Strategic Decision-Making in Early-Stage Drug Development and Lifecycle Management to Maximize a Drug’s Lifetime Value

Imagine you have a true therapeutic innovation in an early-drug development stage and multiple future target indications to go for, based on your drug candidate’s biochemistry. Usually with limited and various scientific evidence at that stage, emerging biopharmaceutical companies are tasked with making sound and objective management decisions on where to put their money first in drug development. In this situation, executive management often faces significant uncertainty in the available information as well as personal bias from key decision-making stakeholders within their team or from the key opinion leader’s side. Nevertheless, wise and sound strategic decision-making is required right at that point in time. How can executive management resolve this issue?

What it takes in such a situation is an objective assessment approach that is able to cope with information uncertainty, minimize personal bias of decision stakeholders, and bring a comprehensive perspective and objectivity to the table, maximizing overall drug and often company value.

In this article, we introduce a structured decision-making approach for executive management to make sound strategic decisions for drug development and lifecycle management (LCM), maximizing the commercial lifetime value of a drug candidate while allowing for flexibility for the individual business situation. Every business situation is different, and requires individual consideration in order to succeed where one-size-fits-all management approaches have previously failed.

Biopharmaceutical companies at an early clinical stage are strongly driven by a scientific perspective. This usually derives from the core indication or therapeutic field where their research could yield a molecular target and a drug candidate to put forward for clinical drug development. Companies at this stage tend to “love their science” and often lack an integrated business perspective in which their general strategic imperatives on a corporate level are fully aligned with the relevant scientific and commercial information.

To understand their options in a spectrum of multiple potential target indications, a company’s very first priority should be to achieve a consensus on its corporate strategic imperatives. Is the company aiming at an exit strategy after clinical proof-of-concept, or considering developing and launching the drug candidate? Or is it even lifecycle management that needs optimization? Based on this consensus, considering various scientific evidence levels in the decision-making process is key as the scientific evidence in various potential indications typically varies from e.g. pharmacological activation/inhibition in established animal models, to only lab-based, in vitro data depending on the potential target indication. Last but not least, the commercial prospects vary greatly across potential target indications, based on the unmet medical need, the potential target product profile (TPP), the current and expected competition, and expected pricing potential in each target indication.

When thinking about management decision-making in such a situation, there are several business questions of utmost importance, which are the basis for our management decision framework. Answering these questions will help biopharmaceutical companies to master the process:

What is in it for the company at the end of the day? This means how many patients will the drug candidate be able to reach at peak and which price level is supposed to be realistic. Especially for early stage biotech companies, the TPP is typically far from concrete at this point in time.

Which indication makes most sense from a scientific perspective and can (potentially) provide maximum medical benefit for patients? The drug candidate typically evolves from one focus area of academic or lab research and this indication is usually well understood. When starting to consider LCM, often the drug candidate has not even been launched in its first indication. How would management be able to tell which other indications out there might be worth pursuing at this point in time?

How challenging will the clinical development program be from a technical feasibility side? The size of a trial program and overall length are key parameters for decision-making and have significant implications for the required funding by the company.

Our management decision framework considers three major business perspectives. It helps to draw sound conclusions despite uncertainty in key information and supports reliable decision-making by executive management.

Commercial opportunity of potential target indications

The commercial opportunity of a new molecular target is driven by the eligible target indication (based on MoA) and the expected price levels in each indication. Size can be fairly well estimated by prevalence, incidence, and potential patient sub-group characteristics in the relevant countries. Companies usually focus on the potential in the EU-5, US, and China, and some include Japan. However, price is less straightforward and raises many open questions, especially surrounding the long-term perspective to market. For example, questions arise when identifying an appropriate price anchor, which — similar to a biomarker — is supposed to capture an analogue situation regarding a medical need and clinical benefit that the drug candidate aims to provide in the future. What if no drug has ever been approved in one or more of the potential target indications? And, if a price anchor exists, can a premium be expected, given that a target product profile often doesn’t exist at such an early development stage? Even when considering LCM, the price expectations are not easy to understand since the various geographic markets follow different pricing and HTA agendas.

We propose starting with potential price anchor points to understand implications from industry and academic perspectives. Whether the objective is revenue optimization or market share and whether these should be achieved in the short or long term depends on the company’s strategic imperatives. For instance, it may be worth sacrificing revenues at the onset (launch in orphan indication) for greater revenues at a later point in time (extension to a larger indication). Important for a comprehensive picture across the potential target indications is a systematic approach for comparability of insights.

Medical-commercial attractiveness of potential target indications

Developing a new drug candidate does not take place in a silo. Others have or are about to bring an alternative treatment option to the market too, hence the question of how competitive your own drug candidate can and will be is of utmost importance. As this competition takes place on various levels, companies should consider four specific factors:

• The unmet medical need, which is a proxy for how many drugs have already been launched in the indication and how well the current medical needs of patients are addressed.
  
• The relevance of the new MoA for a target indication. In other words, how innovative the MoA of the drug candidate is for the respective indication.
  
• The level of scientific evidence of the target molecule in each indication. This requires an in-depth understanding of scientific literature for the drug candidate in each respective indication. The lowest level of evidence here is in vitro data, while in vivo data is more advanced. Human clinical evidence is the most solid and reliable evidence. Dealing with the wealth of scientific publications and comparing the different levels of medical-scientific evidence is where the challenge lies for executive management.
  
• Potential advantages through the route of administration(RoA). These highly depend on the molecular structure of a drug candidate and the dominating RoA and dosing schedule of existing drugs in each indication — an injection can be more attractive than an oral drug if it is not administered daily. Typically, oral formulations are thought to be most attractive.

Technical feasibility of potential target indications

Even if an indication looks attractive from the first two business perspectives, e.g. a large indication, high price levels, high-unmet need, and strong scientific evidence for the new molecule, this does not automatically make it the perfect choice or guarantee that the new drug candidate will be a success. There is a risk of failure, varying by phase and level of evidence, which needs to be taken into account too. Also the typical length of a trial program and the required size are key consideration for or against a potential target indication with implications for the required funding by the company.

We have identified five meaningful factors for coping with the complexity of clinical development challenges:

• Average number of patients included in trials, Phases I–III
• Average duration of trials
• Average cost of trials, indication-specific (!)
• Technical risk of failure
• Availability of surrogate markers in target indication

Depending on the company’s strategic imperatives, there may be a focus on time to proof-of-concept (PoC, phase I and II trials) only, or on the total development cost until filing, including all three phases. A lot of information is publicly available on the platform clinicaltrials.gov, where most trials are registered. However, trial costs are mostly confidential and only available as indication benchmarks from senior industry experts comprising CEOs, CROs, and CMOs from large or mid-sized pharma. Regarding technical risk of failure, we recommend focusing on the technical aspects of clinical trials such as recruiting and logistics, but not on the probability of reaching an endpoint, since that depends on various factors that are usually hard to predict.

Strategic decision-making with limited information helps save time and money

Executive decision-making should always find the optimal balance between effort and value. A key challenge for early biopharmaceutical companies as well as for lifecycle management at this point is to get the sequencing of strategic target indications for drug development right. Once the decision has been made, it is difficult to backtrack, and the right strategic choices at that stage can minimize commercialization risks and maximize lifetime value.

However, detailed strategic analyses are time-consuming and require money and expert capacity. Granularity in a strategic assessment might often not yet be needed to the fullest extent to identify your priorities.

Therefore, we propose rather focusing on a limited set of decision criteria first, i.e. more strongly on the hard facts, such as the scientific mode of action of your drug candidate, the level of unmet medical need in potential indications, and the patient populations in need. This will allow you to prioritize your strategic options before delving deeper into selected indications of choice for a fine-tuning of the decision-making and planning.

When deep-dive analyses are needed to validate higher level decision-making

After strategic target indications and their sequence have been prioritized for drug development or lifecycle management, we recommend addressing more detailed business questions in order to validate and fine-tune the strategic priorities, i.e.:

1. Considering the current and future competition and TPP-based pricing expectations, what can we expect from a pricing and commercial perspective for each indication of choice?
2. Considering the indication- and drug-candidate-specific clinical trial designs, what do we need to plan for precisely, i.e. which trial population sizes, development costs, and timelines are needed and which risks are we facing?
3. What is the expected contribution to the overall drug lifetime and company value in the concert of all pre-prioritized indications?

At an early stage, executive management tends to look at this information rather from a benchmark angle, following the “we will cross that bridge when we come to it” paradigm. In doing so, decision-making can be misled, since an overall trial strategy typically comprises a geographic component and sequencing of trial centers, as well as the required investments depending on a TPP-based trial design and not an indication investment benchmark.

The basis for these deep-dive analyses at this level is careful consensus on the (aspirational) target product profile (aTPP) of the new molecule — individually defined for each indication. This helps to refine expected patient populations, more realistic price potentials, and sales volumes for each. The expected clinical trial designs and their inherent operational risks should be understood now. The required investments can also be substantial and might change priorities once elaborated in full detail.

Depending on the overall prospects of an indication and its specific market dynamics, the organizational requirements to enter an indication might vary greatly, too. Established larger indications can require less organizational buildup and field force than an orphan disease and vice versa. This investment should also be taken into account on an individual level for each indication of interest.

All of this detailed information should be elaborated in this second, deep-dive step after an initial and pragmatic prioritization of indications has been made.

Summary: optimally preparing management for decision-making

If you work for an early stage biotech company with a true therapeutic innovation or plan for lifecycle management of an advanced drug candidate, you may face the challenge of deciding which indication to focus on depending on the biochemistry of your drug candidate. Such a decision is not easy to make for several reasons: Deciding on a target indication for your drug candidate depends on many factors, is subject to a high degree of uncertainty, can be influenced by personal bias, and has long-term implications for the commercial success of your company. Therefore, extensive preparation for such a decision is required.

We advise executive decision-makers to follow a two-step approach in order to elaborate the basis for sound decision-making:

1. Consider a limited set of key insights in a structured way to cope with information uncertainty and balance effort and value for decision-making. Prioritize future indications for drug development or lifecycle management first before addressing more details
2. Consider deep-dive analyses for a validation and fine-tuning of the prioritization made. Here, the individual indication perspective and prospects for your drug allow for a re-prioritization and provide a sound basis for decision-making

This article provides food for thought on how to prepare and structure the decision-making process for far-reaching management decisions. Our approach is applicable for both early biotech drug development and lifecycle management of advanced drug candidates or launched drugs. It allows for comprehensive consideration of a wealth information, minimizes personal bias, structures information, clarifies uncertainties, and guides you on how to consider key business criteria.

Dr. Wolfram Lux is a Senior Director, Dr. Simone Seiter is Partner, and Christian Hinneburg is Consultant in Simon-Kucher & Partners' Life Sciences Division.