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Barri Blauvelt is CEO of Innovara, a global pharmaceutical business and management development firm. She can be reached at Innovara@innovara.com.
A decade ago, pharma companies typically launched new products, observed how well they sold, and, if necessary, modified their marketing strategy and launched again. In today's competitive marketplace, there is only one rule: Get it right the first time.
A decade ago, pharma companies typically launched new products, observed how well they sold, and, if necessary, modified their marketing strategy and launched again. In today's competitive marketplace, there is only one rule: Get it right the first time.
Increasing price pressures in Europe, Japan, and the United States make it tough for companies to command the new-product premiums they need to sustain high levels of investment. So they must find new ways to justify their products' value and to maximize ROI as quickly as possible. Sometimes they must establish a product's market position in as few as 36 months. After that, according to IMS data, the ability to rapidly acquire share and defend price premiums diminishes sharply.
To find out what pharma companies must do to launch products successfully, Innovara conducted a global benchmarking study between September 2001 and April 2002. (See "Study Parameters," page 48.) Based on the results, this article examines
Companies such as AstraZeneca and Pfizer, the study's two mostly highly rated, identify the unique medical and scientific rationale for their products, then work to create the need for whatever that advantage may be well in advance of commercialization.
John Patterson, AZ executive vice-president of product strategy and licensing, believes that shaping the product and its market early are key to his company's success. "We were fortunate," he says, "following our 1999 merger, to retain the top global marketing talent from both Astra and Zeneca. We also have a strategic global planning group that assists our R&D and global marketing teams in producing target product profiles (TPPs) and target product claims (TPCs) early in each candidate's lifecycle. The thinking behind those TPPs and TPCs is not only the foundation for the success of our brands but for the success of our business."
The classic case for the result of that kind of thinking comes from the other top-rated company: Pfizer. Before commercializing Lipitor (atorvastatin), Pfizer created a perception of the importance of triglycerides, which, at launch, seemed to be the only medical differential between the new medicine and other leading statins. During that time, Pfizer underspent the competition in basic R&D and, instead, invested heavily in Phase III studies that would, on approval, be necessary to support the commercial-medical position through launch and post-launch phases.
Three main operating principles appear to shape products and markets to assure global commercial success:
"What is most surprising about this study is not that Pfizer was crowned as the leader of best practices," says David Beadle, executive director of global pharmaceutical research for UBS Warburg, "but rather the extent of its lead over the majority of other industry players. Pharma companies must be prepared to manipulate decades-old marketing rules to create the blockbusters of the future."
So, what are the new rules? Following, in the order of importance, are the 12 best practices in which companies must excel to create blockbusters.
As soon as a company suspects it has a major new drug-as early as Phase I-the patent-life clock is ticking. From that moment on, everyone even remotely involved in new product commercialization must focus on developing the product's potential. And all participants in the three operating principles-medical/scientific excellence, aggressive commercial execution, and seamless organizational alignment-must not only know what they need to do but how to do it quickly.
Who has it? Genentech does. Dr. Colin Goddard, CEO of OSI Pharmaceuticals, who selected Genentech over many larger oncology companies to license Tarceva (erlotinib), gives the best example of what a sense of urgency means: "Speed of development, willingness to invest heavily in the development of the product, talent, and a bet on who would be the market winners were the main ingredients we were looking for. What made the difference for us was that, at Genentech, speed was seen as a key reason not to lose the deal. "
Yet, companies need to balance medical and ethical responsibility with their desire to maximize a new product's lifetime value or to boost shareholders' flagging confidence in the company.
For new products, three public relations strategies are critical to global commercial success:
What comes easiest to most companies is the development of medical community advocacy and thought leadership. Even the strictest governments allow pre-launch PR for major new products through medical congresses, research, and more. In that respect, companies must merely match share of voice and share of spend in pre-launch PR-related medical marketing activities to be fairly assured of achieving the 60 percent unaided recall brand awareness level that most companies aim for by launch time.
But the effectiveness of pre-launch PR depends on nurturing and using global, regional, and local medical thought leaders as advocates. From a PR perspective, those thought leaders must rally around a common message that is highly credible while helping to prepare a global platform for the company's brand. Pfizer,
AstraZeneca, and-until recently-BMS have been masters at that.
More challenging is the PR mission to the investment community, which begins with the earliest clinical testing-or even with discovery and translational research. The companies that do that well take it seriously, right from the top. Merck's Ray Gilmartin, Pharmacia's Fred Hassan, and Genentech's Art Levinson are three CEOs known for their strong shareholder loyalty and investment community PR skills. As a result, they are able to sustain the shareholder community's confidence, even through periods of dry pipelines.
Finally, PR preparedness-so necessary in today's DTC-driven marketplace as a way to raise physicians' interest and to expand the market- is often the industry's Achilles heel. The well known story of Novartis' Gleevec (imatinib) provides a stunning example of how important it is for companies to monitor-and respond to-patients' reactions to a product.
Says Gloria Stone, director of global PR for Novartis Oncology, "With Gleevec, public relations proved to be one of the most effective means of communicating the drug's status to a global audience."
"First and flexible" describes a company's willingness to try new things. Specifically, it means being top of mind with biotech companies and inventors when they are ready to sell or license new technologies. How does a company get to be first on their list?
Dr. Jason Fisherman, managing director of Advent International, a global venture cap firm that works with biotech companies and biotech-related funds, explains: "A critical factor in the decision process is identifying a partner, who not only has a real commitment to scientific and clinical innovation but who can relay a clear vision for how the alliance will lead to mutual commercial success. That includes a shared sense of 'disciplined urgency' and focus as well as an openness to bi-directional learning."
Only two companies make it to best-practice status in that regard: Genentech and Pfizer. Genentech's ability to come through with a thorough and flexible offer shows the licensor they genuinely care for mutual success and rapid commercialization. And, being able to take the plum oncology product Tarceva away from bigger contenders also showed a willingness to build an oncology program around high science that many larger companies would find too complicated or beyond their core therapeutic areas of interest.
Pfizer makes the "first considered" list as an acquisition partner for a different but compelling reason. Five of six of its most recent product launches have come from other companies' R&D efforts.
Many companies want to be on the "preferred partner" list but fall short for two main reasons: First, they have no processes to enable them to rapidly consider new technologies or products outside of defined therapeutic franchises. Second, they are much more rigorous in their analysis of external candidates than they are of their own R&D products, making the hurdle for a positive evaluation much higher-sometimes impossibly so. After one or two rounds of negotiations, licensors quickly lose interest.
Retail guru John Wanamaker is famous for saying, "Half the money I spend on advertising is wasted. Unfortunately, I don't know which half." The same could be said of R&D's "deep pockets." Ken Kaitin, director of Tufts University's Center for the Study of Drug Development, estimates that, of the total R&D spending on new products, less than half relates to the cost of developing the successful compound. "Of every five products that enter human testing, only one will succeed," reports Kaitin. Then, each of those must be approved by a country's regulatory agency. And the odds of success after approval are even worse. The study shows that, in the increasingly generic market, only one in twelve newly approved products will survive five years of commercialization and only one in sixty will become a new market leader.
The lack of courage to pull the plug-especially in the earlier stages-on new therapies that fail to demonstrate strong performance throughout the development process points to a basic lack of clear decision points and other accountability measures. But the real reason for the high cost of R&D may be much simpler: "No one wants to be the bearer of bad news when it comes to a new drug that the company is counting on," says one scientist who evaluates new compounds for Pfizer. "So, at Pfizer we had to change the system. Now we do very aggressive early testing. Better an early stage "no" than an incredibly expensive later-stage one. If it passes, it is "canned," meaning it will now enter our early-stage candidate tracking system."
Most companies face a near-term shortage of exciting new global brands, but a few not only have good new products to develop but good long-term prospects as well. They include Novartis and Wyeth, which plan to launch some exciting therapies in the next three to four years. In particular, Wyeth has new oncology and diabetes combinations and other compounds for launch possibly as early as 2004, all of which have huge global market potential. Although it has fewer new potential billion-dollar brands, GSK is collectively impressive with a range of products, each one with a potential value of half a billion per year and co-marketing agreements for some dynamic new products that are well positioned to use the company's global marketing muscle.
Aventis has significant near-term growth potential with new products Lantus (insulin glargine) and Ketek (telithromycin) and new indications for Taxotere (docetaxel). AstraZeneca should blossom with Nexium (esomeprazole) and Crestor (rosuvastatin)."We all know that the secret to a successful product launch is good drug, good drug, and good drug," says AstraZeneca's Patterson. "No one disputes that our R&D has been productive."
Most companies in the study showed the ability to develop a clear global brand commercialization strategy from a relatively early stage of development. But brand profiling is not only about name and product positioning. Companies must develop core brand marketing strategies that will shape the market to prepare for widespread acceptance of the product as rapidly after launch as possible.
Merck's Fosamax (alendronate) is a classic "best practice" example. If left to the definition of osteoporosis at the time of initial clinical investigations-mainly in post-menopausal women who suffer a confirmed vertebral or other fracture and other factors-the market potential for Fosamax would be tiny. However, Merck redefined the market to include both men and women at risk of osteoporosis prior to a first fracture. In doing so, it created a product potential 20–50 times greater than the previously defined market was expected to reach before Fosamax's launch.
To be successful, companies must study a product to evaluate its ability to define and expand the market. They must establish target brand profiles early and apply them consistently throughout the development process so managers can strategically design and coordinate clinical research, brand awareness, and market shaping activities to achieve maximum commercial results. Companies must have clear global strategies that translate well into local ones and brand imagery and core messages that will essentially remain the same from country to country.
Cross-functional teamwork and alignment with a common purpose is like good sex: everyone talks about it but few have it. One exception is AstraZeneca, whose global business teams are totally cross functional, meaning that the key decision makers are involved in all decisions about all products in all therapeutic franchises from the start. Those teams include representatives from most major countries of the world. Although at times that may appear to complicate communications, in the end it ensures top-down commitment to the new product throughout the company.
Pfizer has such clearly established processes and discipline in evaluating and preparing new products for commercialization that cross-functional communications and effort are automatic. Only the most experienced people at Pfizer are involved in new products, and the company does not worry about therapeutic area competencies. Instead, at the corporate level, it has a highly centralized team of new product commercialization experts who can move from one product and therapeutic area to another with ease and alacrity.
Another question the study addressed was geography. Is it better to have a small team, centrally located, focused on decisions for only the largest markets? Or should companies have those involved in launching a new product consider input from around the world-or at least from all major markets and regional operations?
A clear trend is emerging to answer that question. More companies are migrating to smaller, tighter, new product global launch teams-including R&D and commercialization personnel-based in a major market. That has brought more global new product commercialization teams to the United States.
AstraZeneca bases its global oncology team outside of Manchester, England, but its global CNS team is in the United States. "We try to locate our R&D and global marketing teams together," explains AZ's Patterson. "The United States produces most of our CNS sales, so we made it our R&D center of excellence for CNS research. That makes it easier for our CNS commercialization team to begin collaborating with the R&D team as early as possible."
And Aventis has moved its global commercial teams to its global drug development center in Bridgewater,
New Jersey, to encourage collaboration among cross-functional teams. "In the past, our corporate marketing staff developed brand strategies and essentially said to the countries, 'Here is the strategy, implement it'," says Thierry Soursac, MD, PhD, head of global commercial operations for Aventis. "Now we're empowering country brand leaders across the organization to design and drive commercial strategies for our core brands through global, cross-functional groups known as MAX teams. From the outset, the global marketing teams must work in close partnership with the product development groups. The model has already paid off in sustained growth of our brands Allegra, Lovenox, and Taxotere, as well as in faster uptake of our new products Lantus and Ketek."
All the companies in the study have equal access to business intelligence, but few employ it better than Wyeth. As a relatively small company compared with other Big Pharma, Wyeth realized the need several years ago to be more competitive. To do that, it set a goal to make business intelligence accessible to all in the company who needed it for faster, better planning and decision making.
Wyeth also shaped its intranet to facilitate information analysis and to save money by gaining global access through the web, among other things. Although most companies use information as a power tool for senior management, Wyeth brings access to information down to the working level where it can do the most good.
Other companies are now realizing the power and importance of rapid access to information, especially for the commercialization of new products and for predicting trends through analysis and statistics. That means they must be as well acquainted with other companies' pipelines as they are with their own.
More important, companies need to make the information needed for early-stage decision making directly available to those in R&D. Again, Pfizer leads the way with a staff of dedicated business intelligence professionals inside its R&D operations-independent of the commercial business development teams in its New York headquarters.
That early access to information gives scientists insights into the commercial potential of their ideas and discoveries. Ultimately, that helps R&D scientists make better, earlier "go" and "no go" decisions, to explain to management their excitement about a new technology or drug, and to get the early stage investment support they need to make the transition from research to development.
The companies on the best practice lists have some of the finest people in the business, but functional expertise consists of more than science and marketing. It involves using that knowledge most effectively to launch new products.
One company that illustrates that point well is Becton Dickinson. BD follows a product and cycle time excellence (PACE) process in which every new product has a core launch team from the start. The team includes someone from marketing, medical, manufacturing, and regulatory. As the product moves through development, the team may expand to include sales, training, and finance. Not only do all team members know how to prepare for new product launches, but they are also trained to perform related functions for the larger "project team." If any member falls behind in project responsibilities, the core launch team leader can require management to replace the person.
The importance of functional expertise became clear when BMS suffered a recent "brain drain" of commercialization and R&D experts, exemplified by the departure of Rick Winningham, former head of global business development. The talent losses accelerated with the company's implication in the ImClone fiasco and with charges of unethical wholesaling practices, resulting in the resignation of Rick Lane, president of global pharmaceuticals. An absence of functional expertise almost guarantees commercialization failure, or at the very least, significant slowdowns.
Too often, companies go for fast approval by limiting, or accepting narrow definitions of, product indications and by not fighting "black box" language. But best practices companies have a broad, well planned regulatory strategy from the start. They closely coordinate with, and get input from R&D, pharmacoeconomics, and commercial personnel, including manufacturing, packaging, and operations. And they align those efforts with clinical and healthcare economic research strategies and commercial opportunities. Their regulatory personnel know how to anticipate and preempt problems or complications and have an outstanding ability to craft language that will pass regulatory muster and achieve better pricing.
To achieve global success, companies' regulatory departments must support filings everywhere in the world and achieve approval in as many countries as they can, as quickly as possible, at the highest price possible. The goal should be to launch a new product in all major markets and in up to 90 or more secondary markets within two years of first major country approval-and at a price that is within 10–15 percent of the level of the largest markets (United States, Germany, and Japan).
Pfizer is the only company that can boast about globally launching three of its largest products-Lipitor, Viagra (sildenafil) and Celebrex (celecoxib)-in at least 90 countries within 24–36 months of its first major country launch. And all three subsequently met or exceeded commercial expectations to become global market leaders within two to five years of launch.
Another recent success story comes from Novartis. At the end of 2001, FDA unexpectedly rejected a compound that the company was co-developing with BMS-and that Novartis was truly counting on to be a major new drug . BMS terminated its agreement with Novartis, leaving the latter to fend for itself. Novartis went back to FDA, worked out precisely what its concerns were, conducted additional trials according to an mutually agreeable plan and six months later achieved approval. The regulatory people did not quit. They had the courage and the credibility with FDA to strategize and respond quickly, resulting in a major new product approval instead of leaving the company with what could have been a costly exercise in wasted R&D.
All eyes have been on AstraZeneca's launch of Crestor, its new "super statin." AZ benchmarked Pfizer's spending on Lipitor and the time it took for the drug to become number one in the market and plans to do better. According to some Wall Street estimates, that means the company will have to allocate up to $500 million for pre-launch spending through the first year in the United States. But, according to MIT's ongoing study on the profit impact of market share, AZ will have to spend twice the amount Pfizer spent on Lipitor to achieve the same market share within the same time frame.
Underlying the need for such a high investment is the adoption process. The purpose of all pre-launch marketing is to ready the marketplace to try the new product right away and to ensure that patients use it regularly as soon as the product is commercialized.
The most important pre-launch commercial investments should be in medical marketing, from thought leader and medical advocacy development to promotion through congresses, pre-launch advertising to the medical community, and more. Market leaders must invest heavily in research to benchmark attitudes and trends, then explore the drivers of change and select the best possible brand and communications strategies. Companies must give their sales reps and other front-line personnel the training that enables them to push target customers up the product adoption ladder, including how to pre-sell key accounts. In turn, that may mean that companies must conduct the clinical research that will gain them formulary approval immediately after regulatory approval.
"Time is money" is never truer than for a new pharma product launch. It can take doctors-and patients-six months or more to become aware of a new product and much longer-one to two years-to want to learn about it. That time is critical in terms of lost patent life and revenue. But BMS and Merck have been able to market new products within 24 hours of FDA approval. What's their driving force? They estimate that for every day they beat each other to market with a new cardiovascular product with a similar indication, they can add $6 million to the bottom line.
No one will disagree that successful global new product commercialization requires state-of-the-art manufacturing, outstanding forecasting, streamlined logistics, and related supply chain management planning. But it also requires testing to ensure efficient and rapid distribution and replenishment capabilities before launch. Companies must design their manufacturing strategies to support a worldwide fast ramp up. They must ensure flexibility to tailor packaging or sampling to individual country requirements. They must identify and register alternative sources of supply before launch as back-ups to primary sources. And they must design packaging and package inserts to have maximum appeal to medical customers, both trade and consumer.
A best practice example is Pfizer's Zithromax (azithromycin). Although it's a relatively new product, Zithromax will go off patent by 2005. So Pfizer knew that it needed to maximize sales and market penetration as fast as possible. The company's high-profile strategy to introduce Zithromax as a powerful new macrolide with once-daily dosing for five days-and eventually three days-at a premium price was not enough to ensure the brand's success. Creating one of the most aggressive DTC media campaigns that reinforced the brand through use of the Zebra image-the most consumer-heavy spend at launch of any oral antibiotic in the United States-was still not enough. Pfizer realized that to really build the brand it needed something more. So it created pills with a large print brand name on them that require very little effort to pop out of their blister packs and, most important, a memorable brand name: "Z Pak." Within six months, not only were consumers aware of the product and requesting it but doctors were prescribing it by simply writing "Z Pak." And by copyrighting and trademarking the package, they created a non-substitutable product, which should help sustain the brand long after patent expiration.
Simply defined, global infrastructure means having the breadth and depth of marketing, medical, sales, regulatory, and other personnel required to launch products in a maximum number of countries within two years of first major country launch. Most global companies can do that, but few can carry it off with aplomb the way AstraZeneca, GSK, Merck, and Pfizer can.
Global infrastructure is especially important for achieving major market timings and communicating effectively throughout the world. It means getting as much promotional mileage as a company can from published papers, congresses, and other media. Complementary global infrastructure also is a key component that biotech companies and other licensors seek when considering licensing out a new technology.
Despite all of the expertise and resources outlined here, and as good as most pharma companies are at marketing in-line products, the study's overall finding is that Big Pharma is surprisingly poor at preparing for new products. Overspending in basic R&D and under-investment in other key areas are part of the problem. With most companies planning to launch the next wave of major new products in 2005 and 2006, there is clearly a great need to improve the new product commercialization process. And there's no better time to start than now.