Product launch & Life Cycle Management

Question 1

What are the assumptions of product life cycles?

Answer 1

1) Products have a limited lifetime
2) Sales pass through different stages, with each stage having different challenges, opportunities and problems
3) Profits rise and fall at different stages of the product life cycle
4) Products require different marketing, financial, manufacturing, purchasing and human resource strategies in each life cycle stage.

Question 2

What is the typical pattern of a product life cycle (non- biotech)?

Answer 2

Bell curved with a decline (profits will be negative at introduction/launch) – see Facebook messenger

Question 3

Mention the 6 special sales patterns

Answer 3

1) Growth-slump-maturity pattern (Initial spike then down to a new baseline level)
2) Cycle-recycle pattern (Circular with a smaller peak at recycle stage)
3) Scalloped pattern (Upwards moving in circular fashion)
4) Style (circulært)
5) Fashion (Soft rounded curve downwards after the initial soft rounded growth stage)
6) Fad (spike)

Question 4

What 4 stages does a typical product life cycle go through?

Answer 4

1) Introduction
2) Growth
3) Maturity (peak sales)
4) Decline

Question 5

What defines the introduction phase in a product life cycle?

Answer 5

Characteristics:
– Low sales, high cost pr. customer, negative profits, few competitors, innovators

Marketing objectives:
- Create product awareness and trial - offer basic product, charge cost-plus, selective distribution

Question 6

What defines the growth phase in a product life cycle?

Answer 6

Characteristics:
- Rising sales, average cost pr. customer, rising profits, early adopters, growing competition

Marketing objectives:
- Maximize market share – Product extensions, warranty and service, price to penetrate market, build intensive distribution, awareness in mass market.

Question 7

What defines the Maturity phase in a product life cycle?

Answer 7

Characteristics:
- Peak sales, low cost pr. customer, high profits, middle majority of customers, competitors at stable number starting to decline

Marketing objectives:
- Maximize profit and defend market share – Diversify brands and items, price to match or best competitors’, stresss brand differences and benefits and encourage brand switching (PoD)

Question 8

What defines the Decline phase in a product life cycle?

Answer 8

Characteristics:
- Declining sales, low cost pr. customer, declining profits, customer group is laggards, declining competitors

Marketing objectives:
- Reduce expenditure and milk the brand – Phase out weak products, cut price, phase out unprofitable sales channels, reduce communication to a minimum to satisfy hard-core loyals.

Question 9

What is the typical pattern for a biotech product life cycle?

Answer 9

1) Negative cashflow due to R&D expenses
2) Launch = positive cashflow (slow in the beginning ue to marketing costs)
3) Peak sales
4) Decline and sharp decline at patent cliff

Question 10

How are the distribution of adopters over time?

Answer 10

1) Innovators – 2,5%
2) Early adopters 13,5%
3) Early majority – 34%
4) Late majority - 34%
5) Laggards - 16%

Question 11

Can you mention an example of extension of a product line?

Answer 11

The Boeing 737 has been renewed 4 times.

Question 12

Where does the pharma product life cycle differ dramatically?

Answer 12

Huge negative cashflow in the beginning due to R&D investments. The high FC makes the profits even more dramatic though, as they have an operating leverage (FC/TC) of 50-70% often.

Question 13

Describe the biotech product lifecycle in depth

Answer 13

1) Early phase: Discovery, pre-clinical, phase I-III, NDA, FDA approval – Negative cash flow due to R&D investments
2) Launch: (Introduction, Growth, Maturity, Decline – Peak sales curve style) – Rapid growth (but not rapid profits as the launch is correlated by big marketing costs – very important to get innovators and early adopters on board!), hitting peak sales and very high positive cashflows.
3) Late: Loss of exclusivity and generics/biosimilars enter – rapid decline in profits and customers

Question 14

Why is it important to have a good launch?

Answer 14

It is important to get early adopters!
- Only a minority of launches improve market trajectory (less than 20%)
- Can have big effect on income

Question 15

What defines early and late adopters?

Answer 15

1) * Level of technological knowledge, curiosity, and ability to anticipate potential benefits
2) * Available income and willingness to pay
3) * Degree of risk-taking / aversion
4) * Importance of references (i.e. knowing the opinion of other adopters)
5) * Role of product solving a problem (“need” focus)
6) * Importance of technology being user-friendly

• Implications: adapting product design, marketing tactics, financial & production planning

Question 16

What are the 5 determinates of the adoption of innovation-related products?

Answer 16

1) Relative advantage – Degree of being perceived as better than what it supersedes, small entry barriers (costs), savings in time and effort, incentives for adopting new products
2) Compatibility – No need for behavioural changes (less likely to be adopted then), Inter-relations with other technologies that functions as a system, additional investments required.
3) Complexity – Ease of understandability to use
4) Observability – Results of the innovation are visible to others, social processes can lead to faster adoption of goods
5) Trialability – How well the innovation can be trialed on a limited basis -> reduced customer uncertainty. More important for early adopters and importance decreases over time.

Question 17

What is the correlation between technology adaption and technology development?

Answer 17

Technology development and technology adoption are interrelated and follow S-curve patterns

Question 18

How can you forecast adoption of a product?

Answer 18

Using the Bass model of adoption

• Describes how fast are new innovative products adopted in a market over time (first-time adoption)

Question 19

What elements are there in the bass model?

Answer 19

It shows the correlation between innovators/early adopters, imitators/late adopters and the remaining population.

• It includes market size and likelihoods of adoption in innovators and imitators.

Question 20

The Bass model is primarily built on?

Answer 20

• Interaction and information diffusion between “Innovator adopters” vs “imitator adopters” (e.g. word-of-mouth marketing)
• The functional form of diffusion is primarily a function of the distribution of innovator adopters and imitator adopters among the population

Question 21

Does the Bass model work?

Answer 21

Empirical research has shown that model performs reasonably well for consumer goods (e.g. cable television) – maybe limited for Pharma…

Question 22

What will the adoption curve look like with small/high likelihood of adoption for innovators or imitators?

Answer 22

High likelihood for innovators = Quick peak followed by a steep decline
High likelihood for imitators = Slow rising peak and then decline (bell curve like)

Question 23

What Life Cycle Management strategies are there?

Answer 23

1) Indication expansion
2) Reformulations, allowing for new dosages and routes of administration
3) Fixed-Dose combinations (FDCs and copackaging)
4) Second-generation products
5) Geographical expansions
6) OTC switching

• Patenting includes all of these.

Question 24

What are the goals of pharma LCM?

Answer 24

1) Providing meaningful improvement in clinical profile
2) Increasing patient potential for the brand
3) Ability to generate profit from new investments based on good timing
4) Enhancing market exclusivity

Question 25

Describe the LCM strategi – Indication expansion

Answer 25

- Getting regulatory approval for applying and promoting the drug to a different target patient population and/or disease – can be related indications or entirely new. - Early in life-cycle of main indication since new indication in itself may not allow for protecting brand against generic competition Parallel development can be risky though (e.g. if problems in lead indication emerge) - Ideally combined with additional life cycle measures (dosage regimes & administration)

Question 26

Describe the LCM strategi – reformulations, dosages and route of administration – Focusing on dosages

Answer 26

- Physicians can offer a more differentiated treatment to patients (e.g. amplifying or reducing doses), which may later reduce the competitive impact of generics - If dosage strength is patented by brand owner, generics cannot replicate the particular dosage regime, which may imply that physician stays with brand - New dosage regimens (1x daily instead of 2x) is usually the result of reformulations - Introducing new dosage regimens may have an impact on cost-effectiveness, thus can be attractive for payers - May increase patient compliance or convenience

Question 27

Describe the LCM strategi – reformulations, dosages and route of administration – Focusing on route of administration

Answer 27

- Oral dosage forms: tablet for swallowing, oral disintegrating tablet, capsule, liquids - Topicals: Creams, Gel, lotions, eye drops - Injections: Intradermal, intramuscular, intravenous - Respiratory inhalants: Powder, Aerosol, Nebulizer, Vapor - Suppositories - Use of drug delivery devices: inhalers, implants, injectors, infusion pumps etc.

Question 28

What are some success drivers for reformulations, dosages and route of administration?

Answer 28

* Improving efficacy or compliance / meeting an unmet need * Launch early enough prior to patent expiry to switch patients before generic entry * Lower investments than new product development and launch * Capitalizes on brand equity established for original product

Question 29

What are some success resistors for reformulations, dosages and route of administration?

Answer 29

* Generic companies with the capabilities to develop own non-infringing reformulations * Use of tiered and / or restrictive drug plan formularies may limit uptake * Reformulated drugs being included in reference pricing schemes * Physicians increasingly skeptical of reformulated drugs

Question 30

Fixed-Dose combinations (FDCs and copackaging) is?

Answer 30

Combined different drugs into one package or one formulation.

Question 31

What are second generation products?

Answer 31

Modifying the chemistry of the active substance in an offering 1) New class & same disease: Developing a new molecular entity for a currently served disease area which can serve either as replacement or addition to currently marketed drug 2) Same class & new disease: Experience with one class is used to develop a new molecule of that class for a new disease currently not addressed with the firm’s existing products 3) Same class & same disease: New molecule to replace the existing product, with the new drug being superior (example: Novartis and Tasigna, replacing Gleevec) * Variations at technical level: Isomerism, Polymorphism (crystal structures), new salts

Question 32

What is another way of improving Life Cycles of Pharma Products?

Answer 32

- Patent strategy! All these expansions can be patent protected and prolong the profits and life time. - Pricing considerations

Question 33

What are considerations for geographical expansion?

Answer 33

* Obvious strategy to access larger patient populations * Launch market typically US or Europe, depending on faster regulatory approval * Reimbursement practices also contribute to prioritization / de-prioritization * Emerging markets becoming increasingly attractive (BRIC countries), but IP and exclusivity environments less favorable * Expansion: timing, growth potential, competition, and geographic synergies are relevant dimensions; potentially partnerships needed / helpful * Harmonization of offerings desirable

Question 34

What are some considerations for OTC switching?

Answer 34

From prescription-based to over-the-counter (OTC) * For drugs treating indications that can be self-diagnosed, self-treated, and self-monitored * Mild painkillers, allergy drugs, gastrointestinal disorders (low dose) * Out-of-pocket payments do not allow for a high pricing * Limited periods of market exclusivity possible (in US 3 years, 1 year in Europe) * To consider: what happens to related prescription-based drugs (is there any cannibalization, will they be considered different enough by payers)

Question 35

How can you adopt pricing to the life-cycle?

Answer 35

* Common: starting with niche indications (Orphan) that allow for high initial pricing, later reducing prices if larger patient populations are targeted * Steady price increases not uncommon, but drastically changing prices upward remains to be the exception in most markets * Price decreases in one country may lead to negative price pressures in other countries * Risk-sharing deals with payers in order to allow for high-launch prices (c.f. pay-forperformance)

Question 36

How can you price under threat of generics entering due to patent expiration?

Answer 36

* Generic competition will introduce the same drug at a fraction of the original price * In many cases, the price of the brand drug is not going to decline drastically: even if considerable market share is lost, it can still be economically viable to keep high price tag * Depends on product complexity, intensity of generic competition, and country-specific stakeholder influence (in some countries, price cut is imposed; reference price systems) – For instance, intensity of generic competition may differ on small vs. large molecule drug context * Simultaneous offering of brand and own generic: first-mover entry with first generic may lead to sustained advantage Lastly: You can also introduce your own generic to capture market share!