Pharma Forecasting: Key Markets Investors Can’t Ignore

Na Wie, Partner

Joerg Tritschler, Partner

Martin Slusarczyk, PhD, Director

All with Simon-Kucher’s Life Sciences division

US-centric forecasts are often inadequate when assessing the value of pharmaceutical drugs. In this article, we discuss the relative importance of key global pharmaceutical markets and the need to consider their unique regulatory, pricing, and market access requirements in sales forecasting.

It is easy to see why the US market commands so much attention from pharma forecasters—after all, it is the largest in the world. According to estimates from Statista and IQVIA, the US accounted for 43% of the global pharmaceutical market in 2023, followed by Europe at 19%, China at 8%, and Japan at 5%. This trend is mirrored when examining the revenue distribution of some of the largest pharmaceutical companies globally, using sales data from annual reports and SEC filings. (See Figure 1 below.)

Overreliance on US-centric forecasts risks overlooking critical factors in key markets such as Europe, Japan, and China, which collectively account for a significant portion of worldwide sales. While US sales projections often form the backbone of global forecasts, extrapolating these figures without accounting for the unique characteristics of other markets introduces significant risks and errors.

WHY US-CENTRIC PHARMA FORECASTS CAN FALL SHORT

While the US remains the largest market, it represents less than half of global pharmaceutical sales. The 80:20 rule suggests that to enhance forecast accuracy, it is essential to consider a few additional, large markets—specifically Germany (as the largest European market from which extrapolation to the rest of Europe is reasonable), China, and Japan—while maintaining a practical scope for sales forecasting efforts.

Healthcare markets outside the US differ markedly. In the US, drug prices are predominantly set freely, despite recent legislation, such as the Inflation Reduction Act, allowing the government to negotiate a limited set of drug prices under government plans. In contrast, Europe, Japan, and China are governed by strict health technology assessment-like government authorities that control price and market access, leading to significant disparities. For example, a study by the US Department of Health and Human Services found that drug prices across 32 countries varied by a factor of 1.7 to 7.8 compared to US prices. This analysis likely underestimates the differences, as it does not include China—a key global market known for significantly lower prices than Western countries. Moreover, the regulatory landscapes in these regions differ considerably from that of the US. While price discrepancies are widely acknowledged within the industry, the impact of differing regulatory decisions is often underestimated.

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NAVIGATING REGULATORY NUANCES IN JAPAN AND CHINA

The likelihood of achieving marketing authorization can vary significantly between the West and markets such as China and Japan, with important implications for sales forecasts. To estimate the probability of regulatory approval, analysts typically rely on technical benchmarks such as the availability of surrogate markers, historical success rates in the target indication, and scientific expert opinions on the target drug’s risk/benefit ratio. However, these considerations often focus primarily on the US and Europe, neglecting region-specific factors outside the West.

One critical aspect often overlooked is ethnic patient representation or inclusion of local trial sites in pivotal clinical trials, which is essential for regulatory approval in China and Japan. Local data on ethnic Chinese and Japanese populations is generally required, even for (ultra)orphan indications where conducting large, international trials may be challenging. This requirement can significantly impact the likelihood of achieving marketing authorization and, by extension, the accuracy of sales forecasts.

For instance, gene therapies targeting orphan indications have struggled to gain approval in China and Japan. Currently, none have been approved in China, and only three from a total of 17 are approved in Japan. In China, 16 out of 17 of the pivotal clinical trials did not include trial sites in mainland China, which can help rationalize why none of the drugs are approved yet. A case in point is Novartis’ Zolgensma, which received clearance from the Chinese Center for Drug Evaluation to run an additional Phase III trial for the drug in China, highlighting the requirement for local Chinese data rather than relying solely on international data. The only exception so far is Elevidys, which included Chinese patients in its pivotal clinical trial package; it is expected that a regulatory filing in China may occur in the future, as the drug only received conditional approval in the US last year and has not yet been approved by the European Medicines Agency.

Similarly, Japan’s Pharmaceuticals and Medical Devices Agency (PMDA) has stringent requirements regarding ethnic patient representation. There are only three gene therapies currently approved in Japan: one from a Japanese company and two from Novartis, namely Zolgensma and Luxturna. For both of these treatments, there was significant scrutiny, as the evidence package included only a few Japanese patients. In fact, the PMDA mandated the collection of additional data post-approval, citing the very low numbers of Japanese subjects for both products. Further highlighting the necessity for local data, three gene therapy manufacturers are currently running additional standalone Phase III trials in Japan, in addition to their existing international studies—specifically for Adstiladrin, Hemgenix, and Roctavian.

These examples illustrate how country-specific regulatory factors can significantly affect the accuracy of sales forecasts, especially given the substantial contribution of markets such as China, Japan, and Europe to the overall value potential of pharmaceutical drugs. While it is common practice to base global projections on US sales forecasts, relying solely on historical averages of price and volume differences across countries may fail to capture the complexities of ex-US markets. Overlooking nuances in regulatory requirements and pricing and market access conditions unique to each region can lead to significant sales forecasting errors. Notably, ongoing regulatory reforms in Japan, aimed at streamlining approvals, could further shift market dynamics and should be closely monitored by investors.

KEY TAKEAWAYS

Given this landscape, we suggest three underlying strategies or messages in particular.

• Broaden your forecasting horizon: Limiting forecasts to the US can lead to significant errors; incorporating key markets such as Germany, Japan, and China helps capture a broader range of regulatory, pricing, and access challenges that directly impact valuation models.
• Clinical trial details matter: Regulatory approval hinges not just on efficacy data but also on ethnic representation and local clinical trial involvement. These factors are crucial and can be dealbreakers for approval, affecting market timelines and sales forecasts.
• Pricing and market access challenges are highly variable: Unlike the relatively free pricing model of the US, strict payer controls in Europe, Japan, and China result in significant pricing and access disparities that can alter expected revenue projections. Understanding these market-specific barriers is critical for accurate forecasts.

As the pharma terrain continues to evolve, staying ahead of these regulatory and market dynamics will be crucial for forecasters and investors alike. The future of pharma is global—are your forecasts ready to reflect that.

Na Wie, Partner; Joerg Tritschler, Partner; Martin Slusarczyk, PhD, Director; All with Simon-Kucher’s Life Sciences division