Lecture Slides 8.pdf

8/27/23
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Marketing
Biocon: launching a new cancer drug
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BIOMAb from BIOCON
• It's 2006
• Biocon, a small biotech company in India, has just completed phase-2 trials for a new
cancer drug. The results are significantly better than expected.
• The company has filed for early approval and it expects to get permission to launch the
drug in India.
• Dr. Kiran Mazumdar-Shaw, the CEO of Biocon, must now decide whether to launch the
drug immediately or complete phase-3 trials, a standard practice in the drug industry.
• She also has to formulate a launch plan for the new drug.
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BIOMAb clinical trials
• Clinigene conducted phase-2 trials in which it compared the following four
scenarios:
• radiotherapy only
• chemo and radiotherapy
• radiotherapy and BIOMAb
• chemo and radiotherapy with BIOMAb.
• Each cell contained 92 patients.
• Only 40% of the patients responded (i.e., the tumor was killed) when treated with
radiotherapy alone.
• The results for the other combinations were 70% for chemo and radiotherapy,
• 80% for radiotherapy and BIOMAb,
• 100% for chemo and radiotherapy in combination with BIOMAb
• It was on the basis of these spectacular results that Biocon had filed for
accelerated approval with DCGI.
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Questions
• Shall we launch BioMAb now or wait for phase 3 trials?
• What should be our product strategy
• BioMAb alone or BioMAb+ generics or generics followed by BioMAb
• What should be our positioning ?
• What should be our pricing?
• What is our expected volumes and ROI for 25 Million USD?
• What should be our sales and distribution strategy?
• What shall be our communication strategy?
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Why should BIOMAb be launched now?
• Spectacular Phase 3 results
• First Mover advantage
• Less litigation risk in India
• Bragging rights – being the 1st Indian cancer drug.
• It is immoral to delay launch when the product can save lives.
• Phase-3 can take a long time.
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Why should Biocon wait?
• Merck’s Erbitux has passed phase-3 successfully and therefore will have
greater credibility in the market.
• Let competition educate the Indian market for us. Since our drug is superior to
Erbitux, let Merck create the market and then we can take a large share.
• Our Phase-2 results are based on only 100 patients.
• Oncologists are unlikely to be swayed by phase-2 results and will demand to see
successful phase-3 results before considering adoption.
• Biocon will be unable to charge premium prices without phase-3 results.
• We need time to build sales and marketing capability.
• Biocon cannot afford any missteps at this point – if BIOMAb were to fail in
the marketplace, it could have an irreversible long-term impact.
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Product Strategy
• Launch BIOMAb only
• Launch Generics now and wait for phase 3 results
• Launch BIOMAb and Generics together
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Product Strategy
• Launch BIOMAb only
• BIOMAb will take up all of Biocon’s resources in the short-run.
• Launching generics will dilute the impact of BIOMAb being positioned as a
revolutionary drug and will distract both the sales force and oncologists.
• Offering generics runs counter to Kiran Mazumdar-Shaw’s goal of making
Biocon a high-end Indian biotechnology company.
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Product Strategy
• Launch Generics now and wait for phase 3 results
• at present, the firm does not have sales and marketing capabilities.
• Starting with generics will permit the firm to build these skills in time for the
BIOMAb launch after the phase-3 trial results are available.
• but starting with generics positions Biocon at the low end of the oncology
market and hurts its ability to launch BIOMAb subsequently,
• doctors will not be interested in talking to Biocon’s sales reps if all they have
to offer are generics, and
• Biocon’s sales reps will focus on selling on price rather than learning how to
sell the value and uniqueness of specialty products like BIOMAb.
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Product Strategy
• Launch BIOMAb and Generics together
• sales reps need to first offer a full line of products to get the attention of
doctors and then a one-stop solution to retain it.
• the firm needs the revenues from a product portfolio to justify the sales force
costs.
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Pricing?
• COGS is $250 per dose (case p.4)
• Erbitux costs $4,000 to 5,000 per dose (case p.10)
• BIOMAb product team’s pricing of $1,000 per dose (case p.10) is
based on the Indian brand discount and the Indian customer’s
willingness to pay.
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Price
Value of Life?
6000 $ per dose of Erbitux?
1000 $ for unit of BIOMAb?
Any thing above 250 $ COGS?
Give it free?
2,20,000 $ for life-time treatment with Erbitux
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How to communicate
Patient
Oncologist
Trade
Physician
Government
Friends
Family
Insurance
companies
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Adoption of a new product
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Biocon: Launching a New Cancer Drug in India 508-026
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Exhibit 5 Market Potential of BIOMAb in India, 2007
Cancer Type Incidence Affordability Number of Patients
Head and Neck 190,000 1.0% 1,900
Breast 93,326 3.0% 2,800
Lung 39,205 1.85% 725
Colorectal 37,213 3.0% 1,116
Brain 22,150 2.0% 443
Pancreas 10,325 1.25% 130
Total 392,219 7,114
Source: Biocon estimates.
This document is authorized for use only in Prof. Anandakuttan B Unnithan's Marketing Management! at ${institution} from Jun 2018 to Dec 2018.
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Annual Revenue
Price per
Dose
Market = 200
patients
Market = 1900
patients
Market = 7100
patients
$ 1000 $ 1.2 Million $ 11.4 Million $ 42.6 Million
$ 4500 $ $ 5.4 Million $ 51.3 Million $ 191.7 Million
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Annual profit contributions
Price per
Dose
Market = 200
patients
Market = 1900
patients
Market = 7100
patients
• COGS - 25%
• R&D - 15%
• Marketing - 25-30%
• Profits - 30-35%
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Present value of annual profit contributions
Price per
Dose
Market = 200
patients
Market = 1900
patients
Market = 7100
patients
Present Value = M/(r-g)
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What happened?
• BIOMAb was launched soon after receiving government approval, without
phase-3 trial.
• It was sold at $1,000/dose, although the marketing team suggested a higher price.
• Erbitux was launched in late 2006. Even though it was launched at a much lower
price than expected, on a per dose basis, BIOMAb remained 40-50% cheaper than
Erbitux.
• By December 2007, BIOMAb had 1,000 registered patients.
• The number of registered patients increased to approximately 2,000 by the
end of December 2008.
• By 2007, Biocon was ranked as the 20th largest biotech company in the
world with revenues of $0.3 billion (annual growth 10%) and income of
$0.1 billion (annual growth 25%). The largest biotech company, U.S. based
Amgen, had 2007 revenues of $14.8 billion and income of $3.2 billion
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What do we learn from Biocon case?
• Once Biocon decide to go for
launch of BIOMAb, they should
have a clear plan of action to
market
• Go to Market Strategy
• It starts with the question
• Who is the buyer?
• Whom do we target in our efforts?
• A Decision Making Unit
• Role, Motivations, Needs, and
Power of each of these players.
Patient
Oncologist
Trade
Physician
Government
Friends
Family
Insurance
companies
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Oncologists
• Oncologist is data driven and scientifically curious,
• Interested in saving lives and building and preserving his or her
reputation by being associated with cutting-edge products.
• It is important that the firm credibly proves its claims about product
performance
• Will Oncologists be swayed by phase-2 results?
• Oncologists will be very risk averse and unlikely to switch from their
current practices unless they are absolutely certain about the product
performance
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Oncologists
• So , which oncologists should Biocon go after?
• The practice leaders or those upcoming ones in middle tier?
• Biocon needs the big names and opinion leaders to come on board to
be able to penetrate the rest of the market quickly.
• Potential concentration of top-tier oncologists in major cities, which
makes it easier and less expensive for sales reps to reach them
• These top oncologists may be less willing to try BIOMAb unless it goes
through extensive phase-3 trials.
• In contrast, second-tier oncologists may see this as an opportunity to
gain credibility with a new and potentially revolutionary drug.
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Patients
• What group of patients?
• Those who are newly diagnosed?
• Those in advanced stages?
• Those in terminal stages?
• What will be the mindset of patients?
• In a state of shock
• Worried about death, welfare of family?
• Will they take an objective decision?
• Does it make sense to target the family /friends /relatives?
• Who are the key influencers? What is the process that results in accepting the
treatment decision?
• Or is it left alone tothe oncologist?
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What is the sales pitch?
• To the doctor?
• Effectiveness
• Innovation?
• Indianness
• Cost advantages
• Less side effects
• To the patients
• Increased Expectancy of life?
• Economics and relative cost advantages over competition?
• Any thing else?
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The dynamics of sales interaction?
• What is the doctor going to tell the patient once they have broken the
news?
• Will the doctor lay out the various options side- by-side and do a cost
comparison?
• What is the patient thinking?
• Is s/he rational or emotional at this point?
• Will the patient be willing to try risky treatments?
• What role does the family play?
• Are they rational?
• Who is speaking with and counseling the family?
• What is the role of sales executive in the process?
• In Biocon’s case, the sales representative has to gain the trust of the doctor
and essentially serve as the doctor’s extended arm in dealing with and
counselling patients/families?
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Should the trade be involved?
• What functions do they serve in this process?
• What skills , resources do they bring in? What are their motivations?
• Do they supplement, substitute or augment Biocon’s efforts or competencies?
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The strategic question?
• What is Biocon planning to achieve through BIOMAb launch?
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Annual Revenue
Price per
Dose
Market = 200
patients
Market = 1900
patients
Market = 7100
patients
$ 4500 $ $ 5.4 Million $ 51.3 Million $ 191.7 Million
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8/27/23
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Annual profit contributions
Price per
Dose
Market = 200
patients
Market = 1900
patients
Market = 7100
patients
• COGS - 25%
• R&D - 15%
• Marketing - 25-30%
• Profits - 30-35%
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Present value of annual profit contributions
Price per
Dose
Market = 200
patients
Market = 1900
patients
Market = 7100
patients
• Present Value computational formula = M/(r-g)
• The estimated investment is $25 million
• Assuming 50% of market adoption, will Biocon make money on this investments?
• As an investor , what are your concerns?
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What are the strategic objectives for Biocon?
• What do they expect BIOMAb to do for Biocon?
• Biocon has moved from manufacturing and selling enzymes to statins, to
insulin, and to new molecules like BIOMAb. It is slowly but surely moving
up the value chain – from commodities to specialties.
• Where is Biocon headed?
A. Biocon wants to become a leading bio-technology firm in India (or globally)
B. Biocon wants to become the preferred partner to big-pharmaceuticals in the drug
testing and manufacturing areas. Biocon can offer a low cost option for
pharmaceutical firms that want to outsource these activities.
C. Biocon wants to be the preferred option for any global pharmaceutical company
that operates in the oncology space and wants to enter the Indian market.
• What role would BIOMAb play in these three scenarios?
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Strategic Choices?
• We cannot afford to think of the BIOMAb launch plan in isolation.
• We need to recognize the connection between corporate strategy and
marketing/product/brand strategy.
• In fact, market size and profit contribution estimates suggest that BIOMAb is
unlikely to make substantial profits for the company.
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Strategic Choices?
• By conducting clinical trials, manufacturing and launching a proprietary
drug, and by building sales and marketing capabilities for BIOMAb, Biocon
is signaling its various strengths to the global pharmaceutical companies.
• As the cost of clinical trials in the developed world increases, Biocon may
become the partner of choice for global pharmaceutical companies for
their own clinical trials.
• Biocon has created a subsidiary, Clinigene, especially for this purpose
• by developing sales and marketing capabilities for its own drug, it can help global
companies reach the vast Indian market.
• Does not make sense to develop a specialized sales force in oncology for a single
product
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Strategic Choices?
• Shall we consider Kiran Majumdar Shaw and her vision and motives?
• Kiran Mazumdar-Shaw is one of the leading self-made female entrepreneurs in
India.
• She serves as a role model for all young Indian women.
• BIOMAb could be more than just a category killer for Kiran Mazumdar-Shaw.
• She wants to create the first proprietary drug in India and beat Merck to market.
• Kiran Mazumdar-Shaw wants to establish Biocon as India’s first biotech company
and show that an Indian firm can grapple with the Mercks of the world.
• Does the person and their notions of self and their role in the world matter
in business decision making?
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Lecture Slides 8.pdf