1. The Medicines Company
UGBA 106 Marketing Final Written Analysis of a Case Stephanie Zau Wenwan (Sophie) Yang
Yi Ju (Grace) Chen
Darena Tulanont

2. 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
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

3. The Challenges
To convince hospitals that Angiomax is a better alternative to Heparin
To price Angiomax at a mutually beneficial cost
To correctly analyze the initial sales condition when breaking into the market
To formulate an effective marketing strategy that differentiates Angiomax from Heparin and to facilitate adoption in hospitals
To persuade hospital administrators to acquire Angiomax in a hospital
To segment and target most influential and profitable hospitals
To instill confidence in investors
To develop strategies to acquire a productive drug pipeline

4. Recommendations
Emphasize the advantages of the drug first before publicizing the price
Price a dose of Angiomax at $420
Correctly predict initial sales by utilizing information about the market and statistics
Develop a unique selling proposition: position Angiomax as the modern, no-immune-reaction anticoagulant lowering the risk of heart attack, major bleeding and death
Break into the market by initially targeting doctors
Target large and medium hospitals
Provide specific information to investors that show hospitals will acquire their drugs
Include a more sophisticated screening process

5. 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
Effective in 30 minutes
Doses are “exacting” and “crisp”
No immune reaction
Percentage of patients 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
Weaknesses
Cost 20 times and priced 40 times higher than Heparin, the generic alternative
Alternative is a widely used drug

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

7. Customers, Competition and Collaborators
Doctors
Hospital Pharmacists
Hospital Administrators
“High risk patients undergoing a balloon angioplasty”
Heparin—most widely prescribed anti-coagulant 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
Innovex—providing salespeople with an average of 5 years experience and have connections with doctors and pharmacists in the medical industry

8. Challenge #1 Takes into effect in 30 minutes No immune reaction
To convince hospitals that Angiomax is a better alternative to Heparin
Angiomax
Heparin
Takes into effect in 30 minutes
No immune reaction
Reduced risk of bleeding
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 Treatment
Heparin (372)
Angiomax (369)
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%

9. 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

10. 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 Treatment
Heparin (2,151)
Angiomax (2,161)
Death
0.2%
Heart Attack
4.2%
3.3%
Need for a Repeat Angioplasty
2.8%
2.5%
Experienced Major Bleeding
9.3%
3.5%
To calculate add. patients suffering from complications, we apply the following formula:
From Tab. A: Very High Risk
From Tab. B: High Risk
Heparin
Angiomax
0.5%
0.0%
5.6%
3.0%
3.5%
2.4%
11.8%
21.4%
7.8%
Heparin
Angiomax
0.2%
4.2%
3.3%
2.8%
2.5%
9.3%
3.5%
16.5%
9.5%
Total add. patients:
“high risk” or
“very high risk”
% of add. patients
# of total patients = *
Very High Risk:
(0.136)*(10%)(0.92)(700,000) = 8,758.4
High Risk:
21.4% - 7.8% = 13.6%
16.5% % = 7%
(0.07)*(40%)(0.92)(700,000) = 18,032

11. 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 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 Heparin and Angiomax is calculated below:
Difference in number of patients = 18, ,758.4 = 26,790.4 patients
Add. cost incurred by using Heparin = * 26,790.4 patients = $214,323,200
$8,000
patient

12. 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:
From this equation, x = $ 466, the price ceiling for Angiomax, which is the maximum price per dose that Medicines Company can charge hospitals.

13. 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 $46/patient ($ ). 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

14. Challenge #3
To correctly analyze the initial sales condition when breaking into the market
Current Facts
Company Adoption Profile
Marketed as “alternative to heparin”
Hard to sell in initial months due to lack of evidence in results and hospital representative doubts
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 influence other consumers
Possibly more investors will start taking interest in Medicines Co.
First year, Medicines Co. would predict a net loss
Projected Trend First Year (4 Quarters)

15. 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 consider Angiomax
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

16. 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 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

17. Challenge #5 Uses the drug Need to primarily focus on the doctors!
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

18. Challenge #5 Approve the drug for ongoing use in the hospital
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

19. 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)
Average Angioplasty Procedures
Exhibits some influence on administrators
Medium network in medical industry
Harder to negotiate margins
Mediocre returns on investment ratio
Tough to penetrate, internal conflicts
Small Hospitals (600 medical centers, 93 Angioplasty/center/year)
Few Angioplasty Procedures
Exhibits little influence on administrators
Little network in medical industry
Convince few doctors to convince whole hospital
Easiest segment to enter market
Little chances to negotiate margins, resulting in high margins
Little profit gained by convincing hospital

20. Challenge #6
Goal: Have Angiomax replace Heparin for Angioplasty Procedures
Large Hospitals: YES
Medium Hospitals: YES
Small Hospitals: NO X
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 sufficient margin and awareness in the medical community. Large and medium hospitals also benefit from the tremendous amount of money they can save from converting to Angiomax (See Pricing Statistics)
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.

21. Challenge #7
To instill confidence in investors
Provide investors with specific quantitative and qualitative information that suggests acquiring a certain drug will have significant benefits, financially and medically, to hospitals
Show favorable adoption by hospitals of Medicines Company’s drugs
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

22. 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

23. Challenge #8 Stop development of 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 company’s 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!

24. 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