Biocon Case Study Essay
Biocon Case Study
1. Assuming Biocon receives approval for BioMAb, should it launch the drug immediately or conduct phase 3 trials before launch? Elaborate the various elements of your action plan.
Even if the Drug Controller General of India (DCGI) grants permission for BIOMAb in fall 2006, Biocon should still conduct phase 3 trials before launching. Both Biocon and Clinigene are new to the industry and strong reputations have yet to be developed. Therefore, Biocon must means make sure BIOMAb is a proven quality drug before it’s released. Biocon should enter the cancer pharmaceutical sector as soon as possible to begin building a name for itself in the cancer industry by selling other generic cancer drugs first. R&D costs may be significant, but not as much as creating drugs from scratch.
This would generate revenue and start getting Biocon’s name familiar in the market. Also, by waiting to launch, Biocon would be postioned to defend BIOMAb better if and when Eribtux uses the lack of Biocon’s experience against them. By waiting to launch, BIOMAb might not be the first new drug in the head and neck cancer market, however, Biocon will still be the first Indian company to produce a proprietary drug since Erbitux is an existing drug with a new use.
2. How big is the current and future market opportunity in BIOMAb?
The market in India consists of both public and private sectors, 20% public sector and 80% private. India comprises up 21% of the worlds’ cases of head and neck cancer and 27% of the deaths from head and neck cancer. 85% of head and neck cancer patients are due to excessive use of tobacco and alcohol and India has a high population use of tobacco and alcohol. Venky Rao, senior manager of business strategy, expects that 95% of the patients using BIOMAb would be self-paying. The cost of the drug is a main determinant on the possible market for the drug as most citizens of India are likely unable to afford expensive health care, however the potential is great as the economy is growing in India by about 9% annually, in addition to a population growth of 1.4%. The market for BIOMAb in India is tremendous based on a number of variables. Educating the customers, targeting government and insurance companies, and the price of BIOMAb will all develop the market for the drug and ultimately determine how many customers BioCon is able to secure.
Rao expected that doctors are more willing to use BIOMAb with radio or chemotherapy during advanced stages of cancer and estimates that 20,000 of the 190,000 patients fall into this category. The future of BIOMAb is very strong as phase 2 trials showed 100% success rate when used with radiotherapy and chemotherapy. The market for head and neck patients is approximately 190,000 customers at 6 doses per customer. Given the 7.6 million deaths in 2005 from cancer and expected growth to 9 million in 2015, following with 11.4 million in 2030, mathematically the growth in cancer market is about 18% from 2005-2015 and 26% from 2015-2030. BIOMAb can expect this same market growth in terms of percentage growth and perhaps more given off-label usage of this drug.
3. Who is the buyer for BIOMAb? What is the decision-making unit in this case? What are the benefits that each member of the decision-making unit seeks from BIOMAb?
The buyers for BIOMAb are Indian patients who will utilize the drug to treat head and neck cancer and possibly patients with other indications for off-label usage. However, Biocon will not be marketing directly to patients and will have to utilize a sales team approach to reach out and educate oncologists in order for BIOMAb to ultimately reach the patients. To better market to patients and help ease the anxiety of having a life-threatening disease, Biocon will provide support by having a sales rep spend a few hours explaining the product and its usage, information on their website, consumer helplines, sales force, and direct consumer advertising. The decision-making unit will focus on educating the leading oncologists in India (less 100 total) on BIOMAb. Patients trust the advice from their oncologist and when the superiority of BIOMAb over different drugs is evident, the choice to use BIOMAb is an easy one.
The government-sponsored public sector will also be a decision making unit provided they cover reimbursements for cancer medications. The benefits to the patient will be the successful treatment of their cancer. The benefit for the oncologist will be to help their patients get well and to allow them to see more patients as valuable time spent educating each patient on the drug use and strategy will be handled by Biocon. The benefit for the government sponsored public sector is a potential long term savings as BIOMAb boasts lower amount of side effects and a predictable and finite treatment protocol that will eliminate the need for continuous cancer treatment with ongoing prescriptions like Erbitux.
4. Develop a detailed launch plan for BIOMAb. Provide your rationale for the product portfolio, pricing, channel, and communication decisions.
The launch plan for BIOMAb is to conduct phase 3 testing first to ensure product safety and effectiveness. Waiting for phase 3 completion will prove to the industry that Biocon is not a “fly by night” company and provides excellent products with the people of India’s best interest in mind. Also, during the time it takes for Biocon to complete phase 3 trials, they can utilize R&D departments to develop other generic cancer drugs to compliment BIOMAb. Once the phase 3 testing has been completed, the cancer drug portfolio, including BIOMAb will be released directly to the consumer with a full marketing force promoting the products to leading oncologists in India. Providing a portfolio of products to market in India is necessary to bolster awareness of Biocon’s entry into the cancer drug market and to create multiple reasons for Biocon to reach out to leading oncologists on multiple occasions.
Marketing the product to the leading oncologists is the main priority as patients rarely question the specialist prescribing medications. Win over the specialists and the patients will purchase the drugs provided the price point makes sense. R&D costs will be significant thus the cost structure for the drug must be priced at a point where BioCon can recover those and create profits for the company. BIOMAb does not want to offer a pricing structure that is too low and thus creating a scenario wherein doctors and consumers believe the product itself is not of value. Given that the cost of goods (25%), R&D (15%), and marketing costs (25-30%) comprise approximately 70% of the cost to get the product sold, 30% of revenues are left for profits.
To recoup the cost of the investment, Biocon will need to sell approximately $83.5 million worth of product at 30% margins. Given the aforementioned data, if Biocon is able to capture 1,900 patients per year at 6 doses of BIOMAb per patient, then BIOMAb will need to be priced at least at $7,325 to recover its initial investment within the first year. Pricing one dose of BIOMAb at $4,500 will allow BioCon to recover the $25 million for the manufacturing plant within 2 years and allows the product to be priced competitively against Erbitux.
Once the demand for this product is demonstrated, the next objective is getting the product into the hands of the consumer. Channels of distribution must take into account that the product must be refrigerated at all times. Pharmacies typically do not have the ability to refrigerate their drugs thus, BIOMAb will be couriered overnight to the oncologist. Selling directly reduces costs and has a significant economic benefit to the patient. The slight drawback is that the product would not be readily available and the doctor’s office would have to plan at least a day in advance to ensure that BIOMAb was on hand the day of the patients’ appointment. BIOMAb will be sold directly to the patients which means the oncologist will reap the convenience of not having to stock the drug and the patient will get a lower price.
Detailing is the means of by which the benefits of BIOMAb will be communicated to oncologists. Traditional detailing will not be sufficient as this drug treats a life-threatening disease. Basak explains, “We could provide information, help, and support to our patients through our web site, consumer helplines, our sales force, and direct to consumer advertising” (pg. 11). The assistance to doctors is crucial for this product as patients facing this disease will undoubtedly experience times of high anxiety and the ability to calm them down through the explanation of BIOMAb will provide great value to the doctors and patients. Sales reps can spend up to two to three hours with patients explaining the produce and its usage saving valuable time for the doctors.
5. How has Biocon’s strategy and positioning evolved over the years? What role does BIOMAb play in Biocon’s overall strategy?
Initially, Biocon started out as a mere producer of enzymes for the European and US food processing industry but CEO Dr. Mazumber-Shaw had grand designs to make Biocon an international player in the global biopharmaceutical market all along. To meet this lofty goal, Biocon had to take calculated risks in evolving from enzyme production to statins to insulin until the ultimate goal of entering into the proprietary drug arena. The strategy was always long term in thinking and never did Dr. Mazumber-Shaw move too quickly into a new level of complexity or risk the company’s overall health. Biocon, fresh off a hugely successful IPO in March 2004, was perfectly positioned to step into the final level of evolution in becoming a fully integrated biotech company: creation of proprietary drugs.
The cancer drug BIOMAb is the key to successfully entering into this market. Biocon licensed the cancer drug from the Cuban company CIMAB to develop and market the molecule on the Indian subcontinent. BIOMAb was a perfect entry product for Biocon for several reasons. First, it allowed Biocon to learn about mammalian technology, arguably the future of the biotech industry. Second, it gave Biocon an opportunity to develop essential skills for ensuring the long-term success of the company, namely new research and marketing capabilities. Thirdy, BIOMAb afforded Biocon the positive brand positioning of being the first Indian company to launch a proprietary drug in India.
Lastly, and most importantly, BIOMAb provided Biocon with the opportunity to enter into the proprietary drug arena with an immediate win. Simply put, BIOMAb worked. Ultimately, BIOMAb gives Biocon the ability to realize Dr. Mazumber-Shaw’s goal of becoming a globally recognized player in the biotech industry. However, it must be stated that the ability to capitalize on the BIOMAb opportunity is a product of Biocon’s calculated strategy to gradually increase its capabilities and breadth of offerings through careful, yet systematic, risks.