Weathering the Storm - Pharmaceutical Executive


Weathering the Storm
Out from financial scandal, CEO Peter Dolan is steering BMS' most productive pipeline yet.

Pharmaceutical Executive

"We think muraglitazar will get turned down at FDA and will be delayed as FDA seeks more studies of the drug, being that it doesn't have a lot of benefit relative to TZDs [thiazolidinediones] like Actos [pioglitazone], and has some potential worrisome liabilities on the cardiovascular side," says Deutsche's Ryan.

Others expect an approval—after all, BMS took prudent steps to ensure the drug's safety. Not only did the company apply investigative toxicology in developing Pargluva, it also employed another safety net by partnering with Merck, which had gained significant experience with PPARs while bringing its compound MK-767 to Phase III—at which point it was discovered that the compound had toxicity issues.

Focus: The Order of the Day

In 2002, BMS was facing an inflection point. Dolan had been CEO for about a year, but he and the company had experienced a run of bad luck. Within a matter of months of taking office, Dolan had spent $2 billion to purchase Erbitux (cetuximab). But by December 2001, FDA shot down ImClone Systems' application for the cancer drug. BMS' shares started to tumble. Then in March 2002, tests indicated that the much-touted Vanlev (omapatrilat) was no more effective than currently marketed treatments for congestive heart failure, followed by an advisory committee's recommendation against approval for hypertension. Vanlev and Erbitux added salt to investors' wounds—but what really stung was that FDA had not approved a BMS product in three years.

Topping the list, in July 2002, the SEC began its investigation of "channel stuffing" after Bristol disclosed it had artificially boosted sales by persuading wholesalers to buy more of its drugs than they could quickly sell, leading the company to restate $900 million in profits and $2.5 billion in revenue reported from 1999 through the first half of 2002. One thing was certain: The company needed to change—but how?

A new model Within its six therapeutic categories, BMS was studying up to 45 disease states. Going forward, the company decided to focus on just 10 specialty disease areas that

  • represent a significant unmet medical need—either no available treatments or room for significant improvement
  • are core competencies
  • have a science base that suggests clinical advancement is not only possible, but probable
  • are treated by specialists and a relatively small number of generalists. (See "Areas of Focus.")

"Focus provides a benefit in trying to build a leadership position in our 10 disease areas, as opposed to being much broader and more opportunistic," says Dolan.

In part, says Ryan, the specialty model is a concession to the fact that BMS is unable to invest at an appropriate level for some of the larger markets or compete against heavyweights like Pfizer for the most promising and lucrative in-licensed products. That may be true, but the strategy puts the company on the right side of the changing healthcare landscape. The specialty focus steers the company toward developing differentiated products, for which it can charge a premium and which will be more likely reimbursed by public or private payers because the drugs are truly innovative.

The new model also allows BMS to obtain substantial savings by redeploying reps out of overcrowded general practitioners' offices. For example, Andrew Bodnar, MD, senior vice president, strategy and medical and external affairs, says BMS is launching Baraclude with about 34 reps. Compare that with the average size of a primary care sales force of 600, and given that most companies have several primary care sales forces, the savings realized with this reduced infrastructure are apparent.

Further focus Part of BMS' shift in strategy includes focusing on diseases states instead of therapeutic franchises. "Diabetes and atherosclerosis are two of our disease areas," says Bodnar. "In previous times, that might have been metabolism and cardiovascular disease, which almost forced us to pursue in parallel to diabetes and atherosclerosis a whole set of other diseases. We now recognize that focus is the order of the day."


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