New Product Commercialization

Report Summary: Pharmaceutical New Product Commercialization: Preparing for Market Success

Pharmaceutical New Product

Commercialization: Preparing for

Market Success

PROJECT BACKGROUND

In today’s corporate environment, long and costly product development cycles make it essential for pharmaceutical companies to allocate limited staff and resources to the development of compounds with the greatest potential market value. Leading companies are integrating commercial insights earlier and earlier into the new product process in an effort to identify and target promising compounds, reduce development cycle time, focus resources for greatest impact and increase their potential for launching a blockbuster drug.

Benchmarking Report at-a-Glance

Featured Study Participants • Abbott Laboratories • Allergan • Alexion Pharmaceuticals • Altus Biologics • Amgen • AstraZeneca • Bayer • Eli Lilly & Co. • Genentech • GlaxoSmithKline • Human Genome Sciences • Intervet International

(part of Schering-Plough) • Merck • Neurocrine Biosciences • Novartis • Roche • Shire • Solvay Pharmaceuticals • Teva Pharmaceutical Industries • Vertex Pharmaceuticals

For instance, the Center for the Study of Drug Development at Tufts University noted that only one in every 5,000 compounds screened becomes an approved medicine. Of every 5,000 or more compounds tested, only 250 enter pre-clinical testing, five make it into clinical testing and only one achieves U.S. FDA (U.S. Food and Drug Administration) approval. Progress is made incrementally and requires expensive and extensive research. From the time a company’s R&D (Research and Development) group begins to develop a new prescription medicine until it receives FDA approval to market the drug in the United States, a drug company typically spends $1 billion over the course of 10 to 15 years. With such a small number of drugs reaching the marketplace and so much invested to get the drugs to market, companies must choose wisely which

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compounds they allocate precious resources.

Early-Stage Commercialization activities range from therapeutic opportunity and competitive landscape assessments to thought-leader focus groups, initial pricing studies, and pre-efficacy forecasts during pre-clinical and Phases I and II development. Global pharmaceutical companies must find ways to improve early-stage decision making and enhance product design using commercial insights to gain an overall competitive advantage in the marketplace.

Through this report, executives at leading biopharmaceutical companies shared reasons why the work done through early commercialization groups is invaluable. The participants cited the following areas where Early-Stage Commercialization efforts benefit overall corporate success:

Industry Analysis 20 benchmark companies representing the biopharmaceutical industry participated in this study.

Information Types • 15+ Information Graphics • 33+ Data Graphics • 75+ Metrics • 17 Best Practices Spotlights • 50+ Manager Narratives

Report Length • 85 pages

• Optimizing the value of assets

• Driving alignment of product development with unmet patient needs

• Identifying commercial viability of drug candidates and helping to redirect funding from projects with lower potential to those with higher potential for success

• Focusing all parties on areas expected to have the greatest return on investment

• Enabling project prioritization

• Facilitating collaboration between commercial and clinical development staff

• Informing internal and external investment decisions

• Continuously monitoring and communicating changes in the market that affect product potential

• Paving the way for successful product launch

STUDY METHODOLOGY

Best Practices, LLC conducted research for this report to identify winning strategies, structures, and best practices in early-stage product commercialization and portfolio management. Best Practices also sought to clarify and codify Global Product Strategy’s placement in the corporate organizational chart to determine a best fit for the organization to provide optimal support.



As part of this process, Best Practices, LLC examined how other biopharmaceutical companies’ Early-Stage Commercialization functions are structured, how leaders of these groups manage their functions, and for what activities and roles Early-Stage Commercialization leaders have responsibility. These external benchmarking insights will help companies optimize their Early-Stage Commercialization function.

Marketers, new product planners, market researchers, CI (competitive intelligence) professionals and others working in the early-stage space participated in the creation of this report. The study examines how top companies achieve long-term Early-Stage Commercialization success through thoughtful development of each major program element including:

• Organizational structure and alignment – Optimal fit and utilization within the corporation

• Early-Stage Commercialization activities by phase – Functional involvement at each product development phase and transition of functional responsibilities to in-line groups

o Relationship of Global Marketing to pre-market commercialization

• Building cross-functional teams around the Early-Stage Commercialization function

o Leadership/stakeholders

o Global and regional marketing interactions

• Portfolio management

o Investment decisions

o Lifecycle management processes

• Value that Early-Stage Commercialization group contributes to the business

• Leadership skills

SAMPLE FINDINGS

Among the findings that emerged from this research are the following:

• Structure & Staffing: The commercialization and portfolio management functions are typically centralized and report through marketing or new product planning functions. Centralization helps establish and ensure common process, performance and evaluation standards for projects, programs and product development.



Early-stage commercialization groups employ fewer than 50 FTEs (full-time equivalent employees) at 59 percent of companies.

• Cross-functional Teams & Communication: Successful pharmaceutical product development demands a cross-functional approach, beginning in the earliest, pre-clinical stages. Early-Stage Commercialization staff typically serves on teams with R&D, medical affairs, regulatory, legal, clinical, manufacturing and others.

Ongoing communication with all stakeholders, including regional groups, is vital. Most Early-Stage Commercialization groups have scheduled, formal meetings with key stakeholders at least quarterly to keep all parties informed about progress and/or changes in development plans.

• Functional Involvement: Sixty-one percent of the benchmarked companies begin early commercialization activities in at least one functional area during the pre-clinical phase. By Phase I, more than 70 percent of companies are involved in commercialization activities, compared with 94 percent during Phase IIB and 89 percent during Phase III.

Although activity levels drop after Phase II, more than half the Early-Stage groups continue to participate in several of the benchmarked activities including health outcomes, scientific communication, Competitive Intelligence, and public relations.

• Investment Decision Teams: R&D most often leads the early-stage investment (or portfolio management) committee. Among the full benchmark class, R&D leads or co-leads the investment committee at 56 percent of companies and commercial strategy is the group next most likely to lead.

• Lifecycle Management: Lifecycle management emerges as a critical new skill in the hands of early-stage marketers. Once the domain of brand teams seeking to manage patent expirations in late-stage products, life cycle management is taking on new meaning in the early commercialization process. More than ever, early-stage marketers seek to evaluate the full potential of new and existing molecular entities.

DATA SECTION EXCERPTS

Structuring Early-stage Commercialization Functions (an Excerpt)

Best-in-class companies demonstrate the ability to think not only about product valuation and lifecycle management, but also about franchise management and branding through the R&D




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LLC

Commercialization Function Oversight (Full Class)

N = 18

For a large majority of the benchmark class, there is a designated group responsible for overseeing the commercialization of drug candidates early in the development process, and that group nearly always has global responsibility for the ESC process.

Does your organization have a designated group responsible for oversight of

commercialization for candidates early in the development process?

If yes, does this group have global orregional responsibility?

N = 16

Regional6%

Global

94%

17%

83%

No

Yes

function. It has not been that long ago that companies used the traditional “hand-off” model, where a drug moved from a company’s R&D division to its commercial division.

Figure 2.1: Commercialization Oversight (Full Class)

Of course, this “hands-off” model (as some have chosen to call it) caused a myriad of transition and productivity problems and made it more difficult for companies to bring profitable products to market. This led many companies to pursue a newer business model of Early-Stage Commercialization. The early commercialization model continues to evolve within the industry—even within companies that have successfully harnessed the processes involved—with the aim of developing and marketing more financially viable drugs.

For the nine companies in the large pharmaceutical segment, all use a designated group to guide the commercialization function in its early stages. For those companies with a designated group that oversees the commercialization process, only one chose not to have this group provide oversight from a global perspective. The benefits that the partners receive from a global oversight can be numerous. For instance, at one large pharmaceutical company, the global commercialization group assumes control in the early-stage.

“Our research teams provide the input as far as what the market needs are, on market sizing, all those kinds of things,” the commercialization director said. “They basically are the commercial voice into our very early research efforts.”



Transition Points of Commercialization Roles (an Excerpt)

Just as early commercialization roles begin at different development points at each company, they transition to in-line and regional affiliates at different points as well. This is to be expected as each company and its candidates are unique. This research sought to uncover general trends in handoff of commercialization roles and to identify best practices for ensuring a smooth transition of responsibilities. Among the findings on transitioning are the following:

• More than half the participating companies do not transition at least some of their functions.

• Scientific Communications and Public Relations are the least frequently transitioned functions.

• Phase III is the most common time for large pharmas to transition activities from early commercialization to in-line organizations. Phase IIB is the next most frequent transition point.

• Transition can occur as early as at the end of Phase I or the beginning of Phase II for fast-tracked products where a company might be going to market with Phase IIB data.

• Functional involvement levels are tailored to each product and its individual circumstances.

• Smooth transition of product responsibilities from Early-Stage Commercialization to in-line groups is a key concern of study participants.

N=18

Phase I Phase IIB Phase III Launch No Transition/NA

Commercial Analytics 0 percent 22 percent 33 percent 22 percent 22 percent

Commercial Strategy 0 percent 28 percent 39 percent 22 percent 11 percent Competitive Intelligence 0 percent 29 percent 24 percent 12 percent 35 percent

Sales Forecasting 0 percent 33 percent 33 percent 17 percent 17 percent Health Outcomes 0 percent 22 percent 22 percent 11 percent 44 percent Market Research 0 percent 17 percent 33 percent 11 percent 39 percent Public Relations 0 percent 11 percent 22 percent 17 percent 50 percent Scientific Communications 6 percent 17 percent 11 percent 11 percent 56 percent

Table 2.1: % Companies Transitioning Commercialization Roles Per Phase

Percent Companies Transitioning Commercialization Roles Per Phase


Of the fairly large percentage of companies that do not transition some or all activities, some of the high retention can be attributed to responses from smaller companies, where many of the early-stage functions are managed by in-line groups. However, organizations in as many as 40 percent of the large companies keep responsibility for key activities through launch. Health outcomes, scientific communications and public relations are the functions most often retained in large pharmaceutical companies.

REPORT STRUCTURE AND ORGANIZATION

The project findings are organized into an executive summary, a series of four topical chapters, and an appendix. Following is a description of each section:

• Executive summary: Explains the survey methodology, identifies participating companies and reports key findings.

• Topical chapters: Discuss the components of successful Early-Stage Commercialization organizations.

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TABLE OF CONTENTS

Executive Summary....................................................................................................................... 5

INTRODUCTION.............................................................................................................................. 5

RESEARCH APPROACH................................................................................................................ 6

PARTICIPATING COMPANIES....................................................................................................... 7

REPORT STRUCTURE AND ORGANIZATION.............................................................................. 8

KEY FINDINGS................................................................................................................................ 9

Create an organizational structure that fosters commercialization excellence and integrates portfolio and project processes. ............................................................................... 11

Centralize Early-Stage Commercialization functions to better integrate people, resources, activities and capital-intensive projects. .................................................................. 13

Maintain open, two-way communication across key stakeholder groups to gain multi-dimensional perspective with checks and balances. ................................................................ 14

Develop collaboration, facilitation and negotiation skills that help early-stage marketers integrate both R&D and commercial perspectives into new product development and portfolio management. .............................................................................................................. 15

Establish oversight of portfolio decisions earlier in the process to uncover promising compounds and to ensure proper activities are undertaken to foster successful drugs........... 16

Initiate lifecycle management analyses early on to fully evaluate the potential for multiple indications, line extensions, new formulations, alliances and other value-optimization actions................................................................................................................... 17

Structuring Early-Stage Commercialization for Optimal Impact............................................. 21

INTRODUCTION............................................................................................................................ 21

ORGANIZATIONAL STRUCTURE AND OVERSIGHT................................................................. 21

ALIGNMENT OF GLOBAL MARKETING IN EARLY-STAGE COMMERCIALIZATION ............... 28

EARLY-STAGE COMMERCIALIZATION CORPORATE STRUCTURAL MODELS..................... 30

Functions of Early-Stage Commercialization Organizations .................................................. 33

INTRODUCTION............................................................................................................................ 33

FUNCTIONAL INVOLVEMENT ..................................................................................................... 34

TRANSITIONING OF COMMERCIALIZATION ROLES................................................................ 40



SNAPSHOTS OF COMPANY TRANSITIONING PRACTICES..................................................... 43

BEST PRACTICES FOR TRANSITIONING RESPONSIBILITIES................................................ 44

At transition time, transfer some early commercialization staff to in-line marketing along with the product. .............................................................................................................. 45

Manage transition of commercialization responsibilities as a process not an event. ............... 45

Solicit input on early-stage decisions from the in-line leaders who will eventually have responsibility for the emerging product. .................................................................................... 46

Share information with appropriate in-line and regional leaders on a regular basis, as changes arise and at the time responsibilities are scheduled for transition. ............................ 47

Schedule transitions at logical points in the product development timeline to minimize disruption of activities................................................................................................................ 48

Leveraging Cross-Functional Relationships to Drive New Product Development ............... 50

INTRODUCTION............................................................................................................................ 50

GLOBAL MARKETING RELATIONSHIP....................................................................................... 50

REGIONAL MARKETING INTERACTION..................................................................................... 53

Establish and follow a formal communications program to build vital, dynamic relationships with regional marketing leaders. .......................................................................... 53

Gather early insights from regional marketing leaders on a regular basis to avoid costly development mistakes. ................................................................................................... 54

CROSS-FUNCTIONAL TEAMS..................................................................................................... 56

SELECTED CROSS-FUNCTIONAL TEAM SNAPSHOTS............................................................ 58

PROS AND CONS OF CROSS-FUNCTIONAL COLLABORATION............................................. 60

BUILDING RELATIONSHIPS BETWEEN COMMERCIAL AND RESEARCH STAFF.................. 62

Communicate that the role of commercial is accelerating the success of molecules (not limiting research opportunities) to dispel the idea that commercial and science do not share the same goals.......................................................................................................... 62

Bring the scientific staff out of the lab for special events and activities to help them understand that commercial work supports science goals. ...................................................... 63

Apply diverse market insight tools and studies to inform the Early-Stage Commercialization pathway. Applying the right tools at the right times is the key to insightful and cost-effective research........................................................................................ 65

DESIRED SKILLS FOR EARLY COMMERCIALIZATION STAFF ................................................ 66

STAKEHOLDER COMMUNICATION THROUGH MEETINGS..................................................... 68



Portfolio Management ................................................................................................................. 71

INTRODUCTION............................................................................................................................ 71

Employ peer reviews throughout the research development and commercialization process to ensure the organization supports the best new product candidates....................... 73

COMPOSITION AND LEADERSHIP OF THE INVESTMENT DECISION COMMITTEE ............. 73

FUNCTIONS THAT DRIVE ISSUES PRESENTED FOR DEVELOPMENT DECISIONS ............ 78

Balance clinical and commercial inputs to investment decision committees to improve the odds of discovering hidden opportunities............................................................................ 84



TABLES AND FIGURES

Table 1.1: Benchmark Partner Companies...................................................................................... 7

Table 1.2: Benchmark Partner Demographics................................................................................. 8

Figure 1.1: Relationship With Global Marketing ............................................................................ 13

Figure 1.2: Investment Decision Drivers (Large Pharma).............................................................. 16

Figure 1.3: Tailored Therapeutics Encourage Earlier Involvement ............................................... 19

Figure 2.1: Commercialization Oversight (Full Class) ................................................................... 21

Figure 2.2: Commercial Function Structure (Full Class)................................................................ 23

Figure 2.3: Commercial Function Structure (Large Pharma)......................................................... 24

Figure 2.4: Job Title Of Esc Leader (Full Class)............................................................................ 26

Figure 2.5: Job Title Of Esc Leader (Large Pharma)..................................................................... 25

Figure 2.6: Esc Function Reporting Lines (Full Class) .................................................................. 26

Figure 2.7: Esc Function Reporting Lines (Large Pharma) ........................................................... 27


Figure 2.9: Esc Duration Of Global Marketing Involvement (Large Pharma) ................................ 29

Figure 2.10: Esc Structure – Commercial Model ........................................................................... 30

Figure 2.11: Esc Structure – R&D Model....................................................................................... 31

Figure 2.12: Esc Structure – Corporate Model .............................................................................. 32

Figure 2.13: Functions Included In Early-Stage Commercialization.............................................. 34

Figure 2.14: Functions With Most Involvement Per Phase............................................................ 35

Figure 2.15: Pre-Clinical Commercialization Functions ................................................................. 36

Figure 2.16: Phase I Commercialization Functions ....................................................................... 36

Figure 2.17: Phase Iib Commercialization Functions .................................................................... 37

Figure 2.18: Phase Iii Commercialization Functions...................................................................... 38

Figure 2.19: Commercialization Functions At Launch ................................................................... 39

Table 2.1: Percent Companies Transitioning Commercialization Roles Per Phase...................... 40



Figure 2.20: Transition Points (Full Class)..................................................................................... 41

Figure 2.21: Transition Points (Large Pharma).............................................................................. 41


Figure 3.2: Duration Of Global Marketing Involvement.................................................................. 52

Figure 3.3: Transition Of Team Leadership ................................................................................... 57

Figure 3.4: Cross-Functional Collaboration Pros & Cons .............................................................. 60

Figure 3.5: Seeding Market Insights Into Science Teams ............................................................. 64

Figure 3.6: Developing Broad-Reaching Market Perspectives...................................................... 65

Figure 3.7: Early-Stage Employee Skills........................................................................................ 68

Figure 3.8: Key Stakeholder Meetings (Full Class) ....................................................................... 69

Figure 3.9: Key Stakeholder Meetings (Large Pharma) ................................................................ 70

Figure 4.1: Pathways For Commercial Input To Portfolio Committee ........................................... 71

Figure 4.2: Peer Review Committees ............................................................................................ 72

Figure 4.3: Decision Committee Composition (Full Class) ............................................................ 74

Figure 4.4: Decision Committee Composition (Large Pharma) ..................................................... 75

Figure 4.5: The Investment Decision Table ................................................................................... 76

Figure 4.6: Issue Drivers: Major Investment Decisions ................................................................. 79

Figure 4.7: Issue Drivers: Market Development Funds For Phase Iii Assets ................................ 80

Figure 4.8: Issue Drivers: Line Extensions .................................................................................... 81

Figure 4.9: Issue Drivers: Launch Monitoring ................................................................................ 82

Figure 4.10: Issue Drivers: Post-Launch Product Issues............................................................... 83

Figure 4.11: Issue Drivers: In-Licensing ........................................................................................ 84

Figure 4.12: Investment Decision Leaders: Individual Responses................................................ 85


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