More and more new therapies are being brought to market by biopharma companies that are launching an asset for the first time.1 These organizations’ share of new launches has more than tripled in recent years—from 8 percent in 2006–10 to 27 percent in 2016–18—and is expected to account for up to half of all new launches by 2025.
As more biotech companies swell the ranks of first-time launchers, they face another crucial decision: where to launch. More specifically, should they go beyond their home base and expand internationally to help more patients, maximize the impact of their therapies, and extend their commercial reach? Evidence indicates that many are already doing so.
When we examined first-time drug launches by biotech companies between 2010 and 2020, we found that two-thirds of US launches were followed by launches in other countries.2 The move into other markets was typically swift: three-quarters of international launches took place within two years of the US launch. Among drugs launched internationally, markets outside the United States accounted for about 35 percent of total revenues. This share increases over time, with US revenues peaking earlier because of the earlier launch. The median global peak revenue of assets launched internationally was $625 million, compared with $152 million for those launched in the US market only.
Among drugs launched internationally, markets outside the United States accounted for about 35 percent of total revenues.
The share of sales derived outside the United States varied widely between individual drugs, from less than 20 percent of global revenues to more than 50 percent. These differences are likely to be shaped by a range of factors, from the nature of local epidemiology, treatment paradigms, and patient needs to a company’s strategic choices in balancing the pursuit of growth in existing markets with expansion into new markets to reach wider patient populations.
If your organization is considering a first-time global launch, it can be helpful to understand how peers are building their international presence. By drawing on close observations and expert interviews, we have identified a number of steps that new launchers can take to improve their chances of success at this critical moment.
Treat international expansion as a board priority, and define entry strategies at the outset
Once a board of directors and executive team have committed to expanding internationally, they need to decide whether to reach a country directly or via a strategic alliance, copromotion, or licensing partnership (Exhibit 1). A well-informed decision will be based on careful consideration of five key factors at global, regional, and country levels:
- Strategic context. What is our long-term vision for establishing an international business? Will a global launch serve as a bridge for others, increasing the value of our pipeline and future deals? Or might it be a one-off and a distraction or investment cap that hinders our efforts to deliver our clinical pipeline to our existing markets?
- Unmet patient need. What is the unmet patient need in international markets? Could our therapy represent a substantial improvement over the current standard of care?
- Managerial oversight. How much management attention can we spare for global expansion, given the demands of our home market, R&D, business development, and other priorities? What level of oversight does a given market require?
- Capabilities. Do we have at least the minimum capabilities we need to succeed with a direct launch in the markets we want to enter? Do we have, or could we quickly build, an intimate knowledge of local treatment and reimbursement pathways?
- Investment. What investment would we need to make in our field force, infrastructure, product registration, and so on to enter direct? What would be the trade-offs with our other investment priorities, such as R&D? Do we have sufficient funding to support a global launch? Or could offering overseas sales rights to a partner open up a source of financing to advance our pipeline?
Answering these questions will help companies chart the right course for their context and needs. One biotech decided to license non-US rights to other pharma companies because it wanted to keep its management team focused on developing its pipeline and needed the up-front licensing payments from commercial partners to help fund R&D. Another biotech set a minimum revenue threshold that a stand-alone country would need to reach before the top team would consider a direct-entry strategy.
If a company decides to make building an international footprint a strategic priority, it will need to develop a comprehensive country-by-country road map outlining where to build capabilities and where to acquire them via partnerships. Addressing the global opportunity starts with understanding a complex array of factors at country level, including patient needs; clinical, regulatory, and manufacturing requirements; and commercialization opportunities. For instance, what are the characteristics and unmet needs of patient populations in country X? What do its reimbursement structures look like? What local requirements will shape our manufacturing, development, regulatory, and commercial strategies?
Addressing the global opportunity starts with understanding a complex array of factors at country level, including patient needs, clinical requirements, and commercialization opportunities.
Opportunities for entry can vary significantly between markets. In some hereditary rare diseases, for instance, incidence rates and unmet patient needs differ markedly between countries or regions. As an example, the prevalence of the mucopolysaccharidoses group of metabolic disorders is 14 times higher in Saudi Arabia than in the United States.3 Such disparities lead to differences in disease burdens relative to general population size.
Other material differences between markets lie in national-reimbursement pathways and health technology assessments. The metrics used in these contexts—cost effectiveness, budget impact, clinical benefit, and so on—vary from country to country and can substantially increase or reduce the opportunity for a given drug. Finally, if regulators require data from local clinical trials before approving a drug, as is usual in China and Japan, for instance, satisfying these requirements is likely to prolong entry timelines and increase costs.
An analysis of therapies launched to treat rare diseases indicates that biotech companies typically address some countries via a direct model, and others more often through partnerships (Exhibit 2). France and Germany fall into the first category, for instance, while Mexico and South Korea are examples of the second.
In addition to assessing the healthcare needs, opportunities, and constraints of each individual market, a company also needs to decide how many markets it can serve at one time. Whether it chooses to enter a small and select group of overseas markets or a broader array will likely depend at least partly on the funding and management attention it can afford to dedicate to the effort.
Make sure to learn from others’ successes (and missteps)
McKinsey interviewed more than 100 senior executives and board members who had recently been involved with first-time international drug launches at their companies. From their range of experiences, we identified five critical success factors for local-market entry:
- Develop a clear and well-informed country strategy. Build a deep understanding of the healthcare and patient needs and nuances of each priority market and use it to identify and inform the early commercial decisions that will make or break your launch. Our interviewees spoke of difficulties encountered when critical local-market fundamentals—such as prescribing specialties or comparators that differed from those in the home market—had been overlooked during launch planning. In another case, a failure to consider the implications of complex local regulations led to long delays in commercialization.
- Plan ahead to put enablers in place. Make early strategic investments to fulfill local requirements and lay a firm foundation for sustainable market access and reimbursement. For instance, identifying country-specific data needs and tailoring strategy accordingly—perhaps by including local patient populations in phase III/IV trials or providing local real-world evidence as part of the regulatory submission—could help you take a drug to patients more quickly. One leading rare-disease biotech began its international expansion by including countries with high patient prevalence in its global clinical trials. It also set up clinical operations in core markets with high unmet patient needs, such as parts of Latin America. Having expanded its reach to more than 20 countries, the company now derives about half of its revenues from outside the United States.
- Make the most of your invested footprint. Take advantage of your existing local resources to identify adjacent countries, regional distribution partners, or regional in-licensing deals that might help you capture value in subscale markets that cannot realistically be addressed as stand-alone opportunities. When one biotech in-licensed a novel therapy for a disease with high prevalence in the Middle East, it used its presence in Saudi Arabia to expand into other countries in the region. This strategy allowed the company to make other therapies available to patients in small markets that would otherwise have been impossible to reach.
- Proceed gradually and be prepared to change course. Design your organization with your desired end state in mind, but build it iteratively to avoid committing too much too soon. One US biotech built a complete European commercial organization early on, only to be faced with restructuring it after running into phase III delays and failures. A more cautious approach might involve prioritizing a limited set of countries, or investing in new markets through regional hubs and avoiding committing to further funding until predefined milestones (such as revenue or profit thresholds) have been reached.
- Consider self-pay patients. In emerging markets, out-of-pocket spending accounts for a sizable portion of total healthcare expenditure: 30 percent in Brazil, 35 percent in China, and more than 50 percent in India, for instance. Reaching self-pay patients calls for a different approach from that used for public markets, with different forms of engagement underpinned by a thorough understanding of patient and prescriber needs at a local level.
We expect new launchers to continue to derive meaningful value from international expansion. To bring innovative therapies to patients on the broadest possible scale, they need to explore global opportunities during late-stage drug development and design a nuanced and carefully paced international expansion strategy.