June / July 2017 by Healthcare Sales and Marketing Magazine

™ JUNE/JULY 2017

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THE TOP 50 MEDICAL DEVICE COMPANIES IN THIS ISSUE

medical DEVICE companies

Roundtable: Finding the Best Talent The Dedication of Women in Healthcare Former Deputy HHS Secretary Speaks Out How Roche Diabetes Built a Better Sales Force Partner or Go it Alone? Medtech Global Opportunities

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TABLE OF CONTENTS

Publisher’s Letter..............................................................................................................................................4 Editor’s Letter.....................................................................................................................................................5 Editorial Board....................................................................................................................................................7

ARTICLES Executive Spotlight: Alex Azar of Lilly and former Deputy Secretary of HHS..............................9 Roundtable: How to Find the Best Talent................................................................................................ 15 The Top 50 Medical Device Companies.................................................................................................. 23 How Roche Diabetes Built a Better Sales Force................................................................................... 29 Industry Trends: By the Numbers............................................................................................................. 35 Dr. Jonah Berger on Adherence, Trust, Incentives and more ......................................................... 37 Motivideos.........................................................................................................................................................41 What US Medtech Can Learn About Global Strategy......................................................................... 45 The Dedication of Women in Healthcare................................................................................................ 53 Go It Alone or Partner? The Emerging Pharmaco Choice.................................................................. 63

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Publisher’s Letter

State of the Medical Device Industry It’s part of human nature to want to know what the future holds. I think of this as a conundrum between predicting and forecasting. To me, predicting is quite bold: it suggests that you know what’s coming. Forecasting is a little more modest: it suggests that you are guessing based on available evidence. During the last presidential election, we saw the risks of predicting. Most of the pundits were wrong. As a result, we are now given the task of figuring out how this cari kraft industry will be affected by the potential changes in healthcare policy. As of this writing, congress is still debating what might go into the American Health Care Act (AHCA) that would change what we have now in the Affordable Care Act (ACA). Certainly we are encouraged by the proposal to eliminate the Medical Device Tax, which has not helped that sector of the industry. We are also encouraged by our investigation of the medical device sector in this issue, showing that the top 50 companies have increased revenue overall by 10%, and some individual companies significantly more. In fact, in the entire list there are only six that suffered a downturn, and one that stayed the same in terms of revenue. The other 43 saw gains, proof that this continues to be a healthy segment of the industry. The revenues of the Top 50 companies have reached a total of $328B, which is, to me, a very positive sign. Also, the M&A market was active, with a value of over $100B in transactions and more in the pipeline. In my role as someone who has to regularly make an educated guess as to the path forward for our industry, I see mainly good news. We will continue to stay on top of both national and global developments to help you see what lies ahead. And always, please keep the feedback coming. It all goes to making the magazine better for all of us.

Cari Kraft, Publisher Click here to get Top 50 medical device companies

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HS&M JUNE/JULY 2017| 4

Letter from the Editor

So…What’s New? Rather than my meandering musings, I thought I’d treat you to some updates on things that we’ve covered—news about exciting happenings in the industry. We have been following the progress of Align Biopharma, the subject of an article in our February/March 2017 issue. Align is a life sciences industry standards group, established to make it easier for healthcare professionals to work with life sciences. It was founded by six of the largest global life sciences companies: Allergan, AstraZeneneil greenberg ca, Biogen, GlaxoSmithKline, Novartis, and Pfizer, in cooperation with Veeva. These leaders have now been joined by Lilly, Merck and Takeda. They’re making it easier and faster for healthcare professionals to connect with the companies that provide the products and services. This spring they released their Identity Management Standard and solicited feedback on it. This summer they’ll publish the final version, to be followed later in the year by the Consent and Communication Preferences Standard. To follow the progress, go to the Align site. Meanwhile, The Aurora Project is also steaming ahead. This is another industry-wide project that we covered, aimed at defining and assisting in development of patient centricity standards. It’s something nearly every company has been working on, but which still needs some focus and clarity. Aurora’s Paul Simms, chairman of eyeforpharma, and Jill Donahue, author at EngageRx, have been drawing on the wisdom of hundreds of industry thinkers around the globe, and are seeking an even wider audience to promote numerous initiatives. For the full story, and to share your own genius with them, check out Aurora here. Another much-welcome effort is the Universal Patient Language project, started by Bristol-Myers Squibb but available to everyone. Its goals are to translate complex scientific language into easily-digestible information, so that communications to patients make more sense. In addition to language, it uses icons, visuals and colors so that data is streamlined, accessible and usable. Take a look at it here. Finally, just to pat ourselves on the back, I’m happy to say that Jill Donahue (see above) has joined us as Contributing Editor. Her interviews with world-beaters have been enlightening our readership for several issues. One of her subjects, Adam Grant, co-wrote the recent best-seller “Option B” with Sheryl Sandberg. And what’s coming next? Watch these pages to find out! As always, we continue to look for the value of your contributions. Let us know if you have an idea for an article—the people we write for are the people who write for us.

Neil Greenberg, Editor To become an HS&M contributing author or provide feedback, please email me at ngreenberg@hsandm.com.

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There are some things people just won’t tell you But they’ll tell us in confidence. And we’ll tell you. There are a lot of opinions people never offer you about your company. What the pain is. What you could be doing better. What they think of your competition. How to talk to them effectively. Big corporations get these answers through expensive research. Small to medium-sized companies don’t have that luxury. That’s why we created the Private Process . It’s a quick, cost-effective way of compiling information that people will offer us in complete confidence. Then we assess the results and give you the insight you need to adapt your sales and marketing messages accordingly. ©

For details on how the Private Process works, and the kinds of answers you can get, contact us now at ngreenberg@hsandm.com.

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Editorial Board

the publication for healthcare sales & marketing leaders™

Chris Bergstrom Publisher Cari Kraft Editor Neil Greenberg Contributing Editor Jill Donahue Creative Director Hedy Sirico Digital News Rick Cataldo Digital News Chris Manning Sales Director Andrew McSherry Editorial Board: Kristen Sharron-Albright Head of Marketing at Noven Pharmaceuticals Chris Bergstrom Associate Director, Digital Health Expert at Boston Consulting Group Sebastian “Sebby” Borriello Vice President, Chief Commercial Officer SK Life Science Lewis Chapman Vice President, Global Commercial Operations AllCells, LLC Maria Finlay, MBA Associate Director of Oncology Marketing, Teva Oncology Nick Gurreri Vice President New Products at Alexion Pharmaceuticals, Inc. Bob Roda VP and General Manager at BD © 2017 CL Media Inc., Philadelphia, PA CL Media is not responsible for any unsolicited contributions of any type. Unless otherwise agreed in writing, CL Media retains all rights on material published in HS&M for a period of one year after publication and reprint rights after that period expires. Email ckraft@hsandm.com.

To advertise in HS&M, please contact Andrew McSherry at amcsherry@hsandm.com

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Associate Director, Digital Health Expert at Boston Consulting Group Chris brings almost two decades of commercial expertise as an entrepreneurial executive at large medical device and high-growth digital health companies, and he provides “on the ground” advice for implementing digital health solutions. He currently serves as the expert on digital health at The Boston Consulting Group (BCG). Before joining BCG, Chris was the chief commercial officer (CCO) at WellDoc, a pioneer in digital health. He also held progressive roles at P&G, Roche, and Becton Dickinson. Chris was a senior advisor to several digital health innovators, including MyOwnMed, LiftOff Health, HelpAround, Heart Beam, iSageRx, and Alere Home Monitoring. He also advised the Leona Helmsley Charitable Trust and the Saatchi & Saatchi Wellness Board. Chris holds two digital health patents and has won multiple awards.. Chris holds a Bachelor of Science degree from the Kelley School of Business at Indiana University and earned his MBA from Columbia University.

Sebastian “Sebby” Borriello Vice President, Chief Commercial Officer SK Life Science Sebby is currently service as the Vice President, Chief Commercial Officer at SK Life Science. Sebby’s career has included executive sales and marketing positions at Cempra, Mentor Worldwide LLC, Johnson & Johnson Healthcare Systems Inc., Ethicon, Inc. and OrthoMcNeil Pharmaceuticals, Inc. Sebby received his B.A. in Public Administration from St. John’s University in ‘81, and received his M.S. in Organizational Dynamics from the University of Pennsylvania in 2001.

Maria Finlay, MBA Associate Director of Oncology Marketing, Teva Oncology Maria has over 20 years of commercial marketing, sales leadership and operations experience. She has led multiple sales, women’s leadership, and cross-functional teams at Johnson and Johnson, AstraZeneca, and Teva Oncology. Maria has experience collaborating to launch and grow small and large molecule products across seven different specialty therapeutic areas.

Bob Roda

Editorial Board

VP and General Manager at BD Bob Roda is a Senior Commercial executive with extensive experience in delivering business growth and profit in the Medical Tech and Diagnostics Industries. He currently serves as VP and General Manager at Becton Dickinson where he is responsible for the global infusion therapy business. Prior to his role at BD, Bob held a variety of roles of increasing commercial responsibility within the MD&D sector at Johnson & Johnson. His diverse background included positions in Sales and Marketing at Johnson & Johnson Medical, Inc, Ethicon, Inc and Ortho-Clinical Diagnostics. While at J&J, Bob also served as the Executive Sponsor of the Commercial Leadership Development Program as well as the Chair of the VP Marketing Council for all of MD&D. He has a proven track record of delivering results and leading teams in competitive and diverse business environments. Bob is a highly respected and successful global leader. Bob holds a Bachelor of Arts degree in Economics from the University of Rhode Island.

Lewis Chapman Vice President, Global Commercial Operations, AllCells, LLC Lewis Chapman is currently the Vice President, Global Operations at AllCells, LLC.Â He has spent over thirty years in health care management. He served as VP of Global Strategic Marketing at BioMarin Pharmaceutical from 2007 to 2012, where he was responsible for strategic marketing and product portfolio analyses, and implemented medical education, brand enhancement and sales support programs on a worldwide basis. He oversaw the global launch of Kuvan, which in the U.S. was 112% to budget in 2008, the first year on the market.Â Previously, he worked with Alpha Inntech Corporation as Vice President Global Sales and Marketing, where global sales grew 26% in 2004 and 22% in 2005 under his leadership. Lewis started his career with Eli Lilly & Company, with roles at Syntex and Genentech, where he was responsible for the global commercial launch of Activase (t-PA), the largest biopharm product launch in the history of the industry up to that time (first year sales $187 million).

Nick Gurreri Vice President New Products, Alexion Pharmaceuticals, Inc. Nick Gurreri is a business leader and General Manager with over 25 years of consistently achievinghigh performance and profitability through strong leadership and cohesive team building in the biopharmaceutical and medical device industries. Nick has held executive positions at Medgenics, Insmed, Pfizer, Pharmacia and Bristol-Myers Squibb. Nick received a BS in Mechanical Engineeringfrom the University of Delaware, and also acquired a Master of Science in Information Assurance at Carnegie Mellon University.

Kristen Sharron-Albright Head of Marketing, Noven Pharmaceuticals Kristen Sharron-Albright, the current Head of Marketing at Noven Pharmaceuticals, was until recently VP Sales and Marketing, Anti-Infective Marketing and Institutional Sales Specialty Care Business Unit at Pfizer. She is an experienced business leader with 20 years of experience in the pharmaceutical and biotechnology industries. She has a strong track record of delivering results in highly competitive and complex markets. Starting her career in sales at Eli Lilly, she then held positions of increasing responsibility at Lilly, Neurogen, and Pfizer, where she was responsible for sales and marketing in a franchise business model. In her spare time she volunteers, serves on the leadership committee for her church, and enjoys hiking.

HS&M JUNE/JULY 2017| 8

executive spotlight

Alex Azar: Pricing, Politics and the Progress of Access Seeing the industry through the eyes of Eli Lilly’s Past President and George W. Bush’s Deputy Secretary of Health and Human Services This article is compiled from our discussion with Mr. Azar at a recent Veeva Summit and an interview conducted by Matt Wallach, president and cofounder of Veeva. As of the date of publication, the new healthcare proposals were still being debated in Congress. We’ll see how his prognostications for the industry have played out. Alex Azar is an impressive expert, knowledgeable and articulate but understated and careful in his remarks. He has significant experience in government and pharma, and provides a picture of both that is free of polarization and contro-

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versy. Listening to him talk about his experience with other influencers gives you confidence that there are steady hands on the tiller, and that we are headed in the right direction, even if the headlines suggest otherwise.

Sales, Marketing and Brand Strategy Matt Wallach began his interview by asking about the changing landscape of the sales rep. Mr. Azar was not alarmed by the current situation. “I think that stories of the

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executive spotlight THE SALES REP IS STILL A HIGH ROI TACTIC

WE NEED TO SOLVE THE PRICING PROBLEM

THE INDUSTRY IS MORE RESPECTED THAN WE THINK

WE ARE IN AN ERA OF UNPRECEDENTED CHANGE death of the sales rep are greatly exaggerated,” he said. “The sales rep remains the highest ROI tactic in many instances with many brands. For those doctors and offices that will see a sales rep, that relationship still is the linchpin around which you can build other capabilities.” He values the rep largely because HCPs value them. “There is nothing like when a sales rep goes on vacation, and as the president of a multi-billion dollar pharma company, you get a call from a doctor’s office saying ‘What happened to our rep?’ That tells you that our people are eminently involved in assisting physicians in caring for their patients.” Still, he acknowledged that access is an ongoing problem, even if 11 | HS&M JUNE/JULY 2017

not as bad as some of the statistics suggest. He indicated that leaders of sales forces have to be extremely disciplined about assessing the access levels and making tough decisions. “Our team [at Lilly] actually did an experiment where we were able to build for a brand a suite of interactions; sort of a 360° package of interactions that we wanted to test to see how influential they could be. And we took doctors who were ‘white-spaced,’ we’d call it, who had never been called on by one of our sales reps.”

There is nothing like when a sales rep goes on vacation, and as the president of a multibillion dollar pharma company, you get a call from a doctor’s office saying “What happened to our rep?” That tells you that our people are eminently involved in assisting physicians in caring for their patients. These were the toughest targets, according to their writing behaviors. Lilly engaged with them over six months through peer-to-peer videos on Medscape, WebMD, direct mail, e-mail, and actual post office mail, “Which, believe it or not does get opened,” he said. “We were actually able to convert 18% of those physicians, who never saw one of our reps, from the bottom

tier of belief and writing up to our top tier of advocacy. So that tells me that it can work. But I don’t think it replaces the rep,” he added. On the subject of Key Account Management (KAM), he said that he sees it as a behavioral and organizational challenge. “Behaviorally I have always believed that the best sales professionals actually act as major account managers. They don’t do the short sell, just the pushy old style, but actually do long-term relationship building and value adding over time. Behaviorally everybody ought to be moving into that kind of a space. “Organizationally we tried something modeled after the U.S. military in how one approaches a theater. When you think about the Iraqi theater, we have an army, a navy, air force and Marines responsible for training up, equipping, getting everybody ready. But when you go out into the field there’s actually a theater commander in charge of the ground. And they pull all those different strands together. They know the game plan. Well, we did the same thing and tried that with major systems in big areas trying out different styles of integrated systems. As you know, if you’ve seen one integrated system, you’ve seen one integrated system. “So we tried different approaches. But the key was having a major account leader there with the sales reps under them, with dedicated medical staffing to be on call and available for appropriate medical interactions, with the payer major account people also a part of that team. And I’ll tell you, it worked. It really worked. You brought all

the brands together. The engagement went through the roof. People said, this was the job that I wanted 30 years ago when I joined the company. It’s that teamwork.”

[When doctors] saw that the company was organized around their concerns…you could see a visible, physical relaxation from them. He noted that customers said the same thing. They saw that the company was organized around their concerns: What do you need from us? “You could see a visible, physical relaxation from them. It would just depressurize everything. And then we saw that through actual sales results.” But he also noted that this is most effective with a mature portfolio, and that launching a new brand would require a different, brandspecific focus. Whether you want your regional managers coaching to the brand or to the customer relationship depends on the individual situation. And there are times when coaching to the brand makes sense. Pricing and Patient Benefits Today much of what influences the public’s image of our industry is that it’s greedy, and that the few stories of extraordinary price increases have come to stand for every life sciences company—which is of course far from the truth. But how do we deal with that? “Well, it’s a fascinating story that frankly just doesn’t get told accurately,” he said. “Let’s start by

saying we have a problem. This is not something to put our head in the sand about. Patients are having to pay too much for drugs. Whether they are physicianadministered like an oncolytic product in the highest price, or if it’s a retail-based product, patients are paying out of pocket too much money. Okay? What happened? Was there, in the last three years, a radical change in the pricing of drugs or how high the launch price is? “In the last five to seven years the pricing model really has not changed one bit. So, why did things erupt? They erupted because we have seen a complete and fundamental restructuring of health insurance in the United States over the last three to five years. More of us now have high deductible plans. More of us now have high cost sharing. Basically, the burden of the cost of insurance, especially out of pocket, has been pushed onto us as employees where we as individuals in the individual market have gone for low premium plans and have put off paying the higher cost sharing at the pharmacy, pretending that’s not going to happen. “And as a result, when the patient goes into the pharmacy they’re getting the sticker price. What used to be a tool that was part of the price negotiation, basically, price and rebate negotiation between the pharma company and the insurance company, now the patient’s sitting in the middle at the pharmacy and having to pay the bill there. So that’s a challenge and we’ve got to solve it. This is not sustainable for the patient to walk in and be paying list price for their drugs thinking that hey, I bought insurance. I paid for this already. Why are you charging me again?

I bet you’ve had your own experience where you’ve had that, kind of shock. I have.” There is no easy solution, of course. He said even if you cut the price of drugs by 50%, that’s still going to be expensive from the patient’s point of view if they have a high deductible plan without a funded HSA (Healthcare Savings Account). As a result, this affects the immense fall-off rates on adherence, which in turn affects profitability. “So, we’ve got to work with the insurance industry. My preference would be that this be something the insurance industry and pharma work together to solve. And employers work together to solve as opposed to the government.

My preference would be that [pricing] is something the insurance industry and pharma work together to solve. “How can you pull forward some of the rebates into those high deductible periods? You may be paying a 50-60% rebate to pharma company. You do that, premiums go up. Okay? So at least some of that rebate money is going to pulling down the premium, or going in the employer’s pocket or going in the insurance company’s pocket. But somehow, we’ve got to try to adjust that to solve the issue of high out-of-pocket. “I think we ought to be encouraging more funded HSAs. Often we think of high deductible plans as being the conservative solution. High deductible is not. High HS&M JUNE/JULY 2017| 12

executive spotlight deductible with a funded HSA is. I was there when we created it in the Medicare Modernization Act. The idea was not to shove the burden onto the patient or the employee. The idea was to create the right incentives for consumption so that I have skin in the game.” The Political Realm Alex Azar has consulted with the people most involved in healthcare policy: Paul Ryan, Chuck Schumer, Mitch McConnell, and now Tom Price. What does he think the current direction is? How should the industry respond? “I think anyone who gives real predictions on repeal and replace, where it’s going, take it with a grain of salt. I think almost every prediction I made has turned out wrong at every turn of the way. Because, honestly, people often in charge don’t know where things will end up. Even now that we’re in the Senate, I’ve said in many interviews that we’re just 10% of the way. “You’ve got to get a package that right now has reform, the two largest reforms of entitlement programs in the history of the republic. Okay? Only in Washington does slowing the rate of growth of a program amount to a cut. But that’s basically what it does. It’s sort of freezing in place at about 75, 77 million beneficiaries and actually still growing by about 100 billion dollars for 2020. But then slowing it, instead of it growing, almost by 450 billion dollars over that period. And so you’re slowing that, which is radical. It’s a big change.” He indicated that a large part is getting rid of the individual market subsidies that were very gener13 | HS&M JUNE/JULY 2017

ous. “Up to 400% of the federal poverty level for people going into that individual insurance market and converting that into a tax credit of $2,000 to $4,000 tax credit for people to go into the individual market. Just think about those changes right there alone. And then think about trying to get Rand Paul, Ted Cruz, and Mike Lee to agree to it on this side, and Sue Collins to get to agree to it on this side. I don’t know where it will come out. My prediction is it will be more liberal, more money, more subsidies to individuals than where it started from the House.”

[In Washington] the industry is highly valued…It’s an economic engine of international trade…[and] an intellectual property repository. It’s the crown jewel. As to the impact on life sciences companies, he doesn’t think it will make as much of a difference as many people fear. “Mainly we haven’t seen a huge impact. I haven’t at Lilly. I don’t think other pharma companies really saw a major impact out of the Obamacare implementation. Because really, what was Obamacare? It was a Medicaid expansion. Pharma companies, simply, because of the statutory rebates and Medicaid, simply don’t make a large amount of money in Medicaid. I think we saw more utilization but higher rebate rates. And so it was sort of a wash. I could never put my finger on it and say, this is how we benefited from it.

“Now, there’s a benefit that would come from the repeal as currently structured, which is the Medical Device Tax and the Pharma Excise Tax go away. So that’s a quite significant benefit. But, otherwise I don’t think it’s really something that the industry should be losing sleep about or thinking about redesigning business models as well. It was most interesting to hear him talk about the behind-closeddoors conversations among politicians and pharma execs, which he says are not nearly as contentious as we might imagine. “It’s not productive for anyone to look at the other and say that what you’re doing is evil here or you’re a bad actor. We’re operating with economic incentives that have been created either by regulation or just by how the marketplace works. And we need to work together to solve that. Pointing fingers, calling each other names, and trying to vilify based on intent does not help one bit. All that does is invite the government to get in the middle of things. And, trust me, that should be the last resort for how you solve any issues like this.

You are going to see, over the next decade, a change in the expectation of what it means to live with some of the world’s most debilitating diseases. And that is what we all got into this business for. “I’ll separate what is said on TV from what’s really the image and

See portions of Alex Azar’s commentary here:

reputation of the life sciences industry. The industry is actually incredibly respected in Washington on both sides of the aisle. Now, sure, are there people who are just detractors who you sort of hate at any cost? Yes. But that’s not the majority sentiment either among Democrats or Republicans on the Hill. The pharma industry is highly valued. These are some of the best jobs in the United States. It is an economic engine of international trade for the United States. It is an intellectual property repository for the United States. It’s the crown jewel. Any country on earth would like to have the biopharmaceutical industry that we have here in the US. Okay? And policymakers, at least behind closed doors, understand and respect that.” He was most enthusiastic about the fact that we are at the beginning of a golden age in pharmaceuticals. This is largely due to the success of the Human Genome Project, which greatly increased

our understanding of the molecular nature of disease, and enhanced our ability to custom-design molecules for targeted conditions. “This is revolutionary. We’re seeing this come out of the pipeline right now. We are changing the nature of disease in the world today. And policymakers get that. It is an unbelievably exciting time to be in this industry. It’s an even more exciting time to be a patient

suffering from one of these debilitating diseases because you are going to see, over the next decade, a change in the expectation of what it means to live with some of the world’s most debilitating diseases. And that is what we all got into this business for. “I really do believe this is the fruits of that work. And it’s just the beginning.” •

Alex Azar served President George W. Bush as Deputy Secretary of Health and Human Services, and went on to hold several positions at Eli Lilly & Co., including president of Lilly USA, LLC from 2007 to 2017. He is currently chairman and founder of Seraphim Strategies, LLC, which provides strategic consulting on the biopharmaceutical and health insurance industries. He consults with the Trump administration on healthcare matters.

COMMENT HS&M JUNE/JULY 2017| 14

Roundtable

Tapping Sales & Marketing Talent Lessons learned from Medical Device and Pharma companies on how they identify, attract and retain the best commercial talent

With moderator neil greenberg Editor, Healthcare Sales & Marketing

Our panel of experts: JEFF DOBBS

STACY MARKEL

Vice President, Human Resources Terumo Medical Corp.

Senior Vice President, Human Resources Portola Pharmaceuticals

ERIC FINK Vice President, Global Talent Management Jazz Pharmaceuticals

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BRENDA VESEY Senior Vice President, HR Integration & Transformational Programs Teva Pharmaceuticals

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Roundtable It’s one of the most challenging tasks in our industry: finding the people who have the background, drive, cultural fit and other traits to be a valuable part of our organization. We acquire some of this information through talking to colleagues, fine-combing resumés, doing interviews, and other methods. In the end, how do we determine whether a prospective candidate has what it takes to exceed? Can they become one of the team, a member of the family? It’s a combination of all the above and more. We asked a number of executives who have been successful in attracting and building the best talent. Here’s their wisdom, for your benefit. How do you measure the importance of sales and marketing talent in your organization? Can you share any measures you have or examples/case studies that you have used? JEFF DOBBS: When Terumo thought about taking the business direct, we gave a lot of time and consideration to building the right skills and capabilities we would need to create and deliver the value proposition to our targeted audience. We needed the ability to re-introduce physicians to the importance of vascular access, as well as the ability to teach and influence the adoption of new points of access to the vasculature. The ability to change the conversation with our customers, and then to deliver the technical and procedural education and technology to enable that “new” conversation, 17 | HS&M JUNE/JULY 2017

has driven the need to hire and develop sales and marketing professionals who “get it” and can deliver the suite of sales and marketing tools needed. The entire exercise of starting with the end state and then backing into what capabilities we needed to get there really helped build success. ERIC FINK: Jazz evaluates sales leaders’ performance based on three metrics: meeting sales goals, people leadership, and culture fit within the values based organization: what people accomplished, how they accomplished this, which is conducted via peer review. What is your philosophy on compensation for sales and marketing? Does your company pay over the industry standard? Under the industry standard? How did you determine your strategy?

BRENDA VESEY: There is a delicate balance. The company needs to attract talent, while staying aligned with the current workforce. We work together with a business partner and the compensation committee (with a cross-functional team). Together we set a strategy. For example a company may elect to pay above mid-point: 50-75% to attract the right talent and also pay current employee base competitive to the marketplace. ERIC FINK: For cash (salary & bonus), we actually target the median on average and with equity we target the 60th percentile. However, all employees are equity eligible and currently receive annual grants in addition to new hire equity and any equity associated with President’s Club. JEFF DOBBS: It’s important to understand where you play, and to understand the market. Be purposeful in setting the bar at the right level. Our bar is set at the 75th percentile. We purposely hire the right people at the right compensation level to retain them. We set the highest standards. Once we put the bar at the right level, we then aligned all of the compensation mechanisms (short term, long term) to reinforce this. When designing incentives for sales and marketing, what types of plans have proven most effective and efficient? What is your philosophy on at-risk compensation versus base salary? Capped vs. uncapped commissions? JEFF DOBBS: For our Direct Sales reps we have a highly leveraged compensation model that puts

roughly 65% of pay at risk; for managers it is less so. STACY MARKEL: It’s important to look at the behaviors you are trying to drive when setting up incentives. We need to be sure we are not incentivizing the wrong behaviors. There are different models and different components that can be utilized, depending upon thresholds. Different members of the leadership team have different philosophies on the topic, so first, they set a strategy and ensure alignment. Portola’s compensation is competitive with the market. It’s important to benchmark with peer groups. BRENDA VESEY: Incentives need to be specific, based on role. Some people contribute more directly to pipeline development; they have their own timeline, which may not line up with the annual compensation cycle. Design a plan that is a fit for the purpose. This builds credibility and employee engagement. When employees feel that their work is acknowledged, and understood, they are more likely to be motivated by the plan. When benchmarking, be sure you are identifying your company’s peers. You’ll need an appropriate comparison. Look at the marketplace, but remember that things change rapidly. Everything is so dynamic. Update this information annually. ERIC FINK: The company designs different incentives for different business units. The incentives should align with the work people are doing. For some brands, the focus is around education. Ensure that the incentive plan is aligned with the actions, otherwise the

KNOWLEDGE EXPERIENCE COMPENSATION TRAINING plan can be demoralizing and can create a disconnect. At risk comp: 70/30. Where do you get your best sales and marketing talent from? How do you attract the best players? Do you have any interesting talent acquisition metrics that you use? ERIC FINK: Jazz evaluates talent acquisition and new hires using a net promoter score and benchmarking. We have hiring managers rate new hires 90 days from their start date, and again after one year. They use a 10-point sliding scale to determine whether the “client,” or hiring manager, would “buy again” or hire the same person again. This has proven to be an effective measure of the quality of hire. The company finds it effective to shift talent internally—thereby increasing the knowledge base of each person cross-functionally, leading to a broader base of knowledge. 28% of new hires are internal transfers.

STACY MARKEL: We generally start with networking. That said, we like to diversify, so different skillsets and talents are represented. In your experience, what have you found creates the greatest success in the interview process? Are there specific tactics you have taken that have been most effective? BRENDA VESEY: Behavioralbased interview questions. It’s good to provide interviewers with a certain level of structure, but you need to be flexible, to be sure everyone is asking different questions. There needs to be variation. STACY MARKEL: We also use behaviorally based interviews. We build out a profile for a role, then refine the profile based upon success. For sales roles, we have people pitch products during interviews; candidates may be asked to deliver a presentation, or respond to objections. Technically speaking, we always ask questions to ensure that people did their HS&M JUNE/JULY 2017| 18

Roundtable homework, when it comes to the company, and the science involved. JEFF DOBBS: Our sales leadership team has really taken competencybased interviewing to a new level. We use it rigorously throughout the selection process and have seen great results from it. It’s not uncommon for our sales leadership to spend 3-4 hours drilling down to one question so we know who is joining the team. ERIC FINK: Behavioral-based interviewing. We spend more time on fit up front—it’s important to have the right cultural fit and technical fit. What are your top interview questions? Do you have any interesting interview stories or lessons learned? ERIC FINK: We ask people about their fondest memory; a time when they had to work hardest to get a product across the finish line. Here, people need to develop their own business plans; they need to have a plan and work their plan. They really need to be driven by success, even when it’s more of a challenge. JEFF DOBBS: It’s not just about determining what a person’s skills and experience are. We really want to know that they will be a good cultural fit. Does the person work to help others? Do they coach and engage others? We want to know whether the person is going to be a fit with the type of culture we are building here, and how they can help the organization to be successful.

19 | HS&M JUNE/JULY 2017

How do you assess, develop and measure sales and marketing leadership? Are there any processes or metrics you use that have been helpful? STACY MARKEL: We track engagement and conduct leadership assessments, 360 assessments, identify gaps in leadership. We utilize nine boxes to identify people with high potential. JEFF DOBBS: When we look at performance, we are not just looking to see if people are hitting their numbers every year. They also need to be developing KOLs, bringing on new talent, coaching others, helping others. If people are doing this, they are able to move up the career ladder. This is the culture we have built. What are some of the most effective programs you have put in place from an HR perspective to drive sales and marketing performance? BRENDA VESEY: A total comp statement. The value proposition goes above and beyond traditional comp and benefits. Communicate with employees: the company is investing in them: education, 401k match, medical. What are your retention goals for sales and marketing? How do you set them? How do you measure retention? What are your metrics? Do you have any interesting retention strategies? ERIC FINK: Jazz tracks retention and, more specifically, regrettable loss. Our board holds us accountable for this metric and our results affect company performance metrics and bonus.

JEFF DOBBS: We’ve built a career path and structure for our sales and marketing associates. The creation of that structure was led by our sales and marketing leaders and is reinforced throughout the lifecycle of an associate—what we’re saying matters is what we select for, coach toward and train against. Understanding how it all ties together, and ensuring the associates we promote reinforce the right behaviors, is key to success. STACY MARKEL: We are always working to build a great environment, and develop leaders. We provide equity grants for retention. We conduct employee surveys and exit interviews. What is something that your company does better than others, with regard to sales and marketing and human resources? What sets your company apart? ERIC FINK: Training and development. Jazz focuses on education as a main component to our incentive package. We invest well above the average in each employee, sending them to top rated academic institutions to learn more about each therapeutic state. JEFF DOBBS: Consistency. Our leadership team “walks the talk” when it comes to not just the results we want but how we expect associates to go about getting those results. Those expectations line up with our selection criteria, our competency-based interviewing questions, our promotional criteria, our performance appraisals, the reward and recognition we give out, etc. You get the picture—it’s all about being consistent in what we expect and pulling that through to

all the mechanisms that reinforce those expectations. We’re also consistent in ensuring we utilize the three pillars of effective strategy. One: define the strategic direction/vision for the organization. Two: assess the skills and capabilities we have in the organization, as well as those we need to build, to execute that strategy. We then determine how we’re going to build or buy the capabilities we need. Three: use the operational/budget planning process to ensure we’ve got the financial resources lined up against what we need to buy or build, including the compensation mechanisms and targets we discussed earlier, to execute the strategy. The alignment of those three pillars is critical to success.

What practices would you recommend avoiding? What’s a lesson you’ve learned, through experience? JEFF DOBBS: Avoid the dissonance created by systems that don’t line up. When an organization creates the alignment it needs to execute a well thought-out strategy, it creates a level of energy that is palpable in an organization. You can feel the energy people have for the organization and their contribution to it. It’s great to see.

really speed up the process and ensure that the planning is comprehensive. HR should be looped in during the strategy, design and execution phases of a project. Get the right people in the right room. BRENDA VESEY: Work to ensure clarity. Create models so that everyone is on same page and understands the best case and worst case scenarios. People should know what’s really involved. Avoid surprises. •

STACY MARKEL: Include HR in strategic conversations regarding business. These conversations should include not just the commercial team—when HR is not involved in the planning phase, plans may be lacking in alignment. A cross-functional team can

Moving Forward MEETING GOALS

INVEST IN EMPLOYEES

BEHAVIORAL INTERVIEWS

INCENTIVIZE PROPERLY

HS&M JUNE/JULY 2017| 20

Roundtable

MEET OUR panel of experts

Eric Fink

Jeff Dobbs Vice President, Human Resources

Terumo Medical Corp.

Jeff has over 20 years’ experience in Human Resources, supporting a broad breadth of organizations across multiple industries and in various stages of business growth. Jeff ’s formative experience was with Tyco International where he spent 10+ years in a series of increasingly more responsible HR leadership roles. Jeff is driven by the belief that “there are no HR initiatives, only business initiatives” and that by linking business strategy to individual goals and objectives, and ensuring associates have line of sight to broader business aspirations, organizational effectiveness and increased engagement will flourish.

Terumo started in 1921 as a manufacturer of clinical thermometers, and has grown worldwide to a position of leadership in such areas as hollowfiber technology, blood-management systems, and endovascular therapy. The high-quality medical products of Terumo Corporation are used in more than 160 countries and generate over $5 billion in global annual sales. Terumo Medical Corporation develops, manufactures, markets, distributes, and sells a diverse portfolio of medical devices, supplies, and accessories that generate $800 million in annual sales. Terumo Medical Corporation offers a wide range of products through its business divisions: Terumo Interventional Systems, Terumo Medical Products.

21 | HS&M JUNE/JULY 2017

Vice President, Global Talent Management Jazz Pharmaceuticals

Eric has over 18 years of global leadership experience in human resources and US commercial (sales, commercial operations, sales analytics, sales training and sales management) with companies such as Jazz Pharmaceuticals, Bayer HealthCare, and GlaxoSmithKline. He started building out the sales function at Jazz and went on to the broader learning & development function, and employee engagement & communications and talent acquisition. He also serves as the HR lead on M&A activity and as Executive Site Leader for the Philadelphia office. His talent management efforts led to average 92% engagement score, less than 10% voluntary turnover and over 40% of leadership openings filled by internal candidates during a period of rapid growth (2015—2016), and other strategies led to a 176% increase in employee development scores. In addition, Eric serves as a member of the Senior Executive Board of the Best Practice Institute.

Jazz Pharmaceuticals plc is an international biopharmaceutical company focused on improving patients’ lives by identifying, developing, and commercializing meaningful products that address unmet medical needs. It has a diverse portfolio of products and product candidates, with a focus in the areas of sleep and hematology/oncology. It also supports commercial products in other therapeutic areas where it can meaningfully address serious medical needs. Jazz continues to expand its commercial product portfolio and research and development pipeline through a growth strategy of growing sales of the existing medicines in its portfolio; acquiring commercial products or product candidates that are in late-stage development; and pursuing focused development of its pipeline of differentiated therapies.

Stacy Markel

Brenda Vesey

Senior Vice President, Human Resources Portola Pharmaceuticals

Former Senior Vice President, HR Integration & Transformational Programs Teva Pharmaceuticals

Stacy Markel has over 25 years of business experience in the pharmaceutical/biotechnology industry. Stacy began her career in sales and sales management with Roche Laboratories. She transitioned to human resources leadership thirteen years ago driven by her passion for people, culture and employee development as part of business strategy. Stacy served as the Senior Vice President of Human Resources and Professional Development at Actelion Pharmaceuticals, where she was a member of the Executive Leadership Team and Global Human Resources Leadership Team. She was instrumental in the successful growth of the organization and in positioning culture as a key advantage in attracting and retaining talent. Actelion was designated as a Bay Area Best Place to Work winner for seven consecutive years while evolving into an extremely successful mid-sized biopharmaceutical company. Stacy joined Portola Pharmaceuticals as Senior Vice President of Human Resources in 2015. She is excited to help build upon Portola’s passion for science while also preparing for the organization’s transition into a successful commercial company.

Brenda served at Teva as the HR lead on the efforts to combine the workforces and harmonize HR processes, practices, and systems after Teva’s acquisition of Actavis’ global generics business in mid-2016. Prior to her role at Teva, she and her teams helped support Activis’s strategic plan to expand its global business footprint and played a vital role in seven acquisitions and integrations over a three year period. She has directed the global Employee Relations Center of Excellence (COE) and was a member of the core management team for “Employee Connect Europe (ECE),” the European Works Council representing employees from 27 countries. Prior to her work at Actavis and Teva, she was at Allergan, directing a team of approximately 15 HR professionals across the globe. In that capacity Brenda held overall responsibility for HR business partner support for the company’s global functions, global employee relations, employment counsel, and corporate administrative services. She has also held HR leadership and finance management positions with Toys “R” Us, Inc.; and Chase Manhattan Corporation.

Portola Pharmaceuticals, Inc. was founded in 2003 and is headquartered in South San Francisco, California. It completed an initial public offering in May 2013 and is traded on the Nasdaq Stock Market under the symbol PTLA. Portola has approximately 150 employees. Its goal is to build an enduring biopharmaceutical company with a foundation of products and product candidates that significantly advance patient care in the areas of thrombosis, other hematologic disorders and inflammation. It is advancing its three compounds using novel biomarker and genetic approaches that may increase the likelihood of clinical, regulatory and commercial success of potentially life-saving therapies.

COMMENT HS&M JUNE/JULY 2017| 22

medical device

Click here to get Top 50 medical device companies

medical DEVICE companies

medical device companies: The Top 50 The Medical Device sector (comprising medical device, medical equipment, capital equipment and medical technology companies) showed a healthy up arrow last year, with the Top 50 company revenue totaling $328B, up 10% from $299B in 2015. The M&A market actively contributed to this, with a total value of over $100B worth of transactions completed and $30B pending. Some notable deals include: Abbott’s purchase of St. Jude Medical for $25B, Canon’s acquisition of Toshiba Medical for $5.9B, Danaher’s Cepheid purchase for 3.9B, Stryker adding Sage and Physio-Control for $2.7B and $1.3B, the Dentsply Sirona merger with The Dental Solutions Company, and Allergan’s bid to acquire Acelity for $2.9B.

23 | HS&M JUNE/JULY 2017

Here is a snapshot of the Top 50 ranked by 2016 revenue. We have tracked movement up and down the list with regard to both ranking and revenue changes as compared with 2015. Companies are ranked by their 2016 medical revenue as furnished by their annual reports and publicly available sources, Edgar and Morningstar stock information websites (figures of nonU.S. companies were converted to U.S. dollars from various currencies using end of the year exchange

rates for 2016 and 2015). Medical device, equipment, and medical technology revenues were extracted from reports to create an equal playing field. We also revised 2015 earnings to align “apples to apples” revenue reporting with 2016 figures. Companies that had revised 2015 revenues from our last year’s report include: Philips, Boston Scientific, Novartis, Danaher, and Abbott.

WHEN IT COMES TO CHANGING THE STANDARD OF CARE,

WHERE DO YOU START?

You start with courage. With insights and inspiration. With the intent to actually change behavior, not just mindshare. With the ingenuity and vision required to influence the actions of physicians, patients, and consumers. STRATEGY | CREATIVE | ENGAGEMENT

When each one of these triggers align and deploy – that’s a

Companies are ranked by their 2016 revenue as furnished by their annual reports and publicly available sources such as Edgar and Morningstar stock information websites. Figures of non-U.S. companies were converted to U.S. dollars from various currencies. medical DEVICE companies

Click here to get Top 50 medical device companies

Ranking Company Location 2016 Revenue in US$B

2 3

Medtronic

Dublin, Ireland

$28.83

Johnson & Johnson

New Brunswick, NJ

$25.10

Amsterdam, Netherlands

$18.33

Philips

General Electric

Fairfield, CT

$18.30

Fresenius Medical Care

Bad Homburg, Germany

$17.91

Siemens

Munich, Germany

$14.24

Danaher

Washington, DC

$13.19

Becton Dickinson

Franklin Lakes, NJ

$12.48

Cardinal Health

Dublin, OH

$12.40

Kalamazoo, MI

$11.33

9 10

Stryker

Roche

Basel, Switzerland

$11.27

Baxter

Deerfield, IL

$10.20

Boston Scientific

Marlborough, MA

$8.39

Abbott Laboratories

Chicago, IL

$7.71

Zimmer Biomet

Warsaw, IN

$7.68

Essilor

Charenton-le-Pont, France

$7.49

B. Braun

Melsungen, Germany

$6.81

Novartis

Basel, Switzerland

$5.81

Saint Paul, MN

$5.53

Olympus

Tokyo, Japan

$5.21

Carl Zeiss

Oberkochen, Germany

$5.14

Smith & Nephew

London, United Kingdom

$4.67

Terumo

Tokyo, Japan

$4.49

Dentsply Sirona

York, PA

$3.75

C. R. Bard

Murray Hill, NJ

$3.71

13 14

25 | HS&M JUNE/JULY 2017

Is Your CompensatIon In LIne wIth the IndustrY?

Key Trends in the Medical Device, Biotechnology & Pharmaceutical Industries

2016

Compensation RepoRt

CLICK HERE to gEt youR Copy

Is the position you are trying to fill competitive? Jacobs Management Group is pleased to offer you a full copy of our 2016 Compensation Report. 215-732-6400 • www.jacobsmgt.com • ckraft@jacobsmgt.com

Click here to get Top 50 medical device companies

Ranking Company Location 2016 Revenue in US$B

Fujifilm

Tokyo, Japan

$3.62

Getinge

Gothenburg, Sweden

$3.28

Varian Medical Systems

Palo Alto, CA

$3.22

Hartmann

Frankfurt, Germany

$2.97

Edwards Lifesciences

Irvine, CA

$2.96

Nipro

Osaka, Japan

$2.88

Hologic

Marlborough, MA

$2.83

Intuitive Surgical

Sunnyvale, CA

$2.70

Hill-Rom

Chicago, IL

$2.66

Dräger

Lübeck, Germany

$2.66

Ship Healthcare Holdings

Suita-Shi, Japan

$2.62

Sonova

Stäfa, Switzerland

$2.35

Steris

Mentor, OH

$2.24

39 bioMerieux

Marcy l’Etoile, France

$2.21

Coloplast

Humblebaek, Denmark

$2.08

The Cooper Companies

Pleasanton, CA

$1.97

Miraca Holdings

Tokyo, Japan

$1.96

Teleflex

Wayne, NJ

$1.87

ResMed

San Diego, CA

$1.84

William Demant

Smørum, Denmark

$1.70

ConvaTec

Deeside, United Kingdom

$1.69

Bruker

Billerica, MA

$1.61

Hitachi

Tokyo, Japan

$1.59

Nihon Kohden

Tokyo, Japan

$1.42

Elekta

Stockholm, Sweden

$1.24

27 | HS&M JUNE/JULY 2017

TOP LISTS the publication for healthcare sales & marketing leaders™ This issue continues HS&M’s series of Top Company Lists. The Top 50 Pharmaceutical Companies will be in the next issue, followed by the Top 100 Healthcare Companies of the year. Per your requests we are making last year’s lists available below.

Pharmaceutical Companies click here to receive your copy of the Top 50 pharmaceutical companies

biotech Companies

click here to receive your copy of the Top 50 biotech companies

healthcare Companies click here to receive your copy of the Top 100 health care companies

sales

How Roche Diabetes Built a Better Sales Force What success looks like, and how we got there By Jay Graves, Vice President of Sales, Roche Diabetes Care, Inc.

With the introduction of the Affordable Care Act and the ever-changing healthcare landscape, the diabetes care market is one of many areas that have been significantly affected over the last few years. As VP of Sales for Roche Diabetes Care, I have had to evolve and adjust with each change that comes our way, including how we set up our sales team for success. Here’s a snapshot of what has kept my people competitive. First off, selling diabetes products and medications is extremely complex. This isn’t just a pill, a potion or a shot. Our patients not only need a lot of education— they need ongoing care and attention.

29 | HS&M JUNE/JULY 2017

When I thought about this complicated market and then looked at my reps, I saw a percentage of my team that continued to excel, no matter what the market threw at them. It was clear that they were driven, strategic and proactive, but I knew that wasn’t the whole

What do over of the top 20 pharmaceutical, biotech, and medical device companies have in common?

They chose us as their industry recruiting expert.

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sales

Map of Mind

story. What influences this curve of talent, I wondered. How do you identify the core DNA that allows some individuals to succeed no matter the marketplace dynamics? In our case, there was a large lower tier who, only a few years ago, were doing very well. However, as the selling complexity grew, their performance declined. Next, there was a middle, or core, tier of talented, but struggling people, and lastly, there were our top level performers. The question was, could we uncover a way to unlock the potential of the middle and lower groups and move them toward the top?

31 | HS&M JUNE/JULY 2017

Leveraging Behavioral Analysis to Understand the Mind Map I happen to be a geek about behavioral science. So I reached out to a behavior analytics consultant and commissioned a Map of Mind study. This type of study looks at key attributes of top and core performers and then measures the distance between them in experimental, behavioral, motivational, emotional and psychological areas. Additionally, it looks at life and work experiences. The study assessed randomized groups of 18 top and 18 core performers. Each performer was in-

terviewed extensively to get a mind map of their whole environment. What built you? What motivates you? And finally, how do those traits measure up against results? The Outcome: Challengers vs. Relationship Builders In the top tier, the main attribute that identified a high-performer was what is called the “Challenger.” This is a person who will be most likely to succeed in complex solution selling. Here are some of the components of a “Challenger”: • They are expert at demonstrating differentiation • They deliver meaningful insights

• They have a flex approach to individual customers—they adapt to each as a unique person

• They avoid conflict—don’t challenge, don’t differ, just connect and build relationship

• They build relationships with an end goal in mind. What am I trying to achieve with this HCP, and what’s the best way to get there?

• When forced to push, they are often unsuccessful—they aren’t prepared to deal with any kind of confrontation

• They’re not afraid to challenge the HCP, especially with useful information

It’s important to note that the Challenger is not necessarily aggressive, but confident, knowledgeable and has a passion to teach and direct. The Challenger’s relationshipbuilding skill is one component of a larger goal: to deliver the right information in the right way. One key example where this is illustrated is the Challenger’s focus on the patient. A Challenger will incorporate the story of the patient’s point of view, and how they shouldn’t have to suffer the worst effects of diabetes. This angle drives the conversation in the direction of what HCPs are most concerned with— outcomes. It also indicates a shared mission between the HCP and the rep which ultimately helps establish a path for success.

• They are assumptive in their selling approach • They create constructive tension: education rather than automatic agreement is vital In the core group, the main attribute they had in common was what is called the “Relationship Builder” which spotlighted a slightly different personality: • They are the least successful at complex solution selling • They build relationships in the hope that it will lead to a goal, rather than with a detailed strategy about reaching the goal • Their selling tends to be passive

Culture

Sales Leadership

Training

Putting Analysis into Practice: How Do We Build a High-performing Culture? Stated simply, my goal was to evolve our team culture and dynamic by using the Map of Mind output, ultimately enhancing our results by identifying those on my team who had the ability to shift toward this Challenger mindset. I also wanted to put some swagger in the culture, insofar as it was possible, to hold up an image of what makes a Challenger, and to inspire everyone to reach for it. It isn’t as easy as that, of course. It involves a wide range of areas, resources and commitment. (See graphic below.) First, we overhauled the training. Engaged the top and core performers in action groups. Started conversations. Established new standards of performance. Mirrored the behaviors we wanted to see. And, not surprisingly, there was a lot of feedback. We found that the sales staff was eager to adopt these

Recruiting

Retention

HS&M JUNE/JULY 2017| 32

sales

changes and wanted to be involved in providing their viewpoints and learning as a group. As a result, more peer leadership emerged and we even did some off-site peer led brainstorming sessions. This is where we started to see our core performers emerge into higher performers, and it was exhilarating.

tive was built on behaviors of top performers, which led to the most sales growth

We stopped hiring merely for experience and began hiring for the Map of Mind attributes

• Positive cultural impact

Another interesting output of this exercise was that we stopped hiring merely for experience and began hiring for the attributes the Map of Mind had identified. So, for the first time, we recruited new people from non-pharma backgrounds, which expanded our team’s creativity and diversity. Of the fifteen new hires we’ve had recently, one previously sold cars, and another sold mattresses. And they’re all performing spectacularly, with engagement scores through the roof.

• Created a bench to fill open positions • Lower head count expense due to early in career hiring based on Map of Mind attributes • Incredibly low turnover Lessons Learned • Be mindful of how you announce an initiative like this, if at all • Multiple sales teams allow proof of concept, but it can be cumbersome • Requires a significant commitment of time and resources Looking Ahead • Monitor long term sustainability • Keep an eye on career mobility expectations of early in career hires “I’m the solution.”

• Roughly 25% of the core performers shifted toward the top performer category

It’s not easy to sum up what makes the ideal rep, but one prime indicator is that they’re motivated by more than money. They see compensation as encompassing involvement, education, improvement and other traits that propel a career.

• The Diabetes Sales Representa-

They’re hungry for all the things

And Those Results! Successes

33 | HS&M JUNE/JULY 2017

that truly define success. They get up early with a purpose every day, and some even spend their “vacation” time working at diabetes camps. They do more preparation, know more detail, and have a plan every time they step into an office. They do personalized microstrategizing and ensure a deep understanding of each HCP. As a consequence, access to the HCP is not as much of an issue for us as it is industry-wide. Our people don’t categorize doctors as no-sees. They find a way. Even at the larger, corporate practices and hospitals, they learn how to get through to executives and talk their language. And they tell the story: we’re here to make sure you’re doing the best for your patients.

Our people don’t categorize doctors as nosees. They find a way. They’re not going out to sell products. They’re going out to provide solutions. Which means they get down in the weeds with detail about every aspect of the lives of doctors, nurses, clinicians, executives, and especially patients. And the proof of all this is in the contrast between our legacy staff and our new hires. (See Pilot Results, next page).

Perhaps the most revealing aspect of this example is that our reps typically have contact with patients, an activity not common across the industry. Because of this and our patient-centric culture, our reps have a high degree of empathy, knowledge and passion around helping patients. Beyond my professional responsibilities, diabetes affects me personally, as I am one of the millions of people managing this condition every single day. For example, when I’m about to give a talk, my blood sugar levels tend to drop. My team knows to put a bottle of OJ on stage for me versus water. In our culture, this isn’t something seen as odd, but rather just a fact of life when you are living with diabetes. The team understands what it is like to live and adjust to having a chronic condition, and together we are always looking to provide practical solutions that can help all the patients we serve. That’s how I know they’ve embodied the central principle of our business: “I’m the solution.” •

Jay Graves Vice President of Sales Roche Diabetes Care, Inc. Jay is responsible for leading all field sales and sales operations functions. Since joining Roche in 2006, he has held several positions within Diabetes Care, including Physician Field Sales Representative, Region Business Manager—Health Care Provider, Region Business Manager—Managed Care, Retail and Distribution, Area Business Director for the Central and Western US, and Region Marketing Director for Blood Glucose Portfolio. Jay began his professional career in 1998 as an Intelligence Officer in the United States Army, where he held multiple leadership positions and global deployments, including tours in South America, Central America, The Caribbean, South Korea, The United Kingdom, Jordan and Iraq. Jay.Graves@roche.com Roche is a pioneer and leader in diabetes care. For over 40 years, Roche has been committed to delivering products that meet the needs of people with diabetes as well as their healthcare professionals. Monitoring systems with software for storing and analyzing data, all-in-one blood glucose systems and state-of-the-art insulin pumps are key parts of Roche’s diabetes care portfolio. These features not only help glycemic control for many users, but also offer greater convenience.

COMMENT HS&M JUNE/JULY 2017| 34

industry trends: by the numbers Compiled by Cari Kraft, Jacobs Management Group, Inc.

$75.8B Projected size of cancer immunotherapies market in 2022 The recent estimates for the US cancer immunotherapies market stood at $16.9B. This is expected to grow to four times that size, $75.8B, by 2022. This would be a CAGR of 23.9% Source: Research and Markets, “Global Cancer Immunotherapies Market to 2022 - Immune Checkpoint Inhibitors and Therapeutic Cancer Vaccines to Characterize Increasingly Competitive Market,” December 2016

38% Projected growth of home health aide jobs As healthcare migrates out of hospitals and clinics into homes and less intensive care locations, and as the Baby Boomer population ages, home health aides are expected to be the country’s most in-demand profession from 2017 through 2024, with 348,400 jobs anticipated. Other professions that will gain are physical therapist, emergency medical technician and nurse practitioner. Source: U.S. Bureau of Labor Statistics 35 | HS&M JUNE/JULY 2017

$328B medical DEVICE companies

Current size of Top 50 medical device companies The fifty largest medical device providers in healthcare (medical device, medical equipment, capital equipment, medical technology) grew their revenues 10% over the last year to $328B. Source: Healthcare Sales & Marketing magazine survey, Top 50 Medical Device Companies, June/July 2017

1/3 Number of deaths worldwide due to cardiovascular disease A new study covering every country over the past 25 years has revealed that cardiovascular diseases (CVD), including heart diseases and stroke, account for one-third of deaths throughout the world. Source: Journal of the American College of Cardiology, Global, Regional, and National Burden of Cardiovascular Diseases for 10 Causes. May 2017

10 . 24 % Rate of increase of health expenditures over GDP Estimates of national health expenditures since passage of the Affordable Care Act show that they’ve been growing just 1% over GDP growth, after decades of growth at GDP plus 2.5%. Source: Urban Institute, “The Evidence on Recent Health Care Spending Growth and the Impact of the Affordable Care Act,” U.S. Health Reform Monitoring and Impact, May 2017,

Anticipated global market CAGR growth rate for flu meds The worldwide market for influenza drugs and vaccines is expected to grow by 10.24% CAGR from 2017-2022, mostly due to increased spending through various immunization programs. Source: Azoth Analytics, “Global Influenza Drugs and Vaccines Market,” May 2017

2.5

113,000

Number of shares of GSK’s promoted post on meningococcal disease GlaxoSmithKline had the most-shared healthcare related post of 2016, among major companies surveyed by Unmetric. GSK teamed with world-renowned photographer Anne Geddes to capture the stories of meningitis survivors who became para-athletes. Source: Unmetric, “7 Social Media Trends in the Pharmaceutical Industry,” 2017 HS&M JUNE/JULY 2017| 36

Pharmaceutical

Great Advice from Great Minds Invisible Influence: Dr. Jonah Berger on Adherence,Trust, Incentives and More By Jill Donahue, Principal, Engage Rx

Why do some products, ideas, and behaviors catch on while others don’t? Dr. Jonah Berger researches the behavioral science behind how people make decisions, how ideas diffuse, and how social influence shapes behavior. His ideas can help us in pharma improve patient outcomes by driving new product adoption, sharpen effective messaging, and develop marketing strategy. Jonah is a marketing professor at the Wharton School at the University of Pennsylvania and bestselling author of Contagious: Why Things Catch On and Invisible Influence: The Hidden Forces that Shape Behavior. He’s published dozens of articles in top-tier academic journals, and his work frequently appears in the New York Times, Wall Street Journal, Harvard Business Review, Wired, Business Week and The Economist. He helps organizations, as he says: “get their stuff to catch on.” Inspired by James Cordon’s Car Pool Karaoke, we interviewed Jonah in the car on the way to the airport after his talk at the Rotman School of Management in Toronto. We had some questions about how we can influence more effectively in pharma to help create better patient outcomes, specifically around:

37 | HS&M JUNE/JULY 2017

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Pharmaceutical 1 Helping doctors improve patient adherence 2 Changing physician habits 3 Building our trustworthiness 4 Creating better incentive programs

5 Spreading the mindset of patient centricity

Helping doctors improve patient adherence Jonah said there is one simple thing HCPs should ask patients, but most don’t, to increase adherence. He explained that the biggest problem for adherence is lack of a trigger. A trigger is a reminder in the environment that encourages us to do something. For example, when you think of peanut butter, you automatically think of…. jelly, right? When I learned about this trigger idea after reading Charles Duhigg’s Power of Habit, I was trying to build a new habit of taking Omega 3 each day. I decided the trigger would be my placemat. I drew a circle on a plastic placemat where my pill should be each time I sat down for dinner. It worked! So what does the doctor need to ask? “What will you associate this pill with?” Or in the case of getting a test or a shot or a treatment, “When and where will you go to get this shot?” Jonah assures us that asking this one small question could make a tremendous difference. And that’s often the way it is with influence. Sharing this concept through your sales and mar39 | HS&M JUNE/JULY 2017

keting teams can have a big impact on sales in what would be a small investment for a big outcome. Changing physician habits Jonah suggests we focus on the wrong thing. We need to start with what the physician and patients need, not with what you are selling. He urges us to go beyond listening to truly understanding. When we focus on their needs instead of ours—that’s when we will have our best chance of influencing their habits. We have seen evidence of this first hand, when after teaching teams to focus on the patient, they create significantly better engagement with the physician, increase their access and time and therefore their ability to change behavior! The one thing that has defined every pharma sales model to date has been a focus on getting “the script.” What if that is the one thing that is getting in the way of generating more scripts? The paradox of modern pharma selling is that the best way to grow scripts is to keep them out of your mind when you are selling and instead focus on patient needs. Simply put, stop selling drugs, start serving others. When we do good, we will do well! Building trustworthiness Imagine you had a friend who said she had the right answer to everything. You would soon stop believing her. Same thing for pharma

reps. How can your product be the right answer for everyone? If you want to be the trusted advisor, you need to invest some of your energy in educating your physicians on when another product or solution would be better for a patient. Jonah shared a great example. He described his real estate agent in Philly who he loves and refers to others whenever he can. He even gave him a plug in our video. Why does he love him so much? He’s Jonah’s ‘”go-to” guy when something needs to be done on his house. So when Jonah’s AC breaks down, or he needs to get rid of junk, or when his roof needs repairs, he calls his agent. Jonah’s agent has broadened his offering to include more than just selling or buying homes. By building his network of good home service providers he does a better job serving his clients and increases the likelihood that his clients will recommend him! So let’s say you have a product in diabetes. You should be the diabetes go-to person. You should be the person the doctor thinks of for all challenges related to diabetes. You should be the trusted advisor in diabetes. Changing incentive programs Jonah and I also talked about the practice in pharma of paying bonus or commissions to achieve sales objectives. So many industries use this approach, but in pharma it really stands in the way of becoming a trusted advisor. If you incentivize number of scripts,

See interview here:

Spreading the mindset of patient centricity

that’s what you’re saying is most important—instead of better serving patients. You will be encouraging behavior to get the script even if it undermines trust and longer term success. Part of the problem may that pharma sales departments tend focus on short-term goals. The 2016 Aurora Project: PatientCentric Benchmarks Survey found that 72% of sales reps or managers said their department’s goals didn’t extend beyond the current year. Companies need to see sales rep’s goals in a longer-term context if we are going to become trusted partners. I pushed him and asked how do we switch away from financial incentives when they are so baked into our business models? He suggested we help them change the way they see their job. Obviously, this can’t be as simple as a memo, he laughed. Imagine a meeting, he suggested, where everyone sits down and says—“what do you wish… how could we do it better?

What is our purpose?” This will help peers influence each other and draw the intrinsic motivation forward. Another problem, Jonah explains, is that by putting so much extrinsic reward on the rep’s work, you diminish the very important intrinsic motivation which can be more powerful. The intrinsic motivation; the connection to the difference they make for patients; the difference they make in the world. All these need to be enhanced. We need to talk about patients more and make rep’s work more personal.

Before we parted ways, I explained to Jonah that I was the co-founder of The Aurora Project, a group of pharma leaders trying to illuminate our path to patient centricity. I wanted his advice on how we could spread the mindset of patient centricity. He suggested we try to make the stories of success more visible. Many organizations want to be patient-focused. The more we can show them how others have done it, the better. Like any great conversation, I left the interview excited about the possibilities. What if we focused all our energy on meeting patient needs? What if we became trusted advisors by talking about how solutions other than our own fit into medical practice? What if we eschewed short term financial gains for longer term wins? Whether you’re a rep, an MSL, a sales manager, a marketing manager, or any number of roles in pharma, these questions will help you become more needed by patients, physicians, and your companies. •

Jill Donahue, HBa, MAdEd is on a mission to lift our industry, building purpose-driven, influential people. Through her keynote talks, workshops and award-winning mobile-learning programs, she is helping pharma people build trust, open doors and make a bigger impact. She trains people why and how to engage instead of sell.

COMMENT HS&M JUNE/JULY 2017| 40

motivation

MOTIVIDEOS By Cari Kraft, Jacobs Management Group This month’s theme is motivating yourself! Taking a line from Ted Talks, here are four videos to help you start your day, read people better, get out of your own way, or face a daunting challenge. We All Could Learn a Lesson From Her

Blame

No matter what you think about positive affirmations, you have to admit that this feels good. What do you do to start your day? (Just be careful on that vanity!)

It’s amazing how quickly we all go to blame. Try a little test: how far into your day do you get before your catch yourself blaming someone for something? Here’s an alternative, and how to look at things from a brighter angle.

Try Something For 30 Days What do you want to do? What do you want to stop doing? If either seems like a big challenge, here’s a way to whittle it down to a manageable success. This three-minute video should give you an idea of how to make that happen.

Body Language In commercial positions we are all in the role of influencing others. Before we even speak, we give an impression with the way we look—our body language. This is a short, simple overview of how our first impression affects our communication. Watch this and I am sure you will change one thing forever.

Submissions are welcome. If you have one you like, email a link to me at ckraft@jacobsmgt.com.

Cari Kraft leads a team of master level recruiters at Jacobs Management Group, celebrating 20+ years of executive recruiting in the healthcare (pharmaceutical, medical device, biotechnology) and high-tech industries, nationally. Prior to joining Jacobs Management Group, Ms. Kraft has held positions as a Senior Sales Executive, Director of Business Development and Director of Marketing. She also has deep knowledge of the technology/startup fields, having been in the industry through the rise of the Internet. Ms. Kraft is a University of Pennsylvania/Wharton alumnus holding a degree in economics and decision sciences. Cari can be reached at ckraft@jacobsmgt.com.

COMMENT 41 | HS&M JUNE/JULY 2017

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We All Could Learn a Lesson From Her: Out of the mouths of babes oft comes wisdom.

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HS&M JUNE/JULY 2017| 44

medical device

What US Medtech Can Learn About Global Strategy By Ying Luo, Sumit Dora, Dinesh Khanna, Lillian Poon, Christoph Schweizer Boston Consulting Group

Medical technology is poised to become one of the next industries to break out of emerging markets and play on the global stage. Such names as Mindray Medical International and BGI, both from China, and Transasia Bio-Medicals of India could become as recognizable in industry circles as Lenovo and Huawei. Compared with other industries, medtech has been a late bloomer in emerging markets. Of the revenues generated by the top 200 medtech companies globally in 2015, emerging-market companies contributed just 2%. Multinationals currently hold a strong position in emerging markets. Many of their products and services have solid intellectual property protection and already meet various government standards and regulations. The multinationals also have long-standing relation45 | HS&M JUNE/JULY 2017

ships with the large hospital and health care organizations in emerging markets. In addition, many of them straddle several segments of the fragmented medtech industry, such as equipment, devices, tools, and supplies, which has helped them achieve a scale in these markets that eludes more narrowly focused companies. But the multinationalsâ&#x20AC;&#x2122; advantage could change quickly. Demand for health care is growing rapidly in emerging markets, a function of rising household incomes, increased discretionary spending, and aging

populations. Governments are also investing heavily in health care to combat chronic and critical illnesses.

munications, construction and engineering, and airlines, have followed similar though less dramatic trajectories.

This rising demand gives local companies a chance to make inroads. Local medtech companies understand these markets and know how to adapt products and business models to the needs of customers. They are also increasing their R&D spending and expanding their footprint through M&A.

The emerging-market medtech industry is showing signs that it, too, is on the early, steep slope of the S curve. Chinese medtech companies, for example, are growing much faster than their Western peers. (See Exhibit 1.)

Ready to Take Off Given its small size within emerging markets, the medtech industry is easy to overlook. Of BCG’s 100 global challengers—fast-growing, fast-globalizing emerging-market companies—Mindray, China’s largest medical equipment supplier, is the only medtech representative. There is also only one medtech company, Wego, on BCG’s list of 1,500 global champions—a broader group of fast-growing companies from emerging markets. Many up-and-coming companies simply did not make the $500 million revenue cutoff. Overlooked industries have a way of making a surprisingly big splash in emerging markets, and the emerging-market medtech companies certainly have the potential to grow rapidly from a small base. Among the top 100 global pharmaceutical companies, revenues of those from emerging markets rose from $4.5 billion to $119 billion from 2005 through 2015. Emerging-market companies in other industries, such as telecom-

With the rising tide of health care spending and the development of health care infrastructure in emerging markets, this growth should continue. It could even accelerate if emerging-market medtech companies establish global aspirations and build the capabilities, including M&A expertise, to expand overseas. The Rise of Emerging Markets Emerging markets currently account for less than one-quarter of the medtech industry’s global revenues, but their share is likely to reach nearly one-third by 2022. (See Exhibit 2.) The medtech market in China, already the second largest in the world, is projected to grow by about 13% annually from 2015 through 2022. India’s medtech market, currently the fifth largest, could rival Japan’s and Germany’s in size by around 2022 if it continues its 17% annual growth. Within narrow segments of the industry, emerging-market companies are already dominant. In the China market, three local companies—Biosensors International, Lepu Medical, and MicroPort—currently sell 80% of all

drug-eluting stents. As recently as 2004, multinationals had a volume market share of nearly 90%. The market for direct radiography—a digital x-ray method—has also flipped in China. Local companies have taken one-half of the volume from multinationals, which had a 100% market share in 2004. In India, Transasia has become the number one supplier of in vitro diagnostic (IVD) equipment and reagents, and the company continues to spread its low-cost model to other emerging markets and even mature markets, such as Germany and the US. (About one-half of revenues originate outside of India.) To date, local medtech companies in China have had the most success in segments that pose lower technological barriers. For example, they have grabbed 10% or less of the device market, as measured by value, in the technologically intensive fields of endoscopy and minimally invasive surgery but half or more of the market in patient monitoring and orthopedics. As their technological skills sharpen, medtech companies in emerging markets are likely to succeed not only in their current businesses but also in new ones. Compared with multinationals, emerging-market companies have four built-in advantages: lower costs, localized products, innovative go-to-market approaches, and government support. Although these advantages are shrinking, they continue to serve as platforms for growth.

medical device

Lower Costs. Emerging-market medtech companies still have lower costs than their Western competitors. (See Exhibit 3.) Mindray, for example, can sell a midtier ultrasound product in China at a discount to multinational competitors while maintaining profitability and a positive customer experience, and devoting 10% of revenues to R&D. This advantage will likely persist even as multinationals build manufacturing and R&D operations in emerging markets. For many products, local companies spend less on nonessential elements than do multinationals, which are often intent on maintaining their brand47 | HS&M JUNE/JULY 2017

ing edge. For example, MRI machines built by emerging-market medtech companies are often less visually appealing because they use less expensive material and offer fewer costly bells and whistles, but their functionality is good enough for most medical practitioners. Because lower- to mid-tier products are less costly to engineer, the R&D operations of emergingmarket medtech companies are also less costly than those of their multinational competitors. This advantage, however, may diminish for sophisticated products developed by more expensive talent.

Localized Products Emerging-market companies are often more successful than multinationals at tailoring their products to local needs and constraints. Chinaâ&#x20AC;&#x2122;s Mindray has a presence in nearly three-quarters of all medical organizations in India. The company conducted deep customer research in India, established local operations, hired local employees, and tailored its line of patient monitoring, ultrasound, and IVD equipment to address local unmet needs. For example, it recruited local engineers and operators to provide 24/7 customer service and built a local marketing and sales team.

Emerging-market medtech companies have also found a less expensive alternative to negativepressure wound therapy, which in mature markets is a popular way to promote the healing of acute and chronic wounds. The traditional pump- and vacuum-based therapy sold by Acelity and Smith & Nephew requires special equipment, which can cost more than $10,000 a unit, and a dressing that costs nearly $900, yet the procedures are not covered by most public medical insurance in China. WuHan VSD Medical Science & Technology has created an approach that makes use of the

wall-suction equipment common in large hospitals in China. Hospitals need not buy the expensive pumps, medical practitioners need not carry special equipment on their rounds, and patients pay lower out-of-pocket expenses thanks to a Chinese dressing that costs about $400 less. (In response, multinationals are adjusting their product portfolios.) Innovative Go-to-Market Approaches Emerging-market medtech companies have found alternative routes to reach patients when multinationals have tied up traditional channels.

In India, Transasia has taken advantage of channel segmentation to become the number one IVD provider. In large metropolitan areas, the company has invested in an in-house sales force of about 400 and a service force of about 200. These reps cover more than 30,000 labs. To achieve even broader coverage, Transasia has a network of 350 non-exclusive dealers that sell small-ticket items, generate leads, and work with a group of subdealers. Transasia can afford this channel strategy because it has lower manufacturing costs than its multinational competitors, such as Abbott and Siemens.

HS&M JUNE/JULY 2017| 48

medical device

Government Support In many emerging markets, local medtech companies benefit from direct and indirect government support along the entire value chain. Governments often subsidize R&D, speed regulatory approvals, provide tax and financial support, encourage domestic sourcing, and provide favorable reimbursements for local companies. Wego’s orthopedic plates to mend bone fractures, for example, are less expensive and reimbursed at a

49 | HS&M JUNE/JULY 2017

higher rate than imported products in China. Depending on the province, Wego’s reimbursement rate is 15% to 20% higher than the rate for imports. The bottom line for patients: out-of-pocket cost is anywhere from three times to nearly ten times more for an imported plate. China’s United Imaging offers another example of government support. The company’s CT scan, MRI, and digital x-ray businesses benefit from local tendering policies that favor purchases of domes-

tic products and use authorized lists of recommended local players. Next Stop: The World Several emerging-market medtech companies are starting to go global. In France, Germany, Italy, Spain, and the UK, Biosensors is among the largest suppliers of drug-eluting stents. Mindray is the number three supplier of patient-monitoring equipment across the key global markets of China, Japan, Europe, and the US, and Sinocare is number six in the global market for blood glucose monitoring devices.

While their market shares are relatively small today, recent history from other industries suggests that emerging-market companies are adept at playing catch-up. (In pharmaceuticals, emergingmarket companies have increased their share of global revenues—as measured by the industry’s top 100 companies—by a factor of 26 from 2005 through 2014.) How will medtech companies do it? External Growth MicroPort, a Chinese company founded in 1998 to sell stents and other cardiovascular devices, broke onto the world stage in early 2014 when it closed its acquisition of the orthopedic implant business of the US’s Wright Medical for $290 million. The acquisition tripled the size of MicroPort, which now has about 3,000 employees (one-third of them overseas) and recorded first-half 2016 revenues of nearly $199 million. The Wright acquisition also gave MicroPort a US platform on which to expand its non-orthopedic business. India’s Transasia has made more than ten overseas acquisitions— in the Czech Republic, France, Germany, Italy, Russia, Turkey, the UK, and the US—and exports to more than 100 countries. Organic Growth Meanwhile, Biosensors International, based in Singapore but owned by China’s state-owned CITIC Private Equity Funds Management, has focused on organic growth to fuel its expansion. It competes against Abbott, Boston

Scientific, and Medtronic in selling stents and other products. Notably, Biosensors does not rely on cost advantage. It has invested in clinical trials and in building relationships with physicians and other influencers. In response to market demands, it has also established a direct sales force in several European countries. Innovation-Led Growth Increasingly, emerging-market medtech companies are investing in innovation as part of their growth strategies. They recognize that there are limits to what they can achieve simply by providing low-cost, good-enough products. Mindray, for example, consistently spends more than 10% of revenues on R&D, while BGI, China’s largest gene-sequencing operator and equipment maker, devotes more than one-third of its revenues to R&D, double that of its competitor Illumina. Given their relatively modest revenues and market value, these companies might seem like the mice that roared. Mindray, the largest of the lot, went private in early 2016 in a transaction valued at $3.3 billion. By contrast, Medtronic, the largest pure-play medtech company, has a market capitalization that exceeds $110 billion, and other competitors with nondevice businesses, such as Johnson & Johnson, are even larger. Nevertheless, these emergingmarket companies do have the opportunity to build share in narrow slices of the fragmented industry, to make bold acquisitions, and to

diversify into related medtech segments. Multinationals ignore them at their peril. How Multinationals Should Respond Many multinational medtech companies are not standing still in the face of the challenge from their low-profile, emergingmarket competitors. Learning from the examples of their peers, other multinationals should respond by adapting their product portfolio, reducing costs, localizing their go-to-market approach, and acquiring emerging-market competitors. Adapting the Product Portfolio Many multinationals have not yet tailored their product line to the specific needs of emerging markets. The typical multinational medtech product may be too expensive, complex to operate, or encumbered with unneeded bells and whistles. But it would be a mistake simply to produce a dumbed-down version of the standard product line without addressing other elements of the business. Multinationals need to develop sophisticated customer insight capabilities in their most important emerging markets. Their R&D, business development, and marketing teams in these markets need to work closely together, possibly adopting the iterative, fast-feedback agile approach of software development teams.

HS&M JUNE/JULY 2017| 50

medical device GE Healthcare exemplifies this approach. The company has more than 1,000 R&D engineers and seven manufacturing facilities in China. About one-half of its products sold in China were developed in China. Its portable ultrasound devices, for example, are easy to operate and reliable in nonhospital settings, where they are often used by community doctors. One of GE’s portable devices built for China, the Vscan, has also found a home in emergency rooms and ambulances in mature markets. GE Healthcare has committed $300 million to create its Sustainable Healthcare Solutions business, which is aimed at emerging markets. Recognizing the value of external innovation, the company has also agreed to fund a $50 million incubator that will invest in promising emerging-market health care startups, including disruptive, low-cost technologies. Reducing Costs Pricing and costs are top issues globally for the medtech industry, according to BCG’s 2015 commercial excellence benchmarking study. They are especially critical in emerging markets. If they have not done so already, multinationals should expand their manufacturing and R&D footprints in emerging markets as a way to reduce costs. For products that are not labor intensive, such as stents, local manufacturing will not be a panacea, but it could still lower logistical costs and help avoid tariffs.

51 | HS&M JUNE/JULY 2017

Additionally, product simplification should be part of multinationals’ cost strategies. For pricesensitive hospitals and health care providers, durable, no-frills products represent the best value for their limited budgets.

because the hospitals in such areas generally have basic needs and because the business unit teams can provide support as required. Of course, more focused companies would likely choose a simpler approach. One size does not fit all.

Leading equipment makers, such as GE and Siemens, have been manufacturing a range of products in emerging markets for decades. Their medical equipment businesses have benefited from this decision, with COGS in China lower than the global average.

Acquiring EmergingMarket Competitors

Localizing the Go-toMarket Approach Multinationals need a local approach to reaching key buyers, decision makers, and influencers. Emerging markets often have wider geographic dispersion and lower revenue per account, making the commercial economics challenging. What is routine in the West can quickly become frustratingly complex in emerging markets. Creating a winning goto-market approach requires both strategic insight and execution on the ground. In China, Medtronic has managed the tradeoff between reach and specialization by basing its sales strategy on city size. For large metropolitan hospitals, each Medtronic business unit has its own sales team because the customers for the products are different. In lowertier cities, where that approach would be too costly, Medtronic incentivizes sales representatives by allowing them to sell multiple product lines. This approach works

M&A can be an effective strategy for multinationals. Even if they build local facilities, multinationals still may not duplicate a local company’s cost structure. FDAcertified factories and processes, for example, are costly. M&A can allow multinationals to acquire this infrastructure less expensively than they might be able to build it. M&A can also speed time to market. Many medtech devices require several years to register with the FDA; the acquisition of a company with those registrations in place can bypass the wait. Finally, by making an acquisition, multinationals can enjoy the favorable status of local companies in tendering and requisition processes. Several multinationals have acquired products, distribution, local R&D, and manufacturing through acquisitions. Philips, for example, acquired manufacturing capabilities when it bought Meditronics and Alpha, two Indian medical imaging companies, in 2008. Medtronic, in 2012, acquired Kanghui, China’s leading orthopedic products manufacturer, as a way to broaden both its portfolio and its channels.

Examples of successful M&A abound, but managing due diligence, cultural fit, talent retention, and integration of acquisitions is challenging. So while this approach can jump-start entry into a market, it can also backfire if not managed carefully. The history of emerging-market companies shows us that when they set their sights on an industry, they often catch multinationals by surprise. Medtech could be the next to face an unpleasant surprise, unless multinationals learn the lessons of their peers in other industries. •

PRIMARY AUTHOR: Ying Luo Partner & Managing Director, Beijing The Boston Consulting Group OTHER BOSTON CONSULTING GROUP AUTHORS: Sumit Dora Knowledge Expert, New Delhi Dinesh Khanna Sr. Partner & Managing Director, Global Leader, Global Advantage practice, Singapore Lillian Poon Principal, Hong Kong Christoph Schweizer Sr. Partner & Managing Director; Chairman, Central & Eastern Europe and Middle East

COMMENT

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diversity

The Dedication of Women in Healthcare Diversity is one of the major topics at companies across healthcare these days. It is discussed at most major conferences, but is of course central to the events hosted by the Healthcare Businesswomen’s Association (HBA). We attended HBA’s recent Woman of the Year (WOTY) celebration, which was quite inspiring. At the event, Healthcare Sales & Marketing kicked off a campaign that is part of an emerging topic in the industry—why we all chose to be part of this field. It was an outreach to colleagues to acknowledge what they find energizing about their careers.

53 | HS&M JUNE/JULY 2017

2017

HBA Annual Conference

6-8 November | Philadelphia More than 1,000 healthcare leaders are expected for • pre-conference seminars • main-stage (plenary) presentations • more than 20 interactive workshops • multiple network-building opportunities and social events • exhibit hall

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diversity

Why I Work In Healthcare

Here are some of the many people who enthusiastically contributed, from Daiichi, Celgene, Amgen, AstraZeneca, Pfizer, Merck, Shire and numerous other companies.

We are all here to make a difference. Here is how some of the WOTY attendees expressed their goals: • To help people live happier and healthier lives every day! • To give back to all who need our help. • To maximize the quality of patients’ lives. • To push the boundaries of science to help people and animals. • Because each one of us is a patient. • To make healthcare work as it should. • To help providers improve the quality of care. • To speak for those who cannot speak for themselves. • To eliminate cancer as a cause of death. • To reduce the burdens and complications of chronic conditions. • To continue to find cures that will make the world a better place. 55 | HS&M JUNE/JULY 2017

Why I Work In Healthcare

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Why I Work In Healthcare

57 | HS&M JUNE/JULY 2017

HBA AWARDS We also want to congratulate those that were honored by the HBA, a global nonprofit organization of individuals and organizations from across the industry, committed to achieving gender parity in leadership positions; facilitating career and business connections; and providing effective practices that enable organizations to realize the full potential of their female talent. These awards were given at WOTY, honoring a number of people who have made significant contributions to our industry. We are proud to recognize them here. All award winners were honored at the live event on May 11 in NYC.

WOTY The primary award (of course) is for Woman of the Year, which this year went to Bahija Jallal, PhD, executive vice president, AstraZeneca, and head of MedImmune, the global biologics research and development arm of AstraZeneca. She has guided MedImmune through an unprecedented expansion of its pipeline; in 2007 MedImmune accounted for five percent of the overall AstraZeneca pipeline, and today it represents approximately 50 percent. Bahija has authored more than 70 peer-reviewed publications and holds more than 15 patents. She is a member of the American Association for Cancer Research, the American Association of the Advancement of Science, and is president of the board of directors of the Association of Women in Science.

HONORABLE MENTOR Receiving the Honorable Mentor award was Joaquin Duato, worldwide chairman, pharmaceuticals, Johnson & Johnson. The Honorable Mentor award recognizes an individual who demonstrates long-term advocacy for current and future women leaders. Joaquin is a 32-year veteran of the industry. His current leadership team at Johnson & Johnson includes six female leaders—two of which lead the largest geographic regions for the company’s pharmaceuti-

cal business. He has played an instrumental role in leading the dramatic turnaround of the Johnson & Johnson pharmaceuticals business since 2011. Outside of J&J, he is current chairman of the Pharmaceutical Research and Manufacturers of America (PhRMA), and an active board member of the U.S. Spain Council. His commitment to nurturing a culture of diversity was recognized in 2015 when he was named one of America’s Top 10 Hispanic Business Leaders by Hispanic Career World.

STAR Ceci Zak received HBA’s STAR (Strategic Transformation Achievement Recognition) award. Ceci is principal and COO at Batten & Co., a strategic consulting firm within the Omnicom Group, which builds and activates ambition for corporations by operating at the intersection of business, brands and culture. The HBA STAR is someone who stands apart as a truly exemplary role model by demonstrating a long-term commitment to the HBA’s strategic goals of furthering the advancement and impact of women in the business of healthcare. Previously, Ceci was COO of healthcare at DAS/Omnicom, and has also held senior executive roles at Sanofi. She is also a board member of HealthRight International, a global NGO focused on empowering marginalized communities to live healthy lives; Julia’s Butterfly Foundation, a nonprofit organization dedicated to providing funding to families with chronic and terminally ill children; and is actively involved with the Pachamama Alliance, a nonprofit that strives to empower indigenous people of the Amazon rainforest. HS&M JUNE/JULY 2017| 58

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Also recognized at WOTY are Luminaries and Rising Stars, listed below. LUMINARIES

The HBA Luminary award was introduced in 2014 as part of the 25th anniversary of the WOTY. This year, the HBA honored 34 senior women, identified by their Corporate Partner companies, who serve as role models in their company, actively mentor and sponsor others, help advance other womenâ&#x20AC;&#x2122;s careers, and exhibit dedication to the healthcare industry. These leaders each have more than 20 years of professional industry experience. Mary Lou Ambrus SVP, communications Pfizer Inc. Heather Attra VP, manufacturing and technical operations, vision care Alcon, a Novartis division Colleen Carter EVP, applied innovation and customer solutions JUICE Pharma Worldwide Diana Cucos SVP, global clinical monitoring inVentiv Health Claudia Curtis chief employment counsel BD Belinda Dale VP, supply chain Shionogi Inc. Fran DeGrazio VP, scientific affairs and technical services West Pharmaceutical Services, Inc. Leslie Donworth VP, operations McCann Managed Markets Rossana Gray VP, human resources NA Sandoz

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Kathy Haines principal Deloitte LLP

Michelle Parsons SVP, finance Horizon Pharma PLC

Marie-Pierre Hellio head of development, Japan Pfizer Japan Inc.

Amy Pott group VP-head of US commercial operations Shire

Diane Holman SVP, talent and culture athenahealth Julie Iskow EVP, chief technology officer Medidata Solutions Tina Karunaratne director, clinical and late stage project management Astellas Pharma US, Inc. Maria Eduarda Kertesz president, US health Johnson & Johnson Simona King head of finance, total company financial planning and analysis Bristol-Myers Squibb Company Laurie Kowalevsky senior director, global marketing immunology Eli Lilly and Company Christine LaFave general manager Indivior Canada Ltd Maite Lasmarias regional operations director Quest Diagnostics Beth Levine SVP, associate general counsel and chief compliance officer Regeneron Pharmaceuticals, Inc. Yolanda Lyle VP and assistant general counsel Pfizer Inc. Teresa Montes senior consultant Knowledgent Melissa Morrow partner/EVP, director of client services Calcium USA

Cindy Powell-Steffen senior director, US marketing, brand activation and inside sales Bayer Kate Priestman VP, R&D strategy and portfolio GlaxoSmithKline Alisandra Rizzolo VP/general manager global customer experience Stryker Corporation Amy Spears, DVP creative advertising and design services Walgreens Boots Alliance Suneela Thatte VP, global operations QuintilesIMS India Alexandra von Plato group president, North America, communications and media Publicis Health Brianne Weingarten head of LBD alliance management Purdue Pharma L.P. Debbie Weitzman SVP, GM Cardinal Health Puerto Rico Cardinal Health Ling Wu VP, medical sciences, education and digital strategy Novartis Pharmaceuticals Corporation Kristie Zinselmeier VP, national and strategic accounts Baxter International Inc.

RISING STARS

HBA Rising Stars are professionals in various sectors of the healthcare industry, including pharmaceutical, biotechnology, advertising, public relations, medical education and market research, among other fields. Also nominated by the HBA’s Corporate Partners, the Rising Stars represent various career stages and disciplines, and have demonstrated noteworthy achievements and proven attention to furthering their careers. Tanya Botelho Silva Alcorn VP, global supply chain Pfizer Inc.

Crystal Darby PhD, VP, client services The Scienomics Group

Amy Jamison senior director, client services Publicis Touchpoint Solutions, Inc.

Jasmin Breitenbach manager, global life sciences advisory services EY

Jennifer Dee VP, director of integrated production McCann Torre Lazur

Sonali Jasmin SVP, planner Ogilvy CommonHealth Worldwide

Anisa Dhalla head of ethics and compliance, Americas UCB, Inc.

Stephanie Krogmeier senior director, regulatory Vertex Pharmaceuticals Incorporated

Susan Browne director, discovery research and head of vivo neurobiology Teva Pharmaceuticals Neely Burkhardt VP, marketing Magellan Rx Management Jennifer Cahill principal North Highland Elena Cant VP, head of commercial—global vaccine business unit Takeda Pharmaceuticals, Inc. Eileen Cheigh Nakamura senior director, portfolio management Pfizer Inc. Rui Che managing director KPMG LLP Alexandria Cherry director oncology marketing, Americas Eisai Inc. Barbra Churco senior director, client services Doximity, Inc.

Jennifer DiBenedetto group VP, strategic services The Lockwood Group LLC Monique Dolecki VP, investor relations BD Megan Fabry SVP, director of engagement strategy The Bloc Silvia Freyre manager, clinical operations Inovalon Linda Gray VP, program direction Health & Wellness Partners, LLC Jennifer Gudeman VP, medical affairs maternal health AMAG Pharmaceuticals, Inc. Libby Howe regional business manager Bayer

Saré Largay head, commercial operations and project management Sanofi Beatrice Lavery senior group director, regulatory affairs Genentech, Inc. Susan Logan executive director marketing Amgen Inc. Leverne Marsh executive director, marketing Novartis Pharmaceuticals Corporation Allyson McMillan executive director, lung and head and neck, US commercial lead Bristol-Myers Squibb Company April Meijer SVP, advocacy Discovery USA Susana Moreira group account director Beacon Healthcare Communications, Inc.

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Gerianne Sarte senior finance director, cardiovascular and specialty solutions Johnson & Johnson Fabienne Schlup-Hasselmann manufacturing director, Couvet site Celgene Corporation Maggie Smith group account supervisor Concentric Health Experience Katharine Spayde general manager, US commercial operations Abbott Ariane Spidel manager, design control Roche Diagnostics Heidi Spurling associate director, corporate strategy Ironwood Pharmaceuticals

Adrienne Morgan SVP, director of client services H4B Chelsea

Magdalene Pedersen chief of staff, global president R&D GlaxoSmithKline

Elizabeth Murphy O’Keeffe senior regional business director, neurology sales Lundbeck

Megan Persson VP, management supervisor McCann Echo

Nicole Sweeny product strategy lead, global hematology Shire

Melissa Pirolli COE lead, RWI oncology QuintilesIMS

Maria Tereno VP and global chief D&I officer Boehringer Ingelheim

Els Poff executive director, data integrity center of excellence Merck & Co., Inc.

Lindsey Thompson SVP, brand business leader Marina Maher Communications

Casey Myburgh VP Ketchum Maja Nelson senior director, training and development Actelion Pharmaceuticals US, Inc Estelle Odet brand activator Merck KGaA, Darmstadt Germany Lindsay Olson associate creative director Giant Creative Strategy Carrie Palmer VP and deputy general counsel Takeda Pharmaceuticals, Inc. Nicole Paraggio strategy senior manager Accenture Neena Patil VP, legal affairs Novo Nordisk Karin Payne global compliance quality director RB

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Alexandra Rancier SVP, creative director CDM New York Michele Robertson general counsel, hospital therapies Mallinckrodt Pharmaceuticals Lynn Rochon SVP, group account director TBWA/WorldHealth Krystle Rodrigues tax director PwC Christine Romean VP, client services M3 USA Corporation Puja Sapra VP and CSO, oncology research and development Pfizer Inc.

Anna Trudel Fleming senior manager, life sciences advisory services EY Lerryn Trzcinski executive business director, regional accounts Daiichi Sankyo, Inc. René van der Merwe senior director, clinical development MedImmune Emily Wert manager, marketing and communications ISPOR—International Society for Pharmacoeconomics and Outcomes Research Adilka White director of healthcare solutions and implementations UPS

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Pharmaceutical

Go it Alone or Partner? The Emerging Pharmaco Choice By Ester Oben Etah, Principal, Launch Excellence, QuintilesIMS and Bill McClellan, Principal, Launch Excellence, QuintilesIMS

The emerging pharmaceutical and biotech industry is thriving. But precommercial companies must make a fundamental decision at some point in the drug development process: take the product to market on our own or to partner with an established large pharmaceutical company? This decision is typically made as developers approach the end of Phase II clinical trials, but can take place at any timeâ&#x20AC;&#x201D;even after the drug has launched. QuintilesIMS analyzed the approaches of companies that launched products for the first time between 2006 and 2015 to understand their funding/commercialization strategies.1 Here are the results of this analysis and the implications for the three types of players involved: the research companies, their potential large pharma commercialization partners, and venture capitalists.

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The Nature of First-Time Products In recent years, thereâ&#x20AC;&#x2122;s been a shift in the market towards more innovative, premium-priced specialty drugs. The share of biologics among all FDA-approved New Molecular Entities (NMEs) increased from 14 percent in 2004 to 27 percent in 2015, and the share of orphan drugs increased from 29 percent in 2010 to 47 percent in 2015.

If venture-funding trends are an indication of what is to come, the shift towards biologics and orphan drugs is likely to continue. The share of investment in biologics increased from 27 percent in 2004 to 50 percent in 2013, reaching $38 billion. Interestingly, the rate of first-time launches is increasing. From 2006 to 2015, 105 companies launched a product for the first time. How-

ever, two-thirds of those products were launched between 2011 and 2015. It also appears that the potential of first-time launches to generate high revenue is improving; between 2011 and 2015, seven products (Imbruvica®, Incivek®, Kerydin®, Kyprolis®, Linzess®, Lonsurf®, and Tivicay®) achieved over $100 million in first year sales, whereas only one product (Ampyra®) had done so between 2006 and 2010.2 (See Figure 1) The Launch Challenge Whether for a small or large company, launching a drug successfully is a colossal undertaking. According to PhRMA, on average it takes about 10 years and up to $2.6 billion to bring a product to market. And the risk of failure is

infamously high; the probability that a drug entering clinical studies will actually make it to market is less than 12 percent.3 The costs and risks of late-phase development and commercialization are tied to several industry trends: • The legal and regulatory hurdles to approval are constantly changing—in particular, regulators tend to be requiring more extensive clinical trials, often with commitments for post-marketing surveillance. • The marketplace is ever more competitive and the expectations of stakeholders such as regulators, payers, providers, patients and patient advocacy groups are ever higher. There is an increasing trend towards patient-focused drug development which

requires a better understanding of how a disease impacts the quality of life (QOL) and survival of a patient. Stakeholders are requiring more real-world evidence on how new drugs and technologies impact patients’ QOL and survival rates in the real world settings and not only data from clinical trials. • Regulators need this data to understand safety of a new product when it becomes widely available, typically through post marketing surveillance. • Payers need this data to determine the clinical value of a new product, its cost effectiveness and ultimately its optimal formulary placement.

Incivek generated 1.4B in first year sales. Not shown on the chart because of scale HS&M JUNE/JULY 2017| 64

Pharmaceutical • Providers use this data to improve the quality and medical care of their patients, reduce overall costs and improve outcomes of treatment and patient care. It provides information on how best to incorporate new therapies and technologies into everyday clinical practice. • Patients and patient advocacy groups are empowered by such information which enable them to make informed decisions and ensure that the voice of the patient is heard and understood across every stage of drug development from R&D to commercialization and postmarketing surveillance. The result is that real-world evidence is now included earlier in the drug research and develop-

ment phase and collected all the way through commercialization as well as post-marketing. The inclusion of real-world evidence increases the cost, complexity and time line of the drug development process and the risk of failure. Success, then, requires a rigorous R&D process, extensive regulatory expertise, a well-developed infrastructure and deep experience to support commercialization, and immense financial resources. These requisites, of course, are far more difficult—although not impossible—for first-time launchers to attain. Common Funding Models The sources of funding for precommercial companies are different by phase of development.

In the high-risk, early phases of development (through Phase II clinical trials), emerging companies receive funding from a variety of sources. (See Figure 2.) The fact that over half of earlystage funding comes from large pharma represents a new trend; in the past, the risk associated with highly innovative drugs was largely borne by academia, small biotech firms, and venture capitalists. So collaboration is increasing between pharma and academic institutions. Today, it seems that virtually every large pharmaceutical company has some kind of collaborative agreement with academia and small biotech firms as a way of bolstering their dwindling pipelines while keeping their overhead costs low. A Range of Launch Scenarios Going it Alone: about 60% of companies

Source: Who’s Going to Pay for Future Drug Development—(Part 1 & 2), Stewart Lyman 65 | HS&M JUNE/JULY 2017

• Develop and commercialize own product • In-license and commercialize the product • Acquire a company and commercialize its product Partnership: about 40% • Agreement with another company for commercialization • Company develops the product in collaboration with another company • Develop the product and then sell it to another company • Company A develops the product acquired/licensed from another Company B; Company A eventually acquired by Company C

Weighing the Options for Late-Phase Development To further explain the partnership arrangements above, more than half (55 percent) of co-promotion deals are with large partners. (See Figure 3.) First-time launch companies attempting to bring a product to market on their own face a multitude of challenges, including the need to raise sufficient capital to fund Phase III trials and to either hire in or outsource the talent to manage the clinical trials, prepare regulatory submissions, gain access, and market and sell the approved product. But, if they can do that, the rewards are high. Going it Alone produces twice as many

medium-sized companies (those with first-year sales of $101-500 million) than does partnering. Figure 4 illustrates that even though emerging companies have far less “promotional muscle” when they enter the market on their own, their first-year revenues are not dramatically less than if they had entered into a partnership.

and/or experience when negotiating with payers (given the other products in their portfolio) or the fact that partners tend to be involved with products that have high revenue-generating potential that payers tend to receive well. About two-thirds (61%) of the partnership deals involve such high-potential products. (See Figure 6.)

Going it Alone, however, appears to be riskier when it comes to negotiating with payers. Of those launches that faced high payer rejection rates, a larger percentage (50 versus 32) were introduced by companies Going it Alone than by those in partnerships.4 (See Figure 5.)

The Four Launch Archetypes

This could either reflect the fact that partners have more leverage

Any new product launch can be characterized by the degree to which the product is differentiated from the competition and the amount of unmet need in the market. QuintilesIMS describes every launch as falling into one quadrant of a grid, as shown in Figure 7. A different strategy is then applicable to the archetype within each quadrant. Specifically: • Science Sells: Highly differentiated products entering a market with high unmet need can focus on the science; • Market Shaping: Highly differentiated products entering a HS&M JUNE/JULY 2017| 66

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market with low unmet need must shape the market;

need to find new sources of funding.

• Emphasize the Difference: Poorly differentiated products entering a market with high unmet need must emphasize what makes them different; and

• For commercialization, more emerging companies opt to go it alone than to partner with a large pharmaceutical company. The split is approximately 60/40 between Going it Alone and partnering.

• Who Benefits?: Poorly differentiated products entering a market with low unmet need must focus on highlighting who will benefit from the product. First-time launches of the past 10 years are apportioned across the four archetypes as shown in Figure 8. Research Conclusions The analysis reveals some interesting findings on the choices that emerging companies are making— and the results they are seeing. QuintilesIMS concluded that: • The funding models for earlyvs. late-phase research/commercialization are different. Venture capitalists generally exit deals at the end of Phase II, leaving emerging companies with the 67 | HS&M JUNE/JULY 2017

• In terms of first-year sales, Going it Alone appears to be more profitable for the originator than partnering. Going it Alone produces twice as many medium-sized companies in the first year than does partnering. This is true despite the emerging company’s smaller promotional capabilities. • One of the main short-term benefits of partnering may be in negotiating with payers. Companies Going it Alone are more likely to face payer high rejection rates than those in partnerships. • The long-term benefits of partnering were not explored in this research, but logic suggests that

they might include support with subsequent launches, ongoing leverage with stakeholders, and greater promotional muscle. • Success for first-time launchers hinges on having a high-value product and access to capital. To be successful, new products have to offer patients better outcomes, either in terms of fewer side effects, fewer hospitalizations, improved Quality of Life, increased productivity, or longer survival. There are ample examples of successful launches under both models—Going it Alone and partnering. In general, successful first-time launches are highvalue products that fall into the QuintilesIMS Archetypes: Science Sells, Market Shaping and Emphasize the Difference. • The distribution of launches across the four QuintilesIMS archetypes was similar for Going it Alone companies and those with partners, with high-benefit products accounting for about 60 percent of launches. This

suggests that regardless of their funding structure or commercialization strategy, first-launch companies are generating greater innovation. This could also be driven in part by what earlystage funders such as venture capitalists are willing to invest in. (Venture funding by therapeutic area closely mirrors first-time launch products by therapeutic area over the last decade.) TWO CASE HISTORIES A Partnership among Three Parties Launched Incivek® and Achieved First-Year Sales of $1.4 billion. Vertex Pharmaceuticals developed Incivek®, a novel treatment for Hepatitis C, in collaboration with Mitsubishi Tanabe Pharmaceutical Corporation and Tibotec BVBA (Janssen). Vertex drew upon

Tibotec’s experience in infectious diseases and in conducting largescale, late-stage clinical trials. Incivek launched in 2011, with Vertex retaining marketing rights in the US, and assigning them to Janssen outside of the US and to Mitsubishi Tanabe in Japan. The product was highly differentiated; its new mechanism of action offered significant improvement over the standard of care. In fact, it was designated as a breakthrough therapy. It launched into a market of high unmet need and fell into the “Science Sells” archetype. Kyprolis® Successfully Braved the Market Alone And Garnered $237M in First Year Sales Onyx Pharmaceuticals developed Kyprolis and launched it in the US in 2012, after raising $32.1 million in an Initial Public Offering (IPO)

in 1996. Other public offerings followed, and the company was later acquired by Amgen for the $9.7 billion in late 2013. Kyprolis is indicated for the treatment of multiple myeloma in patients who have received at least two prior therapies. There is still a high rate of relapse in this rare disease, so there is a high unmet need in the market, and Kyprolis was designated as an orphan drug. However, the product is not very differentiated, as it is a proteasome inhibitor like Velcade®, and it received a standard FDA review, rather than the priority review typical of orphan drugs. Kyprolis fits the “Emphasize the Difference” archetype.

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Far-Reaching Implications of the Decision For Emerging Companies It is clear that Going it Alone delivers higher first-year returns, but what about into the future? Partnering with a large pharmaceutical company may provide worthwhile long-term benefits with subsequent products (although this analysis did not attempt to address that hypothesis). Emerging companies also need to weigh the other benefits of partnering—capital, expertise, relationships with stakeholders, and leverage in the market—against the downside—loss of control. 69 | HS&M JUNE/JULY 2017

This can be difficult for entrepreneurs to accept, especially as it may extend to the very direction into which the compound is taken. Emerging companies that choose to work with partners should enter negotiations with a strong position and a full understanding of the deal’s implications. Companies that elect to go through the late stages of development, regulatory approval, and commercialization without a partner obviously need expertise to raise the necessary capital and then must decide how best to staff the required functions. Today, there are operations and consulting partners that allow emerging

companies that choose Going it Alone to invest less to stand up operations. When looking for a commercial outsourcing solutions partner, a proven track record within healthcare information, analytics and technology along with deep therapeutic expertise, including field based teams and back office support should be prerequisites. For emerging global biopharmaceutical companies seeking to optimize their new product’s commercial value, an outsource partner can minimize operational risk, lower the cost of their commercial operation, and increase speed to insight, all while maintaining long term corporate flexibility.

For Large Pharmaceutical Companies The fact that so many emerging companies are finding that Going it Alone is a viable option has ramifications for the large pharmaceutical companies that rely on the innovation of emerging companies to augment their pipelines. Competition for deals is intensifying, and large companies must be proactive in making partnership with emerging companies earlier in the game. The last decade has seen a trend towards increased collaboration between large pharma and biotech companies and emerging companies in early drug development. These deals, which include acquisitions and joint ventures, eventually provide large companies with greater stakes in the outcome of successful and viable new companies. The arrangement ensures that the emerging companies have the cash flow earlier on to pursue innovative research and that the large pharmacos and biotechs are given first rights to new products to bolster their pipelines.

However, this practice may be affected by the fact that some of the traditional funders of earlyphase research are changing their investment models; theyâ&#x20AC;&#x2122;re moving away from funding emerging companies. Instead, in an attempt to reduce their risk, they are focusing on funding drug development from early discovery through to commercialization for already existing companies. This is beginning to create a funding gap that could impact creativity and innovationâ&#x20AC;Ś which would ultimately be felt by large companies. We have seen an increasing number of interest groups and disease foundations trying to raise money to bridge the funding gap for research and development particularly in rare diseases and areas of high-unmet need. For Venture Capitalists Over the last five years, the number and value of the first-time launches we assessed increased, and this trend is likely to continue into the future. As a result, there

will be more opportunities for investors to fund emerging companies as they transition from mainly research and development companies to full-fledged small pharma or biotech companies with R&D as well as commercialization functions. Investor companies need to look at their funding models to determine if they are positioned to make the most of these opportunities as they present themselves. In the past, investors involved in early-phase drug development tended to exit somewhere around Phase II, forcing emerging companies to find alternative sources of funding or to partner with larger companies that could support continued development from Phase III through commercialization. Given the success of the first-time launches and the value they are bringing into the market, investors need to reconsider their exit strategies. They should determine if it is perhaps more meaningful to build on the relationship that they already have with emerging companies and continue their fundHS&M JUNE/JULY 2017| 70

Pharmaceutical ing up to commercialization. Indeed, some venture firms such as venBio have started shifting their funding model, and an increasing number of them are also funding Phase III through to commercialization. For investors, given the success of the first-time launches, it seems that engaging early and becoming the funder of choice for emerging companies will be even more rewarding in the future. Should this become commonplace, emerging companies would be able to retain their autonomy and culture of innovation. In sum, the analysis of companies that launched a product for the first time between 2006 and 2015 revealed that companies can rely on several different funding models and employ a variety of strategies. There are successful examples of each approach, but there are many considerations that should go into the decision, including a company’s short- and long-term goals, the degree of control it wants to retain, and its ability to rely on outsourcing partners, to name a few. Large pharmaceutical companies and venture capitalists should recognize the options—and success—that emerging companies are having and revisit their own business strategies accordingly. • 1 There were 22 more launches in 2016, which can be seen here: https://igeahub.com/2017/01/31/all-the-22-drugsapproved-by-fda-in-2016-and-all-the-new-launches/ 2 All trademarks, trade names and product names contained herein are the property of their respective owners. The use or display of other parties’ trademarks, trade names and product names is not intended to imply, and should not be construed to imply, a relationship with, or endorsement or sponsorship of QuintilesIMS Incorporated or its subsidiaries by such other party. 3 “Biopharmaceutical Research & Development: The Process Behind New Medicines,” PhRMA, August 20, 2015. 4 This analysis covers only those companies (whether Going it Alone or in Partnerships) that actually launched products. Companies whose launches failed were not analyzed.

Ester Oben Etah Principal, Launch Excellence, QuintilesIMS Ester has over 20 years of experience working in the pharmaceutical and biotechnology space both in the US and Internationally. With her medical and scientific background, she brings a lot of therapeutic area expertise as well as an in-depth understanding of the rapidly changing dynamics of the industry. While at QuintilesIMS, Ester developed experience in market assessment & forecasting and patient level data analysis. In addition, Ester has experience in product portfolio valuation & decision analysis, product licensing & deal valuation, mergers & acquisition analysis and life cycle management. Bill McClellan Principal, Launch Excellence, QuintilesIMS Bill is an expert in the field of pharmaceutical launch excellence with over 20 years of experience. He leads the Launch Center of Excellence for the US at QuintilesIMS where he focuses on launch readiness, tracking and performance diagnostics utilizing patient data, statistical modeling, qualitative and quantitative research. Bill leads a team of professionals responsible for developing thought leadership to provide innovative approaches for launching a brand. The research focuses on patient acquisition and prescriber adoption and productivity. The group has examined how launch success varies by market need and product differentiation creating launch archetypes. Findings have fueled offerings that focus on launch strategy, commercialization tactics and performance monitoring.

COMMENT 71 | HS&M JUNE/JULY 2017

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