Post on 22-Nov-2014
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Oshin AivazianRady School of ManagementFebruary 19, 2009
Focused on infection, oncology, respiratory disease, and cardiovascular disease
Two marketed products:• Synagis = drug for prevention of respiratory
infection in infants• FluMist = nasal spray vaccine for influenza
FluMist introduced in 2003 First, and only, nasal vaccine for flu Uses live attenuated flu vaccine;
could not give someone the flue Primary benefit = administered
without injection, unlike competitors Disadvantage = had to be frozen, not
refrigerated, unlike competitors
10 to 20 percent of US contracts flu each year (28 to 56 million people in 2003)
High-risk and normal groups of users High risk:
• Older than 65• Younger than 5• All ages with chronic diseases (ex. asthma)
Flu shot given in October, usually
Three competitors with traditional products
Total, they provided 80 million doses per year
Companies are:• Aventis Pasteur• Evans Vaccines• Wyeth Vaccines (expected not to produce
after 2002-2003 flu season) 93 million doses produced in 2002-03 87 million doses produced in 2001-02
Supplier concentration
Substitution of inputs
Switching costs Forward
integration
Switching costs
Buyer’s inclination to substitute
Bargaining leverage
Buyer information Brand Identity Product
differentiation Buyers’ incentives
Cost advantages Government policy Economies of scale Capital
requirements Brand identity Access to
distribution
Industry concentration
Industry growth
Product differences
Switching costs
Cheaper to produce LAIV vaccines than traditional, inactived vaccines
Lower unit cost, higher production yield• 10 times higher than inactivated vaccines
Capital investment required for LAIV production in an already established vaccine manufacturing campus is less than $10 million• Costs $100 million – $200 million inactivated
vaccines
Only one licensed LAIV producer in US – MedImmune
There are Russian LAIV and European LAIV producers; however, no short term threat to domestic producer
Possible “replication-deficient vaccine” could be developed, that combines theoretical advantages of LAIV and inactivated vaccines
So, MedImmune, through in-house research is its own supplier
No immediate threat from outside suppliers (2003)
However, new “replication-deficient vaccine” and overseas producers might pose future threats
Supplier Power = Low Buyer Power = Low Threat of Substitutes = High Barriers to Entry = High Rivalry = Low
FluMist appears to have few obstacles in the marketplace, despite a high threat of substitutes
People request flu vaccines, although CDC and health care professionals may influence the decision
Buyers have access to information about FluMist and alternative options
FluMist has distinct brand identity – as the only nasal spray vaccine
Incentives: 200,000 hospitalizations, 36,000 deaths
Elderly experience most deaths; insurance companies benefit with vaccine
Traditional vaccines cost $3.50 per dose; sold to health care professionals for $7 per dose
FluMist direct cost at peak capacity is $5 per dose; but, with current low production, it is higher at $15 per dose
The relative cost is higher; insurance companies might find traditional vaccines more attractive
At peak capacity, and inexpensive production, the price could be lower
Patent protection until 2018 on FluMist technology; only LAIV producer
In 2007, a refrigerated version was licensed; FDA approved frozen version in 2003
MedImmune has funds to increase capacity and take advantage of economies of scale
Marketing funds and exclusive partnership with Wyeth increases reach of promotions and sales force
European manufacturer developing new LAIV to cell culture substrate
MedImmune is also working on its LAIV for cell culture based production
New class of “replication-deficient vaccine” could be developed soon, according to early animal experimental data.
Short term rivalry is low
the potential advantages of LAIV are considerable, in speed, scale and cost of production, as well as through the simplicity of its nasal route administration, in reducing healthcare worker needs.
Increased indirect protection through herd immunity, particularly through LAIV vaccination of children, is another potential advantage, at least in seasonal vaccination settings.
capital investment required for an egg-based LAIV production in an already established vaccine manufacturing campus is significantly less than that in required for egg-based inactivated vaccines
Product availability is not a concern, when plant is at full capacity; however, it is a concern with limited capacity
Available in Hospitals, Clinics, Drug Stores
Administered with aid of health care professionals (doctors, nurses, assistants)
Less healthcare worker burden without syringe and needle requirements.
Lower Supply = Higher Price, in event of shortage
Less production by competitors means more need for product
Current price with limited capacity is $15 per dose; full capacity makes use of economies of scale
Even at $5 per dose, costs more to produce than traditional vaccines
Added benefits lower total cost to hospitals and other intermediaries
Direct to consumer advertising in area of $20 million; must consider if effectively reaches intended segment
Media should reach segment of elderly, as well as parents of “high risk” children
Can market the drug as being for both high risk children and adults
Children are primary amplifiers of influenza in the community; most deaths are among elders
Wyeth sales force increases impact of brand among doctors
Appears that FDA would allow FluMist be used on healthy children and adults ages 5 to 49 (159 million people)
Of these, only 10% were already vaccinated; however, vaccine not recommended for this group.
Imposing a vaccine on this group would require influence: stress preventative measures
There is an expected shortage of the drug – CDC said 185 million Americans should get receive the vaccine each year
Production was only 80 million per year; bring the gap to 100 million doses
Therefore, FluMist should be in high demand; perhaps not enough on market
To counteract this possible shortage, MedImmune should focus on a smaller group
Shortage can hurt a company’s reputation
The smaller group could be:• At Risk 5-49 group (if 10% = 2.47 million
people)(if 20% = 4.94 million people)
With capacity of 4 to 6 million, this group could be satisfied
Because this saves health care professionals and insurance companies expense, pricing should take this into account
Consumers pay $20 to $25 for shot Direct cost could be as much as $20 or
$25 and still be profitable for health care professionals (save on supplies and administrative costs of nasal vaccination)
However, take into account need to freeze LAIV, and cost to clinics; set price accordingly – lower than $20 or $25
Focus on its benefits as a preventative measure, for high risk groups
Takes into account effects of possible shortage
Focus less on direct-to-consumer advertising through print media, and more on point-of-sale advertising at pharmacies and clinics
Increase marketing to health professionals, and encourage them to recommend FluMist
Was initially approved only for healthy people ages 5 to 49 because of concerns over possible side effects.
Now FluMist is approved and recommended for healthy children 24 months of age and older.
In August 2006, FDA approved the current unfrozen refrigerated version for healthy people ages 5 to 49. Ready for the 2007-2008 flu season
MedImmune sold only 500,000 of 4 million doses in 2003-2004 than expected, and had originally priced FluMist higher than traditional vaccines; marketed it as a premium product
Because of low demand, it had to sharply reduce price. In 2003-2004 flu season, it only made $48 million in Flu Mist
sales. Price drop did not help the situation, as it made only $21 million the next year
The price premium remains small, but with a new refrigerated version, it could increase
In 2003, Roger Sampson should have a more concrete vision of who specifically would have highest demand for FluMist
Marketing should focus on specific group with the highest demand
If FDA has not allowed to market to this segment yet, then should restructure marketing plan to focus on second-best option.
If cost outweighs revenue, one option would be to wait for FDA approval to use on most profitable segment