Portfolio pricing research


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Neolite is invited to give a presentation on 3rd Summit of China Pharmaceutical Market Research Association which was held on Oct 7-10 in Suzhou. This is the presentation deck.

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Portfolio pricing research

  1. 1. Portfolio Pricing Research Frank REN October 10, 2012
  2. 2. Tribute to from Novartis from XJP & the forthcoming Jaqinus from Pfizer & the forthcoming and TDM1 from Roche Heptodin, Hespera & Viread from GSK and Insulin pipelines from NovoNordisk and Eli Lilly & Glucometer brands from JNJ, Roche and Bayer, etc. Page. 2
  3. 3. Price Methodology Overview Direct Techniques Gabor Granger van Westendorp Price Sensitivity Meter (PSM) BPTO (Brand Price Trade Off) Indirect Techniques Price Scenario Testing Conjoint (Adaptive, Choice-based, etc.) Discrete Choice Modeling Page. 3
  4. 4. Yet challenges to the above mentioned “pure” research methodologies... Has the agency taken the product positioning into account? Is it a “revolutionary”, “evolutionary” or a “me-too” product? Is it a “premium”, “mainstream” or a “PPP”? Is it a 1st line, 2nd line or 3 line product? The positioning initiative will determine which reference price we should use and whether we need to build the pricing scenario from the lower end or ceiling end... Does ACA (Adaptive Conjoint Analysis)/DCM (Discrete choice modeling) really make sense? Given the fact that Rx products are almost established with fix product feathers, the utilization of ACA and DCM is limited. Rigid multiple-choice questionnaires of trade-off techniques also limit the responses How to deal with the potential scenarios listed below? Competitors’ reaction: especially for evolutionary products, competitor price-cut? Life cycle strategy: balance the early adopters and latecomers? Indication approval sequence: high release price and planned reductions as well? Dosage & Formula: impact on hospital listing? RDL & Sponsorship Impact, etc. Page. 4
  5. 5. Portfolio pricing strategy development is part of a business case rather than aresearch case - Below several key issues need to be addressed Is there any specific requirement for each individual brand on either “top-line” or “bottom line”, or both? If top-line is the core parameter, in order to boost the top-line achievement, is there any plan to increase more spending on PFME/PTE/MOGE? If bottom-line is the core parameter, in order to secure more EBIT, have you prepared to cut the spending in marketing and sales, loose the capita, or you have an opportunity to save the COGS? If there is a trade-off for both “top-line” and “bottom-line”, have you set any “Golden rules”? Portfolio Cost Composition (%) Page. 5
  6. 6. Various portfolio business development strategies - Initial pricing guidance!Portfolio/Product fits different customer segments Case Study: JNJ Glucometer portfolio Case Study: NESCAFE portfolio Premium Premium Mainstream Plus Mainstream Plus Mainstream Mainstream PPP PPP Page. 6
  7. 7. Various portfolio business development strategies - Initial pricing guidance!Portfolio/Product fits different commercial models Case Study: XJP antipsychotic portfolio Case Study: Novartis HTN Franchise Invega Exforge Sustenna Risperdal Trade-up for Trade-up for Consta bottom-line bottom-line outcome with outcome with sufficient sufficient PFME PFME Invega Diovan Risperdal Oral Solution Trade-down for Trade-down for top-line top-line outcome with outcome with Risperdal broad broad Lotensin tablet coverage and coverage and distribution distribution Page. 7
  8. 8. Various portfolio business development strategies - Initial pricing guidance!Portfolio/Product fits different clinic roles Case Study: Roche HER2+ Franchise Case Study: Novartis Afinitor indications 1st approval: TSC SEGA 1st line: 2nd approval: 2nd line mRCC 2nd line: ? TDM1? 3rd approval: 2nd line HER2+ aBC 4th approval: TSC AML Much uncertainty depends on the clinic outcome 5th approval: ER/PR+ aBC of EMILIA, MARIANNE, etc. Possible further indications: pNET, TSC Seizure, etc Page. 8
  9. 9. Research approach should hence be customized to fit the portfolio strategy! Market size & potential Portfolio Needstates Unmet needs Targeting & positioning for each product PTE & PFME MOGE Perceived product value Trade margin Commercial Customer Decision tree Top line/Bottom line Models Segments Price elasticity Choice-Based Modeling Portfolio Pricing Scenario-Based Modeling Indication launch sequence Competitive Clinic Roles Competitive evolution Repertoire Clinic paradigm Analogue regression modeling Money flow & Co-pay model Possible competitors reaction possibility Page. 9
  10. 10. Build business mindset before adopting any methodological technique Confirm the “top down” pricing policy & the rationale No change to all established brands? Maintain the mainstream brand? Fixed pricing gap for different brands? Define the expected research outcome & the action standard Price range recommendation? Scenario-based forecast? P & L simulation? Set the research scope & checkpoints of different stages Secondary data modeling? Primary: geographic coverage, customer target, modules, statistic tools, etc. Page. 10
  11. 11. Case Study: Glucometer Portfolio Pricing Study Objective: develop full set of pricing options for a glucometer portfolio Step 1: Consumer needstate study, competitive landscape & price elasticity exploration Economic-fit Psycho-fit Gifting Consumer Segment EM Key EM Key int ext Core needstate “Basic for use” “As in hospital” “Show care” “Show face” Willing to pay ~200-300 ~400-500 ~400-500 ~600-800 ~400-500 ~1000 Own brands Brand A (900), Brand B (800), Brand C (450) Competitive brands Wide range from 250 to 1200 Step 2: Different pricing exercises to achieve the ultimate business objectives Brand D Brand C Brand C’ Brand B Brand C’ Brand A Strategy PPP Portfolio Centric Premium Action points Innovation Renovation Renovation Re-positioning COGS/Trade Key issues Proper “Sandwich” approach to maximize the coverage Communication margin No price test but a Research Implication CA/DCM BPTO or scenario-based forecast concept test Page. 11
  12. 12. Case Study: Antipsychotic Portfolio Pricing Study Objective: Pricing the line-extension brand & new launching brand to optimize the portfolio performance Step 1: Internal P & L scenario analysis (maintaining current key brand as portfolio centric, using the line-extension brand as portfolio centric, or using the new launching brand as portfolio centric, etc.) Current Brand A (20) Option 1 (2017) Brand A (16) Brand A’ (24) Brand B (35) Yearly Revenue (m) 420 Yearly Revenue (m) 380 510 250 Option 2 COGS (22%) 22% COGS (21%) 20% 21% 22% Option 3 PFME (15%) 15% PFME (13%) 8% 15% 15% PTE (10%) 10% PTE (13%) 20% 10% 10% Option 4 MOGE (14%) 14% MOGE (13%) 8% 15% 15% Option 5 Others (11%) 11% Others (11%) 11% 11% 11% ... EBITA (28%) 28% EBITA (29%) 33% 28% 27% Step 2: Scenario-based test & modeling in different cities/hospitals (fit different business models) Option 1 Option 2 Option 3 Option 4 Option 5 Brand A Y N N Y Y Brand A’ Y Y N Y N Brand B Y Y N Y Y Total Portfolio Y - N Y - Page. 12
  13. 13. Case Study: Pricing Across Various Indications Objective: develop a competitive pricing strategy for a brand and build a sustainable and profitable business foundation across various indications Step 1: Demand & value proposition study for various indication (Biz workshop + epidemiology data) Indication A Indication B Indication C Indication D (half dose) Yearly Target patients 9,500 4,000 1,300 30,000 Treatment rate ~30% ~80% ~90% ~90% Treatment days 360 90 300 180 Possibility to win (competitiveness) ~90% ~30% ~20% ~50% Potential Treatment Days 461,700 86,400 70,200 2,430,000 Step 2: Key stakeholders’ Scenario-based Test in regards of the brand Indication A Indication B Indication C Indication D (half dose) Feasible Price Range from SBT (Monthly) 4500-5500 15000-20000 15000-20000 8000-12000 Page. 13
  14. 14. Case Study: Pricing Across Various Indications Step 3: Analogue calibration, Internal P & L review and analysis Step 4: Launch sequence modeling & forecasting Page. 14
  15. 15. In summary… Think beyond pure pricing research methodologies and consider more about business Take positioning status and the possible moves of individual brands into account Pre-study task should cover various scenarios with more financial parameters Multiple approaches (analogue modeling, secondary data mining, direct/indirect research) to cross validate the final outcome Page. 15
  16. 16. Thank you for your attention!For more business enquiry, please visit http://www.neoliters.com. You may also follow Neolite at(http://weibo.com/neoliteinsight) for more shared reports and information…