Datamonitor consulting whitepaper getting more wag from the tail


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Datamonitor consulting whitepaper getting more wag from the tail

  1. 1. White PaperLifecycleManagement:How to GetMore ‘Wag’From the Tail
  2. 2. This document was written by Neal Hansen Managing Director Datamonitor Consulting Neal leads a multi-disciplinary team focusing on the provision of customized solutions to leading players in the pharmaceutical and biotechnology industries in key areas suc such as lifecycle management (LCM), portfolio and brand strategy, in- and out-licensing and forecasting. Prior to this role, Neal was the European Head of Consulting within Wood Mackenzie’s Life Sciences Practice. During his time at Wood Mackenzie, Neal led commercial assessment, scenario planning and war gaming projects for numerous top tier and mid-cap pharmaceutical companies in Europe, the US and Japan. Earlier in his career, Neal held various senior roles within Datamonitor including Lead Consultant and Lead Analyst for Strategic and Company Intelligence encompassing Strategic Insight, eHealth Insight and PharmaVitae Company Tracking. He has authored in-depth analysis on strategic issues affecting the pharmaceutical industry, focusing on lifecycle management, pharmaceutical sales force strategies, competitive dynamics in mature and emerging markets and the changing nature of the global generics sector. He has chaired and spoken at numerous conferences in the field of lifecycle management and the changing nature of the generics industry. His work has featured in In Vivo, The Economist, The Wall Street Journal, MedAd News and PharmaFocus. Most recently, he co- authored Pharmaceutical Lifecycle Management Making the Most of Each and Every Brand and leads a Late Stage Lifecycle Menagement Training Course for C.E.Lforpharma. Neal holds a PhD in Pharmacology and a MA in Natural Sciences (both from the University of Cambridge). If you have questions, please contact Neal on +44 20 7551 9199 or To find out more about Datamonitor Consulting contact on or visit www.datamonitorconsulting.comWhite Paper 2Lifecycle Management
  3. 3. Lifecycle Management: How to Get More ‘Wag’ From the Tail In the good old days of pharma, when pipelines were plentiful, Western markets were a haven for strong prices and double digit growth was a given, little thought or focus was given to those teams working with mature brands or those trying to get difficult ‘emerging’ markets on the radar. Managing mature brands has often been a thankless ‘caretaking’ task, focused on managing the risk in a portfolio far too large to actively drive with as little investment as possible, and in many cases even less resources. Meanwhile, driving emerging markets has been a battle to get the global business to understand (and even care) that local dynamics, stakeholder expectations, business models and growth profiles are different, and thus need to be catered for differently. However, in today’s less rosy world, where sources of top line Fundamentally, it growth, and just as importantly cash flow, are proving more boils down to two challenging to find, these two deprioritized areas of pharma’s key factors – past are converging to form one of the fundamental principles growth dynamics of the next decade’s growth. With the much vaunted patent cliff and portfolio redressing the relative size and contribution from mature expectation brands and growth markets, companies that can successfully marry the two will be those that are best positioned to survive the coming tempests. So why are these two business areas becoming so closely interlinked? Fundamentally, it boils down to two key factors – growth dynamics and portfolio expectation. In terms of the former, the growth dynamics of brands in new markets are often very different to those in the traditional focus regions. As its most basic, the lack of effective patent protection in many of these markets means that multi-source competition can be expected at any time in the product lifecycle, and thus there is no patent cliff from which to fall. As such, for a successful brand, the future potential is only limited by the launch of more effective therapies, not by any point in time increase inWhite Paper 3Lifecycle Management
  4. 4. ‘generic’ competition. As such, there is much less differentiation between launch brands and established brands here. The second factor is the expectation by many customers in these markets of a portfolio sell. Local companies in many growth markets succeed by selling broad ‘one size fits all’ branded portfolios, trading off their corporate reputations and setting the expectations of local physician, pharmacists and hospitals. With these local portfolios often containing branded versions of big pharma’s key drugs, competition becomes more challenging for our traditional companies as they do not have the complementary products to sell themselves. By building effective established brand portfolios themselves, big pharma can look to take on the local players more effectively, providing their own full service portfolios to drive the value of their priority brands. The question on the lips of many in the industry today is ‘How How can we do we actually make this work – how can we develop a develop a business business model that allows us to succeed with established model that allows brands in these new markets?’ While there are many us to succeed with challenges, we will focus here on three key building blocks established brands for future success. in these new markets?White Paper 4Lifecycle Management
  5. 5. Building Block One: The Right Team and the Right Structure The first priority of management has to be to get the right team and the right organisational structure in place to effectively manage an established brands portfolio to meet the company’s goals. As previously discussed, historically these large portfolios of mature brands have been managed by small teams, unloved by the rest of the organisation and generally ignored. It was not a strategically important place to be, and for some companies that will not be named, working in mature brands was the equivalent of being sent to a far flung outpost in the military – you must have done something wrong somewhere along the line to end up there! Today, the profile and structure of these teams are changing. Teams are getting new names, moving away from the ‘mature’ tagline suggestive of end-of-life to more strategic nomenclature, such as Established, Diversified and Cornerstone. The personnel is changing as well, with an international flavour becoming more important, while experience from the generics side of the industry and more shrewd business and finance expertise is on the up. Teams are becoming more cross-functional, with dedicated medical, business intelligence, business development and supply chain functions to support the traditional marketing teams. Stronger communication channels with affiliates and greater accountability and responsibilities are being assigned. The performance and roles of these teams are creeping into CEO presentations and investor communications. The mouse is beginning to roar. Established brands teams are now a key place to be to drive growth, not a place to be forgotten.White Paper 5Lifecycle Management
  6. 6. Building Block Two: Active Portfolio Management Traditionally, portfolio management for established brands has been a largely passive process. Brands would enter the portfolio at an agreed point in their maturity, would generally stay in the portfolio ad infinitum, unless a manufacturing or supply chain problem crept up, at which point they might be withdrawn. Typically, the only way anything new would appear in the portfolio was as a side-effect of a merger, and little was done to actively remove brands from the portfolio if they were not performing (assuming the team could even tell whether the brands were performing or not!). The end result: Diverse portfolios containing often hundreds of brands with sometimes thousands of different formulation and dosage forms and no underlying strategy. What do we So what can be done differently? Active portfolio management need to have for established brands is attempting to shape the ‘ideal’ in our portfolio portfolio for the future, the questions are being asked: What do to be we need to have in our portfolio to be successful? Where is the successful?? dead wood that we should be eliminating? What else can we do to drive priority brands? In terms of adding to the portfolio, two strategies appear to be the flavour of the year. The first is the traditional acquisition in local market - bolstering the companys own portfolio with a broader portfolio of a local player to provide an ideal platform for growth. GSK has become a master of this strategy, with acquisitions of local companies and product portfolios across Latin America, Middle East and North Africa and China in recent years. Pfizer’s 2010 acquisition of a 40% share in Teuto in Brazil boosted its Latin American presence, while Abbott’s acquisition of Piramel in India drives the combined group to the number one spot in the local market. The second approach is to bolster an existing portfolio with branded generics. AstraZeneca, Pfizer and Merck have all adopted this strategy, striking deals with Indian generics players such as Torrent, Aurobindo and Sun Pharma to gain access to broader complementary product ranges. In such a scenario, players can look to develop complementary portfolios to their existing established and innovative brands to offer ‘one stop shop’ services to target customers.White Paper 6Lifecycle Management
  7. 7. While adding to a portfolio can drive top line growth, better profitability can be sought by actively managing out underperforming brands. This can be achieved wholesale by selling off or discontinuing entire product ranges, or more subtly by reducing the diversity of product formation and dosage form within a brand portfolio. A single brand can often have more than 20 or 30 different formulations, packaging and dosage forms spread across the globe, and understanding which can be harmonised, or rationalised to enhance profitability is becoming increasingly important. The final approach is to consider the previously unthinkable: to invest in classic lifecycle management strategies, such as reformulations and fixed dose combinations, for off-patent established brands. Many companies are now taking seriously the much longer lifecycle opportunities presented by growth markets, converting brand portfolios tailored originally to the West to the growing needs of the new world. Brands such as Novartis’s Voltaren (diclofenac) demonstrate what can be achieved by harnessing LCM for the needs of growth markets, generating 2010 sales of close to $800m with less than 1% coming from the US.White Paper 7Lifecycle Management
  8. 8. Building Block Three: A Change in Expectation Management The last critical building block is as much a change in commercial philosophy as it is a change in strategy. Pharma has been used to high margin, low volume and high sales performance from a limited portfolio of brands. Seeking the same from an expansion of established brands and new markets is unrealistic, so companies must adapt to the mindset of lower margins, higher volume, portfolio selling, and must evolve their ROI expectations accordingly.White Paper 8Lifecycle Management
  9. 9. Conclusion Where will the For many stuck in an old-school pharma mindset, this all sounds like investment for a lot of hard work for an unspectacular return. So why bother? Why the next not place your bets on the next big blockbuster and focus resources generation of there? While this is a nice idea, the critical question is where will the R&D come investment for the next generation of R&D come from? from? Without a strong, functioning established brands and growth market engine to generate cash, the R&D engine will be forced to run leaner and leaner, and the risk of spectacular corporate failures will continue to rise.White Paper 9Lifecycle Management
  10. 10. ABOUT Datamonitor Consulting Datamonitor Healthcare Consulting is a leading life sciences strategic consultancy firm that helps clients to operate smarter and more profitably in the complex pharmaceutical and biotech industries. Through our industry focus, depth of functional expertise, and strong scientific and market knowledge, we are able to tackle highly complex challenges, issues and opportunities in your business and market. Over 90% of our clients are repeat customers – confirmation that we continue to deliver the vision, collaboration and critical decision-making support you expect from a valued independent advisor. To discuss your business requirements further, please contact us at Datamonitor is owned and operated by Informa plc (“Informa”) whose registered office is Mortimer House, 37-41 Mortimer Street, London, W1T 3JH. Registered in England and Wales Number 3099067.White Paper 10Lifecycle Management