them into one of five categories: nano launches (<$200 million in expected or actual peak sales), micro launches ($200-$500 million), first runs ($500 million-$1 billion), blockbusters ($1 billion-$5 billion) and mega-blockbusters (>$5 billion). We excluded from this analysis eleven products that lacked sales data.
Of this cohort, 58% have or are expected to have peak sales of less than $500 million, making them either micro or nano launches. First runs represent 17% of the sample, while blockbusters comprise the remaining 23% of novel first launches. Big pharma owns the mega-blockbuster domain, with Moderna’s COVID-19 vaccine the only emerging pharma first launch to place in the rarified category with more than $5 billion in peak sales.
FIGURE 2: Shift in first launch products based on peak revenue over time
Our analysis of a decade’s worth of novel first launches turns up a number of interesting trends and data points:
- During the early part of the decade (2011-2014), blockbusters comprised a large majority (70%) of first launches, dominated by oncology products.
- Between 2015 and 2018, a whopping 90% of launches were of the micro and nano variety, more than half of which (~53%) are orphan designated (oncology and non-oncology).
- In the past four years, first runs comprise a larger share (32%) of first launches. More than half of orphan launches have expected peak sales of greater than $500 million—a significant shift from the mid-decade scenario.
- In other therapeutic areas for non-orphan launches, more than half (~60%) of assets are micro or nano launches, while 30% are blockbusters or mega-blockbusters.
It’s important to note that assets’ peak sales forecasts consider sales in additional indications as long as development for those indications is already underway. What follows are five key takeaways from our review of more than a decade’s worth of novel first launches.
1. Biopharma first-launch blockbusters are more likely to be co-promoted
Roughly three in four products launched in the U.S. with a co-promotion strategy have expected or actual peak sales of more than $500 million (a first run, blockbuster or mega-blockbuster), with only around 25% classified as micro or nano launches. Larger opportunities (those with higher peak sales) may require more promotional spend to realize that potential, which may make a co-promotion a more attractive option for some emerging pharma. At the same time, co-promotions’ higher levels of promotional and educational spend also likely help these launches realize their full sales potential. Meanwhile, approximately two out of three companies that launched with a go-it-alone approach (~64%) landed in the micro or nano category.
FIGURE 3: Launch strategy vs. peak revenue potential
2. Indication expansion correlates with therapy revenue potential
While on average only 25% of micro and nano first launches have expanded, or are expected to expand, beyond their original indications, nearly half the first runs and blockbusters have done so or are expected to do so based on follow-on indications at the time of launch of the first indication. This suggests a correlation between multi-indication potential and revenue potential. However, even for the multi-indication first launches we studied, the initial indication contributes the lion’s share of forecasted peak sales, while follow-on indications contribute, or are expected to contribute, incrementally.
FIGURE 4: Indication expansion vs. peak revenue potential
3. Potential first launchers are common acquisition targets prior to approval
For the years 2021 and 2022, 15 U.S.-based companies with lead assets in late-stage development or filed status (those that might be considering launching themselves or in a co-promote) were either acquired or merged with other companies. We identified four additional companies meeting these criteria that were part of SPAC merger deals, which may be viewed as an alternative to going public. Roughly 40% of the 15 acquired or merged companies were in oncology.
Acquisitions include:
- Pfizer acquiring Arena for $6.7 billion to expand into the inflammation and immunology therapeutic area
- Amgen acquiring Five Prime Therapeutics for $1.9 billion to strengthen its oncology portfolio with a late-stage, first-in-class product bemarituzumab
- MorphoSys acquiring Constellation Pharma for $1.7 billion with an aim to strengthen its position in hematology-oncology prior to a post-launch deal with Incyte
We anticipate that late-stage pre-launch transactions will continue to rise if companies face persistent headwinds in raising capital to fund first launches.
4. An exit via acquisition after a first launch is common
For the period we studied, a third of all first-launch companies were later acquired, with the large majority of acquisitions (75%) occurring within two years post launch. Nearly 40% of all companies that brought out a first-launch blockbuster (8 of 19) were later acquired. This includes companies in financial distress, such as when Bausch Health acquired Synergy Pharmaceuticals.
Though less common, we also observed several examples of exits through bankruptcy, including:
- Affymax recalled peginesatide due to serious adverse events prior to a bankruptcy.
- Achaogen launched plazomicin into an anti-infectives market facing very challenging reimbursement dynamics into the UTI market prior to bankruptcy.
- In the wake of declining sales of rucaparib and the failure of a late-stage indication expansion study, Clovis Oncology recently filed for bankruptcy.
5. Transforming from emerging to mid-size or large biopharma is exceedingly rare
Only a handful of first launchers appear on the path to becoming mid-sized or larger biotech or pharmaceutical companies. Three novel U.S. first launchers since 2011 have greater than $3 billion in annual revenue today (Vertex, Incyte and Moderna). Four others have annual revenues of between $1 billion and $3 billion (Seattle Genetics, Exelixis, Neurocrine Biosciences and Alnylam Pharmaceuticals). The majority of these seven (five) have a blockbuster in their portfolios, while the rest have scaled with a multiproduct non-blockbuster portfolio. Of this group, several companies are considered potential acquisition targets. This suggests that less than 5% of novel U.S. first-launch companies since 2011 are poised to break into the top 50 global biopharma list in the next few years.
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