Expanding a Product Portfolio Without Cannibalizing an Established Brand Report Summary

Research Objective & Key Topic AreasBest Practices, LLC conducted this research to identify successful strategies and practices that canbe used by biopharmaceutical managers and executives to maximize the potential of multi-drugportfolios or franchises. Study Objective & Methodology Key Topics Covered Objective: Effective methods of differentiating multiple brands This benchmarking study was designed to Positioning strategies that minimize identify effective strategies and tactics for product cannibalization marketing multiple brands for the same Operational changes that drive success indication or area of use. when introducing a new brand into a product family Special attention was given to strategies for Positive & negative impacts of introducing managing resources and for avoiding or a new brand controlling product cannibalization. New product’s share of the combined marketing spend during first three years Methodology: both are marketed Best Practices, LLC used on online survey Marketing mix for new & legacy products instrument to collect quantitative data. Marketing activities that drive continuing Research analysts also conducted in-depth success for legacy brand interviews to collect executive insights and Best indicators of marketing effectiveness harvest best practices and lessons learned. Pitfalls, failure points and best practices 2 Copyright © Best Practices®, LLC

Universe of Learning: Companies Participating in StudyParticipants in this benchmarking research included 28 respondents at 22 leading pharmaceutical,biotech and medical device companies. Eighty-six percent of respondents are U.S.-based. Othersare based in Mexico, India, South Africa and the Middle East. Participants Survey Only Participating companies include: Abbott, Alcon, Amgen, Baxter, Boehringer Ingelheim, CardioDynamics, Centocor Ortho Biotech, Elixir, Genzyme, Lumenis, MEDRAD, Merck, Micro Labs, Monogram Biosciences, Novo Nordisk, Pfizer, Schering-Plough, Shire, Solvay, Teva Neuroscience, Wyeth and Xanodyne. Participants also referenced past experience at Eli Lilly, Roche, Bristol-Myers Squibb, Genentech & sanofi-aventis. 3 Copyright © Best Practices®, LLC

Selected Key Findings & ObservationsThe following findings emerged from this benchmark study. 1. Benefits of New Brand: In all, 96% of benchmark participants realized benefits from introducing a new brand where they already had a legacy product. Top among those benefits were market leadership, expanded market share and improved reputation with physicians and specialists. 2. Negative Impacts: Just over half the participants experienced negative impacts in introducing a new brand for the same indication or area of use as a legacy brand. The most common of those was creating product confusion among internal and external stakeholders. 3. Minimizing Cannibalization: Benchmark partners successfully use more than a dozen different strategies to control or minimize product cannibalization. Targeting different patient subtypes and aligning with thought leaders are viewed as the most effective of these. 4. Franchise Approach: More benchmark participants (73%) have successfully promoted their products together as a franchise than independently as separate brands (65%). Products that have complementary treatments lend themselves to franchise marketing, while those treating clearly different patient types are suited to marketing as independent brands. 5. Differentiators: Product efficacy is the attribute that benchmark partners most often find effective for differentiating multiple brands for the same indication or area of use. Nearly two-thirds of participants rated efficacy among their Top Three differentiators. 4 Copyright © Best Practices®, LLC

Efficacy & Delivery Method Are Top Product DifferentiatorsEfficacy and delivery method head the “Top 3” list of most effective product differentiators for morethan half the benchmark participants. Frequency of use is also among the top three for 36% ofrespondents. Q. Which three of the following options are the most effective for differentiating two or more brands within one company for the same indication or area of use? (Check only three.) Top Three Product Differentiators Efficacy 64% Delivery method 50% Frequency of use 36% Price 32% Ease of use 29% Compliance 18% Health outcomes 18% Other Top 3: Segmentation (including Safety 14% audience type, customer type, identifying unique patient types for each brand (2), Quality of life 4% patient-specific needs, efficacy or safety in patient population); Service & Support (2); Other 32% Positioning Statement. (N=28) % Respondents 5 Copyright © Best Practices®, LLC

Multiple-Brand Marketing Spurs Many Operational ChangesBoth the Sales and Marketing organizations undergo changes to accommodate introduction of a newbrand in an area where the company already has an established brand. At a majority of companies,Sales adds training and revises incentives, while Marketing adds and shifts resources. Q. What operational changes did your organization undergo in order to effectively manage more than one brand for a single indication or area of use when the new product was introduced? (Choose all that apply.) Operational Changes Resulting New Product Introduction Shifted resources from older product to 79% marketing for newer product Revised sales force incentives 75% Added new marketing funds for new product 68% Increased portfolio management activities 68% Revised/ expanded sales training 64% Additional Changes= Realigned sales force/ Changed sales territories 46% • Educational activities Revised sales coverage plan to accommodate increased & shifted 29% more people and products • Structure changed to Expanded sales force size 29% support portfolio objectives over (N=28) individual brand % Respondents 6 Copyright © Best Practices®, LLC

Newer Brand Receives Larger Share of Marketing SpendThe new brand typically receives just over two-thirds of the combined new and legacy productmarketing budget during its first year on market. The proportion declines slightly, relative to thelegacy product, over the course of the first three years both brands are marketed. Q. What percentage of the combined marketing spend (for the new and existing brands) should be allocated for the newer product during the first three years that both are on the market? Average Percentage of Combined Marketing Spend Allocated to Newer Product 100% 95% 90% % Marketing Spend for New Brand 85% 80% High 67% 64% 61% Average 60% (Mean) Low 40% 25% 20% 20% 20% 0%(N=28) Year ONE Year TWO Year THREE 7 Copyright © Best Practices®, LLC

Ten Steps to Excellence in Multiple-Brand MarketingBest Practices, LLC research identified a series of 10 critical steps that lead to excellence inmarketing multiple pharmaceutical products for the same indication or area of use. 10. Plan for 1. Take a migration to franchise-centric newer brand to approach 2. Clearly 9. Price retain patients to managing differentiate products to after patent the brands reflect values the products-- expiration both from each of individual customer segments other & from the Multiple competition 8. Align Sales Brand to brand goals with 3. Align each brand appropriate incentives Marketing with distinct customer & clear positioning Excellence & patient segments 4. Conduct 7. Provide sufficient situation analysis sales & marketing to craft marketing plan 6. Align 5. Set that best reflects resources to new marketing realistic brand to enable brand & franchise its growth mix to reflect goals & opportunities market entry objectives position & strength for product sales of franchise & adoption rates offering 8 Copyright © Best Practices®, LLC

Pitfalls to Avoid Key pitfalls identified by the benchmark class in surveys and interviews are: Insufficient buy-in/ cooperation from the sales force Inadequate customer/patient segmentation Failure to clearly differentiate/position individual products and their values Unrealistic product goals Lack of effective pricing strategy Internal competition for limited resources Poor thought leader alignment Insufficient investment in the new brand Failure to align thought leaders Insufficient sales force training 9 Copyright © Best Practices®, LLC

Best Practices – Fulltext Responses, 1 Key best practices identified by the benchmark class are: Best Practices Position clearly on customer value measures (price and/or features) Identify key points of differentiating the new product and focus on just a few areas supporting those areas of differentiation with additional clinical work Clearly articulate the positioning and key differentiation points of new, old and competitor productsProvide Use case studies to develop patient types that paint a picture in the physician,s mind as to where to use each brandclear Some similarities in product branding, yet clear differentiation in product valueproductdifferentiation Pilot newer product with thought leaders to validate value points to effectively distinguish vs, older product& unique Make sure MDs understand where to use each product for maximum patient benefitpositioning Make the indications as different as possiblefor each Differentiate product features by market segmentbrand Ensure speakers/champions have precise messaging on how & when to use each brand. Use case studies. Optimize portfolio positioning Products must have a distinct point of differentiation Differentiated marketing mix Positioning brands to be able to complement each other/clear differentiation Develop product differentiation strategy before late-stage clinical trials begin Clear differentiation between the two products 10 Copyright © Best Practices®, LLC

About Best Practices, LLCWe are a research and consulting firm that conducts work based on the simple, yetprofound principle that organizations can chart a course to superior economicperformance by studying the best business practices, operating tactics and winningstrategies of world-class companies. Best Practices, LLC 6350 Quadrangle Drive, Suite 200, Chapel Hill, NC 27517 www3.best-in-class.com For more information contact: Martha Haswell Senior Research Analyst 919.767.9249 mhaswell@best-in-class.com 11 Copyright © Best Practices®, LLC

Expanding a Product Portfolio Without Cannibalizing an Established Brand Report Summary

by Best Practices, LLC on Dec 15, 2011

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