The Medicines

Company
UGBA 106 Marketing Final
Written Analysis of a Case

Stephanie Zau
Wenwan (Sophie) Yang
Yi Ju (Grace) Chen
Darena Tulanont
SWOT Analysis
Strengths
•Unique business model—acquires
drugs in late stage development
•Clear and concise criteria for
selecting a new drug to acquire
•Lower product R&D costs
•Short breakeven periods after
product launch
•High return on investment ratio if
product is successful
Opportunities
•Aging population
•United States is the most
profitable drug market
•Prescription drug business
expanding
Weaknesses
•Weak backup product (CTV-05
and IS-159)
•Investors have little confidence
•Product launch takes an average
of 10 years
•Very specific segment of a target
market
•Expensive compared to generic
drugs
•Difficult market entry because of
high price
Threats
•Government and managed care
organization pressuring drug
companies to lower drug prices
•Growth in generic drug market
The Challenges
1) To convince hospitals that Angiomax is a
better alternative to Heparin
2) To price Angiomax at a mutually beneficial
cost
3) To correctly analyze the initial sales condition
when breaking into the market
4) To formulate an effective marketing strategy
that differentiates Angiomax from Heparin and
to facilitate adoption in hospitals
5) To persuade hospital administrators to acquire
Angiomax in a hospital
6) To segment and target most influential and
profitable hospitals
7) To instill confidence in investors
8) To develop strategies to acquire a productive
drug pipeline
Recommendations
1) Emphasize the advantages of the drug first
before publicizing the price
2) Price a dose of Angiomax at $420
3) Correctly predict initial sales by utilizing
information about the market and statistics
4) Develop a unique selling proposition: position
Angiomax as the modern, no-immune-reaction
anticoagulant lowering the risk of heart attack,
major bleeding and death
5) Break into the market by initially targeting
doctors
6) Target large and medium hospitals
7) Provide specific information to investors that
show hospitals will acquire their drugs
8) Include a more sophisticated screening process
Overview of Product:
Angiomax Description
A blood thinning drug , or anticoagulant, that reduces the likelihood of
artery blood clots. It is specifically developed for “high risk patients
undergoing a balloon angioplasty.” It can treat patients with heart
attacks, unstable angina, Heparin Induced Thrombocytopenia (HIT)
and patients who have undergone coronary artery surgery.
Cost of goods sold: $40 per dose
Strengths Weaknesses
•Effective in 30 minutes •Cost 20 times and priced 40
•Doses are “exacting” and “crisp” times higher than Heparin, the
•No immune reaction generic alternative
•Percentage of patients •Alternative is a widely used drug
experiencing major bleeding is 1/3
of that of Heparin’s
•Eliminate death rate
•Reduced rate of heart attack and
need for a repeat angioplasty
•70% of time, requires only 1 dose
Promotion, Place and Price
Promotion Place Price
•Innovex: marketing •Hospitals •Undetermined
services firm •Focus on 700 •$40 dollars to
•Average of 5 years of angioplasty produce
experience centers •Before acquiring
•Relationships with •Divided into 5 Angiomax, Biogen
doctors and sales regions projected that
pharmacists •Targeting 54% Angiomax would
•Academic journal articles (700/1300) of cost $100 per dose
•Presentations at trade medical centers to produce with an
shows that perform implied selling of
•Medical Journals angioplasties $1000 per dose
•Highlight shortcomings of
Heparin
•Weekend getaways—
create advocates in the
medical community
•Word of mouth
Customers, Competition and
Collaborators
Customers Competition Collaborators
•Doctors •Heparin—most widely •UCB Bioproducts
•Hospital Pharmacists prescribed anti- producing Angiomax
•Hospital coagulant in acute •Innovex—providing
Administrators coronary heart salespeople with an
•“High risk patients treatment average of 5 years
undergoing a balloon •Commodity drug experience and have
angioplasty” •Sold by many connections with
different doctors and
manufacturers pharmacists in the
•$2 a dose to produce medical industry
•$10 price per dose
•Main shortcomings:
•Unpredictability
•High risk of
bleeding
•Adverse reactions
Challenge #1
To convince hospitals that Angiomax is a better alternative to
Heparin
Angiomax Heparin

• Takes into effect in 30 • Take into effect in 2 to 3

minutes hours
• No immune reaction • Adverse reaction
• Reduced risk of bleeding • High risk of bleeding
Table A: Phase III Results for “Very High Risk”
Patients
Outcome within 7 Days of Heparin (372) Angiomax (369)
Treatment
Death 0.5% 0.0%
Heart Attack 5.6% 3.0%
Need for a Repeat Angioplasty 3.5% 2.4%
Experienced Major Bleeding 11.8% 2.4%
Challenge #1
• Using Angiomax will be less costly than
Heparin
▫ Reduce cost of complications
▫ Reduce patient’s hospital stay
• Additional costs incurred from
complications
▫ Heart Attack: $8000
▫ Death Costs: $8000
▫ These costs are NOT reimbursed by
insurance companies
Challenge #2
*Challenge #1 ‘s Table A: Phase III Results for “Very High
Risk” Patients
Table B: Phase III Results for “High Risk” Patients Undergoing
an Angioplasty
Outcome within 7 Days of Heparin Angiomax
Treatment (2,151) (2,161)
Death 0.2% 0.2%
Heart Attack 4.2% 3.3%
Need for a Repeat Angioplasty 2.8% 2.5%
Experienced Major Bleeding 9.3% To calculate3.5%
add. patients
From Tab. A: Very From Tab. B: High
High Risk Angiom
Hepar Risk
Hepar Angiom suffering from complications,
in ax in ax we apply the following formula:
Total add.
0.5% 0.0% 0.2% 0.2% % of add.# of total= patients:
patients*patients “high risk” or
5.6% 3.0% 4.2% 3.3%
“very high
3.5% 2.4% 2.8% 2.5% Very High Risk: risk”
(0.136)*(10%)(0.92)(700,000) = 8,7
11.8% 2.4% 9.3% 3.5%
High Risk:
21.4% 7.8% =
21.4% - 7.8% 16.5%
16.5% - 9.5%
9.5% = (0.07)*(40%)(0.92)(700,000) = 18,0
13.6% 7%
Challenge #2
To price Angiomax at a mutually beneficial cost
From the case, the total number of angioplasty patients is 700,000
patients. Since the Medicines Company only investigates 92% of all
angioplasty procedures, we need to multiply by 0.92. To summarize:

 High and Very High risk patients = (0.92)(percentage of all

patients)(700,000)

 High risk patients = (0.92)(0.5 * 0.8)(700,000 patients) = 257,600

patients
 Very high risk patients = (0.92)(0.5 * 0.2)(700,000 patients) =
64,400 patients
 Total patients = 322,000 patients

From Table A and B, we calculated the difference of patients that

experienced some complication while using Heparin or Angiomax.
Each of these patients will cost $8,000 to the hospital. The difference
in the number of patients with the above complications between using
$8,000
Heparin and Angiomax is calculated below:
patient
 Difference in number of patients = 18,032 + 8,758.4 = 26,790.4
Challenge #2
*See Challenge #1 Table for numerical data
for reference
Then, we assume that each patient required 1 dose of Heparin and that
each vial of Heparin contains 1 dose. The average dose of Angiomax is
1.45 doses.

 Avg. dose of Angiomax per patient = (70%)(1 dose) + (30%)(2.5

doses) = 1.45 doses

From the case, the company investigates 322,000 angioplasty patients.

Each vial of Heparin costs $10. To calculate the cost of Angiomax, we
use the following formula:
Pricing: $420 per dose
Pros
• With Angiomax, cost of each operation will be $9,910, with insurance
paying hospitals at a flat rate of $11,500. Therefore, the hospital will not
lose any money.
• The hospitals will gain $46/patient ($ 466 - 420). Since there’re 322,000
patients, the hospitals would gain $14,812,000 (approx. $21,160/hospital)
• This price provides a margin if negotiation becomes an issue
• The market price is 1:10 (cost of good sold: selling price). $ 420 is slightly
above Medicines Company’s price floor ($400)
• The drug with help with hospital’s reputation (better-quality drug)

Cons
• Tough to sell in the beginning
• Needs money to develop pipeline drugs or for future R&D
Challenge #3
To correctly analyze the initial sales condition when breaking into
the market
Current Company Adoption Profile
Facts
• Marketed as • Hard to sell in initial months due to lack of evidence
“alternative in results and hospital representative doubts
to heparin” • Doctors will see Angiomax as an efficient and safe
new alternative from short-run results; hospitals will
see Angiomax as a cost efficient alternative in the
long-run, as they see less cost incurring incidents
• May even take a dip in stock prices due to investor
skepticism
• Predicted increase in sales after a few months; after
targeting larger hospitals, positive data would
Projected Trend First Year (4
influence other consumers
Quarters)
• Possibly more investors will start taking interest in
Medicines Co.
•First year, Medicines Co. would predict a net loss
Challenge #4
To formulate an effective marketing strategy that differentiates
Angiomax from Heparin and to facilitate adoption at hospitals

Facilitating Adoption: Break into the market by targeting doctors

and pharmacists first
Innovex --Doctor Innovex --Pharmacist
Approach Approach
•Provide free Angiomax •Provide logistics and
samples for doctors solid data on how much
•Host presentations on money they can save by
the benefits of switching switching to Angiomax
to Angiomax for hospital •In addition, remind them
doctors that patients would lower
•The Push Effect: Free their risks of heart attack,
samples/knowledge of death, need for a repeat
Angiomax induce Angioplasty and major
doctors to persuade bleeding
pharmacists and •The Push Effect: Lower
administrators to pharmaceutical inventory
consider Angiomax cost induces pharmacists
to persuade
administrators to
Innovex
--Administrators
Approach
•Show concrete
data/research results
on how much they can
save and how much
they can lower their
patients’ risk of heart
failures
•Bundle the offer with
quality
assurance/customer
service
Angiomax’s Unique Selling
Proposition
Position Angiomax as the modern, no-side-effect anticoagulant
lowering the risk of heart attack/major bleeding/death
Heparin Angiomax
Less Effective: takes 2 or 3 More Effective: only takes 30
hours to assure successful drug minutes for it to take effect
administration
Possibility of Immune Reaction No Immune Reaction(Side Effects)

Risk of Patient Death/Heart Lower risk of Patient Death/Heart

Attack/Need for Repeated Attack/Need for Repeated
Angioplasty/Major Bleeding Angioplasty/Major Bleeding

Unpredictability(requires close Predictable(requires little monitoring

monitoring when administering when administering Angiomax)

High Risk of Bleeding Low Risk of Bleeding

Challenge #5
To persuade hospital administration to acquire Angiomax in a
hospital
1. Doctors
• Uses the drug
• Need to primarily focus on
the doctors!
• Sales representatives
must emphasize the
benefits of Angiomax
• Why it is a better choice—
educate on advantages
• Should NOT mention
negatives (i.e. high cost)
• Once convince doctors,
then will have a lead to
pharmacists
2. Pharmacists
• Carries the drug
• Have annual budget
▫ Are rewarded for meeting
and beating the budget
• Must justify cost of new drug
to hospital administrators
and get the added expense
added into the budget
• Need to show hospital that
will actually be saving
money by using Angiomax
Challenge #5
3. Hospital Administrators
• Approve the drug for
ongoing use in the hospital
• Most important!
▫ Decides if it makes
economic sense to
acquire the drug
• Approval from doctors and
pharmacists is crucial for
door to administrators
•Must show that the drug will not only benefit the patients
and doctors medically, but also the hospital financially
•Angiomax will lower any potential additional costs
•Angiomax will be less costly than Heparin!
•See Pricing Slide for numerical evidence
 Challenge #6
To segment and target most influential and profitable
hospitals
Segmentation Targeting
Large Hospitals (200 centers) • Volume and lower margins
• Extensive amounts of Angioplasty • Negotiable prices, compromise margins
Procedures for both hospital and Med. Comp.
• Exhibits big influence on • Foot In Door allows product to be
administrators noticed
• Large network in medical industry • Hardest to reach decision, too many
segments need to agree to effort
• Invest lot of time and effort
Medium Hospitals (500 centers) • Harder to negotiate margins
• Average Angioplasty Procedures • Mediocre returns on investment ratio
• Exhibits some influence on • Tough to penetrate, internal conflicts
administrators
• Medium network in medical
industry
Small Hospitals (600 medical • Convince few doctors to convince
centers, 93 whole hospital
Angioplasty/center/year) • Easiest segment to enter market
• Few Angioplasty Procedures • Little chances to negotiate margins,
Challenge #6
Goal: Have Angiomax replace Heparin for Angioplasty
Procedures
Large Hospitals: Medium Hospitals: Small Hospitals:
YES YES NO X
• Large hospitals are difficult to break into, • Small hospitals
however the reward will be high, because once are not as
we break into the market, Angiomax will receive attractive as large
immediate recognition as small and medium hospitals and
hospitals look up to the large hospitals. medium hospitals.
Moreover, once we get the deal, the sheer size of The amount of
large hospitals ensure volume, and consequently time, effort, and
more margins. money required to
convert small
• By targeting Large and Medium Hospitals and
hospitals outweigh
successfully converting them into Angiomax
the profit (margins)
users, the pull effect affect Small hospitals (the
we can get by
600 medical centers) in that they would have to
selling to them
convert as well due to pressures from patients
Angiomax.
and general medical trend.
•Targeting these hospitals also render us
Challenge #7
To instill confidence in
investors
1) Provide investors with specific quantitative
and qualitative information that suggests
acquiring a certain drug will have significant
benefits, financially and medically, to hospitals
2) Show favorable adoption by hospitals of
Medicines Company’s drugs
3) Updating investors on current stages of drugs
and progress of the company
 Establishes a connection between the investors
and the company
 Updates will eliminate any doubts investors may
have
Challenge #8
To develop strategies to acquire a productive drug pipeline
1) A more sophisticated screening process to increase the possibility of
success
▫ Currently criteria only focuses on time and money
▫ Add more specific requirements to existing criteria
▫ Include more industry sector analysis in their drug selection process
▫ Analyze the big picture
2) Before deciding to acquire a drug, formulate a detailed marketing
strategy
▫ When acquiring Angiomax, the company only focused on the pros of
the drug rather than the big marketing picture
▫ Perform efficient financial analysis to better price future drugs
3) Find new drugs with several usages that can generate additional profit
▫ Angiomax is an example of this
 Tested not only as treatment for angioplasty, but also heart attack,
HIT, unstable angina and coronary artery bypass
4) Sub-licensing rights of failed drugs to other companies to increase
revenue
▫ Minimize expenditure
▫ Partially profit from upfront and royalty fees
Challenge #8
IS-159
• Stop development of IS-159
• Would need another 30
millions dollars to finish
research and clinical trials
• Additional 5 years
• Cannot afford to spend as
much money on developing
one drug if there is a
possibility of IS-159 not
being approved
▫ Additive, coconut oil, has
not gained FDA approval
as an additive in nasal
medication
Need to acquire new drugs with more specific criteria
and known success!
CTV-05
• Stop development of CTV-05
• Different from previous two
drugs
▫ Unknown if the drug works
• Has not completed Phase 1 trials
▫ Equivalent to developing own
drug
• Drug was not related to the
company’s goal
▫ “acquired, developed , and
commercialized
pharmaceutical products in the
LATE STAGES OF
DEVELOPMENT”
▫ CTV-05 only in the early stages
Conclusion and Takeaways
1) Industry sector analysis is crucial to the
success of a product on the market
▫ Assess multiple areas such as competition,
consumers and overall market
2) Develop a formal and detailed marketing
strategy
3) A strong product pipeline is important for the
company because it reduces the risk of failure
▫ Reducing risk by distributing risk among several
different products
4) Aspects of the product must be mutually
beneficial to the company and the consumer