Specialising for success

pharmafile | October 29, 2008 | Feature | Research and Development, Sales and Marketing |  marketing, product portfolio 

From the middle of the last century, the likes of GSK, Pfizer, AstraZeneca, Bristol Myers Squibb and others have made billions from a business based on the development and commercialisation of medicines for conditions such as high cholesterol, asthma and depression with populations numbering millions.

But that model is now changing fast. As Andrew Witty highlighted when taking on his role as chief executive at GSK: "It is clear that our industry is facing a rapidly changing environment. Demand for innovative medicines and healthcare products continue to grow, however we are also presented with increasing challenges, such as cost containment, regulatory pressures and generic competition."

But companies still have to increase revenue and expand profit margins to satisfy shareholder expectations, and also remain compliant with marketing codes and laws.

In response to these demands, the industry is employing three strategies to ensure its future succes: expanding into new markets, broadening the revenue base and making businesses more specialist than generalist.

New markets

There is now an increased focus on expanding into new markets, with particular excitement about the prospects of the Brazil, Russia, India and China – now referred to as the BRIC countries. In 2006 the emerging markets such as China, Russia, South Korea and Mexico grew by 81% compared to 5.7% for the US and the other nine biggest markets. Interestingly, Whitty recently announced the development of a new division within GSK solely responsible for sales to these emerging markets.

As well as expanding globally, Big Pharma has been snapping up vaccines, generics and OTC companies in a rush to broaden their revenue base. Sanofi-Aventis has offered over $3 billion for a Czech generics firm, a British vaccines manufacturer and an Australian vitamins business. Meanwhile Daiitchi-Sankyo has purchased the Indian generics manufacturer Ranbaxy. Novartis invested early in this strategy and in their 2008 half yearly results reported that their generics (Sandoz), vaccines and diagnostics and consumer health divisions all grew faster than pharmaceuticals.

Finally, organisations are increasingly going specialist. But going specialist can be done in a number of different ways. Hyper growth speciality pharma companies are successfully focusing on niche products and specialist infrastructure, whilst Big Pharma is more interested in orphan drugs for rare diseases with some organisations reorienting themselves into biopharmas, a nebulous name suggesting a cross between the innovation and large molecule therapies of biotech and the size and both commercial and developmental expertise of pharmaceuticals.

For example, in 2005 BMS was considered one of the top five global pharmaceutical firms with over 70% of total 2005 revenues coming from their highly successful cardiovascular portfolio. But the loss of patents on leading therapies Pravachol and Plavix, cardiovascular revenues of $7 billion declined to $5.5billion the following year, with sales of Pravachol declining at over 50% and Plavix by 15%.

Forced to reconsider their rapidly declining business model, the company has undertook a significant strategic restructuring, changing from "from a Big Pharma company, into a next generation BioPharma company". JKames Cornelius chief executive of BMS commented: "While businesses are always in a state of flux, it's not common for a company to launch a top-to-bottom transformation of its organisation and operational philosophy.' The aim of this restructuring was "to combine the strengths of a traditional pharmaceutical company such as its global reach and its integrated commercial and manufacturing infrastructure, with the advantages of agility, entrepreneurial thinking and flexibility that are characteristic of many successful biotechnology companies" reflected in BMS's pipeline which currently boasts twice as many oncology candidates than any other therapy area.

Speciality Pharma

One business model which has seen extensive growth over the past five years is speciality pharma. Companies such as Meda, Shire, ProStrakan, Almirall and Archimedes focus on therapies for niche conditions in promising late-stage development, which are below the radar of Big Pharma and are promoted only to specialist clinicians. This model reduces both the development costs and risks to the firm, and with a smaller dedicated specialist sales team means lower organisational costs; driving profit and cash flow.

The positive cash flow allows rapid expansion; Meda a Swedish speciality pharma company has seen hyper expansion over the past six years. In 2001, its annual sales were $30m but by 2007 it had achieved revenues of $1,252m – a growth of 85% year on year. However the challenge is purchasing a competitive, innovative and successful portfolio in the face of Big Pharma. Share prices fall quickly and new venture capital is hard to raise for organisations that expand too quickly, because portfolios become unfocused and inefficient to manage.

Rare diseases and orphan drugs

There is evidence that large pharma companies see their future to a greater or lesser extent in specialist pharmaceuticals, rare disease areas, biological products and therapies with orphan indications. Over the last three years AstraZeneca has spent $18 billion on acquiring Cambridge Antibody Technology and Medimmune, Shire spent almost $2 billion on Transkaryotic Therapies and Jerini while Roche is currently negotiating an offer for Genentech for an enormous $44 billion. Just this August, BMS offered $4.5 billion for Imclone and Lilly bought an oncology biotech specialist SGX Pharmaceuticals.

Why? Global sales of biotech prescription drugs increased 12.5% to more than $75 billion in 2007, growing at nearly twice the rate of the pharmaceutical market. And a look at the top 20 therapies worldwide over the last five years highlights the increasing importance of biologic therapies with names such as Enbrel, Remicade, Rituxan, Aranesp, and Avastin appearing.

And organisations are not just buying their way into specialist pharmaceuticals: oncology is currently the darling of the industry development pipeline, with companies like GSK and Pfizer keen to emulate the success of Genentech and Roche and others in oncology.

The success of therapies such as Rituxan, Avastin, Glivec, Erbitux and Herceptin has highlighted that by concentrating on orphan diseases and novel lifecycle management strategies, organisations can create super blockbuster brands, in a potentially less challenging and more lucrative market environment.

The Benefits of Orphan Drugs

Orphan drugs are developed to treat rare diseases, defined as diseases where less than 1 in 2000 patients are affected (in the United States it is any disease which affects less than 200,000 people in total).

In most cases no effective therapies have been developed for these diseases, as under normal market conditions there would be limited interest for companies to develop and market products; as it would be unlikely that the cost of bringing a medicine to market would ever be recovered.

Governments have therefore created economic incentives to encourage companies to focus on these areas, initially in the US in 1983, reaching Europe in 1999.

Although numbers for an individual rare disease are small, there are between 6000 and 8000 rare diseases with an estimated total population in Europe of 30 million people. The paradox being that even though the diseases are rare, it is not unusual to have a rare disease!

Orphan drugs have not traditionally been assocaited with high revenues, but this no longer always the case. Fifty orphan drugs achieved annual revenues exceeding $200 million in 2006 and out of these, 19 attained the $1 billion blockbuster mark, mostly because of their ability to treat several rare diseases. Perhaps most notable is Glivec, currently licensed for two orphan cancers, is effective in at least four other rare diseases and in 2007 delivered $3 billion becoming Novartis's second largest brand.

Organisations are also using orphan indications as a gateway into larger markets: Remicade was initially launched for the orphan indication of Crohn's disease before receiving approval for the much larger rheumatoid arthritis market, and as an end of lifecycle 'evergreening' defence mechanism; Topamax, initially indicated for epilepsy, extended patent protection through the additional orphan indication for Lennox-Gastaut syndrome a severe form of epilepsy.

The main incentive of orphan drug legislation is market exclusivity, after the granting of marketing authorisation, for a period of 10 years (seven years in the US). By preventing direct competition, an organisation gains substantial protection during the critical brand launch phase, something not seen in mainstream pharmaceuticals. Organisations also get reduced fees for the market authorisation process, and support in designing trials to be submitted for authorisation. As well as direct incentives, Orphan designation offers other benefits.

Costs to market are lower and timelines shorter: Clinical development programmes cost less, as they are usually in smaller numbers of patients (patients are rare and difficult to find) and have shorter timelines. There is also evidence that the regulatory authorities approve orphan drugs faster, which allows organisations to recoup their smaller investment costs and attain break even much earlier. In addition, as the audience is much smaller, the infrastructure required to market an orphan therapy is simpler, with the resulting smaller cost base; TKT-Europe commercialised Replagal for Fabry's disease with 20 employees!

Stronger relationships: At launch, the small population of both patients and expert specialists often have similar needs to the drug companies. Almost certainly the key opinion leader (KOL) network will have had very little support for developing their services, and the need to drive disease awareness, formalise a clinical management network and ensure access to both a disease network and therapies, builds strong relationships. Orphan drug teams often find themselves much closer to their prescribers and end users and during the initial growth phase successful marketing can build strong brand loyalty quickly, creating higher barriers for any future competitors.

A faster time to peak sales: Although diagnosis of rare diseases can be difficult, many patients will already be diagnosed, motivated and informed through active patient organisations and so are actively awaiting new treatments. Disease specialists are also likely to be aware of new therapies, having been involved in the phase III trials and the limited competition is likely to require complex and expensive management. Because of this, uptake is usually swift, and the high unit prices which companies can command and the likely high market shares of a monopoly, mean organisations can aspire to generating peak sales faster.

Despite lower clinical and infrastructure costs, the ability to build strong brands quickly on close relationships and shorter time to peak sales, there remain significant challenges for marketers to overcome.

The Challenges

Single orphan markets are small, so to overcome this and become blockbusters orphan therapies have to expand into a variety of different indications. With shorter timelines, managing successful lifecycle is unusually urgent. Developing a 'brand vision' early in the life of the product is essential to guide the best lifecycle strategy, which can then be valued and tested, before finalising programmes.

Orphan therapies often have a clear clinical advantage; however exclusivity from competition is a misnomer. Many clinicians have difficultly in changing beliefs about the management of rare diseases. They often have personal preferences for older, unproven but very cheap therapies or complex surgical interventions, and can be reluctant to try new treatments in sick patients. In addition, the clinical data with which a marketer is working can be small and the endpoints complex and non-comparable. Communicating both disease and brand benefits with unusual clinical data, to an audience with deeply fixed beliefs requires creativity and a understanding of the needs of all stakeholders. Mapping all stakeholders involved, researching their real needs and developing a clear brand proposition is essential. In the UK this needs to be developed long before marketing authorisation, to ensure specialist commissioning teams don't position your brand for you!

Understanding an orphan disease environment is a skill in itself and must be considered when developing teams. Success of a new therapy will rely heavily on orphan expertise in both development and commercialisation. The regulatory process is a significant challenge as trials may never have been run in the disease area before, and patients are hard to find. Following marketing approval, knowing how to develop a rare disease management network and who to work with to access funding are necessary for success. When assessing an orphan market, drawing on knowledge of rare disease management in different countries will guide recruitment of people with the correct balance of skills.

High unit costs and a lack of understanding of the disease mean the biggest challenge to a new orphan therapy will be ensuring smooth access for patients. By developing processes and relationships with key funding stakeholders early, directly and through KOL and patient advocates, teams can keep fund holders happy supporting managed entry.

The growing importance of specialist drugs, means organisations should recognise that different marketing skills are needed for success with specialist brands. Orphan indications offer many benefits, although marketers face significant challenges.

Just as the tools that marketers need to support clinicians and patients are recognisable to any pharmaceutical marketer, in an orphan disease, the balance of where and how to use them is very different. To develop a formalised clinical management network and a funding process requires insightful use of the small pool of advocates, value added services and early development of a clear value proposition.

Box 1: Glivec: the ultimate orphan drug

In many ways, Novartis' Glivec is the ultimate orphan drug and a leading example of how a targeted drug can transform patient outcomes in its therapy area and become a flagship brand for the pharmaceutical company.

First launched in 2001, Glivec (imatinib) was developed to treat Philadelphia chromosome-positive (Ph+) chronic myeloid leukemia (CML), a rare cancer of the blood.

The drug received orphan drug status in the US, Europe and other global markets to treat CML patients, of which there are just 600 new cases every year globally.

The drug is groundbreaking because of its highly specific targeting and, most importantly, its success in turning this cancer into more of a chronic condition rather than a killer disease.

Before Glivec, about 50% of patients progressed to the advanced stages of Ph+ CML after only three to five years, and survival was generally short for those sufferers. But patients on Glivec now have a 95% chance of living for five years after – a very significant extension to life for many patients.

From a commercial perspective, Glivec is Novartis' second biggest selling drug, earning it $1.8 billion in the first half of 2008. This is still some way behind the company's top-seller, the 'mass-market' hypertension treatment Diovan, which earned $2.9 billion in the same period.

But when one considers the products' relative profitability – eg the far greater number of sales reps and other marketing costs required to support Diovan – Glivec emerges as by far the most profitable.

Michael Craig is a consultant at the MSI Consultancy and has a particular interest in orphan drug marketing. Michael can be contacted at mcraig@msi.co.uk or visit www.msi.co.uk for further information.