Naturally, one of the key questions from a potential investor evaluating a business plan is, “What’s the potential market for the new proposed product?” This drives future sales projections, potential return on investment and how to define the target product profile. It may be easy to ride the excitement of a new product, maybe even a disruptive technology, and be tempted to default to broad sweeping, statements to represent the potential market of a new product, such as “The new AMD agent will target the $10 billion market in the key territories,” or “This surgical product will be used in each of the 4 million cataract surgeries performed per year in the U.S.,” or that “This new myopia product will have a market representing approximately 30 percent of the global population.” In evaluating and supporting business pitches from new physician entrepreneurs, I’ve seen a wide range in how the potential market is initially described. This installment of the column will take a brief look at market segmentation, and some specific approaches to how to drill down to find a proper market model.
In Clayton Christensen’s book “The Innovator’s Dilemma,” he discusses business approaches for sustaining technologies into markets with existing products compared with going into markets with disruptive technologies. Thus in some cases truly disruptive technologies may have a market size that is difficult to precisely predict. However even then, one can at least characterize current customer needs and behaviors to contextualize the market.
For the sake of this discussion, here we’ll break down the design of the market summary into a model with four main buckets: 1) Defining the total market. 2) Segmenting the population(s) within the disease/condition. 3) Comparison of our product to existing products. 4) What factors will drive adoption. Drilling down into these four layers should help calculate a credible estimate for the usage level of our new product.
• Defining the Total Market. Here, you should start, of course, with the total prevalence and incidence of the disease or condition your product aims to treat. But ask yourself: Are you capturing it completely? Is the high-level estimate based on the number of formal diagnoses, scripts written or reported signs/symptoms from patients, and is this fully recognizing the potential market?
Examples of situations where the total market may go beyond initial estimates based on the number of diagnoses include cases such as: a novel product, diagnostic test or treatment for earlier stages of diabetic retinopathy that would target patients seen by non-eye-care physicians; a disease like dry eye in which formal diagnoses only estimate a minor portion of the total number of patients that actually suffer from the condition; a product that addresses progression from earlier stages of AMD, prior to evidence of significant changes in standard vision tests, that is evaluated in a trial with a novel, more sensitive visual function endpoint; and allergic conjunctivitis, in which most patients with nasal allergy don’t even associate themselves with a condition they’d label an eye allergy, yet they still report ocular symptoms.
• Segment the Population. The total market can then be broken down into sub-categories. This can be done by such determinants as stage of disease (early, moderate, late/progressed), etiology, patient-reported outcomes, etc. Also, determine at which point in the disease progression you intend to capture the patient. For example, is the product intended for preventing or delaying a surgical procedure, to capture surgical cases to improve outcomes, or for a specific subgroup of patients post-surgery (such as a high-risk population for a recurring condition requiring another surgery or procedure).
In a field like dry eye or a condition with a cosmetic aspect such as redness, you may need to further examine the number of patients that not only are identified by a doctor, but those that self-treat with OTC products, and those that would purchase a new product if available, but aren’t satisfied or even using existing options. In such patients, the sales of current standard of care isn’t going to fully represent the market potential, and you need to characterize what segment your product is targeting.
Another prime example is a product that addresses dry AMD prior to the development of geographic atrophy. In this case is the focus patients who have intermediate disease and are at risk of progressing to GA, or those at earlier stages of disease? And, if it’s aimed at earlier stages in which visual acuity isn’t significantly reduced, what type of treatment burden in terms of route of administration and frequency will a patient accept, and how does that inform the size of the target patient population?
• Comparison to Existing Products. Is the product intended to replace the current standard of care as a new primary therapy, to be used as adjunctive therapy to improve outcomes, or is it to be a secondary therapy for failures or suboptimal responders? Where does the new product realistically fit in the current treatment continuum? A perfect example is a new retinal product: Where does it fit in the wet AMD/DME market among existing VEGFs, the now-approved bispecific faricimab, new products with novel mechanisms, and existing and forthcoming sustained-release options? A specific niche can still represent a significant market size, and defining this niche early will drive your clinical trial designs.
Also, you need to consider existing generics in your product’s therapeutic area. Is the effect of the new product enough to drive use (but also insurance reimbursement coverage from payers) away from existing inexpensive generic products (e.g., a new IOP agent released amid the availability of generic once-daily prostaglandins)? You’ll need to focus the target market estimate of the specific population of patients on whom a physician will choose to use the new product over the existing standard of care.
• What Will Drive Adoption? With a surgical product, for example, some considerations include: What will it take for a doctor to adjust the current standard surgical procedure for a new product, or incorporate a new product that’ll add cost to an already packaged surgical cost? How will the surgeon get the product in their hands for a procedure, and is there a difference between an ambulatory surgical center vs. a larger academic hospital setting? Does the product increase speed or quality? Decrease surgical complications? Or is it meant only for high-risk patients who are undergoing that surgery? How will a surgeon select the appropriate patient?
Performing even some basic market research in the form of surveys of your colleagues can help your business pitch. This doesn’t always require hiring an expensive outside firm, especially for the earlier stage initial pitches during seed fundraising. In order to ensure you have the appropriate number and spread of physicians as part of your market survey, be mindful of the type of physicians and practices to whom you’re speaking. You may be interviewing physicians that are early adopters, or work at a solo or group practices versus a large institutional centers or have an unusually high or low level of patient flow. This will help characterize not only the ultimate size of the market, but the speed of adoption, and will help define your sales ramp in the first several years after your product is launched.
There are times when an initial development plan and regulatory approval may initially address a specific slice of the market, followed by development for broader segments. If this is the case, you should define the market projections in that first category, followed by projections for the stages of product roll out and the different phases of the product’s life cycle. With the above core elements, you should be able to build at least a basic market model that consists of the number of patients and sales projections, focusing on the percentage of the specific subpopulation of patients in the target market segment. Being conservative at this step, rather than inflating your projections by assuming just the broad market with all segments,, can actually help build credibility with investors. These considerations also highlight the importance of defining the target product profile (TPP), which we’ve discussed in previous columns. We can’t stress enough the importance of starting with the TPP and defining target/ideal criteria for each category therein, as well as the minimally acceptable criteria. The exercise of defining the TPP will help drive the clinical trial design, get specific on patient population for enrollment in trials, and ultimately provide support your market model.
Mr. Chapin is a senior vice president of the Asset Development & Partnering Group at Ora. The company offers drug, biologic and device consulting; preclinical and clinical research execution, regulatory and development strategy to support its clients and partners. Review and comments on this column were provided by Aron Shapiro, partner in the same group at Ora. The author welcomes your comments or questions regarding product development. Please send correspondence to mchapin@oraclinical.com or visit oraclinical.com.
