Four Essential Market Assessment Questions

by Susan Nemetz, September 2018

What follows are excerpts from a conversation among NemetzGroup team members regarding market assessment approaches. Specifically, we talked about the levels and types of market assessments needed to answer fundamental development and financial opportunity questions.

The framework we tend to follow is shown below. For today’s newsletter, we will focus on the first column — the initial market snapshot. Here, at this very first stage, the purpose is often to inform some aspect of the following: indication prioritization, selection, and team alignment.

In our discussion, we want to shed light and share perspective on four market assessment questions which our clients face during drug development:

  1. When, how much, and what type of analysis should be done?
  2. How do we avoid internal bias?
  3. How much market information should we share with whom and when?
  4. Should the initial snapshot analysis be done internally or externally?

When, how much, and what type of analysis should be done?

Sue Nemetz: When it comes to market assessments, I believe that people live at the extremes: either they go too deep or not deep enough. That can be problematic. If you use the analogy of buying a piece of land, when you first discover a property that you are considering purchasing, it wouldn’t (yet) make sense to invest in engineering analysis, legal, architectural designs, etc. At the same time (on the other extreme), you wouldn’t want to buy it based on a 15-minute drive-by where you happened to catch a beautiful sunset. What I like about the leveling approach we use for market analysis is that it guides you in determining how much time, money, and effort to spend at each stage.

Cindy Devall: I agree. Which is why we like to ask, right from the start, “Is this anything?” We want to know — early and up front — if we have something worth pursuing. It doesn’t require a deep dive to answer that question. A quick assessment of market size, competitive environment, barriers to entry, and the existence of unmet needs can often prevent a long and ultimately fruitless run down a rabbit hole.

Jim Whalen: At such an early stage, you can be a bit more pragmatic about a product concept. You really don’t need to know much about its projected efficacy or safety. You know it has to surpass whatever is defined as the standard of care by a marginal percentage and that safety must be acceptable — or it won’t be a viable product. The rest of the exercise at this level comes down to relative attractiveness of the indication and the magnitude of unmet medical need.

Meighan Rock: There’s also a need to consider qualitative vs. quantitative analysis. For example, while I certainly appreciate the desire to codify the world, and a quantitative approach does get you to “an answer,” it can also miss the spirit or intent of the inquiry. A pure qualitative approach, on the other hand, can lack some of the precision needed to move forward confidently. I think the “golden path” is probably more qualitative in early stage programs, becoming progressively more quantitative further on. One approach or the other, alone, doesn’t work.

Jen Riley: Everyone always wants more, better, faster. But there are practical limitations in terms of both human and financial resources available.

Marianne Doherty: Agreed. Funding is everything. You don’t want to put effort behind something prematurely.

How do we avoid internal bias?

Lisa Nelson: When people work hard and believe in the cause, it’s hard for them to remain objective. Often, it’s not that the opportunity is not there at all, it may just be that they feel it’s much bigger than it actually is. Part of our value is in providing an objective view of the market. This view helps clients save money, pain, and effort by not pursuing something just because it’s become somebody’s favorite.

Marnie Hoolahan: And there’s a danger in creating a bigger story than what really exists. At this early stage, there’s no clinical data yet. Investors are less likely to be wowed by an impressive speech and presentation — they want to see the data. It’s hard to recapture the market and continue to raise money successfully once a failure happens. You damage your credibility if you build a story too quickly and the data, when it comes out, doesn’t support this. For this reason, we try to play the role of remaining very fact-focused and cautious in our optimism with our clients.

Jim: If you heavily source your work from secondary sources and validate hypotheses using external experts, you can mitigate potential internal biases. We typically like to include a few discussions with outside experts in each early-stage assessment we perform to gain this objective insight.

Lisa: As long as you are pulling data, not cherry picking, and include a broad spectrum of research, it’s hard not to see what’s really there.

How much information should we share and when?

Marnie: When a company is early stage, and there are scientific founders with little commercialization experience, there’s an intense focus on the product, particularly as they are trying to raise money. The snapshot we use provides the value positioning for them. It helps them to recognize where the market is, and where there may be gaps or opportunities. This helps them know what’s most important to share in a financing pitch, and how that will evolve as the product develops. Investors want clients to have all the answers right from the start. We don’t believe they need (or want) all of them at this early stage.

Sue: There’s a difference between what analysis is done and when it is communicated. I think too much analysis here can be a waste of resources since it will be based on assumptions and variables that will change as more data is known. On the other hand, the team needs to have a point of view that they update along the way.

Colleen Moore: Yes, the risk is early research can become embedded as “institutional knowledge.” That creates bias down the road as people refer back to old data points, even if they are no longer valid.

Jim: To Colleen’s point, this is why it is crucial to update sources and research as the market environment and product candidate evolves.

Should the initial snapshot analysis be done internally or externally?

Marnie: It comes down to both budget and capability. If you have someone who’s savvy enough in the business side internally who can spearhead this, I think you could do this internally as opposed to hiring outside resources.

Colleen: It also depends on your goals. If one of the key objectives is to enter into partnering discussions, you may need a much more in-depth and rigorous analysis, even at this early stage. It’s going to depend on the situation.

Cindy: And back to the bias question. Even if you have the budget and skills internally, you still run the risk of not getting the objective snapshot you’re looking for in the first place.

Meighan: That’s one of the reasons I’m a fan of some opposition research. It’s a way of identifying what the warts are. This way, if you speak with a partner who raises some objections, you are not caught off guard.

So, coming full circle, we need to understand the company goals and what decisions this work will inform. That understanding will dictate the level of analysis. At the initial market snapshot stage, we approach the work objectively while ensuring that it is also at the right level — following the Goldilocks principle: not too small, not too big, but just right.

At this stage, we acknowledge that this assessment will hold until x point in time: until there is additional data, new financing, competitive entrant, or portfolio prioritization. Often, we will revisit the analysis in greater depth at a later date. Managing resources until that time shows good judgment.

​The NemetzGroup team on our weekly Zoom call!