MAY 2009 NEWSLETTER

Welcome

Welcome to the Life Science Strategy Group (LSSG) complimentary e–newsletter, keeping you up–to–date with the latest Life Sciences News and Consulting Insights.

In this issue, we highlight Minimizing In–licensing Risk, Optimizing Pricing Strategies, Q2 Biotechnology Investment Climate and insights from our new 2009 Clinical Trial Technology Utilization, Purchasing Preferences & Growth Outlook report.

If there are other specific Life Science topics you´d like LSSG to provide insights on in subsequent e-newsletter editions, please let us know. If you are not interested in receiving our complimentary e–newsletter in the future, please notify us below.

With best wishes,
Life Science Strategy Group

IN–LICENSING STRATEGY

In–Licensing Candidate Selection — Minimize Risk to Maximize ROI

New forces are at work in the pharmaceutical industry that are impacting the traditional in–licensing paradigm. The current global economic slowdown, the increasing importance of product in–licensing to offset lackluster R&D productivity and looming drug revenue cliffs are driving earlier–stage licensing deals which carry significantly greater risk. This risk is causing dire consequences on early–stage investments as more of these programs are unexpectedly discontinued (vs. investments made at the proof–of–concept and later stage). "We are most concerned with making investments in products that don´t carry any ´baggage´ or issues that will eventually kill the program", notes one pharmaceutical in–licensing executive. "One example of a deal gone bad was the Novartis collaboration with Anadys Pharmaceuticals where the Phase I program was stopped due to toxicity issues after just 13 weeks. That $20 million up–front payment, the investment which was paid out, is gone. The focus in today´s environment has to be to minimize risk in order to maximize ROI."

Risk is inherent with any licensing deal. From the "licensee" perspective, the primary challenge is limited money and the inability to complete the necessary studies which can get the "licensor", Big Pharma in particular, "comfortable" with the program, its risk profile and the terms of the deal. From the "licensor" perspective, the big challenge is to screen molecules and identify candidates properly, often with limited data, which are not only worth the upfront payment but are not likely to die a couple of months down the road. "I may come across very interesting molecules, and do the diligence with the available data, but it may just not be enough! For example, let´s say it´s a novel target or novel class, something that could change the treatment paradigm. How do I assess the risk and benefit in order to make the investment, especially knowing that the licensee may not have done all of the studies to provide the full ´Big Pharma Package´", says a pharmaceutical in-licensing executive.

Because of these challenges, LSSG has introduced its In–Licensing Risk Assessment Dashboard & Pipeline Failure Analysis Service. This unique service offering and tool leverages six sigma methodologies, comprehensive secondary research and analytical modeling to identify key inflection points, likely development hurdles and provide increased visibility into in–licensing risk. Leveraging key inputs including study data, pipeline development review, primary research with industry thought leaders, and benchmarks by molecule, target, therapeutic class, development phase and mechanism of action, LSSG identifies important factors leading to historical program discontinuation or failure. This information, including toxicity, lack of efficacy, missing endpoints, FDA determinations or requirements and development timelines, investment influx and cash burn to specific milestones, among others, is incorporated into a probabilistic modeling framework with risk inflection points. With this service offering, licensing executives have a cost-effective, analytical means to better understand where and why development programs fail and can leverage the risk assessment learnings to make better in-licensing decisions, maximize ROI and minimize investment risk.

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PRICING STRATEGY

Optimizing Pricing Strategies – Making Sure “The Price IS Right”

Whether a therapeutic, device, diagnostic or service, pricing is one of the most important aspects of the product launch and commercialization process faced by brand and marketing executives. Price your product too high and face limited uptake, lackluster revenues and market perceptions of an over-priced product that doesn’t deliver value. Price your product too low and fail to maximize the revenue potential of the product, face perceptions of low quality and fight the uphill struggle to raise pricing. Targeting the “right” price and avoiding pricing pitfalls is critical to a strong pricing strategy and involve a compilation of factors. Sensitivities of different stakeholders critical to the purchasing process are key and must be factored into the optimal price for a product. Add to this the challenges posed by political change, the global economy, healthcare reform, market competition and pipeline threats into the pricing equation and it becomes increasingly apparent that product pricing is truly an art and a science.

Keeping this pricing complexity in mind, Life Science Strategy Group, LLC uses a multi-faceted approach to product pricing that combines the "art" of LSSG´s knowledge/consulting experience of life science products and markets with the "science" of multiple analytical methodologies to triangulate to the optimal pricing strategy that will maximize revenue.

For therapeutics, evidence–based medicine/prescribing behaviors, the type of market (branded vs. generic) and the type of stakeholders (patients, physicians/providers, payers, etc.) often dictate the use of pricing methodologies including discrete analysis, Van Westendorp price sensitivity analysis, competitor benchmarking and revenue maximization modeling to triangulate the optimal price. For discovery products and medical diagnostics, test features/attributes, cost per result and trade-off behavior of clinicians and laboratorians need to be accounted for when developing a pricing strategy. As such, methodologies including regression analysis and conjoint analysis are often added to more traditional techniques such as competitor benchmarking to triangulate the best price. Services such as clinical or preclinical contract research pose yet a different set of pricing challenges as often no “tangible” product exists and more qualitative factors including past experience, customer service, quality and reputation play a prominent role in pricing. For these services, developing quantitative frameworks to assess qualitative factors, and then combining them into traditional pricing methodologies can be used.

"LSSG´s approach to product pricing is comprehensive. They ground their analysis in primary research and apply their expertise when triangulating the pricing recommendation. I can see the data, their analysis, and also understand their reasoning for the ultimate strategy for my product."
Marketing Director, Specialty Pharmaceutical Company

While pricing strategy is both an art and a science, it is important to have a clear understanding of the product, current and future market dynamics, key stakeholder sensitivities and benefits and limitations of pricing analysis methodologies to identify an optimal and sustainable pricing strategy which will maximize near-term and long-term product revenue.

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CLINICAL TRIAL TECHONOLGY REPORT

2009 Clinical Trial Technology Utilization, Purchasing Preferences & Growth Outlook – WHAT´S HOT AND WHAT´S NOT

Utilization of clinical trial technologies across Phase 1–4 development is growing, but which technologies are expected to be the "winners" and "losers" over the next 2–3 years might surprise you. According to new research conducted by Life Science Strategy Group with nearly 110 clinical development decision makers at leading pharmaceutical and biotechnology companies in the US, Europe and Asia Pacific regions, utilization of clinical trial technologies, including EDC, IVRS, IWRS, ePRO, CTMS and clinical trial planning/forecasting tools is growing, and for some technologies, is expected to nearly double.

LSSG´s report takes an in–depth look at 6 of the leading clinical trial technologies to explore current and future utilization levels by phase of clinical development. In the report key decision makers comment on current and future technology utilization levels (as a percent of current trials utilizing the technology) for each of the six clinical trial technologies. In our analysis LSSG uncovers the technologies expected to see the greatest increases in utilization, further segmenting each technology by company size and geographic region.

The report goes on to further explore the top drivers of technology use, Sponsors´ preferences for purchasing clinical trial technology, and the type of vendor chosen. Not surprisingly, it is a critical time for clinical development, and factors (detailed in the study) extending beyond just "price" play a significant role in the ultimate choice of vendor for each technology. In the report, LSSG also explores Sponsors´ planned budget growth for each clinical trial technology over the next 2–3 years. Interestingly, even in this time of economic challenge, Sponsors at both large and small biopharmaceutical companies anticipate strong annual budget growth of up to 30% for select technologies.

"People will spend the money if the data can be available faster. Time = money."

You can learn about these and other key findings, gain in–depth insight into specific technology utilization trends, understand Sponsor purchasing preferences and anticipated budget growth for these technologies in LSSG´s Q2 2009 Clinical Trial Technology Utilization, Purchasing Preferences and Growth Outlook Report.

To download complimentary sample pages or to purchase the full comprehensive report, please visit:
www.lifesciencestrategy.com/publications.

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LIFE SCIENCE INVESTMENT

Q2 Biotechnology Investment Climate – So Much for Global Warming

It appears the growing effects of global warming are having little effect on the biotechnology investment climate. “Cold with little chance of investment,” says one fund manager when asked about the current funding climate for biotechnology companies. This same sentiment mirrors those of other venture funds regarding the outlook of biotechnology investments in the second quarter of 2009. With valuations flat for stronger companies as well as those with deep-pocketed investors and down for many other companies, the investment pace will continue to be slow. There is very little early-stage investing going on now, and it will remain low as more VCs conserve “dry powder” for existing portfolio companies. However, the gap may be filled with corporate venture money. “Corporate groups are getting involved earlier but are being very selective,” notes another fund manager. With the Q2 investment forecast cold and gloomy, new ventures and early-stage companies have somewhat limited options. “Write a Small Business Innovation Research (SBIR) grant and take advantage of other non-dilutive funding options to get to within 18 months of an IND. Look to corporate sources as well as this has a higher chance of success versus equity financing,” recommends one Venture Capitalist. In addition, Life Science Strategy Group’s market research and consulting engagements show that many mid-stage companies are changing their business models from “multiple shots on goal” to a “single-focused effort” to maximize longevity of funding. These mid-stage companies are focusing on a lead product/program and shelving secondary/non-strategic products as well as looking at ways to capitalize back-up assets to drive the lead product/program to the next inflection point.

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Copyright © 2009. Life Science Strategy Group, LLC.