Ask most early stage pharmaceutical companies about their drugs US sales potential and they will likely say “$1 billion in peak sales”.

However, according to the Quintiles IMS institute, of the 667 innovative biopharmaceuticals launched in the U.S. over the past 20 years, only 19 drugs have reached the $1 billion in annual sales mark within their first five years. Clearly the “billion dollars” in future sales claim is often met with some skepticism.

How do young companies get to $1 billion? Many rely on product comparables (“Well, Pfizer got a billion with a similar drug”), a high prevalence rate, or a high unmet need. While one or some of those factors could be true, keep in mind they also layer on top of one another. A high prevalence rate might be accurate, but you may also find a relatively satisfied patient population. A high unmet need may be correct, but it is a difficult disease to diagnose or treat. A sales comparable might be valid in one therapeutic market, however the environment is often dramatically different in another so it really doesn’t apply.

I have been working with pharma and biotech companies most of my career to help diligence and forecast drugs from early stage pre-clinical all the way through market products. The way you begin that process and start to collect data to generate a forecast can help you understand what type of information you need to gather and comprehend. By collecting and understanding this data early, it can help shape your story and strategy which can garner credibility when raising money, licensing or selling your company (and avoid the eye rolls when pitching your company or drug).

So, let’s start at the top. The topline model of an epidemiology model is…the epidemiology! We should start by getting to know your target patient.

  1. How many are there?
  2. Where are they located? US, Europe, etc.
  3. Are they diagnosed or do you have to find them?
  4. Of those diagnosed, how many are being treated?
  5. Will any of the above change over time?

Knowing the above information is a great start but now we need to understand how your drug will be used by those patients if it gets approved. You need to understand the current treatment paradigm and the competitive environment.

  1. How are your potential patients being treated?
  2. Are they satisfied with that treatment? If not, why?
    • Efficacy?
    • Safety?
    • Convenience?
    • Price?
  3. Where does your drug fit into the above?
  4. Who are your existing and future competitors?
  5. Will any of the above change over time?

Clearly, there is some simplification here. All of these factors layer onto each other, and each needs to be translated into a mathematical model. Having said that, if you have a good grasp of the information outlined, it is a step in the right direction to help you tell a convincing story and start to formulate a believable forecast.

My general rule of thumb is: A US forecast of $1 billion in sales means you probably missed something!

Shawn Bridy is Venture Partner for Militia Hill Ventures, a venture capital and private equity firm that focuses on developing exceptional life sciences companies, and founder of Bridy Advisors, an advisory firm that provides strategic and operational consulting services for the Biopharma Industry.