Pharmaceutical Life Cycle Management (LCM)

1. CONFIDENTIAL Pharmaceutical Life Cycle Management (LCM) Client workshop June 2001

2. Today´s discussion • Key elements of Life Cycle Management • Thoughts on how to organize for LCM • Key issues * Footnote Source: Source

3. Life Cycle Management • Objective • Life Cycle Management is largely about building brands over time –by incremental investments in value creating activities to maximize the value of a compound • Mindset • Building a business based on a great product idea/brand – • not just launch an innovation

4. LCM requires a commercial mindset • Setting ambition level • Shape the product • Shape the market • Shape • the company

5. Shape the product LCM requires a commercial mindset • Setting ambition level • Early cross functional agreement on vision for the product (target label) • Invest with a venture capitalist mindset • Deliver against timeline • Focus on what is important • Continuously enhance competitive differentiation • Clinical development entirely focused on value creation (e.g., most important indications)

6. Shape the market LCM requires a commercial mindset • Setting ambition level • Shape the market early and actively • Clear and consistent messages in communication/PR strategies • Recognize regional differences in key markets • Clear and broad perspective on resources required to shape the market • Ensure tight link between R&D strategy and market strategy

7. Shape • the company LCM requires a commercial mindset • Setting ambition level • Have a consistent and transparent commercialization process • Market leading where it really matters • Strong motivation among employees to bring product to market • Partnership/communications across functions/teams/MCs • Timely training of all relevant employees

8. LCM requires a commercial mindset • Setting ambition level • Shape • the product • Shape the market • Shape • the company • Early cross functional agreement on vision for the product (target label) • Invest with a venture capitalist mindset • Deliver against timeline • Focus on what is important • Continuously enhance competitive differentiation • Clinical development entirely focused on value creation (e.g., most important indications) • Shape the market early and actively • Clear and consistent messages in communication/PR strategies • Recognize regional differences in key markets • Clear and broad perspective on resources required to shape the market • Ensure tight link between R&D strategy and market strategy • Have a consistent and transparent commercialization process • Market leading where it really matters • Strong motivation among employees to bring product to market • Partnership/communications across functions/teams/MCs • Timely training of all relevant employees

9. Actions often taken years earlier! The life cycle can be divided into three phases Typical industry curve Potential curve with active LCM • Phase • Launch • Extend • Sustain • Year 0–4 5–10 11+ • Overall ambitions • Gain market share • Establish market • Rapid sales ramp-up • Expand market • Gain market share • Minimize impact of generics • Develop and launch line-extensions

10. Rapid growth in market share (x% by year 4) • Establish overall market (from y to z billion USD) • Rapid sales ramp up (a% of year 4 sales in year 2) • Align and anchor targets with entire organization • Ambitions • Rapid launch across all markets • Product label/positioning/branding is consistent and differentiated • Competitor moves and strategies assessed and implications taken – in advance • LCM strategy/positioning over time is clearly identified • Shape the product • Establish KOL network and build base for ongoing relationship • Pricing strategy balances need for quick approval/penetration and establishing favorable long-term position • Marketing mix and focus on key influencers to reach ambition • Clinical “share of voice” and publication levels of sufficient magnitude and quality • Shape the market • Competitive investment level across markets (e.g., x per patient) • Transition global team role and composition; • Educate, excite and align local teams and sales force • Create and maintain master planning chart of launch activities • Negotiate possible alliances/co-promotion arrangement to optimize geographical coverage • Shape the company Best practice targets for ”launch” phase

11. Selecting the right label requires a clear ambition • Example of ambition level staircase • Key input into label • Product name, project name • Product vision • Competitive environment • Main patient and customer groups and their key unmet needs • Pricing strategy • Key claims for launch • Go/no go • Relative value • Route of administration • Dosing regimen • Label indication(s) • Launch date • Key issues • Expand the market • What label is needed to get to the next step? • Class leader • Get “fair share” • Minimally accepted level • No go

12. Trend towards compressed launch schedules – case example: Pfizer • Number of countries* • Worldwide salesUSD billions • Viagra (98) • Lipitor (97) • Lipitor** • (with WL) • Norvasc (90) • Viagra** • Zoloft (90) • Norvasc • Zoloft • Years after launch • Years after launch * Number in parentheses denotes first launch date worldwide ** Includes forecasts because time horizon extends past 1998 Source: FDA; pink sheets; 10-K; Morgan Stanley analyst report (7/98); McKinsey analysis

13. Marketing investment becoming more aggressive • Projected • Cumulative US details • Thousands • Cumulative US sales • USD millions • Lipitor • (1997) • Lipitor • Pravachol • (1991) • Pravachol • Years from launch • Years from launch Source: Sales and details from Scott Levin US

14. Identify key bottlenecks for most attractive consumer/prescriber segments • Evaluate where in the purchase funnel major bottle-necks exist for high-value patients and physicians • Identify which drivers can resolve the bottleneck(s) • How to increase awareness, induce trial, retain patients and physicians, etc.? • 1 • 2 • 4 • 3 • Track results against segment bottlenecks • Develop scorecard to evaluate results from marketing solutions • Focus message and spend on eliminating bottlenecks • Develop marketing solutions and evaluate each based on ability to resolve bottleneck, ease of implementation and cost Dynamic marketing model • Many large pharmaco’s are still in the process of adopting this tool

15. ILLUSTRATIVE EXAMPLE Example of physician decision funnel • Physician is aware of new drug • Physician considers new drug • Physician differen-tiates new drug from old drug • Physician tries new drug • Physician endorses new drugs for patients with unresolved symptoms • Physician endorses new drug for all old drug users • Bottle-necks • Few, if any, unmet needs • No long-term safety profile • Believes that new drug efficacy is not significantly superior to that of old drug • Lack of samples • Lack of experience with new drug; prefer true and tested drug • New drug is not on many formularies/ physician does not want to deal with MCO callbacks • Physician does not want to switch patient who is stable on old drug • Not all patients respond well to new drug • New drug is not on many formularies • New drug does not have full range of indications

16. Publication volume is important in differentiating drug products Correlation between drug sales and publications Sales USD millions Cozaar 620 • Diovan (Novartis) launched in 1994 one year after Cozaar (Merck) with a higher efficacy and better tolerated drug; however, Cozaar was able to leverage a 5–32x greater publication volume to beat Diovan 420 220 Diovan 20 1992 93 94 95 96 97 98 Number of citations 1000 750 500 Cozaar 250 Diovan 0 2Q99 1992 93 94 95 96 97 98 Source: Cited reference science database, various marketing/sales database and publications

17. EXAMPLE Master planning chart Top level milestones • MS1 • MS2 • TG1 • MS4 • TG2 • TG3 • TG4 • MS8 • Process • Global marketing • Target label • Only if issues/LCM* • Disease orientated • Updated disease orientated • Final disease orientated • Initial project specific – staircase • Refined based on market research and trial results – staircase • Final pre-launch • Covers key dimensions • Product development • Global marketing • Product supply • Patents • Etc. • Top level milestones and more detailed activities • Positioning • Reposition if necessary • Broad initial • Updated as CD is elected • Updated based on develop-ment studies and focus groups with KOLs • Final pre-launch based on market research and clinical trials • Branding • Rebranded only in unusual situations • Initial very preliminary • Updated based on market research and focus groups • Final pre-launch based on input from markets and trials * Updated annually

18. Maximize growth of franchise over time through share and market growth • Ambitions • Deliver studies to evolve product positioning and respond to competitive and market shifts – focus on incremental sales • Evolve the product (e.g., drug delivery methods) and add value-added offerings (e.g., diagnosis support) • Pursue local clinical studies balancing need/demands of local markets with diminishing returns of global positioning • Shape the product • Shape the market • Evolve marketing mix and focus over time • Appropriately focus KOL activities to maintain network and respond to new competitors • Increase the size of the market through investments to broaden usage and enhance diagnosis • Secure optimal geographical coverage by alliances/co-promotion • Shape the company • Develop and retain product teams on global and local level • Ensure sales force incentives drive evolution of existing prescribers and conversion of new prescribers Best practice targets for ”extend” phase

19. Examples of product extensions • New indication • Further/expanded indications • Patient based innovation • Line extensions • Pharmaco–economic • Safety/tolerability profile

20. New indication • Identifying diseases/symptom currently poorly/not treated and developing novel products • Proscar (Merck) • Captopril (BMS) • Reo-Pro (Centocor) • Acculane (Roche) • Further/expanded indications • Expanding relevant patient population by redefining diseases of by treating additional diseases (formulation combinations) • Fosamax (Merck) • Mevacor (Merck) • Coreg (BM) • Wellbutrin/Zyban (GW) • Line extensions • Adapting product to avoid/delay generic competition • Voltarol (Geigy) • Amoxil (SB) • Procardia XL (Pfizer) • Safety/tolerability profile • Focusing product development/marketing on addressing safely issues with incumbent therapies • Istin/Norvasc (Pfizer) • Cardizem (HMR) • Zantac (GW) • Pharmacoeconomic • Defining p-economic profile by e.g., redefining clinical end points for competitive advantage • Rocephin (Roche) • IPA/GUSTO (Genentech) • Dipravan (AstraZeneca) • Patient-based • Innovating around the specific need of patients • Easi-Breathe (3M) • Novopen (Novo Nordisk) • Menorest (RPR) Examples of product extensions • Ways to create product extension • Examples • Description

21. Capturing benefits of continued research • 25-40% of sales of top selling drugs in UK/USA are for indications discovered only after the drugs were launched Source: UK office of Health Economics/Market letter June 13, 2001

22. DISGUISED EXAMPLE Impact of new indications • Experience shows • Substantial spillover effects from being first company to launch indication • First mover can get up to 10% more market share even where off-label exists • The follower – running the same indications – usually is not able to improve his market position • Example of possible indications for SSRIs • Major depression • Prevention of relapse of depression • Premenstrual dysphoric disorder • Anxiety – general and panic attacks • Obsessive compulsive disorders • Eating disorders – anorexia and bulimia • Substance abuse • Social phobia • Where can company gain share by pioneering indications? • Where can company leverage class effect?

23. Sustained results with proactive Life Cycle Management – example Voltaren • "Patent life" extended 10 years after expiry through proactive product re-launches • USD 1 billion global sales in 1997 • Global market share • Percent Sales in Germany DEM Millions • 160 Gel • 120 Sustained release • 80 Suppository • 40 Plain • 0 • 1993 • 94 • 95 • 96 • 97 • 1982 • 83 • 84 • 85 • 86 • 87 • 88 • 89 • 90 • 91 • 92 • 93 Patent expiry Source: IMS

24. Sponsored • Supported Increasing challenge to maintain KOL network demands focus • Characterization • “Thought leaders” • Provide critical data • Prescribers • Marketing measures • Scientific events initiated by company • Involvement in sales force training • OPL • “Influencers” • Heavily involved in teaching • “Followers” • Command vast majority of prescriptions • Very heterogeneous and volatile limited understanding • Special company events to leverage OPLs, e.g., “Semi-Annual update” for heavy prescribers • Sales force visits • High prescribers • “Laggards” • Lag behind new therapy developments • Information using marketing measures other than sales force contact • Low prescribers

25. Retaining and motivating top talent over years requires more than money • Values and culture • Well managed product • Company has exciting challenges • Strong performance • Freedom and autonomy • Job has exciting challenges • Career advancement and growth • Great tasks • Great • product • Compensation • Differentiated compensation • High total compensation

26. Ambitions • Maintain market share and profit levels as long as possible • Shape the product • Identify and invest in levers to extend life cycle • Shape the market • Review pricing as a key lever to measure product value • Extend sales and marketing activity • Shape the company • Ramp up excitement and on local teams to extend the franchise • Shift composition of global team to meet demands of sustaining lifecycle • Address internal barriers to sustaining franchise Best practice targets for ”sustain” phase

27. Increase sales spending • Improve sales effectiveness • Increase market spending • Improve marketing effectiveness • Attain additional indications • Maximize remaining sales • Migrate to new proprietary products • Exclusive product enhancements/extensions • ”New” versions of product • Parse the market • Create product • extensions • Litigate • Manage regulatory affairs • Take competitive actions • Defend sales • exclusivity • Produce own generic • Partner with generics • Maximize contribution • Migrate to OTC • Compete in generic market • License • Trade • Sell • Transfer ownership 5 key competitive levers to maximize late life cycle NPV • Key levers • Possible actions

28. Recognition of the threat and opportunity • New product bias • Resource capacity constraints Internal barriers to address lifecycle extensions • Possible response • Determine which generic competitors are likely to enter • Study case examples • Use scenario modeling to quantify impact and assess potential opportunity • Establish more sophisticated risk/reward measures • Focus on total product opportunity rather than annual budgeting for in-line products • LCM revenues important to sustaining performance through ”droughts” • Outsource the LCM work to conserve in-house resources, e.g., transferring ownership

29. Deal • structure, negotiation and alliance manage-ment • Regulatory affairs • Regulatory affairs • Sales/ marketing • Litigation strategy and tactics • Clinical development • Clinical development Non-traditional skills needed in late Life Cycle Management • Traditional • Focus: This year’s profit plan • Required • Focus: NPV of asset • Licensing and acquisitioning/ partnering • Sales effectiveness • Product team • Product team

30. Today´s discussion • Key elements of Life Cycle Management • Thoughts on how to organize for LCM • Key issues

31. Design principles • Drive life cycle management around the major planning events (early on milestones and later in annual planning cycle) • Document life cycle management thinking in a simple document that potentially is broader than the business plan document • Create clear roles and responsibilities between global and markets

32. Focus areas and early recommendations • Make LCM-plan an integral part of tollgate decisions • Make LCM planning part of annual portfolio management process • Clarify decision-making around LCM • Define roles and responsibilities • Define who has what responsibilities • Upgrade the LCM-plan to a real annual strategy document for post launch • Define the company LCM-plan (aligned with markets) • Define the company life cycle plan • Clarify leadership – commercial versus technical • Create a standing/recurring LCM sub-team including key markets • Organize for creation and management of the LCM-plan • Define the role in annual planning • Define the company minimum standard • Link budgets to LCM planning • Make LCM a priority in annual planning

33. ILLUSTRATIVE Life cycle thinking should be part of the early development tollgate decisions • Pre-CD • CD nomination • Proof of concept • Approval to launch • Choice of first indication • Target label assessment • Preliminary target • Target label evolution over time • Patent/IP strategy • Choice of CD and backup • Rough life cycle vision • Future development activities • Evolution of positioning • Updated target label assessment • Staircase • Development project plan for proposed scenario • Scope • Scale • Investment for speed • Updated LCM plan • Agreed vision with markets • Future development initiatives • Evolution of positioning • Future marketing initiatives • Updated development project plan for proposed scenario • Ensure supply • Updated target label assessment • Final “launch” target label • Updated LCM plan

34. EXAMPLE A good LCM plan considers a broad range of strategic initiatives • Market penetration programs • Marketing and sales • Global positioning and coordination programs • New marketing/sales approaches • New claims/ indications What is required to reach vision/ objectives? • Clinical development • Line extensions • Repositioning of other classes • Production and logistics improvement program • Other • Renegotiate alliance agreement

35. ILLUSTRATIVE Create quality standard overall and within the LCM plan • Examples • Decisions should be based on a deeper level of insight into overall market situation than what resides in any single market • Avoid doing “a little of everything” • Avoid mismatch between global and local ambition. Be clear on overall strategic direction • Each plan should increase the future value of product based on defining essential activities for product growth • Ensure that initiatives focus on both development and marketing levers across time • Use innovative tools and framework to push thinking (e.g., “war games”, strategic staircases etc)

36. EXAMPLE • 1. Executive summary • Outline plan for the brand • Explain the overall LCM strategy and performance objectives • Describe the 3–5 main issues that may significantly affect the product success • Lay out actions to resolve issues • Does the executive summary clearly and concisely articulate how the product will win in the market place and overcome any significant challenges? • 3. Situation analysis • Market development • Customer needs • Product profile • Product market performance • SWOT analysis • Have forecasts (best–worst) been assessed and validated • Are all assumptions stated clearly? • Have deviations from previous forecast been assessed and explained? • Does the competitive analysis give us: • Understanding of how the players in the market have acted and positioned themselves • Opportunities for our product? • Anticipated competitor actions on reactions in our LCM strategy so that we can act proactively? Life cycle plan – annual portfolio review post launch • Chapter • Content • Quality guideline • 2. Decision required • Explain what management is asked to decide on • Does the section clearly lay out the needed resources for the recommended option as well as the two–three alternatives?

37. EXAMPLE Life cycle plan – annual portfolio review post launch – cont. • 4. Long term life cycle vision • 5. Objectives • 6. Strategy (short-, mid- and long-term) • 7. Global product/brand team and satellite team composition • 8. Critical success factors • 9. Action plan • 10. Financials • 11. IPP

38. FOR DISCUSSION Life cycle management team – example • Critical that thought leadership comes directly from global brand/product responsible • Brand director will often provide day-to-day team leadership • Requires dedicated standing/recurring satellite team, often with direct market participation (1–2 people) • The role of the sub-team is to drive fact gathering, perform analysis, synthesize conclusions and draft/build buy-in for LCM strategy • Quality planning for a major brand takes 3–4 months and 3–5 fulltime people

39. Today´s discussion • Key elements of Life Cycle Management • Thoughts on how to organize for LCM • Key issues

40. Key issues • Are we creating enough value through Life Cycle Management today? • How important is LCM to our growth over the coming years? • Do we have a simple manual laying out the “COMPANY-way” of doing LCM? • Is LCM a sufficiently large part of our annual planning process? • What are the most critical gap areas? • Is the way we organize for LCM sufficiently clear, e.g., are teams composed (global/local) based on recognition of commercial challenge over time?