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Wrong Marketing Lesson by Big Pharma

May 03, 2014 | About:
anandjha89

anandjha89

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Large pharmaceutical companies like Pfizer (PFE) and Merck (MRK) are often celebrated for their marketing acumen. But, when compared with really successful marketing companies like the Internet giant Google (GOOG), their performance is less than stellar. True marketing leaders must innovate continuously to stay ahead of the market, by creating needs, rather than only responding to them. To them, marketing begins with choosing which products to develop and ends with the sales process. That is what Google has accomplished with Google Glass.

With the advent of the Information Age, marketing has been transformed from mass distribution to targeted, individualized communications aimed at smaller and smaller demographic groups. Recipients of marketing messages are chosen based on criteria such as age, income level and the last item for which they searched on the Internet. Eventually, marketing efforts could become unique to the individual for whom it is intended.

Large pharmaceutical companies have yet to catch up to the trend. For decades they have thrived on a one-pill-for-all model and an old-fashioned, door-to-door marketing approach, where so-called “detail people” hand out starter-dose samples of new drugs they want doctors to prescribe. In the past several years, big pharma companies have also begun advertising directly to consumers on television and in print, telling potential patients, “ask your doctor” to prescribe a variety of powerful medicines that can often have multiple and potentially dangerous side-effects.

Big pharma needs to learn to stay ahead of the marketing curve — to innovate targeted products for specific populations and to focus its marketing on those populations. Yet big pharma seems locked into the quest for billion dollar blockbuster drugs that can support large bureaucratic organizations.

One way big pharma can learn from companies like Google is to give old products new life by improving the products themselves or by improving the delivery systems of existing products. New delivery systems provide an opportunity for drug companies to repackage tried-and-true drugs and regain market exclusivity based on the innovative delivery process. That is what Google is doing with Google Glass. Glass delivers existing products, like mobile telephony, the Internet, global positioning systems and more, through a new, wearable system. In this case, Google is applying new technology to enhance the effectiveness of existing technology, something big pharma rarely does.

Company like Alexza Pharmaceuticals (ALXA). It has developed an aerosol delivery system for already-approved drugs, called the Staccato system. The company’s first product, ADASUVE was approved in January 2013. It combines a 1974-vintage anti-psychotic drug, loxapine, with the company’s new delivery device.

The $33 billion Israeli pharmaceutical company Teva Pharmaceutical Industries Limited (TEVA) must have seen significant potential for the Staccato system when it signed a deal with Alexa in early May worth up to $235 million, including $40 million up front. Under the deal, Teva will be responsible for all U.S.development and commercialization of ADASUVE, including the U.S.post-approval clinical studies and any additional clinical trials for new indications. Alexza will manufacture ADASUVE and supply it to Teva for clinical trials and commercial sales.

The broad implications of this technology reflect a logical paradigm shift in critical emergency room and acute-care medical settings. Teva’s foresight is that it is not acquiring just an individual drug, but a platform for many new drug combinations.

Thomas King, President and CEO of Alexza says, “The Staccato system is potentially a disruptive new technology because it increases speed of availability and action of known drugs. Staccato exemplifies the benefits of changing the method of drug delivery to address critical unmet medical needs, where speed of action and ease of administration are key to the meeting the patient’s need.”

NuPathe is another company with a unique and new delivery system for already approved drugs. NuPathe created a system called SmartRelief. It delivers medication using iontophoresis, which transports molecules through the skin using mild electrical stimulation. It is sometimes called an injection without a needle. The company’s lead product, ZECUITY, delivers sumatriptan, which became a generic drug in 2009, to treat acute cases of migraine with or without aura in adults. ZECUITY was approved by the FDA in January 2013.

Armando Anido, CEO of Nupathe said “Zecuity is the first and only FDA-approved migraine patch and is a game-changing treatment option for millions of patients who suffer from migraine headache pain and migraine-related nausea. We look forward to securing commercial partners and preparing for the launch of Zecuity, which is expected in the fourth quarter of this year.” The fact that NuPathe continues to negotiate for partners reflects a major lack of understanding in the greater pharmaceutical industry.

The point is that corporations like animal species, must adapt or die. The business world is replete with examples of corporations that failed to adapt and are no longer in existence. Western Union telegrams, Woolworth’s five and ten-cent stores, Sharper Image stores and Commodore computers are just a few examples of once successful dominant businesses that failed because they became stagnant and were overtaken by competitors. Companies using new technology and evolving marketing techniques to capture markets and displace predecessors, like Wal-Mart in retailing, Zappos in footwear, Volkswagen in cars, and others, were late entrants into existing markets but eventually surpassed their competitors. Big pharma, beware, the same could happen to you.

About the author:

anandjha89
Anand focuses on Technology, with an eye for dividend income and long-term capital appreciation. He allocates a portion of his own portfolio, to small and medium sized companies offering compelling risk/reward propositions.

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