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
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
600
500
400
300
Kefauver
Hearings
Impact
200
Medicare
1965
100
Nixon
Wage &
Price
Controls
Hatch
Waxman
Act of 1984
EU
Created
1993
HMO
Acts of
1973,76,78
Prescription
Drug User
Fee Act
1992
0
-100
Clinton
Healthcare
Debacle
1992
GATT
Update
1995
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
16
14
12
Approval Phase
Clinical Phase
Preclinical Phase
14.2
11.6
8.1
8
4
2
1.8
2.1
10
6
2.8
14.2
2.1
5.5
6.3
4.4
2.5
5.1
5.9
6.1
1970's
1980's
1990's
3.2
0
1960's
Source: DiMasi, J.A., “New Drug Development in U.S. 1963-1999”, Clinical Pharmacology & Therapeutics 2001.
Generic Share of U.S. Rx Unit Market
50%
45%
40%
40%
35%
35%
30%
30%
46%
47% 47%
35%
32% 33%
27%
25%
20%
42%
44%
43% 43%
22%
23%
19%
15%
10%
5%
0%
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Source: IMS Health 2001
NCE Lifecycle Sales Analysis
Average Percent of Peak Sales Potential
96%
100%
Hatch
Waxman
Exclusivity
80%
96%
95%
100%
83%
75%
76%
71%
64%
60%
53%
41%
40%
46%
32%
21%
20%
6%
0%
1
2
3
4
5
6
7
8
9
10 11 12 13 14 15
Years After Launch
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
120%
Hatch
Waxman
Exclusivity
100%
96%
96% 95% 100%
83%
76%
75%
80%
71%
64%
60%
46%
65% 85% 90%
53%
41%
40%
68%
32%
67%
21%
20%
31%
10% 10%
6%
8%
4%
0%
1
2
3
4
5
6
7
Ethical Share
8
9
10 11 12 13 14 15
Generic Share
Source: IMS (Based on 816 NCE’s launched since 1983)
NCE = New Chemical Entity = New Molecular Entity
USA is key to NCE Success
% Sales of NCE Launches – 1997-2001
70%
62%
60%
50%
40%
30%
21%
20%
7%
10%
Japan
ROW
10%
0%
USA
EU
Source: IMS Health, MIDAS
Comparison of Average Price Per Rx in 2000
Indexed to 1995 Pricing for NME and IMD
2.50
2.20
2.00
2.26
2.45
1.75
1.50
1.00
1.00
0.50
0.00
Pre
1995
Standard
IMD
Standard
NME
NME: New Molecular Entity
IMD: Incrementally Modified Drug
Sources: Scott-Levin SPA data; Internal analysis
Priority
IMD
Priority
NME
Field Force Expansions Exemplify Increased Investment
Spend to Accelerate Market Penetration
89.5
90
81.6
80
74.9
70
62.9
56.4
60
50
40
48.2
41.6 38.6
36.8
40.6
30
20
10
0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
Source: Scott-Levin’s Sales Force Trends
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
35
30
30.5
Ex-US
US
25.7
6.9
25
5.7
20
15.2
15
3.3
23.6
10
20.0
4.1
5
1.9
0
1.5
1980
0.7
0.4
11.9
3.4
1985
1990
2000
2001
Clinical Development Projects per Phase
24
98
2001
488
1136
714
27
115
2000
453
994
652
35
139
1999
471
914
631
29
121
1998
479
873
562
0
200
400
Phase I
Phase II
600
Phase III
800
Filed
Sources: Pharmaprojects, UBS Warburg, CDER/FDA
1000
NME Approved
1200
Industry Supplements internal R&D
with BD&L/M&A Activity
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
PFE
NVS
RCH
GSK
LLY
WYE
JNJ
BMS
AVE
MRK
ABT
SGP
AZN
Licensed
51%
11%
34%
21%
3%
39%
78%
92%
41%
32%
49%
84%
35%
Reseach
49%
89%
66%
79%
97%
61%
22%
8%
59%
68%
51%
16%
65%
Source: Evaluate, Internal Analysis
The Industry Compensates by Shifting
Emphasis to Blockbuster Drugs
80%
72%
70%
60%
72%
% Top 5 Drugs
65%
55%
53%
50%
40%
53%
53%
46%
38%
36%
34%
32%
30%
20%
10%
0%
Sources: Evaluate, IMS Health - Midas
25%
The trend for blockbusters is improving
Number of products achieving global sales over $500 million
120
110
100
91
75
80
60
44
34
27
60
20
40
20
40
48
57
1998
1999
2000
66
2001
0
500 million -1billion
Source: IMS Health: MIDAS, Dec 2001
>1billion
But, only a small % of NCEs
Become Blockbusters
Sales Total Per Annum
•
•
•
•
•
$1.8 Billion or >
$920 Million - $1.8 Billion
$460 Million - $920 Million
$180 Million - $460 Million
< $180 Million
% Achieving
1.0%
1.0%
2.0%
6.0%
90.0%
Average for all Drugs -- $265 Million per Annum
Sources: PriceWaterhouse Coopers, SCRIP
History of Key Pharmaceutical Mergers
1989
Bristol-Myers Squibb
Smithkline Beecham
1992
Marion Merrell Dow
1993
Rhone Poulenc-Rorer
1994
Roche/Syntex
Wyeth/Cyanamid
1995
Glaxo Wellcome
Pharmacia & Upjohn
Hoechst Marion Roussel
1998
Roche/Boehringer Mannheim
2000
Pharmacia/Monsanto
Pfizer/Warner-Lambert
Glaxo & SmithKline
2003
Pfizer/Pharmacia
1996
Novartis
1999
Aventis
AstraZeneca
Sanofi-Synthelabo
2001
Abbott/Knoll
BMS/Dupont
2004
Sanofi-Aventis
Functional
Functional
Geographic
Critical Mass
Portfolio
Portfolio/
Geographic
Functional/
Geographic
Pharmaceutical Industry Stratification ($Billions)
Pre Cox-2 Issues
Market Capitalization 9/04
300
250
Pfizer
200
J&J
150
Novartis
100
50
Lilly
Abbott
Takeda Wyeth
SGP
Bayer
Roche
AZN
GSK
Sanofi-Aventis
Merck
BMS
0
0.0
10.0
20.0
30.0
40.0
Pharmaceutical Revenues for 2004
Sources: Lotus-One-Source, Evaluate, Internal Analysis
50.0
Pharmaceutical Industry Stratification ($Billions)
Post Cox-2 Issues
Market Capitalization 2/05
250
200
J&J
Pfizer
150
GSK
Novartis
Sanofi-Aventis
Roche
100
Abbott
Lilly
50
Bayer
Wyeth
SGP
AZN
BMS Merck
0
0.0
10.0
20.0
30.0
Pharmaceutical Revenues for 2004
40.0
50.0
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
Sales
Price
Units
Sales
M&S
M&S
R&D
R&D
G&A
G&A
EBIT
EBIT
Price
Units
Price Pressures limits
Industry ability to use
price for growth
Industry continues to
consolidate in order to
cut infrastructure costs:
-Reduce sales reps
- Eliminate TA areas
in Research
-Reduce duplication in
support functions
Consolidations protects
Earnings growth &
Capital value
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 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
1. Perform
Environmental
Analysis
2. Create a
Vision of
the Future
3. Conduct
Internal
Assessment
4. Decide on
a Strategic
Position
5. Develop
Strategy
Actions
7. Manage the Planning Process
6. Develop
a Plan
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?
• 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
• 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
• 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
• 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
Competitive Intelligence
supports optimization of
future portfolio
1. Perform
Environmental
Analysis
2. Create a
Vision of
the Future
3. Conduct
Internal
Assessment
- Monitor competitor activity at
tactical/product level to ensure no
major impact on environmental view
4. Decide on
a Strategic
Position
5. Develop
Strategy
Actions
6. Develop
a Plan
7. Manage the Planning Process
– CI tracks competitor activity to ensure achievement of plan objectives
Strategic and Operational Levels
Strategic Level Support
Senior Management
Investor Relations
Corporate Planning
-
M&A Evaluations
Wall Street Monitoring
Divisional Challenges
Operational Level Support
Licensing
Development
Marketing
-
Product Evaluations
Clinical Tracking
Market Dynamics
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 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?
• Competitive Intelligence is a process that
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
• 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
Research
Licensing Development Tech Ops
Disease Analysis
Platforms
Technologies
Targets
Clinical Endpoints
Potential Claims
Time to Market
Clinical Issues
Potential Products
Mechanism of Action
Company Reviews
Competitive Bidders
Marketing
LCM
Phase III & IV
Market Dynamics
Environment
Bulk Sources
Cost Analyses
Technical Assessments
New Formulations
Patents
Regulatory issues
Generic Launches
CI Work Process Model
Databases
R&D - Private
ADIS R&D Insight
R&D Focus
IDdb3
Pharmaprojects
Decision Resources – DB4
Product/Company
Investment Reports
SEC Reports
IMS Audits
Promotional Audits
Internet
Publications
ClinicalTrials
Disease Advocates
Internal
Human
Collection
Summarize
Analyze
Recommend
External
Human
Collection
Dissemination
Summary
Reports
Detailed
Reports
Product
Evaluations
Alerts
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
• 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
Start
Date
Updates
Records
ADIS R&D Insight ADIS Int’l
1986
Weekly
7,182
IDdb3
Current Drugs
1991
Daily
17,500
IMS R&D Focus
IMS Health
1991
Weekly
13,600
NDA Pipeline
F-D-C Reports
1990
Monthly
14,589
Pharmaproject
PJB
Publications
1980
Weekly
20,090
Database
Publisher
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
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
•
•
•
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
• 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
• 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
•
•
•
•
•
•
•
•
•
•
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
• 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
Clinical
Development
Pipelines
•Competitive Products
in Phase II/III/IV
•Product Profile
•Protocol Design
•Progress Update
•Trial Issues
•Side Effects
•Potential Impact
Marketing
And Sales
Activities
•Therapeutic Overview
•Product Ranking
•Product Growth
•Promotion Support
•Detailing Levels
•DTC
•Symposia
•Physician CME Events
•Field pay and incentives
Generic
Activities
•Patents Evaluation
•Exclusivity Status
•API Status
•Generic Formulations
•Open Issues
•Generic Launch Timing
•Franchise Mgt Plan by
Brand company
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
• 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 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
•
•
•
•
•
•
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
•
•
•
•
•
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
•
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 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
Legal
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
Illegal
Hacking into systems
Breaking into buildings
Stealing documents
Bribing employees
Bugging meeting rooms
Breaking into hotels
Stealing documents
Intercepting faxes
Planting a mole
What are the initial steps to defend yourself?
1. Identify critical information that needs to
be protected
2. Analyze the threat of competitor obtaining
this critical information
3. Analyze the vulnerabilities in the
organization that a competitor can exploit
4. Assess the risk of a competitor utilizing an
approach to exploit the vulnerability
5. Apply appropriate countermeasures
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?
•
•
•
•
•
•
•
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
•
•
•
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!
Selling and Promoting
Protecting your strategies
TIMING IS THE KEY!!!
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?
•
•
•
•
•
•
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
•
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
•
•
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 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
• 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
•
•
•
•
•
•
•
Clinical Developmental Physicians and Staff
Thought Leaders
Vendors and Suppliers
Functional Experts
Ex-employees
Special Interest Groups
Industry Organizations
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
• 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
Thank You …..
Q&A