The Big Squeeze - Pharmaceutical Executive


The Big Squeeze
The simple answer to pharma's pipeline crisis? Get more value out of the products you already have

Pharmaceutical Executive

Consider Bayer's success in evolving Adalat (nifedipine) to address new markets. The product was launched in the mid-1970s as an anti-anginal therapy, taken three times a day. Bayer expanded Adalat's label to include hypertension, introducing a long-acting form to address this lucrative market in 1985. As a result, Adalat sales continued to grow until they exceeded $800 million a year by the early 1990s. By 1991, Bayer had again laid the groundwork for a new form of Adalat, this time releasing a once-daily dosage form to match the emergence of competitive products with a similar duration of action. As a result of Bayer's success in identifying new indications and dosage forms early in Adalat's lifecycle, its sales continued to climb to $1.17 billion by 2000—a quarter-century after the drug was first commercialized.

Speed the product on its way. The cost of bringing a major pharmaceutical product to market is estimated to more than $879 million. Of the R&D costs (about 70 percent of the total), the later stages are by far the most expensive; phase I, II and III clinical trials represent 35 percent of all R&D outlays. Although the focus of attention at this stage is naturally on getting the product approved by regulatory authorities, it is important in the total context of product lifecycle management that vigorous prelaunch activities are under way to create heightened awareness of the forthcoming product.

Launch acceleration is now a vital ingredient in product lifecycle management, because every month shaved off the time to market can be measured in additional sales. PPD, a provider of services to assist drug discovery and development, illustrates this using the example of a fictitious product having annual revenues of $11 billion, gross profit of $8.8 billion, operating income of $3.3 billion, and operating income/share of $1.12 billion. According to PPD, if this company could bring a $2 billion blockbuster product to market three months earlier, it would increase its operating income by 14 cents per share. If the product could be brought to market six months faster, operating income/share would rise by 27 cents.

Comarketing can be a potent means of ensuring that a product reaches peak sales quickly after launch. Crucial to GlaxoSmithKline's marketing of Zantac (ranitidine) was a policy of selecting comarketing partners, such as Menarini in Italy, the country where Zantac was launched. This was especially valuable in countries such as Italy, Germany, and Japan, where GlaxoSmithKline did not, at the time, have a high profile among physicians; its marketing partners were chosen as native companies with a good but not overwhelming presence. Having two sales forces ready to promote their brands of ranitidine meant that early product growth exceeded all expectations. It was also an excellent boost to company morale in other countries.

Create a franchise. A therapy franchise is more than the sum of its parts. It is about dominating a particular therapeutic area through the creation of a complementary range of products. The range may be as few as two; in the hypertension field, AstraZeneca has the angiotensin II antagonist Atacand (candestartan cilexetil), which had an 8.7 percent share of the market (but 65 percent growth rate) in 2000. But AstraZeneca also has another antihypertensive, its ACE inhibitor Zestril (lisinopril). Zestril forms part of the same therapy franchise with Atacand, which is recommended in the treatment of mild-to-moderate hypertension, while Zestril is used in more severe cases. By treating the two as complementary products, AstraZeneca has been able to sustain Zestril's growth while launching and growing Atacand. This flies against the predictions of many analysts, but the facts are there: Atacand is challenging the market leader Cozaar (losartan), which is produced by Merck.

Not every company is fortunate enough to have two successful products in the same therapeutic area. Our survey reveals that in-licensing is emerging as a favored means of developing a franchise, by adding products that complement the uses of an existing successful brand.


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