Creating Hybrid CSO Models

Creating “Hybrid” CSO Models for Start-Up Operations
2 Case Studies

Forum on Contract Sales Strategies for Bio/Pharmaceutical Companies
Flexible Sales and Promotional Models for Enhanced Business Profitability
June 21, 2011

prepared • DesignPharma • Pharmaceutical Sales Operations & Analytics Consultants
Witte by Matthew Witte
» MatthewMatthew Witte • DesignPharma • Pharmaceutical Sales Operations & Analytics Consultants

Creating “Hybrid” CSO Models for Start-Up Operations
- Presentation overview

» “Hybrid” Model Definition

» My Experience with “Hybrid” Models

» Why Pair Company Field Managers with CSO representatives?

» Case Study One – Ligand Pharmaceuticals

» Case Study Two – Somaxon Pharmaceuticals

» Matthew Witte • DesignPharma • Pharmaceutical Sales Operations & Analytics Consultants

“Hybrid” Contract Sales Model
Definition
A sales force build where the front line
sales management are employed by the
pharmaceutical company and the sales
representatives are CSO employees.

Note: In this model, the back office CSO support services
can either be completely CSO managed or priced ala carte.


My Sales Teams “Construction” Bio

» Somaxon Pharmaceuticals
 Designed & staffed CNS “hybrid” CSO sales force

» Ligand Pharmaceuticals
 Designed & staffed Pain “hybrid” CSO sales force

» Roche Pharmaceuticals (Midwest Region)
 Built 3X3 “mirrored” primary care sales forces
 Initial build was designed as a “hybrid” CSO sales force model
 Multiple specialty team builds as Roche employees

» Novo Nordisk Pharmaceuticals
 Multiple specialty divisions from 1983-2004, all company employees


Outsourcing Trends
» “…analysts see several trends continuing... with a
move to reduce additional fixed costs through
outsourcing.”
– — The Pharma Agenda: Hard Days Ahead, MedAdNews, January
2010

» “…Companies are now looking to take sales force
outsourcing to the next step.”
— The New Sales Force, Pharmaceutical Executive, March 2009

» The first movers have changed their selling model…
and the traditional selling and promotion model is
being redesigned.”
— Tearing Up the Rule Book, Pharmaceutical Executive, February 2010


Trend Toward Outsourced Sales
- Fewer Company Reps, More Contract Specialty Reps

Total Number of Total Number of Outsourced
Field Representatives Field Reps Increasing
Decreasing

12,000
100%
10,000 Increase

110,000 8,000 12,000
(16% of total)
Total 6,000
~75,000
Reps 6,000
Total 4,000 (5% of total)
Reps
2,000

-
2004-2005 2015 Proj


Strategic Outsourcing
- Why the Change to CSO Managed representatives?
» Efficiency
 Companies can focus on core
competencies
 Outsource the rest

» Flexibility
 Quickly ramp up and/or down as the
market demands
 Adjust the sales mix as needed

» Risk Mitigation
 Uncertainty, in today’s world, is the
norm
 Strategic outsourcing helps mitigate risk


Strategic Outsourcing
- Why Pair Company Managers with CSO representatives?
» Commitment to corporate results
 Company managers are tied tighter to corporate goals & objectives
 Typically incented with stock options
» Management talent
 Salaried at industry standards – increases recruitment pool
 More experienced, tenured specialty managers available
» Recruiting, screening and hiring
 Committed, enthusiastic managers pull in better sales candidates
» Strategic Management
 Focused on strategic & tactical issues, not sales bureaucracy
 Sales management “without the mess”


Case Study One

Ligand Pharmaceuticals Inc.


- Company Overview
» San Diego based, drug development company whose current business
model is specializing in royalty revenue generating assets
» Commercially marketed specialty pharmaceuticals from 1999 to 2007
» Ligand pre-commercial chronology:
 1987 - Progenx is formed
 1989 – The company name is changed to Ligand Pharmaceuticals
 1992 – The company goes public
 1995 – Glycomed is acquired
 1998 – Seragen is acquired
Situation: Classic biotech R&D focused start-up without any commercial
infrastructure


- Commercial History

 1999 - 2 products are FDA approved in the same week (Panretin gel
and ONTAK)
 2000 - Commercial sales ramp up
 2001 - Targretin caps and gel are FDA approved and launched
 2002 - Avinza is acquired from Elan
 2002 - Avinza is FDA approved and launched
 2003 - Organon begins co-promoting Avinza
 2006 - Eisai acquires oncology products & personnel for $205MM
 2007 – King acquires pain product & personnel for $313MM
 2007-date – Ligand continues as a royalty revenue company


Ligand Pharmaceuticals
- Multiple Roads to Commercial Products

» Acquires ligand retiniod R&D projects from Allergan in 1997
 Targretin – caps and gel
 Panretin – gel

» Acquires the company Seragen and assumes Interleukin 2-based
targeted combination oncology projects
 ONTAK

» Acquires late stage product IND and marketing rights from Elan
in 2002
 Avinza

» Ligand achieves FDA approval for all 5 products in 4 years


- Product Portfolio
» ONTAK (denileukin diftitox)
 Targeted oncologic, combination of IL 2 and diphtheria toxin
 Indicated for a rare indolent lymphoma - CTCL
 Deep frozen product
 Administered IV, similar to chemotherapy
 Price approx. $20K per cycle (2006)
» Targretin caps and gel (bexarotene)
 Retinoid, selectively targeting only X retinoid receptors
 Indicated also for CTCL
 Cost >$1K/month, depending on dosage formulation (2006)
» Avinza (morphine sulfate extended release capsules) CII
 Once-a-day formulation
 Flat PK profile


- “Hybrid” CSO model
» CSO provider – Innovex
» Ligand’s CSO goal – add scalable sales strength at the lowest
possible cost per representative using existing internal sales
support
» Contract details
 2001 – initiated a CSO agreement for 20 full time dermatology contract sales
representatives (managed by 4 existing Ligand oncology RSMs)
 2002 – redirected these 20 reps to support the launch on Avinza
 2002 – expanded the pain sales team to 50 reps, adding 30 additional full time
CSO reps (managed by 5 Ligand Pain RSMs and a National Sales Director)
 2004 – expanded the pain sales team to approx.100, by adding an additional
50 CSO reps (expanding the Ligand RSMs to 10)



» Innovex provided a National Field Director and Regional
Field Coordinator allocated 50% to the Ligand contract

» Ligand RSMs were relieved of all traditional HR
responsibilities due to co-employment rules

» All CSO back office services were ala carte (and virtually
unused)


Ligand Product Sales
$160

$140

$120
Product Sales ($M)

Ligand expands to
106 Specialty reps
Avinza
launches with
$100
70 ―hybrid‖
CSO Specialty
reps
$80 Oncology
Eisai
40 reps
Deal

Oncology 20 ―hybrid‖ CSO Organon
$60 Co-promotion
20 reps reps hired to
700 reps King
launch T gel in
Deal
dermatology
$40

$20

$0
1999 2000 2001 2002 2003 2004 2005 2006 2007

Year
Avinza Ontak Targretin Caps T gel and Panretin

Ligand Sales
$225
3

$200 Targretin
20
gel
Product Sales ($M)

$175 4
32

19
$150 Targretin
31 caps
$125 4

15
$100
32 Ontak
$75 150

4 3
113
$50 7
12 12

3 15
24
70 Avinza
$25 2 7
27

24
13 12 17
8
$0
1999 2000 2001 2002 2003 2004 2005 2006

Year

- “Hybrid” CSO Model Conclusions
» Goal:
 Scalable sales force
 Ability to shift deployment from Dermatology/Oncology to Pain, when needed
 Low cost per representative
 Use existing internal sales support
 Strong control of control, training, messaging, field activity, commitment through
company employed RSMs
» Results:
 Sales force grew easily from 20 original reps and no additional RSMs to 106 reps in 10
regions
 20 Derm reps formed the core of the initial 50 rep Pain sales team
 Cost per rep was minimized by using Ligand’s fledging sales support infrastructure
 Pain reps successfully launched Avinza into stiff competition, w/o a co-promotion
partner, due in part to excellent field sales management


Case Study Two

Somaxon Pharmaceuticals Inc.


- Company Overview
» San Diego based, commercially-focused company
» Formed in 2003, acquiring the marketing rights to low-dose doxepine (trade
name Silenor) for sleep disorders
» Successfully executed an IPO in 2005
» Initial planned launch in 2008 abandoned after a FDA approvable letter
 Internal CommOps employees were released
 Plans to launch a 300+ sales force scrapped
» Final FDA division appeal resulted in Silenor approval in March 2010
 Internal staff down to 5 Executive Officers
» Silenor commercially launched in September 2010
Situation: Specialty pharmaceutical start-up based on a re-purposed
molecule and without any commercial infrastructure


- Product Portfolio
» Silenor (doxepine)
 Indicated for the treatment of insomnia characterized by difficulty with sleep
maintenance
 Silenor is approved for the treatment of both transient (short term) and chronic (long
term) insomnia in both adults and elderly patients
 Silenor demonstrated maintenance of sleep into the 7th and 8th hours of the night, with
no meaningful evidence of next day residual effects in clinical trials
 Silenor is not designated as a controlled substance by the U.S. DEA because of its
demonstrated lack of abuse potential
 Price approx. $1 per day, with copay assistance the price to the consumer can be as
low as $0.50
 Available as 3mg and 6mg dosage forms
» Sales Challenge
 Doxepin, originally launched as Sinequan by Pfizer in 1969, available as10mg generic


Analyst’s Perspective

“We think Silenor has the best chance to become what many have tried
and failed to achieve – the ideal insomnia drug. According to the FDA-
approved label, Silenor carries no liability for dependence, addiction,
tolerance, withdrawal, rebound, or next day residual effects yet still
provides ideal efficacy for 8 hours. It is not DEA scheduled and works
within the body's natural sleep-wake cycle; therefore it has a shot to
finally shake the "sleeping pill" stigma.”
– Jeffries & Company, Inc.; April, 2010

“Silenor carries what we find to be one of the most compelling labels
among its competitors and will be the first insomnia drug to offer both
real efficacy and a lack of DEA scheduling.”
– Jeffries & Company, Inc.; April, 2010


» CSO provider – Publicis Touchpoint
» Somaxon’s CSO goal – scalable sales force at premium per rep to
build a medium-sized, fully supported specialty sales team
» Contract details
 March 2010 – FDA approves Silenor
 April 2010 – Somaxon raises approx. $100MM to begin commercial scale-up
 May 2010 – “Hybrid” CSO sales force model designed
 July 2010 – 10 Somaxon RSMs are hired, marketing team deployed
 August 2010 – 110 Publicis reps are hired
 August 2010 – P&G co-promotion with 105 reps announced
 September 2010 - Silenor launched after 300+ national launch meeting
 March 2012 – 35 Publicis reps and 3 Somaxon RSMs added

Somaxon Pharmaceuticals

» Publicis initially provided a National Field Director and
Regional Field Coordinator (RFC), allocated 100% to the
Somaxon contract
» For the expansion, 2 additional RFCs were added
» Somaxon RSMs were relieved of all traditional HR
responsibilities due to co-employment rules
» All CSO back office services were purchased


Somaxon Pharmaceuticals
- “Hybrid” CSO Model Conclusions
» Goal:
 Scalable sales force, quick deployment
 Ability to shift deploy 110 initially and then build to approx. 250, when needed
 Premium cost per representative, competitive specialty base salaries
 Use full CSO back office sales support
 Strong control of control of sales training, messaging, field activity, rep commitment
through company employed RSMs
» Results:
 Sales force grew easily from 110 original reps and 10 RSMs to 145 reps in 13 regions
 Premium cost per rep was justifiable considering no internal sales support
infrastructure was required
 Sales reps average 6 years of specialty sales experience (90% CNS & 60% sleep)
 Publicis Touchpoint reps successfully launched Silenor in less than 4 months, also due
in part to excellence field sales management


American Psychiatric Association Meeting
Silenor 20’X20’ Booth
Honolulu, Hawaii – May 2011


Creating Hybrid CSO Models

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