Vose SoftwareModelChoice decision tree · Pharma and biotech
Biosimilar Launch Strategy Decision
Launch a biosimilar at risk, wait for a patent settlement, license it in, or stay out of the market?
From the model’s decision tree
Best first decision: At-Risk Launch
The expected value of each first option when every later decision is also made well (the tree rolled back).
| First decision | Expected value | |
|---|---|---|
| At-Risk Launch | $130,000,000 | ✔ best |
| Wait for Patent Settlement | $117,125,000 | |
| License-In from Manufacturer | $80,850,000 | |
| Don't Enter Market | $0 |
| Measure | Value |
|---|---|
| Expected value of the best strategy | $130,000,000 |
| Chance of a loss on the best strategy | 20.0% |
| Best outcome on the best strategy | $650,000,000 |
| Worst outcome on the best strategy | −$120,000,000 |
S-curve (cumulative probability) of At-Risk Launch from the saved simulation.
The decision
A specialty pharma company has developed a biosimilar version of a blockbuster anti-TNF biologic (reference product annual sales: $8B). The biosimilar has completed analytical similarity, PK/PD studies, and a confirmatory clinical trial. FDA approval is expected, but patent litigation clouds the launch path.
Objective
Maximize expected NPV. The at-risk launch offers highest upside but carries litigation risk up to -$200M if patents are enforced.
The options
- Option 1: At-Risk Launch ($150M)
Launch immediately upon FDA approval, before patent disputes are resolved. High investment in manufacturing and commercial infrastructure. Risk of patent infringement lawsuit with potential for injunction or large damages. If sued, must decide: settle with royalty or fight in court.
- Option 2: Wait for Patent Settlement ($80M)
Delay launch until patent situation is resolved through settlement or expiration. Lower risk but may lose first-mover advantage to competing biosimilars. Settlement timing is uncertain (2-6+ years).
- Option 3: License-In from Manufacturer ($30M)
License a biosimilar from an established manufacturer rather than building own manufacturing. Lower capital investment but dependent on partner.
- Option 4: Don't Enter Market
Focus resources on other therapeutic areas. No investment or risk.
The decision tree
The tree has 3 decisions, 13 chance events and 31 outcomes. The best path is open: at every decision the best choice is marked, and the expected value beside each branch counts every cash flow from the start. Open any other branch to see what follows it.
DecisionChance event+$ cash flow on the branch
At-Risk Launch −$150,000,000expected $130,000,000 ✔ best
Chance: Patent Litigation Outcome15% No Suit Filedexpected $270,000,000
Chance: Market Capture (No Suit)30% High Market Shareexpected $500,000,000
Chance: FDA Interchangeability?- 40% Interchangeable Designation +$800,000,000payoff $650,000,000
- 60% Biosimilar Only +$550,000,000payoff $400,000,000
- 45% Moderate Market Share +$400,000,000payoff $250,000,000
- 25% Low Market Share +$180,000,000payoff $30,000,000
25% Suit Filed - Preliminary Injunctionexpected $46,000,000
Decision: Preliminary Injunction GrantedAppeal Injunction −$15,000,000expected $5,000,000
Chance: Appeal Outcome- 30% Injunction Overturned +$450,000,000payoff $285,000,000
- 70% Injunction Upheld +$50,000,000payoff −$115,000,000
Negotiate Settlementexpected $46,000,000 ✔ best
Chance: Settlement Terms- 35% Favorable Entry Date +$350,000,000payoff $200,000,000
- 45% Delayed Entry + Royalty +$150,000,000payoff $0
- 20% No Deal Reached +$30,000,000payoff −$120,000,000
- Withdraw from Market −$20,000,000payoff −$170,000,000
60% Suit Filed - Case Proceedsexpected $130,000,000
Decision: Settle or Fight in Court?Settle - Pay Royalty −$10,000,000expected $130,000,000 ✔ best
Chance: Royalty Settlement Terms25% Low Royalty (5%)expected $250,000,000
Chance: Reference Product Price Erosion- 30% Mild Erosion (10%) +$600,000,000payoff $440,000,000
- 45% Moderate Erosion (25%) +$400,000,000payoff $240,000,000
- 25% Severe Erosion (40%+) +$200,000,000payoff $40,000,000
- 50% Moderate Royalty (12%) +$300,000,000payoff $140,000,000
- 25% High Royalty (20%) +$150,000,000payoff −$10,000,000
Fight in Court −$25,000,000expected −$26,250,000
Chance: Patent Trial Verdict35% Win - Patents Invalidexpected $300,000,000
Chance: Post-Win Market Capture- 30% Dominant Share +$700,000,000payoff $525,000,000
- 50% Competitive Share +$450,000,000payoff $275,000,000
- 20% Crowded Market +$200,000,000payoff $25,000,000
- 25% Partial Win +$250,000,000payoff $75,000,000
- 40% Lose - Infringement Found −$200,000,000payoff −$375,000,000
Wait for Patent Settlement −$80,000,000expected $117,125,000
Chance: Patent Settlement Timing25% Early Settlement (2 yr)expected $252,500,000
Chance: Early Entry Market Share- 35% First Biosimilar - High Share +$500,000,000payoff $420,000,000
- 40% Competitive Entry +$300,000,000payoff $220,000,000
- 25% Multiple Biosimilars +$150,000,000payoff $70,000,000
- 45% Mid Settlement (4 yr) +$200,000,000payoff $120,000,000
- 30% Late/No Settlement (6+ yr) +$80,000,000payoff $0
License-In from Manufacturer −$30,000,000expected $80,850,000
Chance: License-In Terms30% Exclusive Territory Licenseexpected $179,500,000
Chance: Licensed Product Market- 35% Strong Uptake +$350,000,000payoff $320,000,000
- 40% Moderate Uptake +$180,000,000payoff $150,000,000
- 25% Weak Uptake +$60,000,000payoff $30,000,000
- 40% Non-Exclusive License +$120,000,000payoff $90,000,000
- 30% Deal Falls Throughpayoff −$30,000,000
- Don't Enter Marketpayoff $0
Change the numbers. Open the workbook with ModelChoice, change a probability or a cost in the tree, and the best decision updates at once.
Key assumptions
| Assumption | Value | Notes |
|---|---|---|
| At-Risk Launch Investment | $150,000,000 | Manufacturing, sales force, launch costs |
| Wait Strategy Investment | $80,000,000 | Reduced scale manufacturing + readiness |
| License-In Cost | $30,000,000 | Upfront + milestones to manufacturer |
| Reference Product Sales | $8B/year | Blockbuster anti-TNF biologic |
| Patent Litigation Risk | 85% | Probability of suit if at-risk launch |
| Trial Win Probability | 35% | Patents found invalid or not infringed |
| Damages if Lose at Trial | $200M+ | Lost profits damages + injunction |
| Price Discount vs Reference | 15-30% | Typical biosimilar discount range |
| Peak Market Share (Best Case) | 25-35% | With interchangeability designation |
| Number of Competing Biosimilars | 3-5 expected | Crowded biosimilar landscape |
The figures are illustrative: the companies and numbers are invented for teaching.
Try it in ModelChoice
- Strategy Table. Compare at-risk vs wait vs license-in strategies
- Sensitivity Analysis. How do litigation probability and market share affect EV?
- Risk Profile. Visualize downside risk of at-risk launch vs safer alternatives
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Further reading
Download the workbook and open it with ModelChoice. The free trial opens every example.
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An illustrative example: the figures are invented for teaching. Last updated 9 October 2026.