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 modelacquires
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

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

Opportunities
Aging population
United States is the most
profitable drug market
Prescription drug business
expanding

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:
Description
Angiomax
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
Effective in 30 minutes
Doses are exacting and crisp
No immune reaction
Percentage of patients
experiencing major bleeding is 1/3
of that of Heparins
Eliminate death rate
Reduced rate of heart attack and
need for a repeat angioplasty
70% of time, requires only 1 dose

Weaknesses
Cost 20 times and priced 40
times higher than Heparin, the
generic alternative
Alternative is a widely used drug

Promotion, Place and Price

Promotion
Innovex: marketing
services firm
Average of 5 years of
experience
Relationships with
doctors and
pharmacists
Academic journal articles
Presentations at trade
shows
Medical Journals
Highlight shortcomings of
Heparin
Weekend getaways
create advocates in the
medical community
Word of mouth

Place
Hospitals
Focus on 700
angioplasty
centers
Divided into 5
sales regions
Targeting 54%
(700/1300) of
medical centers
that perform
angioplasties

Price
Undetermined
$40 dollars to
produce
Before acquiring
Angiomax, Biogen
projected that
Angiomax would
cost $100 per dose
to produce with an
implied selling of
$1000 per dose

Customers, Competition and

Collaborators
Customers
Competition
Collaborators
Doctors
Hospital Pharmacists
Hospital
Administrators
High risk patients
undergoing a balloon
angioplasty

Heparinmost widely
prescribed anticoagulant in acute
coronary heart
treatment
Commodity drug
Sold by many
different
manufacturers
$2 a dose to produce
$10 price per dose
Main shortcomings:
Unpredictability
High risk of
bleeding
Adverse reactions

UCB Bioproducts
producing Angiomax
Innovexproviding
salespeople with an
average of 5 years
experience and have
connections with
doctors and
pharmacists in the
medical industry

Challenge #1
To convince hospitals that Angiomax is a better alternative to
Heparin

Angiomax

Takes into effect in 30

minutes
No immune reaction
Reduced risk of bleeding

Heparin

Take into effect in 2 to 3

hours
Adverse reaction
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 patients 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

in

ax

in

9.3% To calculate3.5%
add. patients
suffering from complications,
we apply the following formula:
ax

0.5%

0.0%

0.2%

0.2%

5.6%

3.0%

4.2%

3.3%

3.5%

2.4%

2.8%

2.5%

11.8%

2.4%

9.3%

3.5%

From Tab. A: Very

High
Risk Angiom
Hepar

21.4%
7.8% =
21.4% - 7.8%
13.6%

From Tab. B: High

Risk
Hepar Angiom

16.5%
16.5% - 9.5%
9.5% =
7%

Total add.
% of add.# of total= patients:
patients*patients high risk or
very high
Very High Risk:
risk

(0.136)*(10%)(0.92)(700,000) = 8,7

High Risk:
(0.07)*(40%)(0.92)(700,000) = 18,0

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 therere 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 Companys price floor ($400)
The drug with help with hospitals 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
Approach
Provide free Angiomax
samples for doctors
Host presentations on
the benefits of switching
to Angiomax for hospital
doctors
The Push Effect: Free
samples/knowledge of
Angiomax induce
doctors to persuade
pharmacists and
administrators to
consider Angiomax

Innovex --Pharmacist
Approach
Provide logistics and
solid data on how much
money they can save by
switching to Angiomax
In addition, remind them
that patients would lower
their risks of heart attack,
death, need for a repeat
Angioplasty and major
bleeding
The Push Effect: Lower
pharmaceutical inventory
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

Angiomaxs 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

hours to assure successful drug
administration

More Effective: only takes 30

minutes for it to take effect

Possibility of Immune Reaction

No Immune Reaction(Side Effects)

Risk of Patient Death/Heart

Attack/Need for Repeated
Angioplasty/Major Bleeding

Lower risk of Patient Death/Heart

Attack/Need for Repeated
Angioplasty/Major Bleeding

Unpredictability(requires close
monitoring when administering

Predictable(requires little monitoring

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

2. Pharmacists

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

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)

Extensive amounts of Angioplasty
Procedures
Exhibits big influence on
administrators
Large network in medical industry

Volume and lower margins

Negotiable prices, compromise margins
for both hospital and Med. Comp.
Foot In Door allows product to be
noticed
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
centers, 93
Angioplasty/center/year)
Few Angioplasty Procedures

Convince few doctors to convince

whole hospital
Easiest segment to enter market
Little chances to negotiate margins,

Challenge #6
Goal: Have Angiomax replace Heparin for Angioplasty
Procedures
Large Hospitals:
YES

Medium Hospitals:
YES

Large hospitals are difficult to break into,

however the reward will be high, because once
we break into the market, Angiomax will receive
immediate recognition as small and medium
hospitals look up to the large hospitals.
Moreover, once we get the deal, the sheer size of
large hospitals ensure volume, and consequently
more margins.
By targeting Large and Medium Hospitals and
successfully converting them into Angiomax
users, the pull effect affect Small hospitals (the
600 medical centers) in that they would have to
convert as well due to pressures from patients
and general medical trend.
Targeting these hospitals also render us

Small Hospitals:
NO X
Small hospitals
are not as
attractive as large
hospitals and
medium hospitals.
The amount of
time, effort, and
money required to
convert small
hospitals outweigh
the profit (margins)
we can get by
selling to them
Angiomax.

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 Companys 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

CTV-05

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

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
companys goal
acquired, developed , and
commercialized
pharmaceutical products in the
LATE STAGES OF
DEVELOPMENT
CTV-05 only in the early stages

Need to acquire new drugs with more specific criteria

and known success!

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