Sales Forecasting in the Pharmaceutical Industry

One of the main challenges Sales & Marketing teams face is how to forecast the revenue of new products. There exist two principal strategies to estimate the sales of new products hitting the market:

  1. Primary research: communicating to KOLs and physicians how a new medicine can add value to patients and its potential side effects. Hence, based on their views and on current competition an estimation can be established for the peak sales of the product.
  2. Developing a patient flow: a purely financial estimation based on potential market share to be captured and on drug pricing.

In this article I will discuss about the second method for developing drug sales forecasts. In particular, I will establish an estimation of the U.S. and EU5 sales of Nusinersen (expected launch in 2017), an orphan drug co-developed by Biogen and Ionis Pharmaceuticals for the treatment of Spinal Muscular Atrophy (SMA). SMA is an ultra-orphan neurodegenerative and autosomal recessive disorder with a prevalence of approximately 1/10,000 live births.

SMN1 and SMN2 genes are responsible for producing the SMN protein, the protein which is crucial for the survival of motor neurons (neurons that exist in the spinal cord). In SMA, a defect in the SMN1 and SMN2 genes causes disruption in SMN protein expression.

There exist four types of SMA categorized based on age of onset, disease progression and prevalence (1,2):

Table 1: Description of SMA types
sma

Using prevalence estimates the % breakdown of SMA patients can be derived.

Table 2: Breakdown of SMA patients by type.

SMA Patients - Breakdown

At this point, some important assumptions need to be made in order to develop the sales model for Nusinersen. Nusinersen will be the only pharmacological solution for the treatment of SMA and therefore, it can be assumed that a company with global reach such as Biogen can easily capture 40% of type 1 and type 2 patients and 10% of type 3 and type 4 at peak (since symptoms and disease progression for these types are much less serious and paying a high-cost product might not be justified in these cases). In addition, patent expiry is assumed 10 years post-launch (2027). Diagnosis and compliance rates are assumed 95% for type I and type II and 85% for type III and IV (late age of onset, less visible symptoms).

For the purpose of this analysis, the average annual cost of treatment of Duchenne Muscular Dystrophy (DMD) therapies has been assumed as the standard annual cost for SMA. That is because, both DMD and SMA are orphan, genetic disorders causing defects in the musculoskeletal system due to deletion mutations. Therefore, cost of treatment for DMD is the closest approximation to that of SMA. Since Nusinersen is an ultra-orphan product, it is normal to expect the annual cost of treatment to range between US$ 200,000 – 400,000 in the U.S. and a 60% discount on that price for EU5 (this discount accounts both for price reductions and for clawbacks / rebates that are present in some EU countries). EU prices are in most cases significantly lower than those in the U.S. Recent example in DMD: big price cuts for Translarna in Germany. (In indications where there are many treatments available, price estimations and discounts can be estimated with more accuracy by analysing prices of competitive products (number of dosages, mg/dosage, $/mg etc.) or by using reference pricing for EU).

Table 3: Estimated Annual Cost for Therapy for SMA (US).

Annual Cost of DMD Therapies

The assumptions made above can be summarized into an input sheet of the financial model:

Table 4: Inputs for Nusarnesen Sales Forecast

SMA4

Using these assumptions the sales forecast is developed as follows:

Table 5: Nusanersen Sales Forecast

SMA5

By 2023 the product is expected to hit the billion dollar mark driven by strong market penetration and high annual cost of treatment.

Table 5: Summary of Results

SMA6

This is a bright example of a blockbuster orphan drug. Although the blockbuster model has become obsolete, there are still blockbuster opportunities for big pharma / biotech in indications where no pharmacological treatments are available, especially in the orphan space. In these markets, high prices can be charged, market shares can be maximized in little time and sales & marketing expenses are smaller leading to huge ROI. The challenge however is that regulators are stricter when it comes to high drug prices and therefore such prices must be justified by the value (in terms of efficacy and safety) added to patients.

References

(1) D’Amico, A. and Mercuri E. Spinal Muscular Atrophy (2011). Orphanet Journal of Rare Diseases 6, 71.

(2) http://www.orpha.net/

(3) Eurostat

(4) U.S. Census bureau (http://www.census.gov/topics/population.html)

One thought on “Sales Forecasting in the Pharmaceutical Industry

  1. Hi,

    this article is really helpful.

    Can you please tell my how the numbers are calculated for the below 3 points

    1. SMA type I patient number is calculated for US?
    2. Target Patient for US
    3. US revenue

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