Business Development & Licensing Journal For the Pharmaceutical Licensing Groups

Issue 16 | September 2011 www.plg-uk.com

The keys to successful entry into the US market

How can crowdsourcing help drug development?

Make the most of your forgotten assets

programs, including Medicare, Medicaid, and

the Veterans Administration. Geographically,

Medicare reimbursement decisions vary

widely across national and local jurisdictions,

the idea being to grant individual regions

flexibility in their reimbursement options.

These payer groups also have at their

disposal a variety of tools that indirectly

influence who receives therapies and

what they pay. One plan may provide easy

access to products with low co-pays and

few hurdles, such as a step edit or prior

authorisation. Another may force patients

through a gauntlet of access restriction

challenges. Meanwhile, the first plan

may extract significant rebates from the

manufacturers of those products that patients

seem to acquire so easily. Geographically,

these competing programs may overlap,

intertwine and abut in a system driven more

by patient age, employment status and

personal choice than by state, county or city

boundaries.

Connecting with consumersUnlike in many other countries, direct contact

with patients by pharmaceutical marketers

is permitted in the US, allowing for the

creation of patient-directed commercialisation

strategies. Programs such as DTC advertising,

couponing and web-based promotion are

all permitted in the US, but the rules are

complicated.

Simply knowing when to get the

necessary approvals and from whom

presents the first hurdle. Pharmaceutical

F our key factors drive a company’s

strategy for entry to the US market. First,

the options may be limited by financial

resources and in addition the company

leadership’s tolerance for risk will influence

its willingness to apply those resources to

the US market. The size of the opportunity

for the product and the market complexities

associated with making the most of that

opportunity make up the third and fourth

factors. Leaders of well-funded companies

emboldened by an enticing product forecast

may quickly overcome traditional risk aversion

but they should do so with a well-informed

understanding of the challenges they face.

In addition to preparing for the general

business environment, leaders in the

pharmaceutical industry must build

knowledge of the industry’s unique operating

requirements. Although ultimately no more

complex than any other market, the US does

present its own set of challenges. It has a

fragmented reimbursement environment,

unique freedoms and limitations around

direct-to-consumer (DTC) advertising and

complex regulations relating to the sales force

and its access to physicians.

ReimbursementBusiness leaders accustomed to single payer

environments will find the US reimbursement

system dauntingly complex. It is fragmented

in many ways, with reimbursement decisions

made by a range of payers, including insurers,

employers and pharmacy benefit managers,

all guided by a panoply of government

Any ex-US company looking to bring a pharmaceutical product into the US for the first time faces a hard choice – to go it alone, sign a licensing deal or embark on an acquisition. Careful consideration is needed to decide on the right strategy.

By Ben Bonifant, Senior Vice President and Practice Area Leader, and Eric Rambeaux, Senior Practice Executive, Corporate Development, Campbell Alliance

About the authorsBen Bonifant is Senior Vice President and

Practice Area Leader, Campbell Alliance.

He is the leader of Campbell Alliance’s

Business Development practice, assisting

pharmaceutical and biotechnology companies

with key licensing and acquisition initiatives.

He also acts as a strategic advisor to venture

capital and private equity decision makers.

T: +1 919 844 7100

E: bbonifant@campbellalliance.com

Eric Rambeaux is Senior Practice Executive,

Corporate Development, Campbell Alliance.

Keys to successfully entering the US market

4 Business Development & Licensing Journal www.plg-uk.com

advertising is regulated by the US Food

and Drug Administration’s Division of Drug

Marketing, Advertising, and Communications

(DDMAC). Product sponsors of prescription

advertisements must submit their

promotional materials to the FDA around

the time the materials are initially put into

public use, although a majority of product

sponsors voluntarily submit their broadcast

advertisements to DDMAC for prior review

and comment as the materials are being

produced. The most common violations

cited by DDMAC are instances when

pharmaceutical ads overstate a product’s

efficacy, expand the indication or the

patient population approved for treatment,

or minimise the risks of the product either

through inadequate presentation or omission

of information.

The rules around DTC advertising in the US

are not limited to government oversight. The

pharmaceutical industry’s trade and advocacy

organisation, the Pharmaceutical Research

and Manufacturers of America, released

its own Guiding Principles on Direct to

Consumer Advertisements About Prescription

Medicines in 2005. This action was designed

to use industry self-regulation to head off

potential congressional action against DTC

advertising in the wake of mounting criticism.

Selling to physiciansAs in other markets around the world,

efforts to market and sell prescription drugs

to physicians are highly regulated in the US.

In the mission to convince a physician to

prescribe one drug over another or to begin

prescribing a new therapy option, US sales

representatives are under strict constraints

regarding what they can and cannot say

to their physician audience. For marketers

entering the country for the first time, an

understanding of the rules and regulations

particular to the US is vital.

Companies new to the US must

develop an appreciation for each of these

factors and many more. They also must

build strategies that recognise how these

elements are inter-related. For example,

a company facing difficult payer access

may rely more heavily on DTC programs,

including couponing. Alternatively, offering

an overly generous sampling program may

undermine profitability for a product with

open payer access and where physicians

welcome additional information from sales

reps. Tools for effective pricing, creative ways

to gain access to physicians, and alternative

commercial programs are product and

market specific. There is no single approach

to the US market, and what works in one

arena may turn out to fail miserably in a

different product situation.

Weighing up the optionsIn the face of these challenges, companies

in recent years have pursued a range of

strategies (see figure 2). Each of the main

strategic options for bringing a product into

the US market – going it alone, licensing,

co-promotion, or acquisition approach

– carries its own set of advantages and

disadvantages. Weighing up these factors

will help push decision makers toward one

option or another (see box: Questions for

consideration, page 8).

Going it aloneBuilding an independent US commercial

organisation from scratch may appear the

best way to maximise income. Removing

co-promotion or licensing partners from the

equation ensures all product revenue goes

to the brand owner. Also, the product under

consideration may be the first of a string of

assets. Developing capabilities for an initial

product forces the company to build its

own knowledge of the US market, making

launching future products easier.

Unique US requirements mean companies

without existing expertise need enormous

investment of resources to build a fully

Although ultimately no more complex than any other market, the US presents its own set of challenges. >>

Fig 1: Deal distribution by year for various territoriesThe general 2010 trend showed a decline, but the number of deals for Europe and the rest of the world (ROW) has been relatively stable.

Nu

mb

er o

f d

eals

Year

35

30

25

20

15

10

5

02006 2007 2008 2009 2010

Source: Windhover Database. Updated 2 May 2011.

Europe onlyEurope & ROW

North America & ROWNorth America only

www.plg-uk.com Issue 16 | August 2011 5

What appears to be a profit-maximising choice can lead to extended periods of negative returns.

>> functioning independent commercial

organisation. If unsuccessful, companies

may burn significant energy and cash to

little effect. What appears to be a profit-

maximising choice can lead to extended

periods of negative returns.

Out-licensingOut-licensing the product to a US-based

company or one with an established presence

allows the entrant to take full advantage of

existing market knowledge and limits the

investment of money and resources. But

returns will be limited, as product revenue

will be shared. This strategy also keeps the

ex-US company distant from US marketing

activities, preventing the opportunity to build

up market knowledge.

When a company decides to license a

product, about 75% of the time it partners

with a regionally focused firm. The in-

licensors tend to be specialty-focused players

with strong commercial capabilities, limited

research and development capabilities and

little consideration for ex-US expansion

(see figure 3). The vast majority of assets

involved in regional deals are marketable or

very late stage assets. These characteristics

are fundamentally important for products

targeted at highly competitive areas or when

commercialisation requires large numbers of

in-market personnel.

The out-licensing approach was chosen by

Spanish pharmaceutical company Almirall,

which licensed its phase III candidate

LAS34273 for chronic obstructive pulmonary

disease and LAS100977 for broncho-

constriction in patients with asthma to Forest

Laboratories US.

Co-promotionCo-promotion strategies offer a middle way.

Companies can co-promote with a contract

sales organisation, or with a partner around a

single pharmaceutical product or around an

entire therapeutic area.

The co-promotion option allows an ex-US

company to begin building its own market

knowledge by learning from its US partner

and by getting first-hand experience with its

own commercial efforts. The strategy also

requires less investment than an independent

commercial effort while ensuring more

revenue income from the product than a

licensing strategy.

A co-promotion strategy affords the

company the opportunity to build market

knowledge so may be a valuable stepping

stone towards developing an independent

commercial organisation. A company may

choose to find a commercial partner to assist

with sales and marketing of a less strategic

asset with a view to developing the expertise

to go it alone with its primary asset.

This approach requires ample time to build

expertise with the less strategic asset. When

time is short, an ex-US company may be

compelled to turn to acquisition.

AcquisitionThe acquisition strategy lies outside the

spectrum of the options described above. An

ex-US company of sufficient resources and

size may purchase a US company matched

to the product’s commercialisation needs.

By absorbing and bringing the US company

into the fold, this approach provides instant

access to the US company’s existing market

knowledge while ensuring all revenue

from the product is delivered to the parent

company outside the US.

In 2008, speciality pharmaceutical

company Ipsen, based in Paris, took

three significant steps towards building a

commercial presence in North America. In the

field of neuromuscular disorders, Ipsen signed

an agreement with Vernalis to acquire its US

operations, which became Ipsen’s platform

6 Business Development & Licensing Journal www.plg-uk.com

for the launch of Dysport. In the field of

endocrinology, Ipsen acquired Tercica, and

in the field of haematology, Ipsen entered

into an agreement with Octagen to acquire

all of its OBI-1 related assets, a recombinant

porcine factor VIII.

Recently, even companies with an

established US presence have chosen

acquisition to enter new therapeutic areas.

The challenges posed by the oncology

market help explain why so many Japanese

companies have taken this approach.

Takeda’s acquisition of Millennium in 2008,

Astellas’s acquisition of OSI in 2010 and

Daiichi Sankyo’s acquisition of Plexxicon in

2011 all fit this profile.

Decision makers will need to consider

factors such as commercial requirements, the

payer landscape, the degree of consumer

involvement, the level of competition, and

physician access. Within a competitive

category, companies may also be more keen

to retain control over strategic decisions, such

as pricing and resource deployment. This

desire can push decision makers toward the

acquisition strategy.

In contrast, the more a product uniquely

fulfils an unmet medical need to a focused

prescribing group, the more likely the

company is to enter the market independently,

especially where reimbursement is not

anticipated to be as great a challenge.

When Dainippon Sumitomo Pharma Co.

began exploring options for introducing

its schizophrenia drug, Latuda, to the US

market, executives knew they would need a

strong commercial organisation to launch the

product successfully. They had three options:

build the organisation themselves, partner

with a big pharmaceutical company or buy

a smaller US-based company with the right

resources already in place to do the job. A

thorough analysis of its opportunities led

Dainippon Sumitomo to purchase Sepracor, >>

Figure 2: US commercialisation deal strategies

ActionCompany

In their second partnership, European drug company Grunenthal licenses to Forest

Laboratories exclusive US and Canadian rights to its pain compounds GRT6005 and

GRT6006. Deal date: December 2010

Italy’s Chiesi Farmaceutici grants specialty pharmaceutical company Cornerstone Therapeutics

an exclusive US license to sell its porcine-derived lung surfactant Curosurf (poractant alfa)

for the following 10 years (renewable thereafter automatically in one-year increments). In

return, Chiesi receives 11.9 million Cornerstone shares, becoming the majority shareholder of

Cornerstone. Deal date: May 2009

Spanish pharmaceutical company Almirall out-licenses US sales and marketing rights to Forest

Laboratories for LAS34273 for chronic obstructive pulmonary disease in 2006 and LAS100977 for

bronchoconstriction in patients with asthma in 2009. Deal dates: April 2006 and December 2009

Acadia grants Biovail Laboratories International US and Canadian rights to its phase III

selective 5-HT2A inverse agonist pimavanserin for neurological and psychiatric diseases.

Acadia retains rights in all other territories. Deal date: May 2009

Sanofi-Aventis licenses exclusive US development and commercialisation rights to Aeterna

Zentaris’s cetrorelix pamoate for benign prostatic hyperplasia. Deal date: March 2009

Portuguese drug maker Bial-Portela licenses the rights to commercialise the epilepsy candidate

eslicarbazepine in the US to Sepracor. Deal date: February 2009

Dainippon Sumitomo Pharma purchases the outstanding shares of common stock of Sepracor.

In July 2010 the Sepracor name is changed to Sunovion Pharmaceuticals in the US.

Deal date: October 2009

Shionogi completes the acquisition of Sciele Pharma through a cash tender offer followed by

short-form merger. The deal allows the Japanese pharmaceutical company Shionogi to expand

into the US market. Deal date: October 2008

Ipsen completes the acquisition of Tercica in North America to establish its global presence in

endocrinology. This is the third of Ipsen’s three steps to globalise its specialist care business.

Deal date: October 2008

Daiichi Sankyo concludes an agreement to acquire Plexxikon, a privately held pharmaceutical

company based in Berkeley, California, with a late-stage oncology product, PLX4032.

Deal date: March 2011

Astellas Pharma completes the acquisition of OSI Pharmaceuticals for $4 billion through a

short-form merger. Deal date: June 2010

Takeda Pharmaceutical completes the acquisition of Millennium Pharmaceuticals through a

tender offer and subsequent merger of a wholly owned subsidiary of Takeda into Millennium.

Deal date: May 2008

Grunenthal

(Licensing)

Chiesi

Farmaceutici

(Hybrid)

Almirall

(Licensing)

Acadia

Pharmaceuticals

(Licensing)

Aeterna Zentaris

(Licensing)

Bial-Portela

(Licensing)

Dainippon

Sumitomo

(Acquisition)

Shionogi & Co.

(Acquisition)

Ipsen

(Acquisition)

Daiichi Sankyo Co.

(Acquisition focused

on oncology)

Astellas Pharma

(Acquisition focused

on oncology)

Takeda Pharmaceutical

(Acquisition focused

on oncology)

www.plg-uk.com Issue 16 | August 2011 7

integrating the company with Dainippon

Sumitomo Pharma America and rechristening

the combined organisation with the new

name Sunovion Pharmaceuticals.

A year and a half earlier, Bial-Portela

also chose Sepracor as a commercialisation

partner, but the Portuguese drug maker

followed an entirely different approach,

licensing the rights to commercialise its

epilepsy candidate eslicarbazepine in the US

and Canadian markets.

Getting acquiredOne other strategic option may be attractive

to smaller ex-US organisations looking to

establish a foothold in the US – they may

choose to position themselves to be acquired

by a larger US business to take advantage of

the resources of such an organisation.

Picking a partnerDecision makers should consider several key

business questions in regard to potential

partners. For example, what do partners

have to gain in terms of new markets, share

growth, product extension or incremental

use of sales force? What are their risks?

What actions have they taken in this area

already? What other options are they likely

to consider? Do they bring the required

commercial capabilities?

Most important is the consideration of

the potential partners’ core capabilities as

they relate to the product’s potential success.

Some potential partners, for example, are

masters of contracting and payer access,

others may be highly successful at developing

and executing DTC strategies and consumer

access, while some may possess a large and

effective field force of sales representatives.

Assessing the capabilities of one company

versus another is challenging but necessary

when making this type of strategic analysis.

It is also important to map each potential

partner’s need for a deal as well as its history

of completing a deal with a structure as

envisioned by the company looking to enter

the US market. Balancing potential partners’

likelihood of matching the desired deal

structure against their company capabilities

provides a worthwhile insight that the ex-US

company can use in approaching these

potential partnerships.

ConclusionFor companies outside the US looking to

bring a product to the US market for the first

time, the opportunities can be enormous.

But so are the challenges. Few will go it

alone; some will seek the expertise they

require through acquisition and many will

tap into much needed resources via strong

partnerships. Through careful analysis of

their company’s own skills and resources,

the market potential and characteristics of

its product and the scope and capabilities

of potential partners, decision makers can

determine which commercial strategy has

the most potential to make their product a

success in the all-important US market.

Questions for consideration

In addition to creating a profile of the capabilities a potential partner would possess, decision makers should

create a profile of the preferred deal structure in which their company would be willing to participate. There is a

wide range of questions to consider in determining such a deal structure.

• Within the terms of the deal, how important is it for the company to recognise revenue or to have responsibility

for product launch and pricing?

• Is it important that the partner be willing to assist in developing managed markets capabilities?

• Should sales and marketing operations fall under a joint steering committee, with the decision makers’ own

company having final authority?

• Should the company have strategic input on a sales force incentive compensation plan or sales force training?

Whether for Europe or North America, the in-licensers in region-only deals tend to be the specialty-focused players in the regions.

Only a small number of the major EU regional pharmaceutical companies is represented in the

European in-licenser group(e.g., Almirall, Grunenthal).

Forest Lab, Endo, Hospira and the generic companies Watson and King were among the

most active in-licensers in the 2006-2010 period.

Deals for Europe only Deals for North America only

Fig 3: Profile of in-licensers for regional deals

North America

5%

Europe18%

Japan10%

Japan5%

Note: regions refer to the region of origin of the companies involved.Source: Windhover Database. Updated 2 May 2011.

Europe85%

North America

77%

Global co.20%

Global co.11%

Regional co.65%

Regional co.62%

Emerging co.3%

Other 1%

>>

8 Business Development & Licensing Journal www.plg-uk.com