Shimasaki Craig D. The Business of Bioscience: What goes into making a Biotechnology Product

Подождите немного. Документ загружается.

103Market Research and Assessment Tools

BookID 185346_ChapID 7_Proof# 1 - 20/08/2009

Branding

Branding is the personal sense of benefit, value, and desirability customers associate

with having a product. Companies sell products, but they are really marketing

brands. Branding is more than just a product trade name and its recognizable product

packaging – it is all the information evoked in the mind of the consumer when they

encounter a product.

Companies spend many years carefully creating brands that evoke value in the

minds of their customers. For instance, when someone thinks of the safest automo-

bile, they may think of Volvo. When one thinks of automobile reliability, they may

think Toyota or Honda. When one thinks of luxury, they may think Mercedes-Benz

or Lexus. Notice that Toyota’s brand is not associated with luxury because their

target market customers do not want to pay $60,000–$80,000 for a Toyota automobile.

Toyota knew that they could not get their target market to pay high prices for a

“luxury Toyota,” so they successfully created an upscale Lexus brand using the

same or similar parts. Brands are created over time by consistently delivering prod-

ucts that are in line with a brand’s promise.

For biotechnology products, branding is strongly associated with the tangible

medical benefit a product provides to the patient, or physician, or medical researcher.

There are other factors that help create the brand’s value, and these can be enhanced

if there is first a tangible medical benefit to the product.

Market Research and Assessment Tools

Market Research is the foundation upon which to build a market strategy – it is

obtaining information about a product’s potential customers. Market research

includes all methods of gaining information and insight about the market for a

product, and the needs of their customers. For scientists, engineers, or physicians, think

of this process as a graduate level thesis, proposing a hypothesis and examining data

pertaining to the market needs of the customers in question. From this information,

one will formulate conclusions in a stepwise manner just as one would conduct

scientific experiments – building upon proven theories before arriving at conclusions.

Market research may be gathered from medical providers, specialty physicians,

insurance companies, researchers, or patients with a particular disease or condition.

Be sure to conduct thorough market research, gathering as much data as possible.

When studying and interpreting market research results, be sure to guard against

selectively seeing and hearing only things that confirm a bias for market acceptance

of a product. Be your own naysayer, and think of reasons why a target market will

not want this product, and why it may not receive medical reimbursement. By doing

this, one can then formulate many answers to investor market questions before they

are even asked.

104 7 Developing a Marketing Strategy

BookID 185346_ChapID 7_Proof# 1 - 20/08/2009

Primary and Secondary Market Research

Market research is classified into “primary” and “secondary” market research.

Primary market research is a first-hand account of information, such as talking

directly with customers and getting answers from them, conducting focus groups,

or commissioning a study by a market research group. Secondary Market Research

is information obtained by and from others, such as published studies, or commer-

cially available competitive market information. Because all market research has

some bias, knowing a bit about polling and population statistics can be helpful.

Market Size and Opportunity

All companies and their investors want to target the largest possible market for

their product or service. Venture capital likes to see large market potentials for a

biotech product, usually in the range of a billion dollars. Market potential or a mar-

ket opportunity is considered to be all potential customers for a product.

Sales Projections

It is not enough to just state your market potential to investors; the entrepreneur

needs to estimate how much of the potential market will be captured with their

market strategy during a period of at least five years. This projection is referred to

as a Sales Forecast, Pro forma, or Management’s Projections. Sales projections are

used to show the projected impact of your market strategy, and the attractiveness of

your market. There are two ways to develop a forecast: one is the top-down

approach, and the other is a bottom-up approach. The top-down approach is a first

approximation, but it is not built by real drivers of demand. The top-down approach

is done by first taking the market potential, and estimating a market penetration

percentage based on various assumptions, including penetration rates by other

companies in adjacent markets. The bottom-up approach is a methodical approach

that takes key assumptions supported by data, and builds upon these and other

tangible factors to calculate a resulting revenue stream.

For instance, for a company developing a diagnostic test for a particular condition

that will be ordered by an OB/GYN for one would start by showing the number of

OB/GYNs in the country, then research the number of patients with this condition that

any one OB/GYN sees in a day, a week, or a month. Then one makes reasonable

assumptions on what percentage of patients with this condition the test would be

ordered based on this market research. This way, an investor sees what assumptions

are made, and they can agree or disagree with them. However, they cannot disagree

with the number of OB/GYNs in the country, or the average number of patients with

this condition. It is worthwhile to produce sales projections by both the bottom-up and

the top-down methods to arrive at the best estimate of revenue generation.

105Biotechnology Products Typically Have Three Customers

BookID 185346_ChapID 7_Proof# 1 - 20/08/2009

Be forewarned, sales projections are always suspect by investors. They have

seen too many instances where entrepreneurs make up wildly unrealistic projec-

tions. Most investors rightly discount all sales projections in a business plan. There

is no way to overcome this mental exercise by potential investors. The best thing to

do is to provide realistic projections, and list the key assumptions used to arrive at

these projections. Show investors that the projections are supported with solid data

and logic. Occasionally, there is no data available to support an assumption. In this

case, draw parallels from another market or product, but be sure to acknowledge

these limitations, and provide reasons the estimates are logical. Do not make

unrealistic assumptions or provide unsupported estimates – poor assumptions undermine

your credibility in the eyes of investors.

When preparing a pro forma, it is wise to prepare a worst case scenario – one in

which some of the key assumptions are not met. For biotech products other than

therapeutics and biologics, you will be in the market sooner. If you are counting on

precisely hitting your sales projections and your cash is planned to the exact month,

slightly missing your projections means that you will run out of money. Be sure to

build pro forma projections using various scenarios, and you will end up with better

estimates for your sales projections.

Biotechnology Products Typically Have Three Customers

Marketing to a single segment of customers is hard enough, but to make matters

more difficult, biotechnology products must gain acceptance from multiple customers

to receive broad acceptance. For biotech products, the Patient, the Physician and

the Payor, all play a key role in the gaining of market acceptance and success.

The ultimate end-user of most biotechnology products is the patient, but usually the

patient has less influence in the product selection, and the physician usually makes

or shares in the final decision. In the US, the payor must also find enough value in

the product to provide reimbursement. Without reimbursement for these products,

there is no realistic method for wide-spread adoption of most biotechnology

products in the US.

Who Is the Patient?

The patient for a biotechnology product is usually easy to define. If your product is

a drug-eluting stent, your patient-customer is an individual with coronary artery

disease wanting to avoid bypass surgery. If your product is a new statin drug then

your patient-customer is someone diagnosed with high cholesterol that fits the

indications-for-use of this drug. If your product is an infectious disease diagnostic,

your patient-customer is a person presenting to a clinic, hospital, or doctors’ office,

with the disease symptoms.

106 7 Developing a Marketing Strategy

BookID 185346_ChapID 7_Proof# 1 - 20/08/2009

Who Is the Physician?

Determining the physician can be a bit more complex than identifying the patient,

as multiple specialty physicians and medical opinion leaders are involved, and each

may have a differing interest in your product or service. For the drug-eluting stent,

the physician-customer is an interventional cardiologist, who will be inserting the

stent into the appropriate patient-customer. For the statin drug, the physician-

customer may be a general practitioner, an internist, a cardiologist, a geriatrician,

or even a physician’s assistant. For the infectious disease diagnostic, your physician-

customer may be any physician, but generally there will be a core group of them

that will see more cases of this particular disease than others. For instance, if your

test is for Respiratory Syncytial Virus, this disease primarily occurs in children less

than 2-years old; therefore, the target physician-customer would most likely be

a pediatrician or hospital ER physician.

Who Is the Payor?

There are multiple payor sources, such as private insurance (large, small, regional,

national), HMOs, Medicare, Medicaid, and each have certain requirements to reach

a reimbursement coverage decision. In the US, we tend to have a sense of entitlement

for medical care and usually do not expect to be paying much out-of-pocket for

healthcare services. This means that to get most products or services adopted in the

medical field, you will need to secure medical reimbursement. To get payor coverage,

your product must provide a significant benefit to the payor and to their patient.

Many private insurances rely upon medical reimbursement evaluation groups for

assessing reimbursement decisions – targeting these groups may save you time and

money without having to deal with each payor individually. You will need to spend

sufficient time examining medical reimbursement strategy issues to get wide-spread

adoption of your product, as this is a critical component of success for biotechnology

products. Do not presume that these issues are ones you deal with after your product

is developed. Smart investors will not fund projects that have no reasonable chance

of getting medical reimbursement coverage, so be sure to have a good understanding

of this as you raise capital.

Multiple customers make biotech product market research and development

more complex than in industries where there is only one customer. You must care-

fully consider each of these customers because you cannot market your product

successfully without acceptance from all three.

Five-Step Process to Applying Market Concepts

I have listed below, five steps to help you begin formulating your marketing strategy.

There are many more aspects, but those outlined will help you get started developing

your own marketing plan. To reiterate, you must first have already determined that

107Five-Step Process to Applying Market Concepts

BookID 185346_ChapID 7_Proof# 1 - 20/08/2009

there is an acute need for your product, which is not served by other alternatives

or substitute products. This is even more important than the market size. Niche

marketing categories are seen as opportunities to capture a ready market for a

product that would be expected to grow in demand and usage because of the acute

need for such a product.

Step 1: Determine Your Potential Market Size

First determine the potential market for your product. This is the largest group of

customers that could conceivably purchase or use your product. The total market size

represents your market potential and is not a sales projection – rarely do product sales

get close to capturing the entire market due to many limitations, including competi-

tion. By taking the total customer market, you will estimate the total annual market

potential in dollars, using your product pricing and other factors such as frequency

of use. Investors want to know that your market is big enough to support their invest-

ment, and provide the type of return they expect. Most venture capital investors want

to see market potentials that exceed $1 billion dollars annually. For instance, it would

be foolish for a venture capital investor to invest $30 million dollars into a company

if the total market size for the product was only $5 million dollars annually.

There are many ways to determine your potential market size. One way is to

evaluate your competitors’ potential market, if you have competition. Another

way is to evaluate the potential market for substitute products. Remember, you

are not using the actual sales of competitors or alternative products; you are

estimating the potential market that could be reached with an ideal product –

which usually is many times larger than a substitute or competitive product.

Most market potential estimates are determined using demographic data. For

instance, if you are estimating the total market for a biotech product that pro-

vides blood flow to an ischemic artery immediately after cardiac arrest, you

would determine the total number of heart attack victims per year, multiplied by

the estimated price of your product.

Step 2: Define Your Target Market Segment

Next, you have to determine who is your best customer. This is a subset of your

market potential, and represents the first group you will target, with the highest

likelihood of purchasing or using your product. This is the group with the greatest

need and desire for your product, and it represents the population that you must

capture first to reach more of your potential market later. A Target Market is easier

to reach than your entire potential market because these customers have many simi-

lar needs and behaviors. If you cannot first capture your target market segment,

your product will not be successful. Define your Target Market by segmenting your

Potential Market into homogeneous groups of individuals that have the greatest

108 7 Developing a Marketing Strategy

BookID 185346_ChapID 7_Proof# 1 - 20/08/2009

likelihood of purchasing or using your product. Your target market is the most homo-

geneous group of individuals with similar wants, needs, and desires, as it pertains

to your product. Use the segmentation filters outlined earlier, such as geography,

demographics, and behavior and usage, to identify your target market.

Sometimes your target market may be a niche market if it is small and specialized.

In some senses, your target market can be thought of as your market niche. The truth

is that you must be successful first in a niche, and seek to own that market, in

order to gain acceptance from the rest of the market later. This is true of all prod-

ucts, including long-distance running shoes, where the phenomenally successful

Nike first established a niche in the early 1970s. Since then, Nike expanded their

brand to everything including the eyeglasses that I wear while writing this book.

The principle of “owning” a niche, establishes your reference point, from which

you later expand to the total market potential.

Step 3: Articulate Your Product’s Value Proposition

to Your Target Market

This is called positioning. Here you want to articulate the product’s benefit to your

target market. Ask yourself, “What are the product’s features that infer benefit to the

user?” “What are the unmet product needs of this target market?” “What are the

meaningful and compelling points-of-difference between this product and the

competition?” “How will the customer benefit by using this product?” For biotech

products, it is useful to quantify the benefit to the user or patient, such as: a phar-

macoeconomic benefit, quality-of-life benefit, survival benefit, measure of improved

health, less pain, lower risk of adverse events, less complications, faster acting, etc.

Start by examining competition or substitute products, and find out what value they

bring to the user. Inadequate substitute product can be thought of as inferior

competition, even though they are not a direct competitor since there may not be an

ideal product that meets this market segment’s needs. Consider the unmet needs of

your customers in spite of these inadequate substitute products, and identify how your

product fills these needs. Then list the solutions, features, and benefits your product

provides to this target market segment.

Step 4: Select a Market Channel to Reach

Your Target Market Segment

A market channel is the method you will use to gain access to your best customers,

and the way you will deliver your product to them. All biotech products will have

some type of market channel, and most companies will not directly sell their

products to the end-user unless they are a vertically integrated pharmaceutical company.

109Using Biotech Product Examples

BookID 185346_ChapID 7_Proof# 1 - 20/08/2009

For a simplistic example, the market channel for Rainbow® bread is the grocery

stores and convenience stores. If you are Dell computer, you have more than one

channel – the direct market to the end-user consumer over the internet and phone,

and a market channel through retailers such as Wal-Mart and Sam’s Club. If you are

Ford or GM, your market channel is independent car dealers who show your vehi-

cles to the end-user and fulfill the warranty obligations of the company.

Find ways to leverage existing market channels. Do not claim to build a new

market channel as part of your market strategy, though it has been done with

some biotechnology companies such as Amgen, Genentech, Genzyme, and even

the newcomer Genomic Health. Ideally, you should propose to leverage existing

market channels because the development of a new market channel is a new mar-

ket risk. There are good market channels available to reach your target market, so

pursue these rather than developing your own first. Also, look into collateral

usages of existing market channels that are mutually beneficial to you and the

channel partner.

Step 5: Validate and Refine Your Market Strategy

Test your market assumptions. All marketing plans are interesting theories but the

only good ones are the ones that work for your product. Test your market strategy

in some way to see if it is viable. The ways you can support the validation of your

market strategy are many: hire a consultant, retain some physicians in this field,

interview option leaders in this market, or beta test your product’s receptivity. Use

additional primary market research to see if it supports each of the assumptions in

your market strategy. Your goal is to, in some way, validate your assumption that

the target market still wants your product.

Using Biotech Product Examples

Here we take two product examples and walk through a hypothetical market strategy

development process to help you see the application of these concepts and tools.

Using these examples, you can draw parallels to your own product, and apply it to

your own situation. The two product examples we will use are the following:

A molecular genetic test for the assessment of breast cancer risk.•

A nasal spray biologic vaccine against influenza virus.•

The market strategy you develop will be incorporated into your business plan, but

nuances and modifications are refined over time. The examples here are not neces-

sarily optimal for either of these products, but they simply serve as illustrations for

application of these marketing tools.

110 7 Developing a Marketing Strategy

BookID 185346_ChapID 7_Proof# 1 - 20/08/2009

Example: Molecular Genetic Test for the Assessment

of Breast Cancer Risk

Determine Your Potential Market Size

We start by identifying the total market opportunity for this product and estimate the

market size in patients and dollars. We always want to find the largest potential market

for our product. For this example, the patient-customer could be both men and women

because men do get breast cancer, though it is only about 1–2% of all cases. Clearly,

the total potential market would double if this test were offered to both men and

women. But to market to both men and women, you need product development

milestones that include genotyping men and women with breast cancer in order to

identify causative genes for both. However, your market research may show that today

there is not an acute need for a product to assess breast cancer risk in men, so we will

target only women. This reemphasizes a previous point – you do not want to have

a superior technology product in search of a market need. Also, notice how market

development decisions impact your product development milestones and vice versa.

We concluded that the potential market for this product is all women, right?

Not necessarily. You need to determine how acute is the need to assess breast

cancer risk in a 10-year-old or a 90-year-old female? As the need increases, the

consumer/patient has a greater interest in the product. From our secondary market

research, we find that in the US, annual mammography screening recommendations

begins at age 40 and continues through to age 69. Therefore, it would be reason-

able and logical to assume that there would be some interest in assessing breast

cancer risk from women aged 40 to 69. For now, let us conclude that this is our

potential market – in the US, this means approximately 65 million women, and in all

developed countries it may be approximately 250 million women. If we price this

test at $1,000, then the market potential for this test would be $65 billion dollars

in the US and $250 billion dollars world-wide. Realize, that making a pricing deci-

sion is much more complex than presented here. Product pricing can be based on

a comparison of similar technology product pricing plus a premium; it can be the

amount you can reasonably charge, or it can be based on willingness-to-pay studies

if it is paid by the patient. Pricing decisions will also be impacted by private insurance

and government reimbursement. If you are in a country where medical care is

covered by government funds, then pricing is impacted by other factors, and these

criteria determine whether your product is accepted into their formulary.

Define Your Target Market Segment

We determined that our Potential Market world-wide is 250 million women, but

this is not our Target Market segment. Remember the target market is the most

111Example: Molecular Genetic Test for the Assessment of Breast Cancer Risk

BookID 185346_ChapID 7_Proof# 1 - 20/08/2009

homogeneous group that has the strongest interest in your test. You define this group

by segmenting the potential market using the tools provided. Let us use demograph-

ics to further segment the Target Market. Let us say this test will be paid for by the

patient until reimbursement is obtained. Therefore, a more homogeneous market

segment with the desire and ability to purchase this test might be women aged

40–69, with household incomes greater than $75,000 annually. But we can still

find a more interested target market segment for such a test. Secondary market

research reveals that about 65–75% of all women between the ages of 40 and 69

seek mammography services annually. Women who seek mammography services

and travel to these centers, want to be told they do not have breast cancer. This

target market segment should be even more motivated to purchase this test than

all the others. At this point we will stop segmenting because eventually you can

segment too much and end up with too few customers to have a viable business. So

now, we have defined our Target Market Segment for this test as those having the

following demographic and behavior characteristics:

Women•

Age 40–69•

With household incomes greater than $75,000 annually•

Women seeking mammography services annually•

Segmentation by behavior and usage help us to identify and target the most

homogeneous group with similar wants, needs, and desires, who would have the

highest likelihood of purchasing this test. Your Target Market is the group from

which you will build a market base.

Determine a Value Proposition to the Target Market

Having a genetic test to tell a woman of her risk of breast cancer is just information.

But information that has no actionable plan may only provide intellectual or enter-

tainment value. The Value Proposition for this test must be the ability to do some-

thing to change the outcome of your genetic predisposition. Genetic predisposition

tests for Huntington’s disease do not have a high value proposition because today

there is little a patient can do to alter the course of that predisposition – so why

would one want to know? A value proposition needs to be something so valuable

to the patient, that it compels them to want to use the product. Your secondary

market research reveals that if detected early, the five-year survival rate for breast

cancer is 95%; whereas if detected after it has metastasized to another organ, the

five-year survival rate is 21%. Secondary market research also shows that there are

preventative medications available, and that women who get breast cancer, about

90%, do not have a strong family history of the disease. Therefore, one Value

Proposition can be that genetic information coupled to action can potentially prevent

breast cancer, or catch it early, where long-term survival is the greatest.

112 7 Developing a Marketing Strategy

BookID 185346_ChapID 7_Proof# 1 - 20/08/2009

Evaluate and Select a Market Channel to Reach

the Target Market

Because this product is a genetic testing service with specimen collection requirements

and not a device, you will need to find an appropriate avenue to reach the patient. Since

this test requires medical interpretation, you would want the market channel to involve

a physician. Having a market channel encompassing all physicians would be pro-

hibitively expensive to reach, and may require a pharmaceutical-type sales force.

Remembering that biotechnology products have three customers, you would also

segment the physician market just as you did for the patient, but the physician can also

become a market channel. Your market research may show that there is movement to

consolidate mammography services to comprehensive breast care centers, which have

higher-end services with greater sensitivity and specificity, such as MRI and ultra-

sound. Your research shows that these centers do not have a method to identify the high

risk patient other than through family history, so this would be an ideal test to incorporate

into their services. By targeting this market first, you have a suitable market channel and

may later expand into a secondary market such as OB/GYNs and Family Practice.

Validate and Refine the Market Strategy

One way to validate the market is to do a test market of the product’s receptivity. Test

markets can be difficult and expensive to conduct, but they can provide good infor-

mation as to patient interest and willingness-to-pay. If you have a handful of these

centers with physicians interested in this test, ask them to participate with you in a

limited manner. Assess the receptivity of their population to take such a test, and

thus verify the physician and patient market interest. This step is necessary to be sure

that all your market research and conclusions actually mirror what is going on in the

real world.

Example: Nasal Spray Vaccine Against Influenza Virus

Determine Your Potential Market Size

Just as we did in the previous example, we want to find the largest potential market

for this product. To do this we can consider all individuals that could be vaccinated

against influenza as a starting point. Since influenza is a disease that potentially

affects all individuals, the potential market is simple to estimate, which would be

all individuals between certain ages. Pick a country, find the population between

those ages, and multiply that number by the price of the vaccine. Let us presume

that this new vaccine delivery product will have the same potential market as all