Download Maximize Your Drug Delivery Opportunities with OTC/Consumer

Maximize Your Drug Delivery
Opportunities with OTC/Consumer
Healthcare Companies
Susan Levy-Cantor
Director, Business Development
Schering-Plough Healthcare Products
January 21, 2008
Agenda
• Who is Schering–Plough Consumer
Healthcare?
• How does SP Build OTC Brand Loyalty?
• OTC Companies and Drug Delivery
• What does SP seek in a Drug Delivery
Company?
• What are the Criteria for Successful Drug
Delivery Partnerships?
Schering-Plough
Consumer HealthCare
About Schering-Plough
An Integrated Global Healthcare Company
Rx Businesses
• R&D
• Sales & marketing
Consumer Health
• R&D
• Sales & marketing
Animal Health
• R&D
• Sales & marketing
Supply Chain &
Shared Global Functions
ƒ Business, research, manufacturing and sales operations in over
120 countries
ƒ More than 50,000 colleagues worldwide
ƒ 2006 revenues: $10.6 Billion
2006 Sales by Business & Region
Total = $10.6 Billion Net Sales
U.S.
$4,192
Pharmaceutical
$8,561
40%
81%
9%
9%
8%
11%
Animal
Health
$910
Consumer
Health Care
$1,123
42%
Europe/Canada
$4,403
Does not include sales from the Merck/SP cholesterol JV which are recorded as equity income.
Latin
America
$990
Pacific Area
and Asia
$1,009
Schering-Plough Consumer HealthCare
Organizational Highlights
•
$1.1 Billion in North American sales
•
Broad Range of Leading OTC Products
•
Leader in Rx-to-OTC Switches*
– Claritin
– MiraLAX
•
Leading Footcare and Suncare Franchises
* Source: CHPA Rx to OTC Switch List
Schering-Plough Consumer HealthCare
Net Sales Growth ($MM)
1200
$1,085 $1,093 $1,123
1100
$1,026
1000
900
800
$715 $758
$691
$670
700
$626
$588
600
500
400
300
200
100
0
1996 1997 1998 1999 2000 2002 2003 2004 2005 2006
Schering-Plough Consumer HealthCare
Commercialization Capabilities
•
Rx-to-OTC Switch Expertise
•
Strong, Experienced Marketing Department
•
Premier Sales Organization
•
State-of-the-art distribution and customer
service/logistics operation center
•
Complete Manufacturing Capabilities
•
Extensive, dedicated R&D facilities—all aspects
•
Alliance Management Expertise
How Does SP Build Brand Loyalty?
One of the Largest OTC Switches Ever
Comparison of First Year Retail Sales: FDM ex. Wal-Mart & Club
$343MM
$256MM
$238MM
$249MM
Building Brand Loyalty: Switches
• At OTC Launch:
– Create a meaningful difference from what is
already available OTC
• Create/Redefine a Category
– Create an ownable brand identity that can
compete against generics/private label
• Sustainable ethical heritage
Building Brand Loyalty: Switches
• Post Launch:
– Provide Identifiable Consistency
• In brand equity
• In communications
– Meaningful Product Innovation
• Maintain growth in base business with new
packaging, dosage forms, strengths, etc.
• Introduce meaningful line extensions to expand
the franchise user base and build business
efficiently
• Extend the brand with new indications
Review of Claritin Switch Results
• Strongest Brand in the Category
– Highest brand awareness in the Category•93%•OTC or Rx
– Highest loyalty levels in the category.
– Highest advertising awareness in the crowded Allergy
category - OTC or Rx.
• Stellar Sales Results and Executional Excellence
– Drove +100% growth in the OTC allergy category
– Achieved cumulative sales of $1 Billion just 28 months after
launch
– 2007: Claritin continues to grow, despite “D” placement
behind-the-counter, while private label declines
Dr. Scholl’s Innovation
• New dual wave design - Soft gel waves cushion and
absorb shock. Firmer gel provides added support
• Gel insoles launched in 1997
• “Are you gellin?” launched in 2003
• Campaign drove 129% growth on this flagship item
Dr. Scholl’s Innovation
• Custom Fit Orthotics
– 2007 Test Market
– 2008 Roll-out
Coppertone Innovation - 2007
Protection
Convenience
OTC Companies and Drug Delivery
Pharmaceuticals vs. Consumer (OTC)
Pharmaceuticals
Consumer (OTC)
• Fewer decision makers
(doctors) making objective
decisions
• Many decision makers
(consumers) making objective
and subjective decisions
• Higher profit margins,
smaller unit volume
• Lower profit margins, greater
unit volume
• After a long patent life,
Generics erode majority of
market share
• After a typically shorter
period of exclusivity, compete
with Private Label
• Overall lifecycle may not be
much longer than patent life
• Via innovation, brand can
evolve and enjoy long lifecycle
Healthcare Company Profit Margins
Company
Pharmaceutical Segment
Sales
(MM)
Bayer
€7,478
Profit (MM)
€1,686
Margin
22.5%
(EBITDA)
Consumer Health
Segment
Sales
(MM)
Profit (MM)
€4,246 € 927
Margin
21.8%
(EBITDA)
GSK
₤20,078 ₤7,125 (Op)
35.5%
₤3,147 ₤ 683 (Op)
21.7%
Wyeth
$16,884 $5,186 (EBIT)
30.7%
$2,530 $ 516 (EBIT)
20.4%
Novartis
$22,576 $6,203 (Op)
29.7%
$6,540 $1,068 (Op)
16.3%
J&J
$23,267 $6,894 (Op)
29.6%
$9.774 $1,374 (Op)
14.1%
Source: Most recent company annual reports
Private Label “Intrusion”
Percent Unit Sales in Category attributed to Private Label Products
50.0%
47.1%
41.8%
38.9%
40.0%
Source: Nielsen 52 w/e 10/27/07
Anti-Itch Hydrocortisones
Oral Laxatives
Athlete’s Foot Cream
0.0%
Headache Remedies
10.0%
Adult Cold Remedies
20.0%
Cough Remedies
23.2% 24.1%
Multi-Vitamins
27.3%
Medicated Nasal Products
30.1%
30.0%
32.0%
Adult Allergy Sinus Remedies
34.5%
OTC Brand Life Spans
• With innovation, strong consumer brands
can maintain their relevance for a longer
time-frame than an Rx drug:
– Listerine
– Dr. Scholl’s
– Halls
– Coppertone
– Tylenol
1895
1904
1930’s
1944
1955
Listerine Innovation
“The taste you hate twice a day”
1992: Mint taste provided
greater acceptance
2001: Enhanced portability
Listerine Innovation Continues
2003: Less Intense Citrus Flavor
2005: Pocket Paks Oral Care Mist
2006: Agent Cool Blue Plaque Detecting Rinse
Hall’s Innovation
1930’s: Halls Mentholyptus introduced in the UK
1990: Halls Plus – the only
cough drop with a soothing
liquid center
1999: Halls Defense with Vitamin C
Hall’s Innovation
2002: Pectin-based Hall’s Breezers
2003: Halls Shotgum
introduced – UK/Ireland
2006: Halls Max – 8 hour cough relief
Tylenol Innovation
Headaches
Muscle and Body Aches
Arthritis Pain
Pain Relief
Allergy & Sinus
Cold, Flu & Cough
Pain & Sleeplessness
Children & Infants
Tylenol Innovation
Tylenol Rapid Release Gels
“Fast Pain Relief”
Tylenol Go Tabs
“Fast Chewable Portable
Pain Relief”
Is this True Innovation?
• Which of these innovations changed the
game?
• Which kept these brands only a half step
ahead of private label competition?
What Does SP seek in a Drug
Delivery Company?
Drug Delivery Checklist
9Provides meaningful advantage for
consumers
9Does it change the drug profile?
9Faster
9Longer-lasting
9Fewer side effects
9Or does it keep you one step ahead of Private
Label?
9Easier to use
9Better tasting
9More portable
Drug Delivery Checklist
9Can you “own” it via patents or other
exclusivity?
9IP and know-how can add value if they stave
off Private Label competition
9Is the technology clinically proven?
9What can be communicated to consumers?
9Is the Manufacturing process robust?
9What is the impact on COGs?
What are the Criteria for
Successful Drug Delivery
Partnerships?
What Should each Party Seek?
• Considerations:
– Tangibles
• Short-term gain vs. Long-term sustainability
– OTC brand lifecycles allow for longer-term benefits
– Innovations that “change the game” are more valuable
than those that keep the brand a half-step ahead of
Private Label
• OTC profit margins vs Rx profit margins
– May not be conducive to double-digit royalties
– Especially when the costs associated with launching a
new product or new brand are included in the equation
Consumer Healthcare Profit Margins
Marketer (Division)
P&G (Health Care)
Sales (MM)
Profit (MM)
Margin
$8.964
$2,148 (EBIT)
24.0%
€4,246
€ 927 (EBITDA) 21.8%
₤3,147
₤ 683 (Op)
21.7%
$2,530
$ 516 (EBIT)
20.4%
$ 228
20.3%
$6,540
$1,068 (Op)
16.3%
J&J (Consumer)
OTC pharma & nutritionals, skin
care, women’s health, baby & kids care
$9.774
$1,374 (Op)
14.1%
Merck KGaA (Consumer Health Care)
€ 398
€
13.8%
¥149,486
¥17,384 (Op)
Pharma, OTC, diagnostics, oral care
Bayer (Consumer Health)
Consumer care (OTC), diabetes care, animal health
GSK (Consumer Healthcare)
OTC, oral care, nutritionals
Wyeth (Consumer Healthcare)
OTC, supplements
Schering-Plough (Consumer Healthcare) $1,123
OTC, foot care, sun care
Novartis (Consumer Health)
OTC, animal health, CIBA Vision
55 (Op)
OTC medicines, natural remedies, VMS
Taisho (Self-medication)
Tonic drinks, OTC Medicines, VMS
Source: Most recent company annual reports
11.6%
What Should each Party Seek?
• Considerations:
– Intangibles
• Culture
– Decision-making process, speed
– How are hand-offs handled?
• Alliance Management
– May be advisable for “innovations that change the game”
Comments on Alliance Management
• The statistics*are concerning
– 70% of alliances fail
• The route cause for failure is surprising
– Due to poor or damaged working relationships
• Relationship issues matter and managing
them is integral to productivity and long term
alliance success
– Trust, ability to jointly resolve conflict, openness
and quality of communication is key
*Vantage partners – report on 150 alliances
10 Key Capabilities Aligned with
Alliance Success
1.
2.
Building and Maintaining Internal Alignment
Evaluating relationship fit with potential partners
3.
4.
5.
6.
7.
8.
9.
10.
Building a strong relationship while negotiating a deal
Establishing common ground rules for working together
Having dedicated alliance managers
Having collaboration skills in alliance employees
Having a collaborative mindset
Managing multiple relationships with the same partner
Auditing alliance relationships
Managing changes that affect alliances
Some Conclusions
• There are many advantages in partnering with
OTC companies
– Commercialization of drug delivery technology tends
to be faster with OTC products (than with Rx drugs)
– Established OTC brands are easier to extend with
new technology
• Innovations that change the game are in greater demand
than those that maintain edge versus Private Label
• New technologies help maintain brand loyalty
• Aesthetics matter
– Consider both the tangible and intangible aspects of
the partnership between a drug delivery company and
OTC organization
Questions?
Susan Levy-Cantor
Director, Business Development
Schering-Plough HealthCare Products
908-473-1992
[email protected]