In every industry, revenue is driven by a simple equation:
Revenue = (Price per Unit) × (Units Sold)
For most sectors, both levers are available. A company can raise prices, sell more units, or ideally do both.
In our industry, however, increasing price has become increasingly difficult. As a result, the industry has shifted its focus (or, perhaps more accurately, has continued to shift the focus) toward expanding the number of units sold.
This simple fact has profound implications for portfolio construction and BD&L strategies.
This shift is reshaping (or, should shape) how start ups and emerging companies go about prioritizing candidate development, portfolio planning, and out-licensing activities. It also influences which drug candidates become the most attractive to potential Licensees.
Pricing Pressures are Increasing
The pricing environment has changed dramatically over the past decade. Once upon a time, a brand manager could increase price by 5% or more just by rolling out of bed. Today, several factors now constrain the ability of manufacturers to grow revenue through price increases, including the United States.
Key drivers include:
- Government policy and regulation. The Inflation Reduction Act (IRA) introduced Medicare drug price negotiations and inflation-linked rebates. These policy changes may limit price increases for many high-revenue products in the years to come. The many problems with the IRA have been eloquently discussed elsewhere.
- Payer consolidation. Pharmacy benefit managers (PBMs), hospital systems, and insurance companies increasingly negotiate aggressively on price and formulary placement. Efforts to reform the PBM industry have been discussed elsewhere.
- International reference pricing. Health technology assessment (HTA) bodies such as the National Institute for Health and Care Excellence (NICE) in the United Kingdom evaluate cost-effectiveness and determine reimbursement levels.
- Competition. Biosimilars and generics continue to erode pricing power in established categories, such as anti-TNF therapies.
Thus, relying on price increases alone is no longer a sustainable growth strategy for most pharmaceutical companies.
Therefore, the Growth Imperative Becomes Units Sold
However, increasing units sold in our industry is not merely a matter of marketing. Instead, it requires strategic clinical and regulatory planning that expands the addressable patient population.
There are two primary ways to achieve this:
- Increase patient capture within an existing indication
- Expand into new indications
Increasing Patient Capture Within an Indication
Even within a single approved therapeutic indication, there are often opportunities to treat more patients. These may include:
- Moving earlier in the treatment paradigm (for example, from refractory disease to first-line)
- Treating broader disease severity categories
- Pediatric approvals
- Geographic expansion (and their associated pricing pressures)
- Treating related sub-populations supported by biomarker data or real-world evidence
For example, several oncology products have moved from late-stage metastatic settings into adjuvant and even neoadjuvant settings. This shift expands the eligible patient population significantly, sometimes by an order of magnitude.
Expanding the Label: The Power of Indication Expansion
The second lever, and arguably the most strategically important, is indication expansion.
Indication expansion refers to securing regulatory approval for additional therapeutic uses of a drug beyond the initial approval.
Recent data highlight the importance of this approach. According to a 2025 IQVIA report, 509 new active substances (NAS) approved in the United States between 2000–2023 received 1,092 additional approved uses, meaning that many drugs effectively double their approved indications within five years of launch. Thus, for many products, the initial market represents only a fraction of the ultimate commercial opportunity.
This is an extraordinary statistic that underscores the commercial importance of indication expansion.
Well-known examples include:
- GLP-1 receptor agonists being studied in not only obesity, but also cardiovascular disease, Alzheimer’s disease, non-alcoholic steatohepatitis (NASH), and sleep apnea
- PD-1 inhibitors expanding across dozens of oncology indications
- Anti-TNF therapies transitioning into multiple immune-mediated inflammatory conditions
Keytruda is arguably the modern poster child for indication-driven revenue growth. Initially indicated for metastatic melanoma in 2014, Keytruda was subsequently approved for NSCLC, Head and Neck Cancer, and other cancers. From 2015 Revenues of $566 million, Keytruda has grown into a >$25 billion platform, thanks to an indication expansion strategy (and, importantly, a (modality x mechanism of action) that made this possible).
Humira is an older example of this phenomenon. From an initial indication in rheumatoid arthritis in 2002, Humira has grown into a >$21 billion franchise by expanding into dermatology, gastroenterology, and other therapeutic areas.
Other well-known examples include Dupixent, Revlimid, and, more recently, Ozempic / Wegovy.
A recent analysis in Pharmaceutical Executive highlighted the commercial impact of indication expansion in the GLP-1 class. By adding approvals in chronic weight management and cardiovascular risk reduction, Wegovy generated an incremental $6.1 billion in 2023 revenue, separate from Ozempic’s diabetes sales. In other words, each new indication created a new commercial stream rather than cannibalizing an existing use.
Conversely, rare disease products tend to have very rapid initial uptake, followed by a plateau with minimal growth, simply due to a limited patient population and limited opportunities for patient expansion. The high prices for these products makes geographic expansion outside the US even more challenging, even though these products are delivering outstanding clinical benefits to patients. Examples abound, such as Luxturna, Zolgensma, Brineura, and Strensiq.
Strategic Implications for Business Development and Licensing
This trend has major consequences for BD&L.
From the perspective of a potential Licensee, assets that offer multiple plausible paths for indication expansion may be far more attractive than those limited to a single therapeutic niche.
These candidates represent what we call “platforms in a box.”
They offer:
- Multiple Phase II (and beyond) opportunities
- Greater optionality in resource allocation
- Higher probability that at least one indication will succeed commercially
- Stronger potential return on investment for marginal investments
- Opportunities to leverage existing commercial infrastructure
For a large pharmaceutical company, a single asset that can eventually support five or more approved indications across multiple therapeutic areas represents an exceptionally compelling investment.
As a result, these multi-indication assets may command higher upfront payments, more favorable deal terms, and stronger competitive bidding intensity during partnering discussions.
The Challenge for Single-Indication Assets
What happens when a drug candidate only addresses a single, narrowly defined patient population?
Gene therapies for ultra-rare diseases illustrate this challenge. These candidates may offer transformative clinical benefits, but their commercial potential is limited by:
- Very small patient populations
- Limited (or no) opportunity for expansion into additional indications
- High development and manufacturing costs
In such cases, securing a partnership may be more difficult unless the opportunity is:
a) Large enough in economic terms to justify investment, and/or
b) Aligned with the strategic priorities of a Licensee.
This explains why some promising rare disease programs remain unpartnered, or why partnerships occur only with companies that already have an established presence in the relevant therapeutic area.
Portfolio Planning Consequences for Emerging Biotech Companies
For early-stage companies, indication expansion potential should be a central consideration during portfolio planning.
Key questions may include:
- Does the mechanism of action support multiple therapeutic applications?
- Are there credible scientific rationales and/or animal data supporting additional Phase II studies?
- Will real-world evidence provide opportunities for broader use?
- Can the development plan support regulatory expansion over time?
Companies that can articulate a clear, data-driven path toward multiple indications will likely be better positioned to secure partnerships and attract investment.
Conclusion
The traditional revenue model driven by price growth is simply not sufficient for sustained growth. This has not been the case for some time now, and it is only getting more challenging. Pricing pressures from governments, payers, and competitors / generics have shifted the strategic focus toward increasing units sold.
This shift places indication expansion at the center of product development strategy.
Candidates with broad expansion potential represent “platforms in a box” that are highly desirable from an out-licensing and portfolio standpoint. Conversely, single-indication assets may struggle to secure partnerships unless they are strategically aligned or economically compelling.
For emerging biotechnology companies, understanding and communicating the indication expansion potential of their candidates will be essential for successful partnering discussions and long-term value creation.