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Pharmaceutical Industry Dynamics that drove the formation & growth of the Competitive Intelligence function. Neil Mahoney – President. Global Business Management Concepts 126 Clinton Road Fairfield, NJ 07004 973-882-1201. Agenda for Presentation. Government Impact on Industry Dynamics

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slide1

Pharmaceutical Industry Dynamicsthat drove the formation & growthof the Competitive Intelligence function

Neil Mahoney – President

Global Business Management Concepts

126 Clinton Road

Fairfield, NJ 07004

973-882-1201

agenda for presentation
Agenda for Presentation
  • Government Impact on Industry Dynamics
  • Portfolio Planning Impact
  • CI Function and its Operations
  • Role of Internal CI versus Consultants
  • Key Counter Intelligence Concepts
  • Summary and Conclusions
index of cpi versus hcpi from 1962 2001
Index of CPI versus HCPI from 1962-2001

GATT

Update

1995

Clinton

Healthcare

Debacle

1992

Nixon

Wage &

Price

Controls

Hatch

Waxman

Act of 1984

Kefauver

Hearings

Impact

HMO

Acts of

1973,76,78

EU

Created

1993

Index based on 1964 Prices

Medicare

1965

Prescription

Drug User

Fee Act

1992

1962

1974

1984

1992

2001

CPI: Consumer Price Index; HCPI: Healthcare CPI (Rx and Medical Supplies )

Source: Bureau of Labor Statistics

total drug development time from synthesis to approval
Total Drug Development Time from Synthesis to Approval

14.2

14.2

11.6

8.1

Source: DiMasi, J.A., “New Drug Development in U.S. 1963-1999”, Clinical Pharmacology & Therapeutics 2001.

nce lifecycle sales analysis average percent of peak sales potential
NCE Lifecycle Sales AnalysisAverage Percent of Peak Sales Potential

Hatch

Waxman

Exclusivity

Source: IMS (Based on 816 NCE’s launched since 1983)

NCE = New Chemical Entity = New Molecular Entity

nce lifecycle sales analysis average percent of peak sales potential by brand and generic share
NCE Lifecycle Sales AnalysisAverage Percent of Peak Sales Potentialby Brand and Generic % Share

Hatch

Waxman

Exclusivity

100%

96%

95%

76%

71%

Source: IMS (Based on 816 NCE’s launched since 1983)

NCE = New Chemical Entity = New Molecular Entity

usa is key to nce success
USA is key to NCE Success

% Sales of NCE Launches – 1997-2001

Source: IMS Health, MIDAS

comparison of average price per rx in 2000 indexed to 1995 pricing for nme and imd
Comparison of Average Price Per Rx in 2000Indexed to 1995 Pricing for NME and IMD

Pre

1995

Standard

IMD

Standard

NME

Priority

IMD

Priority

NME

NME: New Molecular Entity

IMD: Incrementally Modified Drug

Sources: Scott-Levin SPA data; Internal analysis

field force expansions exemplify increased investment spend to accelerate market penetration
Field Force Expansions Exemplify Increased Investment Spend to Accelerate Market Penetration

Thousands of Field Reps

Source: Scott-Levin’s Sales Force Trends

industry tries to improve discovery process
Industry Tries to Improve Discovery Process
  • Utilizes new Technologies: - High Throughput Screening

- Combinatorial Chemistry - Genomics for Target and Lead Finding

  • Evaluate Strategic Opportunities - Disease Strategy for Target Areas - Platform Technologies - Target Product Profiles
ethical pharmaceuticals r d expenditures
Ethical Pharmaceuticals R&D Expenditures

30.5

25.7

$Billions

15.2

4.1

1.9

clinical development projects per phase
Clinical Development Projects per Phase

Sources: Pharmaprojects, UBS Warburg, CDER/FDA

the industry compensates by shifting emphasis to blockbuster drugs
The Industry Compensates by ShiftingEmphasis to Blockbuster Drugs

Lilly

Aventis

SGP

AZN

Merck

Wyeth

Abbott

Pfizer

J&J

Roche

GSK

BMS

Novartis

Sources: Evaluate, IMS Health - Midas

the trend for blockbusters is improving
The trend for blockbusters is improving

Number of products achieving global sales over $500 million

110

91

75

60

Source: IMS Health: MIDAS, Dec 2001

but only a small of nces become blockbusters
$1.8 Billion or >

$920 Million - $1.8 Billion

$460 Million - $920 Million

$180 Million - $460 Million

< $180 Million

1.0%

1.0%

2.0%

6.0%

90.0%

But, only a small % of NCEs Become Blockbusters

% Achieving

Sales Total Per Annum

Average for all Drugs -- $265 Million per Annum

Sources: PriceWaterhouse Coopers, SCRIP

history of key pharmaceutical mergers
History of Key Pharmaceutical Mergers

1989

Bristol-Myers Squibb

Smithkline Beecham

1992

Marion Merrell Dow

Functional

Functional

1994

Roche/Syntex

Wyeth/Cyanamid

Geographic

1993

Rhone Poulenc-Rorer

Critical Mass

1995

Glaxo Wellcome

Pharmacia & Upjohn

Hoechst Marion Roussel

1996

Novartis

Portfolio

1999

Aventis

AstraZeneca

Sanofi-Synthelabo

Portfolio/

Geographic

1998

Roche/Boehringer Mannheim

Functional/

Geographic

2000

Pharmacia/Monsanto

Pfizer/Warner-Lambert

Glaxo & SmithKline

2001

Abbott/Knoll

BMS/Dupont

2003

Pfizer/Pharmacia

2004

Sanofi-Aventis

slide19

Pharmaceutical Industry Stratification ($Billions)

Pre Cox-2 Issues

Pfizer

J&J

GSK

Market Capitalization 9/04

Novartis

Sanofi-Aventis

Roche

Merck

Lilly

AZN

Abbott

Wyeth

Takeda

BMS

SGP

Bayer

Pharmaceutical Revenues for 2004

Sources: Lotus-One-Source, Evaluate, Internal Analysis

pharmaceutical industry stratification billions post cox 2 issues
Pharmaceutical Industry Stratification ($Billions)Post Cox-2 Issues

J&J

Pfizer

GSK

Novartis

Market Capitalization 2/05

Sanofi-Aventis

Roche

Abbott

Lilly

AZN

BMS

Merck

Bayer

Wyeth

SGP

Pharmaceutical Revenues for 2004

what are the next set of gov t actions
What are the next set of Gov’t actions?
  • Medicare adding drug benefit for elderly will put more burden on the Federal budgets and spur Congress to find ways to reduce price of prescriptions
  • Import of medication from foreign sources where local government dictates pricing will undermine freedom of pricing in the U.S. market
price pressures will drive consolidations in order to maintain earning levels
Price Pressures will Drive Consolidationsin order to Maintain Earning Levels

Sales

Price Pressures limits

Industry ability to use

price for growth

Price

Sales

Price

Units

Units

M&S

  • Industry continues to
  • consolidate in order to
  • cut infrastructure costs:
  • Reduce sales reps
  • Eliminate TA areas
  • in Research
  • Reduce duplication in
  • support functions

M&S

R&D

R&D

G&A

G&A

EBIT

EBIT

Consolidations protects

Earnings growth &

Capital value

summary points on industry dynamics
Summary Points on Industry Dynamics
  • Gov’t regulations have changed the industry dynamics requiring it to become more efficient
  • Gov’t price pressures will increase as Rx drug benefit is expanded and parallel importation rules are relaxed, which will drive more consolidations
  • These dynamics forced the industry to improve the planning processes
agenda for presentation24
Agenda for Presentation
  • Government impact on Industry Dynamics
  • Portfolio Planning Impact
  • CI Function and its Operations
  • Role of Internal CI versus Consultants
  • Key Counter Intelligence Concepts
  • Summary and Conclusions
portfolio planning process
Portfolio Planning Process

1. Perform

Environmental

Analysis

2. Create a

Vision of

the Future

3. Conduct

Internal

Assessment

4. Decide on

a Strategic

Position

6. Develop

a Plan

5. Develop

Strategy

Actions

  • 7. Manage the Planning Process
planning process in the 1980 s
Planning Process in the 1980’s
  • Focus was on internal portfolio opportunities
  • External view emphasized market research data for current competitors (Static View)
  • A cursory run from PharmaProjects constituted competitive assessment for future environment
  • A “Plan” was more of a wish list of what management needed to meet growth rates and not what could be accomplished in a changing competitive environment
what does market research tell you
What does Market Research tell you?
  • The met and unmet needs of the current customers (focus on providers)
  • The perception of current products
  • The marketing positioning and differentiation among current products
    • Pricing
    • Key attributes
    • Promotion program
    • Detailing support
this static view was inadequate for impactful portfolio planning
This Static View was inadequate for Impactful Portfolio Planning
  • It failed to predict changes in the market place due to:
    • New technologies
    • Process improvements by competitors
    • New competitive segments (Generics, Biotech)
    • Managed Care impact on segmentation of market
  • Which resulted in misallocation of resources for optimizing portfolio
changes to improve planning process
Changes to Improve Planning Process
  • Evaluate Strategic Opportunities - Disease Strategy for Target Areas - Platform Technologies - Target Product Profiles
  • More analysis on pipeline developments (ethical, biotech and generic segment) to determine impact on internal development portfolio
management recognized need for better insights on competitors activities
Management Recognized Need forBetter Insights on Competitors Activities
  • Thus, CI units began to emerge in different functions within organizations to address the competitive issues that had blindsided them
  • CI functions required broader skill sets than Market Research departments since the scope encompassed responsibilities and issues across the business chain, including processes as well as product issues
ci supports portfolio management
CI supports Portfolio Management

Competitive Intelligence

supports optimization of

future portfolio

1. Perform

Environmental

Analysis

2. Create a

Vision of

the Future

- Monitor competitor activity at tactical/product level to ensure no major impact on environmental view

3. Conduct

Internal

Assessment

4. Decide on

a Strategic

Position

6. Develop

a Plan

5. Develop

Strategy

Actions

  • Manage the Planning Process
  • – CI tracks competitor activity to ensure achievement of plan objectives
strategic and operational levels
Strategic and Operational Levels

Strategic Level Support

Senior Management - M&A Evaluations

Investor Relations - Wall Street Monitoring

Corporate Planning - Divisional Challenges

Operational Level Support

Licensing - Product Evaluations

Development - Clinical Tracking

Marketing - Market Dynamics

goal for ci functions
Goal for CI Functions
  • CI ultimate goal is to serve as backbone of portfolio and operational planning process
  • Tactical collection of competitive processes and product developments should result in projections of future competitive environment
  • This allows management to allocate resources to win or hold market share in the future environment and maximize return on investments
agenda for presentation34
Agenda for Presentation
  • Government impact on Industry Dynamics
  • Portfolio Planning Impact
  • CI Function and its Operations
  • Role of Internal CI versus Consultants
  • Key Counter Intelligence Concepts
  • Summary and Conclusions
what is competitive intelligence
What is Competitive Intelligence?
  • Competitive Intelligence is a processthat gathers and analyses information from various sources on specific business issues to develop insights that management can use in decision making
  • Competitive Intelligence improves various aspects of the planning process including product positioning, sales forecasting, and resource allocation to enhance portfolio optimization, thus improving financial performance
ci has various mandates
CI has various mandates
  • Benchmarking Across Competitors
    • Comparison across group of competitors
  • Company Level Analysis
    • Portfolio view of key competitors
  • Functional Issues
    • Explore process, system, or structure
  • Product Level Support
    • Licensing evaluations
    • Competitive pipeline tracking
    • Promotional support or message changes
ci needs and focus varies across the business chain
CI needs and focus varies across the business chain

Research

Licensing

Development

Tech Ops

Marketing

LCM

Disease Analysis

Platforms

Technologies

Targets

Clinical Endpoints

Potential Claims

Time to Market

Clinical Issues

Phase III & IV

Market Dynamics

Environment

Potential Products

Mechanism of Action

Company Reviews

Competitive Bidders

Bulk Sources

Cost Analyses

Technical Assessments

New Formulations

Patents

Regulatory issues

Generic Launches

ci work process model
CI Work Process Model

Databases

Internal

Human

Collection

Dissemination

R&D - Private

ADIS R&D Insight

R&D Focus

IDdb3

Pharmaprojects

Decision Resources – DB4

Summary

Reports

Detailed

Reports

Summarize

Analyze

Recommend

Product/Company

Investment Reports

SEC Reports

IMS Audits

Promotional Audits

Product

Evaluations

External

Human

Collection

Alerts

Internet

Publications

ClinicalTrials

Disease Advocates

three levels of databases
Three Levels of Databases

Private R&D Databases

Several vendors gather information from publications,

congresses, press releases, R&D days, and patent filings to

reflect pipeline developments in Pharma and Biotech industries.

Private Commercial Databases

Several vendors gather information from surveys and audits

on such items as revenues, units, prescriptions, sales forces,

product detailing, promotional spending, CME, and journals.

Agencies sell analyst reports and other published data.

Public Databases

Government agencies, industry groups, patient advocacy groups,

individuals, special interest groups, university sites, and

medical sites offer multiple opportunities to gather information.

uses of various databases
Uses of Various Databases
  • R&D databases establishes framework of players in area, some insights on progress and positioning, possibly hospitals and physicians involved
  • Private commercial databases provides insights into portfolio developments and promotional support levels and priorities
  • Public databases give insight into portfolio, possible trial locations, physicians involved, and provides leads for primary interviewing
review of private r d databases
Review of Private R&D Databases

Note: Record totals are from January 2002, except IDdb3 from 2001

key r d database features
Drug name

Trade name

Originator

Licensee/licensor

Patent Assignee

CAS Registry Number

Laboratory Code

Pharmacological Action

Therapeutic Class

Clinical indications

Nomenclature

Molecular formula

Development status

Development history

Abstracts

Text

Chemical structure

Chemical name

Key R&D Database Features
private r d databases issues
Private R&D Databases Issues
  • Various databases rarely agree on current development status of a particular compound
  • Data is usually 6-18 months old as it is collected from public forums, most of which require submission and review months in advance
  • Lack specific facts or insights desired by management related to a competitor’s drug
  • Phase IV trials rarely identified
private commercial databases issues
Private Commercial Databases Issues
  • Many managers define the commercial databases as “competitive intelligence” and this is their view of the function
  • While there is valuable insights available from this data, it is retroactive data and it does not address all issues (promotional messages, Phase IV activity, etc) that may impact the future promotion of a product
  • It is of value when combined with primary CI to give a full picture of product support
value of internal human collection
Value of Internal Human Collection
  • Taps into expertise of internal associates to confirm database and external human collection inputs
  • Captures internal experts information picked up in the course of working in a therapeutic area from attending meetings, congresses, interacting with personnel from other pharmaceutical companies, and from interactions with external vendors
value of external human collection
Value of External Human Collection
  • Primary collection captures more current information and potentially gives more relevant insight to specific company issues or hypotheses
  • Various inputs across a large interview audience helps build the CI analyst’s base for projecting the competitive situation
sources for external human collection
Sources for External Human Collection
  • Clinical Development: Physicians & Staff
  • Thought Leaders
  • Vendors and Suppliers
  • Functional Experts
  • Ex-employees
  • Special Interest Groups
  • Industry Organizations
  • Supply Chain (Wholesalers, Retailers, MCOs)
  • Wall Street Analysts
  • Publications
key collection opportunities
Key Collection Opportunities
  • Congresses
    • Collection of knowledgeable experts and company personnel in one location
    • Posters have lots of valuable data and insights into trail progress and potential product positioning
    • Company presentations are trying to build awareness of new product with physician community
  • Company Presentations
    • R&D days
    • Wall Street meetings
    • Industry meetings
landscape sweep by franchise
Landscape Sweep by Franchise

Clinical

Development

Pipelines

Marketing

And Sales

Activities

Generic

Activities

  • Competitive Products
  • in Phase II/III/IV
  • Product Profile
  • Protocol Design
  • Progress Update
  • Trial Issues
  • Side Effects
  • Potential Impact
  • Therapeutic Overview
  • Product Ranking
  • Product Growth
  • Promotion Support
  • Detailing Levels
  • DTC
  • Symposia
  • Physician CME Events
  • Field pay and incentives
  • Patents Evaluation
  • Exclusivity Status
  • API Status
  • Generic Formulations
  • Open Issues
  • Generic Launch Timing
  • Franchise Mgt Plan by
  • Brand company
landscape sweep sources
Landscape Sweep Sources
  • Secondary data sources
    • R&D: Adis, IDdb3, R&D Focus, Prous, Centerwatch
    • M&S: IMS, Verispan, PDDA, Scott Levin
    • Generic: Orange Book, Patent Filings, Paragraph IV
    • Publications
  • Primary interviews
    • R&D: KOLs, Clinical Investigators, CROs
    • M&S: Physicians, Pharmacy Directors, MCO
    • Generic: API producers, import/export agents
summary of ci process
Summary of CI Process
  • It takes various sources to build the story around a competitor’s product
  • No one source usually gives the entire story, but enough pieces and an experienced CI expert can provide excellent projections of a company’s product or franchise strategy
  • Thus, CI function has a monumental task of collecting from numerous sources in an ethical manner to draw conclusions about the future, often for numerous products and issues
agenda for presentation52
Agenda for Presentation
  • Government impact on Industry Dynamics
  • Portfolio Planning Impact
  • CI Function and its Operations
  • Role of Internal CI versus Consultants
  • Key Counter Intelligence Concepts
  • Summary and Conclusions
role of internal ci group
Role of Internal CI Group
  • Establish CI role and customer base
  • Create CI processes and procedures
  • Provide planning support to operational people for portfolio planning
  • Identify and prioritize “Key Intelligence Topics” (KITs)
  • Manage and allocate CI investments
  • Enhance and improve the CI process
role of consultants
Role of Consultants
  • Supply manpower to supplement internal CI group to handle workload on timely basis
  • Provide expertise and contacts to support internal CI projects
  • Provide objective view free of internal politics and influence
  • Serve as anonymous collector of CI for client so as not to reveal interest in area
  • Ensure focus on key issues as needed
ci decides on use of consultants
CI decides on use of Consultants
  • Internal CI group decides on utilization of consultants
    • Supplement manpower
    • Play a specific role
    • Partner in CI effort
  • Internal CI has more access to private databases and must decide on how much to share or provide information to consultants
agenda for presentation56
Agenda for Presentation
  • Government impact on Industry Dynamics
  • Portfolio Planning Impact
  • CI Function and its Operations
  • Role of Internal CI associates and Consultants
  • Key Counter Intelligence Concepts
  • Summary and Conclusions
there are different levels of exposures
There are different levels of exposures

Questions at R&D day

Questions on Wall Street

Questions at Congresses

Physician interviews

Industry Meetings

Patent filings

CMPM Minutes

Web Sites

Press Releases

Gov’t Reporting

Legal

Hacking into systems

Breaking into buildings

Stealing documents

Bribing employees

Bugging meeting rooms

Breaking into hotels

Stealing documents

Intercepting faxes

Planting a mole

Illegal

what are the initial steps to defend yourself
What are the initial steps to defend yourself?
  • Identify critical information that needs to be protected
  • Analyze the threat of competitor obtaining this critical information
  • Analyze the vulnerabilities in the organization that a competitor can exploit
  • Assess the risk of a competitor utilizing an approach to exploit the vulnerability
  • Apply appropriate countermeasures
why identify critical information
Why identify critical information?
  • A job done everyday becomes mundane
  • Thus, the person working on it no longer understands that this is proprietary
  • So by identifying it as critical and stressing this to the individuals involved, the awareness is raised back to the correct level of importance
where do leak happen
Where do leak happen?
  • Congresses where scientists or physicians are presenting on a compound
  • Physicians working on your trials
  • Suppliers
  • Vendors
  • Industry Meetings
  • Field Forces
  • Investment Analysts
selling the company s potential and meeting reporting requirements can t be stopped
Selling the company’s potential and meeting reporting requirements can’t be stopped
  • Congresses where the company is trying to build excitement about its pipeline and build momentum with physicians
  • Investment Analysts receive a lot of guidance and have access to senior management to encourage investment in the firm’s stock
  • SEC reporting is required by government agencies
but some sort of balance is needed
But some sort of balance is needed!

Selling and Promoting

Protecting your strategies

TIMING IS THE KEY!!!

misinformation can be dangerous
Misinformation can be dangerous
  • Misinformation can be illegal if it misleads investors
  • SEC filed fraud case against Germany’s E.On AG (holding company) when it issued false statements in Germany since it also had stock on U.S. exchange
what are some things you can do
What are some things you can do?
  • Form multidisciplinary watch committees
  • Assign responsibility for handling suspicious phone calls and surveys
  • Limit access to sensitive information
  • Mark and control documents
  • Limit what employees carry on trips
  • Assume all international fax, phone and emails are intercepted
keep awareness high
Keep Awareness High
  • Regular communications on subject
    • Training courses
    • Email updates (Pfizer has cartoons to emphasize key points sent out weekly)
  • Annual renewal of employee confidentiality agreements by having each employee sign a new form
  • Include in staff meetings to discuss any suspicious activity or level of balance needed
points to remember
Points to Remember
  • You can’t protect everything
  • You can’t protect anything forever

BUT

  • Never make it easy!
  • Never make it cheap!
  • Don’t just give it away!
agenda for presentation67
Agenda for Presentation
  • Government impact on Industry Dynamics
  • Portfolio Planning Impact
  • CI Function and its Operations
  • Role of Novartis Industry Research (CI) Group
  • Role of Consultants
  • Key Counter Intelligence Concepts
  • Summary and Conclusions
ci creates the future view
CI Creates the Future View
  • Projecting how competitive pipeline products are progressing in the clinics and what the expected positioning will be once it hits the market
  • Determining the status of generic threats against the portfolio
  • Handling special projects across all functions when it involves investigating competitors activities
thus the ci focus is not on customers
Thus, the CI Focus is not on Customers
  • Clinical Developmental Physicians and Staff
  • Thought Leaders
  • Vendors and Suppliers
  • Functional Experts
  • Ex-employees
  • Special Interest Groups
  • Industry Organizations
goal for ci functions70
Goal for CI Functions
  • CI ultimate goal should be to serve as backbone of strategic and operational planning process
  • Tactical collection of competitive processes and product developments should result in projections of future competitive environment
  • This process allows management to better allocate resources and maximize return on investments
summary of ci role
Summary of CI Role
  • The CI function was created to improve the planning cycle by collecting detailed competitive information to project future environments
  • Most CI departments started within a functional area supported by local management
  • The challenge is to expand and integrate the CI function across the organization