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J & J Case CompetitionFebruary 28, 2013Rider University: Bryan Griffith, Joshua Malcolm, Allison Fabiano, John Mancini
• Pantheon Health:• Known for its diverse portfolio in the Pharmaceutical
Sector• Possible acquisition, license or development of late stage
prostate hormone medication, Abira
• Six distinct business decisions to make:• License, Buy or Develop In-house• Secondary Development• Pricing Strategy• Delivery Mechanism• Marketing Strategy• Patient Assistance Fund
Central Issue
“In meeting their needs everything we do must be of high
quality.”
“We must constantly strive to reduce our
costs in order to maintain reasonable
prices.”
“We are responsible to the communities in which we live and
work and to the world community as
well.”
“We must be good citizens, support good works and
charities and bear our fair share of
taxes.”
“Our final responsibility is to our stockholder.
Business must make a sound profit.”
“We must experiment with new ideas. Research must
be carried on, innovative programs
developed and mistakes paid for.”
Pantheon Health’s Credo
Evaluating Target Market
African American, Caucasian, and Asian men aged 65+African American, Caucasian, and Asian men aged 40-65
All men aged 40+
Environmental Analysis: SWOT
-High Brand Equity-Experience in the oncology therapeutic area
-No hormone oncology drugs-Acquisition or development costs of Abira
-Growing Population of Males over 40 years old-Ability to enter late stage cancer market
-Competition-Economic Climate-Other developments in prostate cancer medication-FDA approval time
STRENGTHS WEAKNESSES
OPPORTUNITIES THREATS
Category Drug 1 Drug 2 Drug 3 Drug 4
Competitor Proton Astrix Vedimation Abira
Commercial stage
Launched 2010
Launched 2010
Launch Est. 2014
Launch Est. 2016
Frequency Every 2 weeks
Every 3 weeks
4x/day Once a month
Cost $31,000 per infusion
$6,000 per treatment
$7,450 per month
$5,000 per month
Length of Treatment
3 infusions 6 treatments
8 months 8 months
Est. 2012 sales
$800MM $600MM N/A N/A
Therapy market share
22% 17% N/A N/A
Improved Survival
4.1 months 2.4 months 4.8 months 4 months
Competitive Analysis
Alternative Solutions/StrategiesBusiness Decisions
Alternative Solutions: Product
Benefits Drawbacks
License
-Launch in year 4-Opportunity to purchase at year 5-Phase 3 asset
-Limited control over product-15% of NTS in Royalty Payments-Milestone payment of 50mm in year 3
Buy
-Launch in year 4-Phase 3 asset-No royalty or milestone payments-More control-Approved by FDA
-Acquisition cost of 225mm-Locked into investment
Develop In-house-Absolute control-Potential Partner with Zephyr for phase 3 costs
-Just starting phase 2 trials-Launch in year 6-High costs
Alternative Solutions: Secondary
Development
Benefits Drawbacks
Buy
-More control over product-No more royalty payments
-Acquisition cost of 175mm in year 5
Line Extension
-Increase in patent life-Broad base of patients-Increase in market share-Proved effective for pre-chemo
-Not approved by FDA-Risk of 200mm
Partnership with Zephyr
-Share costs for phase 3 development-Launch at beginning of year 5
-Reduction of NTS by 25% per year
No Action -Less risk -No innovation
Alternative Solutions: Pricing
Strategy
Benefits Drawbacks
$4,500-Increase in market share by 1.5%
-Lower revenue-Potential low quality perception
$5,000-Reasonable revenue with no loss of market share
-No gain in market share
$5,500
-Highest potential revenue-Potential high quality perception
-Decrease in market share by 1.5%
Alternative Solutions: Delivery
Mechanism
Benefits Drawbacks
Orally
-Most convenient treatment option- Generally preferred by patients- Lower manufacturing costs-Easiest to scale into full production
-Patient compliance (Forget to take medicine)-Drop in market share in year 2-Perceived lower quality-Four pills everyday
Intravenous
-Administered by a health professional-Greater compliance with recommended dosage-By year 2 market share increased by .7%-Only once per month
-Lower adoption to delivery mechanism-Higher manufacturing costs -Patients have to find transportation to doctors office-Initial drop in market share in year 1
Alternative Solutions: Marketing Strategy
Benefits Drawbacks
Basic
-Affordable-Work directly with Oncologists
-No direct to consumer advertising-No increase in market share
Premium
-Direct to consumer advertising-Builds relationship with consumer-Increase in market share-Does not rely solely on Oncologists
-More expensive-DTC advertisements does not guarantee better brand perception-Reactive marketing approach
Premium Plus
-Targets Urologists-Increase in market share-Proactive marketing approach
-Most expensive-Urologists prefer not to write prescriptions-Does not guarantee larger Abira awareness
Alternative Solutions:
Patient Assistance Fund
Benefits Drawbacks
Yes
-Aligns with the credo-Fulfills societal responsibility-Increase in market share by .05%-Generate goodwill and positive perception for Pantheon
-200mm investment
No-Saves money -Losing potential
positive perception
Recommended StrategyOur group’s recommendationsFinancial Analysis
Decisions Years 1-5 Years 6-10
Development Buy Line Extension
Pricing $5,000 $4,802
Pricing Changes Decrease Decrease
Delivery Mechanism
Intravenous Intravenous
Marketing Strategy Premium Premium
Patient Assistance Fund
Yes Yes
• Pantheon’s Objectives/Assumptions:• Expand customer base• Gain a return on investment to buy Abira• Become market leader in hormone therapy
market• Prostate cancer population will increase• Our estimates for market growth are
accurate
• Buy:• More control over production quality and monitoring• Launch product in the beginning of year 4• Allows for continued development of the product• No royalty and milestone payments
“In meeting their needs everything we do must be of high quality.”
• Line Extension: • Increase in patent life• Broader base of patients• Increase in market share• Effective for pre-chemo
“We must experiment with new ideas. Research must be carried on, innovative programs developed and mistakes paid for.”
Recommended Strategy: Buy and Line Extension
• $5,000 Launch Price Point:• Reasonable revenue with affordable price• No loss of market share
• Decrease price:• Aligns with the credo• Higher market share
“We must constantly strive to reduce our costs in order to maintain reasonable prices.”
Recommended Strategy: Pricing and Price Changes
• Intravenous:• Administered by a health professional• Reflects higher quality of product and patient care• Matches our marketing strategy of providing support
• Only once a month• Greater patient compliance• Overall increase in market share
“Customers’ orders must be serviced promptly and accurately.”
Recommended Strategy: Delivery Mechanism
• Premium Marketing Strategy:• Direct to consumer (DTC) advertising• Builds relationship between brand and patients• Spreads information to both doctors and patients
• Increase in market share by .75%• Does not solely rely on Oncologist
recommendation
Recommended Strategy: Marketing Strategy
• Yes:• Aligns with the credo of Pantheon • Fulfills societal responsibility to help the
community• Increase market share by .05%• Generates goodwill and has a positive impact on
consumers’ perception of Pantheon
“We are responsible to the communities in which we live and work and to the world community as well. We must be good citizens, support good works and charities and bear our fair share of taxes.”
Recommended Strategy: Patient Assistance Fund
Recommended Strategy: Decision Outcome
Years ‘12 ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 ‘19 ‘20 ‘21 ‘22 Total
Net Incom
e
- (31) (31)
(31) 102 127 210 209 209 209 209 1,181
Net Cash Flow
(225)
(31) (31)
(31) 67 142 226 231 231 231 231 1,041
In millions of dollars
Cumulative Sales: $4,715,000,000
Peak Share 16.8%
Cumulative Sales $4,714 (In millions)
Cumulative Net Income $1,181 (In millions)
Net Present Value (NPV) 372
Internal Rate of Return (IRR) 24%
Recommended Strategy: Financial Highlights
“Our final responsibility is to our stockholders. Business must make a sound profit.”
Sensitivity AnalysisReserved, Anticipated, Optimal
Decision Points Reserved Anticipated Optimal
License, Buy, DIh License Buy Buy
Buy, Line Ext, NA No Action Line Extension
Line Extension
Pricing $4,500 $5,000 $5,500
Future Price Flat Decrease Decrease
Delivery Mech Intravenous
Intravenous Intravenous
Marketing Basic Premium Premium Plus
Patient Asst. Fund
Yes Yes Yes
Avg Mkt Share 15% 15.9% 15.1%
Net Income (Millions of Dollars)
$868 $1,181 $1,224
Net Present Value
356 372 392
Internal Rate of Return
55% 24% 25%
Sensitivity Analysis
Cash flow Comparison
0 1 2 3 4 5 6 7 8 9 10-300
-200
-100
0
100
200
300
ReservedAnticipatedOptimal
Marketing: Branding, Promotions, Consumer Relationships
Marketing Strategy
Motivate men to take control of their disease
Empower men by giving them great supportWorld campaign to spread
awareness about prostate
cancer
Content
marketing
Creatively explore men’s need for control
“Support You Deserve” Campaign
Campaign promotes the idea that support (financial and psychological) is something everyone deserves.
Gives older men the opportunity to learn about prostate cancer in a meaningful and informative way.
Traditional DTC advertising that will take advantage of print promotions like posters, brochures, newsletters, and personalized direct mail.
“Your Support In Your Hands” Campaign
Empowers men by giving them the opportunity to build their own support group.
Content marketing strategy that will take advantage of interactive and social media for an online digital support group.
Proactive campaign
Will include poster designs, direct mail and interactive media.
Note: All print promotions will guide reader to website
Collaboration Campaign
Work with other prostate cancer support groups to help spread awareness and information about prostate cancer
Executive Summary
Buy Abira Line extension
$5,000 price point with
future decrease
Intravenous delivery
Premium marketing strategy
Yes to patient
assistance fund
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