New Products Market Entry – Points to Consider – Asrar Qureshi’s Blog Post #883

New Products Market Entry – Points to Consider – Asrar Qureshi’s Blog Post #883

Dear Colleagues!  This is Asrar Qureshi’s Blog Post #883 for Pharma Veterans. Pharma Veterans  aims to share knowledge and wisdom from Veterans for the benefit of Community at large. Pharma Veterans Blog is published by Asrar Qureshi on  WordPress, the top blog site. Please email to asrar@asrarqureshi.com for publishing your contributions here.

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Pharmaceutical Industry is a happening place; the number of new products being launched every year is quite significant. For example, about 500 new products were launched during last year, most of these were generic products which added to the list of similar products. The companies are still launching Ceftriaxone, Meropenem, Piperacillin Tazobactam and even some old products. Not all launches are successful. A major company launched a brand of ondansetron with great fanfare but could not achieve their aspirations. There are no statistics to show the percentage of successful and failed launches, but generally only about 20% new market entrants succeed; rest are failures. 

In my blog on ‘Inside View’, I had emphasized to develop an ‘Outside View’ to get the reality check. I have seen too many instances where senior managers kept looking at the Inside View cheerfully and earned huge losses.

Is it only the Inside/Outside views that make the difference between success and failure? No. There are other factors.

An article by John T. Horn, Dan P. Lovallo, and S. Patrick Viguerie (Link at the End) discusses this issue in depth, identifies problem areas, and offers advice on how to do better. Most points are not relevant to Pharma Industry, but some are. I shall take those points from this article and add my own perspective and commentary. 

Cognitive Bias has been often talked about which is when the managers/leaders/planners see the things in their own way which is away from reality. They overestimate some attributes and underestimate others and therefore come up with a rather rosy picture. Big sales forecasts are presented because they think they have a special team, or a special product, a special market position, and they can pull what others probably cannot. Of course, the reality they face is fast and furious. 

Apart from other things, the authors have recommended to look at these six factors that are particularly important predictors of success or failure. I shall present these factors with reference to pharmaceutical product launches/ new companies entry.

Factor #1 – Size of entry relative to minimum efficient scale

When translated to pharma products, it means how do your inputs compare to the market parameters. For example, if you are considering launching a brand of Meropenem today, you need to see the size of the customer base for this product, the geographical distribution of existing sales, the specialties who prescribe the most, and the market segments you may need to cover. Let us say hypothetically, that Meropenem is prescribed by 50,000 doctors, the sales are spread all over the country, almost all specialties prescribe it, and the sales come from public hospitals, private hospitals, tender purchases, and direct purchases. In order to determine minimum efficient scale, you will have to decide how many towns shall be covered, how many segments shall be approached, how many salespersons shall handle this product, how much will you invest in this launch etc. Please understand that if you enter a large market in a small way, you will not get much business and you will be quickly beaten by the competitors. On the other hand, if you enter a small market in a large way, you will waste resources and will not get desired return. 

Factor #2 – Relatedness to the Market Entered

Probably no pharma company covers all segments of pharma market, and rightly so. Market dynamics are such that no business is allowed to gobble up major share in any segment; it is not by regulation, it is by market forces, namely, your competitors. This also means that you should better play by your strengths and not try to count on areas where you do not exist. If your company is strongly represented in gastroenterology, pulmonology, and diabetes, launching new products in these specialties will have greater chances of success. The next question shall be, ‘then how shall we diversify ever?’. It is a logical question. The answer is that go boldly in areas of your strength and enter cautiously in areas where you are not known. The entry is not prohibited; caution is recommended.

Factor #3 – Review Complementary Assets Also

Core assets are the ones which are real strengths of an organization. R&D in a pharma company may be a core asset who make it possible to bring new products quickly. Similarly, regulatory may be your core asset as it can get registration expedited. Now consider this scenario. The R&D and Regulatory teams present the opportunity to market first generic of a highly anticipated molecule, your complementary assets are supply chain, marketing, and distribution. If your complements do not support you, you will fall flat. In another case, the core asset could be marketing and the complementary could be supply chain. Supply chain is not a core asset in any pharma company because it is capital intensive, and it is mostly run by the owners themselves who see things differently. For these reasons, it is not enough to focus on core assets, it is equally important to look at the complementary assets to achieve success.

Factor #4 – Order of Entry

There is a serious competition among top ten companies to bring a new generic as a first mover. If not first, then at least second or third; they don’t want to count after three. There are two considerations here. If you are sure that the product is robust, and the market is highly receptive for its launch, then it is worthwhile to endeavor to be the first mover, or among the first three movers. It will give good advantage and you will have the opportunity to carry large part of the market. In real life however, not all products are fantastic, and the market may be lukewarm. In such a case, it is better to move slowly, even if it is your area of strength. Order of entry is not fixed at number #1; it should be determined on case-to-case basis.

Factor #5 – Industry Life Cycle Stage

Pharma Industry has always been there and shall be there as long human beings are there. So, I would tweak the statement a little and call it product life cycle. If a new product enters when the market is giving space eagerly, it will be able to get market share early and substantially, if the market is shrinking for any number of reasons, it may be very hard to make a place. Even if you let the R&D drive you crazy with its fast-paced product development, the final decision must be taken after product life cycle stage analysis.

Factor #6 - Degree of Technological Innovation

This may be more applicable to other industries, but for drugs with unique drug delivery system, this would be a real advantage or disadvantage.

Sum Up

Product managers in pharma industry are used to thinking in straight lines. They make marketing plans in the same way. However, they must know that things are changing fast, and that in order to survive and thrive, they must change their old ways.

Concluded.

Reference:

https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/beating-the-odds-in-market-entry