Pre-commercial Biopharma: Your therapeutic is ready for the big stage; are you?

You have successfully navigated bringing a product candidate through clinical trials and secured regulatory approval for your therapeutic. Ideally, you will have been preparing yourself for commercial operations well before you submitted your data for regulatory approval. Your remaining commercialization preparation now has greater significance and urgency to complete.

Among other things, you must formalize your launch strategy, set up governance practices and begin a commercial plan across each business function and at an enterprise level.

You may still be heavily invested in science and research to keep your pipeline active and robust, which is advisable for many pharma companies—but your focus needs to shift to operating a commercial enterprise. Your attention to compliance can make or break you.

Regulatory compliance and reporting

• To ensure transparency around payments you have made to physicians and medical institutions from the research and development stage onward, make sure you understand and comply with the Physician Payments Sunshine Act.
• Make sure you are following the Drug Quality and Security Act (DQSA), particularly Title II of the DQSA—the Drug Supply Chain Security Act (DSCSA)—which outlines steps to identify and trace prescription drugs as they are distributed in the United States.
• Be prepared to address any new financial reporting risks associated with commercial operations.

Financial reporting and accounting

• If you haven’t built a strong digital backbone for your internal systems, now is the time—revenue recognition and inventory accounting and management, for example, are the most significant new areas of accounting and financial reporting post-approval.
• To meet financial reporting needs and requirements, your company may also need to set up processes to obtain data from external sources (such as third-party logistics partners or specialty distributors).
• You will need to establish new processes in order to consider the impact that becoming a commercial company has your tax attributes (net operating losses, tax credits and other tax assets) as well as tax compliance considerations resulting from changes to financial results and entering new jurisdictions (sales taxes, income taxes and VAT).

Vendors, contracting and procurement

• Understand your capacity, constraints and costs; determine what you can do and where you may need to supplement your organization with third parties.
• Ensure that third parties for manufacturing, distribution and sales are compliant with FDA and other regulatory standards.
• Consider more strategic sourcing, re-negotiate with vendors and/or consolidate vendors.

Sales and operations forecasting

• Operational forecasting will now include new key performance metrics based on the need to educate investors and other key stakeholders on key success drivers stemming from becoming a commercial organization.
• Start mapping out the talent needed for your launch strategy. Determine whether you’ll need internal or external partners or resources to assist with product launch, marketing, sales and market access. Ensure that you have a good handle on cost of goods.
• Ensure that you have a solid understanding of selling, general and administrative expenses both for your profit needs and for financial reporting to investors and the public.

Pricing and distribution strategy

• You need to analyze data from the market, your competitors and your clients to build your initial gross-to-net model.
• Identify and then thoroughly research and vet potential sales and distribution channels.
• Start thinking about longer-range commercial forecasting.

Staffing and other infrastructure

• It might not have made sense earlier to have sales, commercial, regulatory compliance and market access staff; now they are critical.
• Operational staff, such as procurement and vendor management staff, are more critical now for the sake of your gross margins and EBITDA.
• Having robust recruitment, compensation and retention policies will support and help an entity more successfully recruit and retain the added staff needed to support commercial operations.
• With greater competition for talent, consider outsourcing all or part of some critical functions, such as commercial operations, finance and IT.
• Security and IT issues become more important than ever as your intellectual property has become much more valuable.
• Determine whether you want to handle any or all of your own manufacturing or choose a CMO or CDMO.

Be ready for transformative events

You now have a marketable product. Being a commercial company allows you greater access to capital as well as other options. Do you want to be a market player on your own, do you want to join forces with someone else, or do you seek to be part of something larger?

• Your company’s attractiveness as a merger or acquisition target increases.
• Drug licensing deals become more likely and attractive, whether out-licensing or in-licensing.
• Joint ventures also become a more tempting and profitable consideration.