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
nhansen@datamonitor.com
To find out more about Datamonitor Consulting contact on
info@datamonitorconsulting.com or visit
www.datamonitorconsulting.com
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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 in
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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?
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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.
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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 company's 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.
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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.
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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.
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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.
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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
info@datamonitorconsulting.com.
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.
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