NEW DRUG DECISION ANLAYSIS AT BAYER PHARMACEUTICALS

NEW DRUG DEVELOPMENT in U.S.o Time consumingo Resource intensiveo Riskyo Heavily regulated

3 phases1. Phase 1-Safety of the drug2. Phase 2 – Drug is tested for its clinical efficacy3. Phase 3 – Expansion of safety and efficacy studies and gathered data

forms the primary basis for the FDA’s approval of a drug.

New drug development at Bayer Pharmaceutical

Structured process based on the principles of decision analysis to evaluate the technical feasibility and the market potential of the new drug.

Formed strategic planning department who’s responsible for the commercial evaluation of a new blot clot bursting drug.

Drug – BAY 57-9602

Drug category – thrombolytic drug therapy

Benefits – safer and more effective

Methodology Combined the leadership committee with cross functional project team.

Members of the project team- 4 research scientists 1 clinician 1 regulator 1 production engineer 1 industrial engineer 1 marketer 1 decision analyst

Members involved for the process1. Leadership committee

2. Cross functional project team

3. Strategic planners

4. Scientific and marketing experts

Commercial evaluation methodology and process

1st meeting1. Defined the scope and purpose of the project2. Developed team ownership of the project &3. Discussed various perspectives related to the project

Commercial evaluation methodology and process

Techniques used

brainstorming,

back-casting, and

role-playing techniques to uncover additional issues.

INFLUENCE DIAGRAM

Commercial evaluation methodology and process Data collected after the meeting includes

1. Time

2. funds needed to develop BAY 57-9602;

3. the likelihood of BAY 57-9602 succeeding in each stage of

development;

4. the cost of manufacturing and marketing it; and

5. the size of the PAO market and BAY 57-9602's potential share

of that market. T

Product Target Profile o Central to data collection is the product target profile (PTP).

o The PTP is for assessing the technical feasibility and commercial potential of a

new drug.

o If the PTP changes, Pharma re quires collecting data anew from the functional

experts.

o Pharma requires that each PTP must specify how efficacious the drug will be in

treating the disease, how safe the drug will be to patients taking the drug, and

how convenient it will be to administer the drug to these patients.

To create the PTP of BAY 57-9602,

Project team was asked to list the 1. major benefits and drawbacks of the current standard therapy, 2. the changes needed, and 3. what therapies other drug companies might be working on.

Decision point 1Preclinical drug development

o Estimated that the preclinical drug development would cost around $1

million and take about 24 months

o Probability of technical success (PTS)

o (animal data should be safe and efficacious)

o Each scientist was asked to estimate the probability of success of BAY 57-9602

(average 65%)

Decision Point 2Clinical Drug Development(Testing in humans)

o Most expensive stage

o Phase 1: to test the safety of the drug

o Phase 2: to identify the optimal dose to be used in phase 3

o Phase 3: Statistically designed study for proving efficacy clinical end point or

safety clinical end point

o Clinical development plan is devised

o 2 types of costs: 1. External costs

2. Internal costs

What is estimated?o External and internal costso Time needed to enroll patientso Time needed to conduct each studyo Time to analyze data and report results

Phase 1 Approx 12 months

Phase 2 Approx 18 months

Phase 3 Approx 30 months

Safety end point Approx 36 months

PTS for all three phases was calculated on basis of the clinicians expertise

PTS for Phase 1: Clinicians: 80%

Benchmark: 75%

PTS for Phase2: Clinicians: 85%

Benchmark: 50%

PTS for Phase 3:Clinicians: 85%Benchmark: 75%

PTS benchmarking values were used for further decision analysis

Production Process Developement

DP 3 and DP 4o Higher yield results in lower labor costs, material costs and plasma costs

o Depreciates capital using 15 year straight line method

o Pharma assumes that capital investment for the production for the production facility occurs approximately five years before the launch date

Pricingo $2000-$4000- thrombolytic drug therapy in US

o Therapy in USA=therapy in Canada

o Cost of Europe=1/2 cost of US

o Cost of Japan=3/4 cost of US

o Market believed that BAY 57-9602 could demand 20% over thrombolytic drugs

Conclusiono Presented BAY 57-9602 in three levels of pharma decision makers

o November 1999- BP leadership committee awarded DP1 status to

BAY 57-9602

o January 2000 BP began preclinical development

Regulatory Approvalo Pharma PTS benchmark of 90%

o According to the regulator, BAY 57-9602 must obtain fast track submission before receiving a fast track review of the biological license application

BAY 57-9602 obtaining fast

track submission was 75%

6 months

12 months

60% 40%

Orphan Drug Status

o BAY 57-9602 could be eligible for orphan drug status

o FDA approved orphan drugs receive a 7 year period market exclusivity in the US guaranteeing that no other drug may be approved for the disease unless it demonstrably provides better efficacy and safety

Marketingo Bayer estimates that the marketing cost of BAY 57-9602 <

marketing cost of an asthma drug since fewer physicians treat PAO than treat asthma

o BAY 57-9602 could be launched in 8 countries: US, Canada, France, Germany, Italy, Spain, UK and Japan

Size of the PAO market o Probability estimates from the marketer for the annual growth

rate of patients with PAO

o She estimated that a typical PAO patient could receive one thrombolytic drug treatment/year and one out of 4 patients could receive 2 treatments

Class share & Product share in PAO market

Two classes of treatment

1. Thrombolytic drugs

2. Surgery

Current share of thrombolytic drugs :

USA and Canada (80%)

Europe (40%)

Japan (25%)

Class share & Product share in PAO market

o Products in the thrombolytic drug class that are marketed for treating PAO are called plasminogen activators

o Limitations in efficacy and complications of bleeding

o BAY 57-9602 has a sustainable competitive advantage

o The project team expected BAY 57-9602 to be the 1st product of its type available in the thrombolytic drug class for treating PAO

Competitiono If BAY 57-9602 was to obtain orphan drug status, it would lose

20% of its market share to a me-too competitor after the exclusivity expired

o Also the probability of a recombinant competitor entering PAO market to approx. 20%