successful european rx to otc switch strategies james dudley aug'09

James W. Dudley

Tel. ++ 44 (0)1562 747705

e-mail [email protected]

web site: www.jamesdudley.info

Innovating Self – Medication European Rx to OTC Switch

Strategies

®

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www.Jamesdudley.info © James Dudley International Ltd 2008 227 August 2009

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Agenda

327 August 2009

• The Global OTC Market• Anticipating Future Market Environments• Evolving Strategic Choices• New Market Space• Rx to OTC Switches• Case Study – Lamisil ®

• Way Forward


% Share Global Non-Rx Market 2006

Japan11%

SE Asia/China11%

Latin America8%

Others10%Europe

36%

North America24%

Global Sales - OTC Medication

• $86 billion Global OTC market • 10% of the global pharmaceutical market • 7% growth p.a.

• Europe 36% • N. America 24%• Latin America 8%• Japan 11%• China and S.E. Asia 11%


Anticipating Future Market Environments• Unfolding themes and interacting drivers on the medium term business environment – cost

of social healthcare, unfolding regulatory harmonization, concentration of pharmacy distribution channels and retail groupings and growth of new channels

• Empowered and informed consumer segments – growing enthusiasm for health, information and access

• Needs based customer/consumer segmentation (differently motivated segments e.g. needs array of heart patients)

• Trends in competitor structure and intensity (consolidation of major players, separation of Rx and consumer self-medication)

• Global and regional Rx to OTC switches, unlicensed developments and new medical devices i.e. growing direct and indirect competition

• Customer access - Channels, buying structures and professional health care influencers and end user choices


Evolving Strategic Choices

• Patient/consumer groupings forming identifiable segments based on similar needs, motivations and attitudes (typical self-medication user)

• Customer targeting based on key criteria other than solely on sales potential i.e. - profit potential, market influencer factors, company sector strengths

• Tailored communications and sales attack aimed at key customer groupings

• Counter competitors with different positioning statements to different consumer/customer segments

• Exploit competitive advantages to the full and attack competitor weaknesses

• Seek (or invent) and dominate new market space


New Market Spaces

Customers ChannelsCompetitorsPartnersValue chainsRisks

New Market Space

New Customers, Geographies &

Competitors

Current Brands & Products

Innovation –Pipelines

New Horizons

Refresh/Renew

Stretch - grow new customers,

geographies, channels etc

Grow new businesses

Grow new products &

technologies

Extend Boundaries

Business todayExisting

Customers, Geographies & Competitors

©James Dudley – Rx to OTC Frameworks for Success

Extend Boundaries

Eroding Boundaries


New Market Spaces

Switches within the Growth Matrix

New Customers, Geographies &

Competitors

Current Brands & Products

ExistingCustomers, Geographies

& Competitors

Innovation –Pipelines

Business today

New HorizonsExtend

Boundaries

Extend Boundaries

POM to P

P to GSL

New Consumer Segments

New Channels

New products, technologies etc.

Eroding Boundaries

Medical devices



Rx to OTC ‘Switching’

• A change in the regulatory status of an active chemical entity from prescription only to non-prescription – P or GSL

• Movement from focusing only on professional audiences towards consumers and channels

• One of several options for developing an innovation pipeline• Brand life-cycle management option

A process or a concept ?


Top Global Brands - Rx to OTC Origin US$ millions

207

230

233

311

330

384

Prislosec

Voltaren

Efferalgan

Nicorette

Advil

Niquitin

Global OTC Brands

6 out of top 10 top global brands originated from Rx to OTC

Source: IMS Consumer Health


89% of consumer purchases of OTC medicines in Europe are for brands presently or previously prescribed

James Dudley OTC Distribution in Europe 2009


Types of Switch

Definition ApproachTotal Brand SwitchesEntire Brand

Switch to OTC i.e. moving all forms and indications of a brand to the OTC sector e.g. Claritin USA.

Consumer Professional Consumer professional switch i.e. extending marketing of a professional brand into a larger OTC opportunity e.g. Canesten® in Europe while maintaining a prescription business

Consumer Variant Taking elements of a patent-protected prescription only brand to create an OTC variant e.g. Lamisil AF® as a global entity

Professional (semi-ethical) Exploitation of the reclassification of a doctor prescribed brand in order to gain additional business from the OTC sector whilst primarily focusing on prescriber demand e.g. Pevaryl ® France.

Active Ingredient Switches - Dual brand separating doctor and consumer sectors i.e. using a ‘switched’ active to create a new brand e.g. Advil® as a global entity

- Third party ‘switch’ introduced as a new brand or launched as a product line under an existing umbrella trade name.



Rx to OTC – the Opportunities• Rx to OTC is a primary source of new product innovation for consumer health in the world today by creating new concepts that increase consumer expectations or reposition competitor offerings in the way their needs are met e.g.:-

Ø Anchor products for new umbrella brands

Ø Innovative line additions to existing OTC brands

Ø Combining with other advanced technologies to create massive competitive advantage e.g. Lamisil one shot athlete’s foot treatment and prevention

• The Rx to OTC offers bigger opportunities to reach consumer market segments than can be reached through Rx alone e.g. Zovirax

• Switching Rx brands using a similar trade name to OTC presents lower risk, lower marketing costs and greater chances of creating a new market leading consumer brand than launching a new trade name (empirically)

• There is a clear opportunity to grow and maintain profit streams from brands long after patent protection has expired - through continuous innovation and brand renewal strategies

• Retail channels will see ‘switches’ as innovative and progressive in terms of new brand development and increased OTC earnings

• Exploits existing intellectual assets and market knowledge


Advantages Rx to OTC

• Creating a greater opportunity with a consumer OTC positioning than that afforded by the prescription sector for certain indications or product forms e.g. Lamisil Cream (Novartis)

• Stretching access to brands for consumer segments either not effectively served by the prescription sector or preferring to self-treat e.g. Diflucan UK (Pfizer CH)

• Creating a sustainable, long-term intellectual property which provides both an earning stream and good will value as an asset in the OTC division – e.g. Nurofen

Creating and dominating new market spaces through the full exploitation of competitive advantage and branding


Factors contributing to the Success of New ‘Switches’ in Europe

Predictive Factors Executional Factors

• Brings something meaningful and new to the OTC market that meet both physical and emotional consumer needs

• Maintain professional supportpost-switch

(i.e. Doctors, Pharmacists etc.)

• Ability to leverage the brand’s ethicalheritage

• Innovative potential of base brand for a succession of new presentations, strengths and packaging

• First/early to switch in its therapeutic class

• Potential to develop franchise extensions into related segments

• Can be switched prior to patent expiry

• Sustainable competitive levels of consumer marketing

• Makes a distinctive, relevant and superior consumer offer

• Realistic pricing(60% of brand failures attributed to pricing issues)

• Ensure sustainability of brand identity(Maintaining a trade name that takes part or all of the name of the prescription brand)

• Access to channels of distribution relevant to potential users in terms of sustainable market coverage and penetration



Too soon - Too late - Spot on

Get the Timing Right

Key objectives:• Be first to create new market space• Maximize period free of competition• Develop a pipeline of innovations to stay ahead of new entrants (inc. private label)


Timing Options

Before patent expiry

• Early lifecycle – Self medication proves a better opportunity than the prescription sector (Zovirax ®, Lamisil AF ®, Levonorgestrel ®)

• Late lifecycle - stretch Rx asset value to the last (Zantac ®)

• External pressures - forced switches (imidazole UK, omeprazole Sweden, topical diclofenac France)

• Competitors - shelter behind patent to establish OTC offer©James Dudley – Rx to OTC Frameworks

for Success


Timing Options

After patent expiry

• Switch initiated by third party (e.g. Pfizer Benadryl ® - cetirizine)

• Early follower (Angelini Moment)

• Late Challenger (Bayer Canesten Once ®)

• Competitors all launch at the same time (ibuprofen Germany)



100% ofSufferers100% ofSufferers Treat

Source of treatment

Ask for brandby name

Treatment Decision Source of Treatment Product Knowledge

Know type ofproduct required

Always/Usually 48%

Self-medicate

78%

Yes 87%

Yes 71%

Visit a Doctor 9%

Home Remedy 13%Never 21%

Consumer Decision Making - Cold Sufferers

How do we create a new market space in such a well informed consumer led environment?


% of Respondents - Europe

48.2

42.2

21.2

20.2

16.7

16.712.8

5.6

5.3

1.6

0.3

7.9

2.8

Doctor

Pharmacist

Television

Family

Printed M edia

Nurse

Friends

Advertising

Radio

Other

Internet

D/K

None

Consumer Sources of Information

• Professional recommendation and endorsement together with WOM between family and friends are critical sources of information• Role of the media should not be underestimated – editorial influence and advertising are key


Myth

• Offsetting some of the sales losses to brands declining in price and volume as a result of generic pressure in a post-patent expiry environment

• Extending returns on initial research investment long after the prescription brand has reached the end of its prescription life

There are simpler and more effective strategies to achieve these ambitions


Cold Sore Treatments

• Cold sores - low interest GP category

• Patients present too late (if at all) for viable treatment

• Acyclovir only 48% effective at blister stage

• High use of home remedies and astringents

Toothpaste and Tea bags popular home remedies


Identified the Tingle

Europe - $60 million market opportunity

• Consumers believed no effective treatment existed

• Feelings of anger and feeling dirty typified frequent sufferer attitudes

• Remarkable association with feeling a tingle as a pre-onset warning (>90% sufferers)

• Acyclovir is most potent at this stage


Sustained Period of Leadership

• Creation of new market space – new indication in pharmacy

• Switch pre-patent expiry (2 - 5 years)

• First in with tingle claim (exciting consumer expectations)

• Rapid roll-out with high investment in consumer and trade education, merchandising and optimum pricing

• Early leadership achieved in all key markets

• Maintained professional support in key markets e.g. Germany


Brand Vulnerability

• No major innovative programme to retain new market space

• Challenges from acyclovir generic brands

• Penciclovir ‘switch’ 2005

• New medical devices


Case Study - Lamisil ® AT (terbinafin)


Lamisil ® History

• Prior to the Switch - Prescription only Lamisil ® Cream global sales were a littleover US$ 9 million (8% of total brand sales)

• Cream was ranked eighth with a 3.0% global market share and while it waspresent in most markets, it had a top five rank in only two

• Within Novartis Pharma division’s product portfolio, Lamisil® cream was rankedforty-fourth and represented only 0.4% of total Pharma sales

• Systemic terbinafin represented over 90% of total the Lamisil ‘brand’ sales

• Systemic Lamisil® was ranked first in the global market with a 27% share and wasgrowing fast

• Within Novartis Pharma division’s product portfolio tablets were ranked five, and represented 4% of total Pharma sales


Lamisil ® Strengths• First to deliver a ‘one week cure’ and prevention from re-infection - i.e. a relevant, superior and demonstrable competitive advantage

• A prescription heritage through the adoption of the Lamisil® AT trade name thatcould be leveraged to reinforce this competitive advantage

• Potential to reposition competition to create and lead a new ‘one week cure’segment

• Patent protection to 2005 would provide a monopoly position around which to buildthis new segment

• No significant safety issues to increased consumer availability were identified

• Lamisil ® Cream was already non-Rx in Denmark and Sweden

• Novartis would have the capability to reach the professional sector to reinforce a consumer/ professional positioning particularly in European markets.


Lamisil ® Consumer Positioning

Pricing• Premium

Positioning•The one week “cure” for athlete’s foot• Prevents re-infection•The most effective topical treatment for fungal infections

Image• Medical heritage• Global branding


Programme of Line Extensions

Continuous Brand Renewal through Innovation

• Cream

• Spray

• Gel

• Powder


One Dose Treatment

New Market Space created and dominated with one dose treatment


Global Success

44 Country MarketsTop 3 brand in USA

Top 3 brand Europe’s main Markets (G.P.UK)

Growing 10% p.a.

Novartis CH


Key Learnings from the Lamisil® Case Study

Success Criteria• First to Fulfill Consumer Expectations Better• Get the Timing Right• Adopt the most appropriate Consumer Access Model• Realistic Business Plan• Build Competitive Advantages into the Consumer Offer• Continuous Brand Renewal and Stretching (pipeline of line additions)

Creation of New Market Space with Lamisil Once ®


Rx to OTC Strategies

Set Vision for Strategic Leadership, Goals, Priorities & Organization

(There is no need to reinvent processes for every new project)



Objectives – Organization - Processes• Global objectives and priorities

• Organisation and project leadership

• Key processes

Ø Intelligence gathering and consumer research

Ø Regulatory affairs (goal is to gain approvals for targeted claims)

Ø Product design (future pipeline should feature in business plan)

Ø Positioning and pricing (price volume metrics)

Ø Marketing Communications (professional endorsement, editorial influencers and WOM set as key goals)

Ø Role and recruitment of key influencers

Ø Channel targeting and management (penetration targets, training and planogram development makes a

major difference)

• Business plan and brand marketing strategy


Project Team – Typical Switch Project

InternalCentral

InternalNationals

ExternalAdvisers

• Project leader• Registration strategist/ medical adviser• Rx brand coordinator• Economist• R&D/Production representatives• Supply management representatives• Acquisition, licensing and partnering as required

• Country project leaders

• Market researcher (as required)• Marketing strategist (as required)• Advertising agency (as required)• PR and Advocacy (as required)


Key Phases - Strategic Framework

• Phase 1 GETTING TO START- Research and feasibility studies and lead market identification.

• Phase 2 GETTING TO GO- In-depth evaluation of the consumer opportunity.- Competitor benchmark analysis.- Measurements of impacts on parent Rx brand.

Creation of a Global Business Plan Y/N decision

• Phase 3 GETTING TO MARKET- Devolution of the global strategy model into local business plans.

• Approval to pursue an Rx to OTC project - outline vision and desk research

Time Table

36 Weeks

86 Weeks


Clear and Rigorous Road Map

• Project proposal• Global strategy model• Geographical roll out • Rigorous time table

• Consumer research led project • Full understanding of competitor capabilities• Criteria for partnering with key channels• Set milestones©James Dudley – Rx to OTC Frameworks

for Success


Key Pathways


Regulatory Pathway

SPC

• Basis for marketing authorization Rx uses variation for OTC

• For pan-European Switch SPC needs to be harmonised

• SPC provides the legal basis for medical claims

• Strategic importance of the SPC e.g. Nurofen additional clinical trials to gain

headache as a claim


Consumer Research

• Identify and quantify universe and main sub-segments (purchasers and users)

• Identify needs – understand the pain – physically and emotionally

• Usage and attitudes treatment/information access norms etc (understand

satisfactions and dissatisfactions with existing products and trust in sources of

information)

• Consumer indication and product knowledge (purchaser /user/influencer)

• Test concept consumer proposition

• Road test proposition against competition – claims, offer, price channel (PVM)

• Quantify demand


Typical – Project Dimensions

Competitors’ Strategies

Key Influencers

Channels

Media choice

Existing needs, knowledge and expectations


Market research provides the framework for the entire

strategy development• SPC connects regulatory strategy and brand development strategy• Governs information content to target audiences


Key processes• Intelligence gathering - consumer research, trade opinions, analysis of evolving competitor strategies

• Regulatory Strategy (goal is to gain approvals for targeted claims)

• Identification of target audience segments (needs, expectations, choices, uses and beliefs)

• Competitor analysis – identification of relative competitive advantages and critical weaknesses

• Positioning and pricing (price volume metrics)

• Product design, packaging strategy etc. (future pipeline should feature in business plan)

• Advertising, PR and other marketing communications (professional endorsement, editorial influencers and WOM set as key goals) Appoint key professionals

• Role and recruitment of key influencers

• Channel targeting and management (penetration targets, training and planogram development makes a major difference)

• User loyalty strategy (including Internet interactive dialogue)


Typical – Brand Development

Regulatory PathwayBrand

Development

Identify Key Target Consumer Segments

Competitors’ Strategies

Key Influencers/ Trusted sources of information

Targeted Channels

Media preferred

Existing needs (physical & emotional)

Knowledge and expectations

ChoicesMarket Research

• Consumer Positioning and Concept (objectives)• Product design (and future pipeline development)• Consumer proposition and pricing

- Advertising- PR and key influencer

advocacy• Channel strategy, incentives, education and training

SPC



Regulatory Pathway

Marketing Authorization - Options in Europe

• Centralised Procedure (2 examples only so far Orlistat (Alli ®) and Pantoprazol)

• Mutual Recognition Procedure

• Decentralised Procedure

• National authorization Procedure


Planning Documents

Business Plan – Investment Rationale

Attractiveness - Strategic Opportunity Outline & Key Metrics

Entry Plan - Marketing Execution Outline

Entry Plan – Timetable, Targets and budgets

Follow through – Next phase Marketing Execution Outline



Rx to OTC - Summary• Organisation and project leadership

• Project objectives and priorities, timetable and milestones

• Attractiveness analysis – Opportunity measurements (target consumer segments,

core competitive advantages, relative competitor strengths and weaknesses)

• Brand development strategy (Target consumer segments, positioning, pricing etc.)

• Regulatory Strategy

• Product adaptation/design strategy

• Marketing communications strategy

• Business plan

• Entry plan and follow through©James Dudley – Rx to OTC Frameworks

for Success