Dx Launch Risks
This case study shows how a risk management strategy for possible recalls could prevent disruption, not only to a biomarker's market progress, but to ...
Diaceutics asked four senior executives in the pharma and diagnostic industry to come up with a value on how much it would cost to launch and commercialize a novel diagnostic test. Here’s what they came up with.
Every other year Diaceutics holds a convergence meeting in Washington DC composed of some 35 invited movers and shakers in the personalized medicine world, split pretty much 50:50 between diagnostic and pharma companies. Always a forum for great debate and networking, this year’s meeting focused on how to cooperate in the commercialization of non companion diagnostics. However at this year’s meeting , there was a collective gasp of disbelief among the pharma audience when I put up a number on the screen suggesting that on average the cost of developing and commercializing a diagnostic properly in the US is $50 million to $75 million.
This is not the first time I have met with disbelief when talking about the cost of commercializing a diagnostic and clearly others have met with the same reaction. We decided then to open this number up to external scrutiny, in short to get a few ‘people who have actually taken a test from soup to success’ to give their view and once and for all get the dollar facts out there. In total, a virtual expert panel of four senior folk in the industry (names below) were asked to come up with agreement on the investment required to truly commercialize a novel test.
Costs were broken into two buckets: development to launch, and launch and commercialization costs. In general, it was agreed that there is more accurately a dollar range, depending upon the novelty of the technology being developed. We defined low end as a follow on diagnostic product where a similar test exists in the market, and a high end test which is a new biomarker (needing to establish novel clinical utility), or a new platform likely to be in oncology, a chronic disease like rheumatoid arthritis or a range of infectious markers requiring panel performance. The dollar range ran from $20 million to $106 million and is detailed in Table 1.
|All numbers are in US$m||Low end||High end|
|Development and Manufacturing Costs|
|Technology acquisition and protection||0.6||4.0|
|QSR and FDA compliance||1.0||3.0|
|Platform development (buy in or make)||3.0||20.0|
|R&D (based on 1-3 years of FTEs at 200k/yr loaded spend)||3.0||8.0|
|Clinical utility trials retrospective versus prospective||1.0||10.0|
|Admin and financing||3.0||5.0|
|Subtotal costs to launch||12.1||55.0|
|Sales and Marketing Costs (US market only)|
|Direct sales team (assuming required for 3 years)||3.0||12.0|
|Health technology assessment and payer negotiations||1.0||4.0|
|Clinical education (guidelines – KOL endorsement multi-stakeholder education)||2.0||25.0|
|Marketing (launch meetings, representative detail aids, online marketing)||2.0||10.0|
|Subtotal costs to drive adoption||8.0||51.0|
|Total costs to commercialize||20.1m||106.0m|
Table 1. Dx Development and Commercialization Costs.
Low end = follow on product, existing owned platform, infectious disease
High end = new assay, new platform, new technology, oncology or chronic disease
The expert panel was then asked to provide comment on these costs. These are summarized below:
So there you have it: the cost to develop and commercialize a diagnostic is subject to a considerable investment range, depending on the test positioning and novelty. On average, an additional investment of about $50 million to commercialize a diagnostic should be factored in to the additional cost of targeted therapy if the test is to contribute to enabling the right patient to be treated at the right time.
My thanks to our expert panel for this cost assessment and analysis.
Dr. Doug Dolginow has extensive experience in the personalized medicine arena and has served as CEO, COO and on the Board of Directors of several organizations focused on furthering the reach of personalized medicine. Prior to joining the Ignite Institute, Dr. Dolginow served as CEO of NanoValent Pharmaceuticals. Dr. Dolginow also co-founded and served as CEO of Calderome, Inc., which led to the founding of Veracyte, an early stage cancer diagnostics company addressing the emerging opportunities in personalized medicine. Dr. Dolginow co-founded and served as President and COO for OncorMed which he took public in 1994 and sold to Gene Logic in 1998, where he then served as Executive Vice President of Pharmacogenomics.
Dr. Katherine Tynan is a seasoned biotechnology entrepreneur with a focus on business development, startup entrepreneurship, fundraising and strategic business planning for clinical diagnostic companies. She has a background in reimbursement, financial analysis, operations, product development, diagnostic reimbursement and commercialization of new technologies for clinical diagnostics. In her current role as a consultant, Katherine works with a number of early stage and established multinational diagnostic companies, guiding them through product development choices, market entry strategies, funding ($21 million raised) and a diverse range of business development transactions.
Noel Doheny, CEO of Epigenomics, has 30 plus years of experience in the field of diagnostics, with over 20 years in senior management. In his most recent position as CEO of OpGen (2008 to 2009), Mr. Doheny led the transformation of an incubator lab services company into a systems company in less than two years. Prior to this, he held positions as Senior Vice President for the Molecular Diagnostics Division of Affymetrix Inc., Vice President of Pre-Analytical Solutions and was a member of the Executive Committee at QIAGEN, as well as President and CEO of BioStar Inc. (known as ThermoBioStar post-acquisition). Importantly for Epigenomics as it continues to build a US sales force, he has built several operating teams from the ground up, including the commercial teams to launch novel products at companies such as Ciba Corning, ThermoBiostar and OpGen. Mr. Doheny obtained degrees in Biology and Chemistry from West Virginia University and attended Georgetown University for postgraduate studies in Biochemistry prior to moving into industry.
Peter Keeling, CEO of Diaceutics, brings over twenty-four years of experience in international health care, having directly initiated and managed the launch of four pharmaceutical, seven OTC and five diagnostic products, in addition to three joint ventures and two major joint corporate marketing campaigns. In addition to Peter’s extensive operational experience in the US, he also has substantial experience running operations in all the key health care markets of the world, including Germany, the UK and Japan. Peter has spent two extended periods in applied industrial research, including a year at MIT’s Pharmaceutical Program at the Sloan School of Management in Boston.