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Maximizing new product revenue requires go-it-alone strategy in Japan

A fresh look at strategic analysis, market research, and economics shift pharma MNC’s perception of out-licensing benefits in Japan.

Challenge

A top 15 global pharmaceutical company wanted to select the best Japanese partner to help co-promote and out-license its new specialty product in Japan. The company had significant success negotiating similar arrangements in the past but wanted an objective point of view and evaluation of several interested partners. The company and McKinsey in Japan worked on a number of engagements previously, and company leaders again turned to McKinsey for help in selecting the right partner, as well as in better understanding and modeling the expected economics of the partnership.

Discovery

The McKinsey team first conducted a series of in-depth interviews to better understand the market potential of the product, its likely competitive positioning, and the right way to promote the product. Using the market insight and a robust set of data from the client, the team refined the client’s revenue forecast and also developed a resource template that estimated the number of sales representatives required to cover the targeted physicians. Finally, the team began assessing the capabilities and pros and cons of each of the potential Japanese partners to help launch the drug.

Upon better understanding the market potential of the new drug and the resources that would be required for successful launch, the McKinsey team challenged the client’s underlying assumption that the product should be out-licensed at all. Although it was a surprising recommendation, the team argued that analysis showed the product had significant potential. Accordingly, if the client had a longer-term desire to stay and lead in this particular therapeutic area, it should reconsider the strategic value of licensing. The McKinsey’s team analysis showed that the net present value of keeping the product and launching it itself exceeded that of out-licensing or co-promoting it, even though the upfront investment in building appropriate sales and marketing support would be substantial.

Though it was not part of our original charge, the client carefully reviewed the recommendation and chose to keep and launch the product itself.

Impact

The client followed through on the recommendation to launch the product in Japan and quickly recruited the necessary additional field force. The product launched in early 2011 with significant success, far outpacing even the estimated best-case scenario in terms of sales. In fact, the client is looking for opportunities to acquire/license new products within this specialty area, seeing it as a growth platform.

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