CENSUS: six criteria for commercial success in biopharma
A guide to choosing a successful lead candidate
I only know two basic models for creating new drugs.
The first — the majority of big-money biotech IPOs over the past decade — starts with a new platform of apparently unbridled scientific potential: gene and cell therapy, CRISPR and other gene editing technologies, mRNA, and so on. The business theory being that such highly versatile technologies can solve dozens of therapeutic problems. Only question: which drug candidate and therapeutic problem to start with?
The alternative value creation strategy: find a valuable drug candidate (maybe created but disprized elsewhere) and develop it, hoping that you’ll have somehow uncovered gold. Think Rallybio Corp. (NASDAQ:RLYB), or Agios Pharmaceuticals Inc. (NASDAQ:AGIO), or even Roivant Sciences Ltd. (NASDAQ:ROIV) and its series of -vants.
Both can work, and both models can exist in the same company. But at least one needs to work. As BioCentury argued in its Back to School essay: a biotech’s choice of lead program is critical to successful growth. And while that program is worthless without a meaningful clinical profile, it’s also of little value if it can’t make a strong commercial case — in particular, that it will be broadly prescribed and reimbursed.
Thus, I thought it might be helpful to create a list of business, not medical, criteria that defines the right candidate to start with — a drug that is most likely to be a commercial winner.
As a memory aid, call the checklist CENSUS.
New for new’s sake doesn’t mean much — but new (along with the assumption of better) is hugely important for payers.
A few background assumptions.
First, the drug has to work meaningfully better (either better efficacy or better safety/tolerability) in the appropriate patients than its competition. I don’t see cutting price as a shortcut to blockbuster status. But once medically better is out of the way (and I realize I’m minimizing the most difficult part of drug discovery), the rest is business.
Second, a drug that misses on one of the criteria below won’t necessarily be a market loser, but it probably would need higher scores on the other parameters.
1) Chronic. It just creates better returns (repeat customers, most importantly).
2) Existing competition. It’s counterintuitive, I realize. And yes, there are drawbacks — pricing flexibility will be limited by what’s out there already. But there’s a whole mess of advantages as well. First, the more drugs there are for a disease, the clearer and less risky the regulatory path. Second, doctors are going to be far more familiar with a disease when they’ve already been heavily marketed to by competitors. For example, they’ll recognize patients with the disease faster and be more willing to try alternatives (particularly if the drug has big advantages — see the very first assumption). And third, payers won’t put up the same kind of hurdles to a category they’re already paying for. Their big issue is new spend — if they see a new drug coming into a category they’re already paying for, they’ll be a lot less prone to knee-jerk restrictions.
3) New mechanism of action. New for new’s sake doesn’t mean much — but new (along with the assumption of better) is hugely important for payers, which generally have to cover, for each category, at least one drug of every mechanism. I also think new helps with marketing to docs, but that advantage certainly won’t compensate for mere therapeutic parity.
4) Symptomatic. A high score on this one criterion can compensate for missing a bunch of the others. If a patient hurts or hates how he looks, he’s going to seek treatment. Take Tepezza teprotumumab from Horizon Therapeutics plc (NASDAQ:HZNP), for example. I think the drug’s impact on quality of life — through resolution of bulging eyes and blurry vision — was a huge factor in its standout success. When a treatment for thyroid eye disease appeared, patients ran to get it.
5) Unsatisfied market. This may seem to overlap with “symptomatic” and indeed it’s related. But patients don’t often feel when a drug isn’t working while physicians can see when many of their patients don’t get to therapeutic goals (e.g., on any of a number of unsymptomatic parameters — cholesterol, blood pressure, eGFR results in chronic kidney disease); the physician grows frustrated, switches meds, and then switches again and, if there are more choices, again.
6) Significant market. That may be obvious but by large I mean, mostly, prevalence. The economics of orphan disease (not the legal definition of fewer than 200,000 patients but the industry’s de facto definition of fewer than about a tenth that number) just don’t work very well given investors’ expectations of returns (I wonder what Henri Termeer, the author of the orphan strategy, would have thought of the contortions orphan companies have put themselves through to justify prices that can generate returns based on the tiny number of patients available to treat). Yes, there are exceptions (which require another set of success criteria to define, like 1) an easily diagnosed and 2) fatal pediatric disease), but in general this is a difficult commercial row to hoe. Just the risks inherent in patient identification can derail commercialization: any one patient you don’t identify, for example, is a huge revenue loss (think, for example, of the negative sales growth for Lumakras sotorasib from Amgen Inc. (NASDAQ:AMGN) — a classic story of challenging patient identification).
So, who wins and who doesn’t in this worldview? It’s easy to look for examples in the past. Prometheus Biosciences Inc.’s TL1A for ulcerative colitis and Crohn’s is the CENSUS champ. It addressed a high-prevalence, deeply unsatisfied, chronic market that contained lots of competitors, and offered a new-mechanism drug to highly symptomatic, motivated patients. Merck & Co. Inc. (NYSE:MRK) knew what it was doing when it paid $10.8 billion for the company.
Who has their work cut out for them? Among others, companies in non-alcoholic steatohepatitis (NASH), which are coming into a market with virtually no competition, no current payer spend, and asymptomatic patients. If I were a NASH company, I’d be overspending on preparing and making the case to payers (both in terms of the appropriate trial population and payer-focused clinical endpoints, including those that can be adjudicated in value-based agreements); and figuring out novel approaches to identifying patients who won’t, by themselves, know enough to ask for therapy.
Roger Longman is founder and chairman of Real Endpoints, a boutique market access consultancy.
Signed commentaries do not necessarily reflect the views of BioCentury.