How much is first-to-market worth? There's a formula for that

Yes, it's worth it to win the launch race--and some new academic research can show you just how much.

Researchers at Duke University's Fuqua School of Business not only quantified the gains that await first-to-market meds, but came up with a tool to predict success--or lack of it--for new drugs based on when they hit the market and how much they spend on ads.

"We're giving them a formula," professor David Ridley said in a Duke-penned article for the World Economic Forum. "You can plug in your own numbers for your delay, for your advertising and your entry order, and that will output your market share."

David Ridley

For a Nature Reviews Drug Discovery article, Ridley and his team zeroed in on 50 different market debuts, specifically looking at drugs that weren't big clinical breakthroughs. The idea was to analyze rivalries where market share wouldn't depend on drug quality, but on other factors.

Using promotional and market share data from private vendors, the Duke researchers concluded that second-to-market meds that lag a first mover by two years can capture only 34% share at peak. And that's when the second company spends just as much money on promotions as the first-mover did.

"We found that even if the second mover spends just as much as the first mover on advertising at a given time, and in fact they do, their peak market share is much lower," Ridley said. "They spend the same as the first mover, but only catch about a third of the market at their peak."

Ridley is well acquainted with drugs' path to market. He helped create the priority review vouchers that can speed new products through the FDA. That system cuts the review time to 6 months from the standard 10--and that four-month difference can translate into a couple percentage points in market share, Ridley now figures.

Several companies have snapped up priority review vouchers from other pharmas that earned them through the FDA's program, notably Sanofi ($SNY) and Regeneron ($REGN). The two partners plunked down $67 million to win priority review for their PCSK9 cholesterol-fighter, Praluent. The purchase leapfrogged the drug ahead of Amgen's ($AMGN) head-to-head rival Repatha. But in the end, Praluent only beat Repatha to market by one month. We'll have to wait and see whether Praluent shows any first-mover advantage from that buy.

Of course the first-mover advantage doesn't always hold. Biogen's ($BIIB) multiple sclerosis pill Tecfidera launched in third place behind Novartis' ($NVS) Gilenya and Sanofi's Aubagio, but two years later, it owns the biggest share of the oral MS market. And Johnson & Johnson ($JNJ) and Bayer's anticoagulant Xarelto was approved as a stroke prevention pill a couple years after Boehringer Ingelheim's Pradaxa, but quickly moved into first place by share. And McKinsey & Co. research has found that first-mover advantage is its biggest for Big Pharma companies.

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