Successful European RX To OTC Switch Strategies James Dudley Aug'09

®
Innovating Self – Medication

European Rx to OTC Switch
®
Strategies
James W. Dudley
Tel. ++ 44 (0)1562 747705
e-mail information@James-Dudley.co.UK
web site: www.jamesdudley.info

This presentation is the copyright property of James Dudley International Ltd 2009.
Please feel free to forward it to colleagues and friends.

Any reproduction or quotation into other documents or publications should acknowledge the
source and use the words “Courtesy of James Dudley”
http://www.jamesdudley.info
27 August 2009 www.Jamesdudley.info © James Dudley International Ltd 2008 2

Agenda
• The Global OTC Market

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

Global Sales - OTC Medication
• $86 billion Global OTC market

% Share Global Non-Rx Market 2006
• 10% of the global pharmaceutical
market
• 7% growth p.a.
Japan
North America
11%
24% SE Asia/China
11%
Latin America
8%
Others
Europe 10%
36% • 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 Space
New New
Extend Horizons
Boundaries Customers, Geographies &
Competitors
New Market Spaces
Stretch - grow new

customers,
geographies, Grow new
Current channels etc businesses Innovation –
Brands & Pipelines
Products
Grow new
Refresh/Renew products &
Customers technologies
Channels
Competitors
Partners
Value chains Business today ©James Dudley – Rx to OTC Frameworks
for Success
Risks Existing
Extend
Eroding Customers, Geographies
Boundaries & Competitors Boundaries

Switches within the Growth Matrix
New New
Extend Horizons
Boundaries Customers, Geographies &
Competitors
New Channels New

Consumer
Segments New Market Spaces
P to GSL
POM to P
Current Innovation –
Brands & Pipelines
Products Medical
devices
New products,
technologies etc.
Business today Existing

©James Dudley – Rx to OTC Frameworks
for Success
Eroding Customers, Geographies Extend
Boundaries & Competitors Boundaries

Rx to OTC ‘Switching’
A process or a concept ?
• 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

Global OTC Brands
Top Global Brands - Rx to OTC Origin US$ millions
Niquitin 384
Advil 330
Nicorette 311
Efferalgan 233
6 out of top 10 top global brands originated

Voltaren 230 from Rx to OTC
Prislosec 207
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 Approach
Total Brand Switches Switch to OTC i.e. moving all forms and indications of a brand
Entire 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.
for Success

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 • Maintain professional support
new to the OTC market that meet both post-switch
physical and emotional consumer (i.e. Doctors, Pharmacists etc.)
needs
• Ability to leverage the brand’s ethical • Innovative potential of base brand for a
heritage succession of new presentations,
strengths and packaging
• First/early to switch in its therapeutic • Potential to develop franchise
class extensions into related segments
• Can be switched prior to • Sustainable competitive levels of
patent expiry consumer marketing
• Makes a distinctive, relevant and • Realistic pricing
superior consumer offer (60% of brand failures attributed to
pricing issues)
• Ensure sustainability of brand identity • Access to channels of distribution
(Maintaining a trade name that takes relevant to potential users in terms of
part or all of the name of the prescription sustainable market coverage and
brand) penetration

for Success
Get the Timing Right
Too soon - Too late - Spot on
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

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)

for Success

Consumer Decision Making - Cold Sufferers
Yes 71%
How do we create a new market
Yes 87% Ask for brand
space in such a well informed
by name
consumer led environment?
Self-
Know type of
medicate
product required
78%
Always/
Usually 48% Source of
treatment
100%
100% ofof
Sufferers Treat Visit a Doctor 9%
Sufferers
Home Remedy
Never 21% 13%
Treatment Decision Source of Treatment Product Knowledge

Consumer Sources of Information
% of Respondents - Europe
Do cto r 48.2
P harmacist 42.2
Televisio n 21.2
Family 20.2
P rinted M edia 16.7
Nurse 16.7 • Professional recommendation and
Friends 12.8 endorsement together with WOM
between family and friends are critical
A dvertising 5.6 sources of information
Radio 5.3
• Role of the media should not be
Other 1.6 underestimated – editorial influence and
Internet 0.3 advertising are key
D/K 7.9
No ne 2.8

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
• 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
Europe - $60 million market opportunity
www.Jamesdudley.info © James Dudley International Ltd 2008

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 little
over US$ 9 million (8% of total brand sales)
• Cream was ranked eighth with a 3.0% global market share and while it was
present in most markets, it had a top five rank in only two
• Within Novartis Pharma division’s product portfolio, Lamisil® cream was ranked
forty-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 was
growing 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 that
could 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 build
this 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
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
Pricing
• Premium

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 Markets
Top 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)

for Success

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
Internal • Project leader

Central • Registration strategist/ medical adviser
• Rx brand coordinator
• Economist
• R&D/Production representatives
• Supply management representatives
• Acquisition, licensing and partnering as required
Internal
Nationals
• Country project leaders
External
Advisers
• Market researcher (as required)
• Marketing strategist (as required)
• Advertising agency (as required)
• PR and Advocacy (as required)

Key Phases - Strategic Framework
Time Table
• Approval to pursue an Rx to OTC project - outline vision and desk
research
• Phase 1 GETTING TO START

- Research and feasibility studies and lead market identification.
• Phase 2 GETTING TO GO 36 Weeks

- 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 86 Weeks

- Devolution of the global strategy model into local business plans.

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
for Success • Set milestones

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
Channels
Media choice
Market research provides Key Influencers
the framework for the entire
strategy development
Competitors’ Strategies
• SPC connects regulatory
strategy and brand
development strategy
• Governs information
content to target audiences Existing needs,
knowledge and
expectations
for Success

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
Identify Key Target Consumer

Segments
SPC
Brand Regulatory
Existing needs (physical Pathway
& emotional) Development
Knowledge and • Consumer Positioning and

expectations Concept (objectives)
Choices • Product design (and future

pipeline development)
Market Research
Key Influencers/ Trusted • Consumer proposition and
sources of information pricing
- Advertising
Media preferred
- PR and key influencer
advocacy
Targeted Channels
• Channel strategy,
incentives, education and Competitors’ Strategies
training

for Success

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
Attractiveness - Strategic
Opportunity Outline & Key Metrics
Business Plan – Investment

Rationale
Entry Plan – Timetable, Targets and

budgets
Entry Plan - Marketing Execution

Outline
Follow through – Next phase

Marketing Execution Outline

for Success

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
for Success
• Entry plan and follow through

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®

Innovating Self – Medication

Tel. ++ 44 (0)1562 747705

web site: www.jamesdudley.info

Please feel free to forward it to colleagues and friends.

27 August 2009 www.Jamesdudley.info © James Dudley International Ltd 2008 2

• The Global OTC Market

27 August 2009 www.Jamesdudley.info © James Dudley International Ltd 2008 3

• $86 billion Global OTC market

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

• Needs based customer/consumer segmentation (differently motivated segments e.g.

• Trends in competitor structure and intensity (consolidation of major players, separation of

27 August 2009 www.Jamesdudley.info © James Dudley International Ltd 2008 5

• Patient/consumer groupings forming identifiable segments based on similar

• Tailored communications and sales attack aimed at key customer groupings

• Counter competitors with different positioning statements to different

• Exploit competitive advantages to the full and attack competitor weaknesses

• Seek (or invent) and dominate new market space

27 August 2009 www.Jamesdudley.info © James Dudley International Ltd 2008 6

New Market Spaces

Stretch - grow new

27 August 2009 www.Jamesdudley.info © James Dudley International Ltd 2008 7

New Channels New

Business today Existing

27 August 2009 www.Jamesdudley.info © James Dudley International Ltd 2008 8

• A change in the regulatory status of an active chemical entity from

27 August 2009 www.Jamesdudley.info © James Dudley International Ltd 2008 9

Top Global Brands - Rx to OTC Origin US$ millions

6 out of top 10 top global brands originated

Source: IMS Consumer Health

27 August 2009 www.Jamesdudley.info © James Dudley International Ltd 2008 10

James Dudley OTC Distribution in Europe 2009

27 August 2009 www.Jamesdudley.info © James Dudley International Ltd 2008 11

27 August 2009 www.Jamesdudley.info © James Dudley International Ltd 2008 12

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

• Exploits existing intellectual assets and market knowledge

• Creating a greater opportunity with a consumer OTC positioning than that

• Creating a sustainable, long-term intellectual property which provides both an

Creating and dominating new market spaces through the full

27 August 2009 www.Jamesdudley.info © James Dudley International Ltd 2008 14

Predictive Factors Executional Factors

©James Dudley – Rx to OTC Frameworks

Too soon - Too late - Spot on

27 August 2009 www.Jamesdudley.info © James Dudley International Ltd 2008 16

Before patent expiry

• Early lifecycle – Self medication proves a better opportunity than the

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

• External pressures - forced switches (imidazole UK, omeprazole

• Competitors - shelter behind patent to establish OTC offer

27 August 2009 www.Jamesdudley.info © James Dudley International Ltd 2008 17

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)

©James Dudley – Rx to OTC Frameworks

27 August 2009 www.Jamesdudley.info © James Dudley International Ltd 2008 18

Treatment Decision Source of Treatment Product Knowledge

27 August 2009 www.Jamesdudley.info © James Dudley International Ltd 2008 19

27 August 2009 www.Jamesdudley.info © James Dudley International Ltd 2008 20