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New Commercial Model in Life SciencesOnline survey

New Commercial Model in Life SciencesOnline survey

Results and key take-aways

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Survey outline

1. Survey outline

2. New Commercial Model - background

3. Future areas of success

1. Sales and marketing

2. Research and development

3. Manufacturing

4. Expected level of change & other industry parallells

5. Level of adoption within organizations

6. Conclusion

7. MCE view

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Participants

• An email invitation was sent to the Life Science customer base of MCE

• The survey was performed online

• 229 respondents completed the survey

• We segmented the respondents in the following groups: Industry: traditional pharmaceuticals vs biotech Level: executive – director – manager – individual contributor Department: marketing – sales – medical – finance/L&A Current growth rate: high – medium - low Expected growth rate: strong – medium - other Industry ranking (sales): top10 – between 11-20 – lower We did not get sufficient answers to run subanalyses for generics and OTC companies, and for the Manufacturing and Discovery

Research segments.

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Sales and Drug development will undergo most of the change by 2010.

Interestingly, manufacturing (and less so, marketing) are not seen as areas that will see major changes.

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Segment analysis

• The key trends from the overall analysis remain the same in the subanalysis, illustrating the robustness of these trends.

• All but one segment feel that sales will face most of the change – even in high-growth companies

• Only Finance/L&A sees biggest change coming from drug development unit.

• Drug development takes the number 2 spot in almost all segments

• Discovery research is number 3, but several subsegments select Marketing as either 2 or 3, with the ‘insider’ Marketing segment agreeing on the massive change (position 2).

• Individual contributors also feel that support services and manufacturing will face important changes by 2010. Priority 1

Priority 2Priority 3

Priority 1Priority 2Priority 3

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41% of respondents see mergers happen more frequently than in the past – only 26% see a decline.

Despite the absence of big mergers (and the absence of tangible merger benefits) in recent years, the current pressures on pharma are seen to lead to a new wave of big mergers and consolidation.The trends are very similar for the segments; however, Finance/L&A and individual contributors see even more consolidation going forward.

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Health economics/market access is the key area where significant investments will be made.

Pharma is putting its bets on health economics and R&D. The more traditional units that have delivered success of the past will face a disinvestment strategy.

Average growth rate in %

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Urgency to shift resources to adapt to the new environment is highest among the senior levels...

• The need for having important disinvestments in area of primary care, manufacturing, marketing and specialty care is much higher at managing director and director level. • Individual contributors (and to a lesser extent managers) have less explicit shifts in mind. They seem to be continuing to work along the ‘old business model’. This indicates that there is still a lot of change management needed to get the entire organization moving towards the new commercial model.

Average growth rate in % expected in next 5 years Red Nbrs = Avg growth rate deviating >30% from the Overall average growth rate

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Summary Results by segment

Average growth rate in % expected in next 5 years

Red Nbrs = Avg growth rate deviating >30% from the Overall average growth rate

Except for the functional level (see previous slide), most other segmentations yield similar outcomes; another noticeable exception is low-growth companies, which are divesting more across the board with the exception of HE/market access.

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Improving relationships is key for S&M

Delta % from average score of

Account management, customer centricity and new services are seen as key levers for success. Somewhat surprisingly, digital marketing is not among the key trends and also the new stakeholders score below the “noise level” they are generating. The same goes for contract salesforces, which is a big trend in the real world – perhaps less well known by our sample?

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Summary S&M focus areas by segment

Rank nbr. - Lowest 3 ranking vs Top 3 rank

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Summary S&M focus areas by segment

• The top and bottom 3 areas tend to be the same for all segments; however, in 2 cases, digital marketing is prioritized to 2nd position (executives and low-growth companies), illustrating there is still ambiguity about the impact of digital marketing, certainly at companies that are doing well and at lower functional levels.

• Investment in new stakeholders & markets are not seen as a top-3 priority by most respondents, although they are generally said to be key components of the new commercial model, suggesting once more the need for broad change management.

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R&D: efforts are focused around building economical relevant medicine and developing niche markets

Average weight

Health Economics is once again a clear winner, followed by the human genome. Inlicensing is expected to decrease, while the probability of running more trials in emerging markets is seen is very remote.

Delta % from average score

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Summary R&D focus areas by segment

Rank nbr. - Lowest 2 ranking vs Top 2 rank

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Summary R&D focus areas by segment

• The top and bottom items tend to be the same across the segments, with a few striking examples: Executives rate development outsourcing much higher than all

other categories, highlighting again the “divide” between the top and other levels in the organization.

Unsurprisingly, low (expected) growth companies have a stronger interest in licensing in phase-III compounds (ranking it at 2-3) than other players

Once again, size of the company has no impact on priorities. Overall, most respondents are looking at today & the short-

term future and underestimate the impact of key R&D trends.

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Manufacturing: efforts are focused around plant consolidation and offshoring to low-cost countries

Average weight

Delta % from average score

Consolidation of pharmaceutical plants is the clear winner; at the other extreme, most respondents believe chemical plants have been optimized already. Outsourcing & offshoring is seen as less important.

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Manufacturing: efforts are focused around plant consolidation and offshoring to low-cost countries

Average weight

Delta % from average

•Overall, trends are very similar across all segments•Companies with low (expected) growth are feeling the pressure more and see offshoring as the top priority

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Most respondents expect little if any change going forward…and find it difficult to relate to other-industry models

Average weight

Delta % from average

Delta % from average score

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Executives are not in line with their colleagues with regard to the dominant business model.

Average weight

•Despite all the buzz in the media and the layoffs, traditional pharma, executives, sales & marketing staff, large companies and strong-growth companies are more inclined to see “no change” at all.

•The customer-centric model (banks) vs product-centric gets some support as a runner-up strategy.

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Despite the fact most see limited change, most participants feel the company should reinvent itself.

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This is particularly the case with the executives, marketing and larger companies

•Executives and directors are much more convinced about the need to change compared to the lower ranks (managers and individual contributors).

•There seems also to be a disconnect between marketing an the other parts of the organization especially with the sales community.

•Not surprisingly larger organizations see a bigger need to reinvent themselves compared to the smaller companies.

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Most organizations have a programme in place – but it often fails to fully engage the employees

Companies clearly invest in communicating the change but are not always specific enough.

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Programs around the new commercial model are more frequently in place at large and low-growth companies.

Sales seems least aware of these projects.

•Larger companies and companies who expect to face low growth in the coming years invest more in programs around the new business model.

• There is a big difference in the awareness of such programs between sales and marketing people.

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Respondents in sales, lower functional ranks and smaller companies rate the communication as insufficient

• Executives are far more satisfied with the level of communication compared to the other ranks in the organization.

• Sales is less happy with the level of communication – this is all the more striking as everyone expects the change to hit hardest in the sales ranks.

• Also smaller organizations tend to invest less in clear communication.

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The adoption of the new way of working is mixed and requires an acute boost.

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Once again, sales and lower-level staff feel themselves in a vacuum

• The huge difference between executives and individual contributors suggests that the related strategies are far from being implemented in the field.

• Once again, sales people feel left out, despite the fact that most changes are happening in their area.

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Conclusions

1. By 2010, most companies expect a strong change in the salesforce, followed by R&D.

2. In terms of sales, a more customer-centric approach is expected, featuring more account management and extra services. Primary-care salesforces will continue to decline.

3. On the R&D side, a big uptake in Health Economics/Market Access is expected to take place.

4. At the manufacturing level, the optimization of pharmaceutical plants is key.

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Conclusions

5. Interestingly, despite all of these trends and the media coverage of restructurings, most respondents see little or no major change happening.

6. At the same time, however, most companies have a program in place to address the new commercial model.

7. Unfortunately, the momentum of these programs is limited:o Communication is very selective and anecdotal beyond the senior

levels: particularly salesforce and individual staff members have limited insight.

o Very few companies have gone beyond communication and put in place key processes to support the change (new KPIs, processes, incentives, ...)

8. This situation is all the more undesirable, as most of the change will impact the least-informed & -committed levels – sales and individual contributors.

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MCE view

• Management Centre Europe has supported many industries and companies in their transformation journey to a new business model.

• It is clear that also pharmaceuticals will continue to undergo major change. The common perception in the survey that limited or no change will happen in pharma is a clear indication of the fact that there is no “burning platform” fueled by a need to change and a clear vision of the future.

• The introduction of programs around the new business model in certain companies is an important lever for success. However, the implementation of these programs should be improved fast to prevent the typical pitfalls of transformation programs.

• To address this need, MCE is offering an interactive 3-day New Business Model workshop taking participants from the key trends in the pharma landscape & selective parallells to other industries to an actionable roadmap for successful change, based on many years of experience in this field.

• This workshop can also be customized and run in-company. For more info, see the next page.

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Contact

New Business Model in Life SciencesFonny Schenck, senior associate

Tel: + 32 477 45 32 87

Email: Fonny.schenck@services.mce-ama.com

http://www.mce-ama.com/The-New-Business-Model-in-Pharmaceuticals.aspx

GeneralMCE Management Centre Europe

rue de l'Aqueduc 118

1050 Brussels

Belgium

Tel : + 32 (0)2 543 21 00

http://www.mce-ama.com

info@mce-ama.com