Pre-Launch Forecasting of A Pharmaceutical

International Journal of Pharmaceutical and Healthcare Marketing
Pre-launch forecasting of a pharmaceutical drug

Renato Guseo, Alessandra Dalla Valle, Claudia Furlan, Mariangela Guidolin, Cinzia Mortarino,
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IJPHM
11,4 Pre-launch forecasting of a
pharmaceutical drug
Renato Guseo, Alessandra Dalla Valle, Claudia Furlan,
Mariangela Guidolin and Cinzia Mortarino
412 Department of Statistical Sciences, University of Padova, Padova, Italy
Received 12 July 2016
Revised 23 May 2017

Accepted 30 August 2017 Abstract
Purpose – The emergence of a pharmaceutical drug as a late entrant in a homogeneous category is a
relevant issue for strategy implementation in the pharmaceutical industry. This paper aims to suggest a
methodology for making pre-launch forecasts with a complete lack of information for a late entrant.
Design/methodology/approach – The diffusion process of the emerging entrant is estimated using the
diffusion dynamics of pre-existing drugs, after an appropriate assessment of the drug’s entrance point.
The authors’ methodology is applied to study the late introduction of a pharmaceutical drug in Italy within
the category of ranitidine. Historical data of seven already active drugs in the category are used to assess and
estimate ex ante the dynamics of a late entrant (Ulkobrin).
Findings – The results of applying the procedure to the ranitidine market reveal a high degree of accuracy
between the ex post observed values of the late entrant and its ex ante mean predicted trajectory. Moreover,
the assessed launch date corresponds to the actual date.
Research limitations/implications – The category has to be homogeneous to ensure a high degree of
similarity among the existing drugs and the late entrant. For this reason, radical innovations cannot be
forecast with this methodology.
Originality/value – The proposed approach contributes to the still challenging research field of pre-launch
forecasting by estimating the dynamic features of a homogeneous category and exploiting them for
forecasting purposes.
Keywords Diffusion models, Pharmaceutical new product forecasting, Sales data
Paper type Research paper
1. Introduction
Innovation is a key success factor in the pharmaceutical industry, where scientific
knowledge, experimental research at different stages and marketing mix and managerial
tools ensure a competitive advantage. Estimating the evolutionary market share of a new
pharmaceutical drug that starts commercialization after existing drugs in the same category
is essential for defensive and aggressive strategies in the pharmaceutical industry
(Gassmann et al., 2008). However, these ex ante characterizations are complex and partially
dependent upon subjective judgments and limited specific information. The entry of a new
product may modify the life cycles of existing drugs over time, but the capacity (the market
potential) of a category is not static and provides opportunities for alternative treatments. In
other words, a new entry may be sustained also by expansion of the market category,
without generating immediate competition. A simple evaluation of relative market shares,
without a more suitable comparison of absolute sales, may be misleading.
International Journal of
Pharmaceutical and Healthcare
Marketing
Vol. 11 No. 4, 2017
pp. 412-438 This work has been supported by Ministero della Salute and Regione Veneto, Italy. Bando Giovani
© Emerald Publishing Limited Ricercatori 2009; A forecasting model for drug utilization and expenditure integrating a Cellular
1750-6123
DOI 10.1108/IJPHM-07-2016-0036 Automata model with the Budget Impact Analysis approach GR-2009-1580488.
Our aim is to develop a pre-launch forecasting method for the temporal sales Pre-launch
performances of a late entrant pharmaceutical drug in a homogeneous category. This study forecasting
could be relevant to pharmaceutical companies to forecast the performance of their own
products but also to estimate the market share of their competitors. From a different point of
view, this early predictive knowledge, combined with budget impact analysis (BIA), may be
essential in evaluating costs and benefits also for a national health system (e.g. at the price
negotiation step).
The issue of early forecasts about the diffusion of an innovation can be dealt with either 413
at the beginning of the life cycle, with a few preliminary data (see, e.g. the recent
contribution by Wright and Stern, 2015, and the references therein cited), or even before that
step, when the product has not yet been launched. This paper deals with the latter case and
studies how the life cycles of existing products and their sequence of entry in a category
may convey information about the category dynamics and the sales performance of a late
entrant. As an example, we focus on the introduction in Italy of a new pharmaceutical drug,
Ulkobrin, within the category of treatments based on ranitidine for acid-related disorders in
the class of H2 antagonists. The pre-existing drugs in this category were Ranidil, Zantac,
Trigger, Ulcex, Ranibloc, Raniben and Mauran.
These pharmaceutical specialties may be taken by patients under medical prescription.
In this sense, the first unit of adoption are the physicians. As highlighted by Stremersch and
Van Dyck (2009), word-of-mouth dynamics among physicians may be powerful, and the
effect of a peer recommendation may have a stronger effect on one’s prescriptions than the
action exerted by pharmaceutical sales representatives. Moreover, in this application,
differences in price are not expected to influence physicians’ prescriptions, because these
drugs are reimbursed by the national health system and patients are possibly required to
pay a small contribution that does not depend in any way on the specific drug or its effective
cost.
1.1 Literature review

Early literature on the relative changes in market shares emphasized the role of market
entry order jointly with further concomitant explicative factors, in particular, Urban et al.
(1986) and Kalyanaram and Urban (1992). These approaches are essentially based on
linearized regressive/panel data models and require a specific effort in monitoring and
predicting reliable information for partially controlling factors. These models assume a
suitable stability over time of the sales dynamics and exclude, therefore, the presence of
limited life cycles of co-existing brands in a category. Conversely, in this paper, we consider
the sequential entry of competing brands whose data actually exhibit nonlinear saturating
life cycles.
The challenge of pre-launch forecasting of a new product has been documented by
several authors in the literature. The methods developed to overcome this challenge follow
essentially three approaches: Bayesian methods, subjective methods, and guessing-by-
analogy methods. Bayesian methods are centered on forecast updates based on the
availability of new information (see, among others, Lilien et al., 1981). The main drawback of
this approach is that it requires initial pre-launch forecasts. Subjective methods involve
management judgments and specific product information that have to be converted into
mathematical parameter estimates of a possible future diffusion process (Kim et al., 2013).
This methodology is not appropriate when reliable judgments are not available. Guessing-
by-analogy methods assume that the parameter estimates of the diffusion process of a new
product are derived by weighted sums of the parameters of products with similar
evolutionary life cycles. Trusov et al. (2013) propose an approach based on the role of social
IJPHM networks of consumer interactions for identifying systematic behaviors in the diffusion of
11,4 analogous products. If the same network is assumed to convey information for all products
and the network is assumed to be stable for a given period of time, then the network can also
be consistent with the evolution of new products. Other models, based on conjoint analysis
and choice models, can be found in Assmus (1984); Bass et al. (2001); Bayus (1993). A
comprehensive review was recently proposed by Goodwin et al. (2014). In particular, the
414 authors emphasize the key role of diffusion of innovation theory with special focus on more
advanced extensions, including different aspects of heterogeneity effects.
Diffusion of innovation models define a multidisciplinary framework that faces the issue
of estimating and predicting the life cycle of products, combining complex systems, systems
analysis, quantitative marketing, and statistics. Interest in theoretical and empirical

research on diffusion of innovation models has grown in the past four decades. Relevant
reviews in the area of quantitative marketing may constitute a litmus test of the increasing
advancements in a context that is open to different and complementary contributions
(Mahajan and Muller, 1979; Mahajan et al., 1990, 2000; Meade and Islam, 2006; Peres et al.,
2010).
Bass’s (1969) pioneering paper gave a sound formal approach to Rogers’ (2003) intuitive
ideas concerning the timing of adoption events in a system such as a marketplace. In the
Bass model (BM), the innovation and imitation drivers, related to different channels of
information – institutional (firms) and internal (adopters) – determine a special hazard of
adoption events (sales). However, the BM has several limitations, which have been overcome
in different directions to include, for instance, heterogeneity aspects for the continuous case
(Bemmaor and Lee, 2002) or multicycle aspects for the discrete case (Karmeshu and
Goswami, 2001; Goswami and Karmeshu, 2004; Guseo and Guidolin, 2015). Market
segmentation with reference to some heterogeneity of adopters has been addressed by many
authors with explicit recognition of slowdown and/or chasm effects. With a two-period
model, Mahajan and Muller (1998) separate innovators and the majority to emphasize
different targeting policies. A dual market decomposition is also examined theoretically and
empirically in Muller and Yogev (2006) by assuming two different equations to determine
the dynamics of innovators and, separately, of the main market (the majority). Vakratsas
and Kolsarici (2008) proposed a new model to deal with the dual market for pharmaceutical
drugs. In particular, these authors were interested in the description of drugs’ diffusion
when demand is accumulated before they are launched. This is an important issue for
radically innovative drugs treating pathologies for which solutions were not previously
available. In that case, at the product’s launch we observe a very high level of sales of the
“early market”, which is totally aware of the product. Vakratsas and Kolsarici (2008) model
adoption timing in that market through an exponential structure, that is, a decreasing
function without an imitation effect. In the second wave, diffusion in the “late market” is
modeled with a BM (allowing an innovative and an imitative coefficient) or with a
Generalized Bass Model, GBM (Bass et al., 1994). We notice, however, that as remarked
recently by Kim and Hong (2015), Vakratsas and Kolsarici’s (2008) model suffers non-
negligible identifiability problems in the estimation phase.
A well-known limitation of the BM is the assumption of a constant market potential
throughout the whole life cycle. To overcome this restriction, a general framework of latent
dynamics in market potential, GGM, is proposed in Guseo and Guidolin (2009, 2010, 2011).
The model emphasizes the distinction between a communication component, which affects
the potential, and an adoption component, which defines the final decision stage of the
diffusion process. Both components are time-dependent, and, as explained by Guseo and
Guidolin (2011), they represent with different meanings the time positioning of earlier sales.
In standard drugs (e.g. over-the-counter products), the earlier component is essentially Pre-launch
driven by communication. Conversely, for severe health problems the early sales may cover forecasting
the accumulation of demand. The Guseo and Guidolin model (GGM) automatically
recognizes the drivers’ sequence without imposing a predetermined interpretation, as is
required in Vakratsas and Kolsarici (2008). A large separation over time between
communication and adoption may cause a slowdown or a saddle explaining a “change of
regime” or a pause between two regimes. We emphasize that a slowdown is defined as an
inflection point in the rate diffusion curve. The GGM has proven to be a particularly efficient 415
way to describe, with only five parameters, very different drug temporal trajectories and
related parallel communication channels.
In this paper, we operate in a framework in which the interaction among life cycles is not
easily estimable. The considered drugs enter the market for a particular pathology at
different times, generating distinct life cycles. Competition modeling through systems of
differential equations in the field of the diffusion of innovations has received limited
attention in the literature. For example, Savin and Terwiesch (2005) and Guseo and
Mortarino (2012, 2014, 2015) follow the approach of models with a closed-form solution. For
less homogeneous product categories, Lotka–Volterra models would provide more flexible
competition structures to be estimated directly through differential equations (Abramson
and Zanette, 1998; Morris and Pratt, 2003; Guidolin and Guseo, 2015). The limitation of all
these joint models is that they can efficiently be applied to describe competition and
interaction effects only between two competitors. If the competition–cooperation dynamic is
defined for a large number of partially substitute products entering the market at different
times, the study of the corresponding differential systems – to estimate all the parameters
simultaneously – may become extremely difficult or infeasible. This is primarily due to the
increasing number of possible interactions over time. The alternative approach, as followed
in this study, is to combine dynamically the separate estimates pertaining to each
competitor with a univariate common parsimonious model that is sufficiently flexible to
describe quite different life cycles.
Within the literature dealing with guessing-by-analogy methods based on diffusion of
innovation models, we highlight two interesting contributions. In Goodwin et al. (2013), the
BM is used to predict the life cycle of a new entrant. The BM was fitted to the data until 1995
for 23 potential analogous products, and the averages of the parameters (or of a subset of
them) were used as the parameters of the new entrant (“static” averages). The estimated life
cycle was then evaluated by using 21 target products with data after 1995. Goodwin et al.’s
(2013) aim was to compare alternative strategies in the selection of analogies, using a
modified mean absolute percentage (MAPE) index. Notice that only parameters p and q were
actually estimated with information available before the product launch. The crucial
parameter m (market potential) was estimated through fitting to the actual ex post observed
data. The authors admit that with simple static averages, “it would be unreasonable to use
the value of m estimated for an analogy as an estimate of the market saturation level for a
target” (the late entrant product). Moreover, the authors express the idea that the use of older
analogous products does not provide reliable estimates of the diffusion parameters, p and q,
when they show a temporal evolution.
Lee et al. (2014) similarly use the BM to describe the life cycle of the products, focusing on
the prediction of the diffusion parameters, p and q, for the late entrant. As in Goodwin et al.
(2013), the market potential issue is separated from the aim of the work, to be faced with
further information sources. Lee et al. (2014) describe all the potential analogies with a large
set of attributes and test alternative regressive techniques to find the best-performing
models to describe the pi and qi values for the analogies as a function of their attributes. The
IJPHM forecasts for p and q describing the late entrant are then evaluated, assuming that the
11,4 attribute values for the new product are known. This approach does not take evolutionary
aspects into account, but it is particularly useful whenever the set of potential analogies is
heterogeneous.
In our application, the pharmaceutical market under study defines a “bounded” category,
where analogous products are perfectly identified by the list of drugs based upon the same
416 active compound already launched in the market. The question about selecting analogies
thus is answered. In addition, the similarity of the analogies to the late entrant can be
considered complete, and the only attribute that would differentiate substitute products is
their launch date. The key issue is how to exploit all the features of that set of products to
forecast the late entrant’s diffusion framework.

1.1.1 Our approach. In this context, we propose a dynamic meta-analysis characterized
by a better-performing GGM (compared to a simple BM), as motivated in Section 2, to
predict the life cycles of competing products, and a forecast for the new entrant’s
performance based on the temporal evolution of the diffusion of analogous products in a
category. In this paper, we apply the diffusion model at the brand-level. Most extant
research has applied and/or clearly states that the application of the BM should be at the
category level. However, in particular in pharmaceutical industry applications, there have
been a few successful and calibrated demonstration of the application of BM at brand level.
See Section 2 for more details about this issue.
Rather than following the static approach of simple weighted sums of parameter
estimates, our paper offers a dynamic view of parameter evolution, producing regression
models for these parameters. Moreover, particular attention is given to the evolution of
market potential, which is a non-negligible factor in determining the size of the market in
which the new product will take its place, and for which alternative information sources
may not be available. For each parameter, specific trajectories over time are established and
used to estimate the parameters of the late entrant drug at the assessed entry time.
The estimated launch date of the late entrant drug is not determined through an
optimization approach in stationary environments (Savin and Terwiesch, 2005), but derived
through the empirical modeling of actual observed purchase actions. In particular, as will be
further discussed in Section 3, the observation of an inflection (slowdown) in the
instantaneous sales of earlier launched products may be interpreted as a crucial signal that
there is enough space for the birth of a new product or, at least, indicate the suitable moment
to launch the new product with less difficulty.
The paper is organized as follows. In Section 2, we introduce details of the BM and GGM
models. In Section 3, we explain how the late entrant’s diffusion is forecast through the
dynamics of previously launched products in the same category. In Section 4, we apply the
diffusion models to the ranitidine category in Italy. In Section 5, we propose the assessed
launch date of the late entrant and study the evolution of the diffusion parameters found in
Section 4 to estimate the characteristics of the late entrant. A comparison of the predicted
and observed sales for Ulkobrin is included. Section 6 is devoted to the concluding remarks
and final comments. Statistical inference aspects are presented in the Appendix.
2. Diffusion Bass model and Guseo and Guidolin model

As explained in the literature review, diffusion of innovations theory has developed since
the 1960s. In quantitative marketing, the BM (Bass, 1969) has stimulated thousands of
theoretical and applied contributions. See, among others, the review papers by Meade and
Islam (2006) and Peres et al. (2010).
In this section, we highlight the basic features of the BM and the GGM for the description Pre-launch
of the life cycle of a single product. forecasting
The BM is based on a simple differential equation:

0ð Þ zð t Þ zð t Þ
z t 5m p þ q 1 (1)
m m
where m represents the asymptotic market potential over the life cycle, z 0 (t) is the
417
instantaneous sales (the number of items sold during a unit of time), z(t) is the
cumulative sales at time t, p denotes the innovative component of the sales process
due to institutional activity (advertising) and q represents the imitative component

due to the internal communication (word-of-mouth). The closed-form solution is
given by:
1 eð pþqÞt
zðtÞ ¼ m ; zð0Þ ¼ 0; t 0; p; q > 0 (2)
1 þ qp eð pþqÞt
and z(t) = 0 for t < 0. The constraint z(0) = 0 is an initial condition relevant for counting
processes.
Notice that although the BM was initially introduced in the literature to describe
aggregated data at the category level, many references after the publication of the model
document its successful implementation at the brand level. Bass (2004, p. 1838) himself
explicitly suggests the following:
The guessing by analogy method has been used with success in some cases, but it is still a guess,
at best. This method depends on a database of estimates of ps and qs from previously introduced
products.
Givon et al. (1997) describe the relationship between software brands and their pirated
versions. Peres et al. (2010, p. 99), in their important review, write:
Although the relationships between brand-level and category-level adoption have not yet been
clearly identified, the main body of literature has assumed that internal dynamics are important
at the brand level, and, therefore, a Bass-type model can be used to model brand choice.
Turning to the specific application of diffusion of innovation models to the pharmaceutical
market, we mention, among others, Hahn et al. (1994) and, more recently, Nikolopoulos et al.
(2016). Johnson (2005) and Porath and Schaefer (2014) address specifically the issue of the
BM applied to individual newly launched drugs and support the model’s good performance
from the predictive point of view.
The GGM (Guseo and Guidolin, 2009) defines a special approach in formalizing an
important characteristic omitted by the standard BM. The relevant new feature of the GGM
is the general shape of the latent market potential, m(t), in contrast to the constant
assumption m in the BM. The general aggregate differential form is:
(" #" #)
0ð Þ zðtÞ zð t Þ
z t ¼ mðtÞ ps þ qs 1 xðtÞ
mðtÞ mð t Þ
(3)
m0 ð t Þ
þ zð t Þ ; zð0Þ ¼ 0; t 0
mðtÞ
IJPHM with the usual constraint, z(t) = 0 for t < 0, where z(t) denotes the cumulative sales, m(t) the
11,4 variable market potential, x(t) an exogenous intervention function and z(t)m 0 (t)/m(t) a
collective self-reinforcing effect that emphasizes or depresses sales based on the sign of
m 0 (t). The parameters ps and qs denote the local dynamics of the adoption process.
The general closed-form solution to equation (3) with an initial condition z(0) = 0 and
z (t) = 0 for t < 0 is:
418 Ðt
1 eðps þqs Þ 0 xðt Þdt
zðtÞ ¼ mðtÞ Ðt ; t 0; ps ; qs > 0 (4)
1 þ qpss eðps þqs Þ 0 xðt Þdt
and zero elsewhere. Equation (4) does not depend upon special choices of m(t) and x(t). In
our application, we restrict our attention to the simpler case with x(t) = 1 for all t, by
excluding external interventions. The issue of a realistic definition of a variable market
potential m(t) for specific problems was treated by Guseo and Guidolin (2009, 2011)
through the dynamic description of an evolutionary network among individuals in a
social system with autonomous expression and saturation of awareness, which allows for
a better understanding of the parallel potential. The special result for this particular
approach is:
sffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi
1 eðpc þqc Þt
mðtÞ ¼ K (5)
1 þ qpcc eðpc þqc Þt
where pc and qc denote the communication parameters that generate the nonconstant
market potential, and K is the asymptotic market potential. The approach proposed by
Guseo and Guidolin (2009, 2011) allows the separation of the two main forces,
communication and adoption, and may give rise to different prevalent allocations over
time of the two components; see, in particular, Guseo and Guidolin (2011), where explicit
examples in pharmaceutical drug diffusions exhibit saddle or slowdown effects relevant
for marketers. These effects appear as significant drops after a period of rapid growth,
followed by a recovery to the former peak. The use of a model structure that allows
“saddles” or “chasms” and dynamic market potentials is described by Goodwin et al.
(2014) as an important, still open, issue that must be faced to avoid biased forecasts in the
specific context under study.
The context for our approach is a category where multiple drugs exist and their data
(sold packages) are used to predict the performance of a new drug that is not supposed to
represent a considerable innovation in terms of therapeutic efficacy. The model by
Vakratsas and Kolsarici (2008) thus may be possibly theoretically adequate to describe only
the pioneer in the category. None of the subsequent products or the expected new drug may
be characterized by an early market of patients waiting for a new treatment. Our data
confirm that there is no evidence, from time series inspection, of an initial decreasing path,
typical of an early unmet market. Moreover, as explained in detail in Guseo and Guidolin
(2011), the GGM would be able to describe such a feature where the adoption driver precedes
the standard communication driver (due, e.g., to the demand accumulation). In addition, for
the implementation of the proposed methodology, a common model structure is required to
describe all the products in the category. Previous motivations make Vakratsas and
Kolsarici’s (2008) model inappropriate in this study.
The details about statistical inference for the estimation and validation of the proposed Pre-launch
models are presented in the Appendix, where the basic indexes for testing and comparisons forecasting
are briefly illustrated.
3. Pre-launch modeling of a late entrant

In the previous section, we presented the BM and the GGM that we use in Section 4 to
describe the temporal trajectory of each incumbent product in a category.
The approach presented in this paper is based on the recognition of possible patterns of
419
sequential life cycles in the common product category. In particular, we use a description of
the trajectories of existing products in the category to deduce the features of the late
entrant’s mean diffusion process.

The main issues to deal with are:
a) The estimated launch date for the late entrant product (or reasonable scenarios for it);
b) A pre-launch estimate, with no specific information, of the parameters
characterizing the late entrant’s mean dynamics, under reasonable assumptions.
The estimate of the launch date of the late entrant product – point (a) – may be possible, for
instance, when existing products are described with a model that exhibits a slowdown or a
saddle. A saddle in the evolutionary behavior of the latest competing product or a common
saddle in a group of existing competitors in the category may be interpreted as a kind of
pause in its or their spread. During that pause, a new entrant may have fewer difficulties
sustaining and increasing its sales. The saddle in an existing product’s life cycle may also
represent the end of the initial phase when promotional actions (e.g. pressure by
pharmaceutical firms on physicians) are often required to allow its start. Usually, when this
phase is over, the product’s performance may provisionally decrease up to a subsequent
possible recovery due to the product’s true acceptance by the market. This pause may be
exploited by a new competitor, but we could also reverse this argument by observing that a
new competitor’s expected launch may temporarily reduce the sales of existing products.
In any case, the concurrence of the two events may be used for the desired purpose.
We propose to make the launch date of a late entrant coincide with the time point when
earlier products experience a saddle or a slowdown. For situations when such a feature is
not relevant or saddles are not experienced, this step may be enriched by the formulation of
alternative plausible scenarios about the launch date.
Conditioned on an assessment of the launch date of a late entrant product, the second
issue to be solved – point (b) – is the ex ante evaluation of the entrant’s future mean
evolutionary pattern. The simple idea proposed in this paper rests on a dynamic approach
that generalizes Goodwin et al.’s (2013) proposal:
b1). Describing each product previously launched in the category by separately
fitting a common diffusion model (here, the GGM). The choice of the common model
may also depend on the forecasting accuracy evaluations;
b2). Assuming that the late entrant’s diffusion may be described by the same model
structure;
b3). Studying, for each parameter b i [ b [in the GGM, b = {K, pc, qc, ps, qs}; see
equations (4), (5)], the behavior of the estimates b^ i obtained in (b1) pertaining to all
the existing products in the category. In particular, as each product enters the
market at a different time point, we can think of the different estimates of a b i as a
time series that describes the evolution of b i in the category. For example, the time
series of ^p s would depict how the innovators’ adoption contribution changed over
IJPHM time for the current brand within the product category under study. The proposed
11,4 method describes the evolutionary behavior of this time series through a convenient
data-driven time-dependent function (e.g. a polynomial) and evaluates the predicted
value at the estimated launch date of the late entrant. This estimate will be used as
the value for parameter b i in the GGM of Step (b2), predicting the mean evolution of
the late entrant.
420 In the following, we denote this procedure as a dynamic meta-analysis. Of course, this term
should not be confused with the traditional meta-analysis term, which refers to a static
combination of results from separate experiments performed in multi-centric studies. A
dynamic meta-analysis is extremely important to identify possible changes through time in

the common structure of the homogeneous class of competing products. Our approach
generalizes the methodology studied in Goodwin et al. (2013) and Lee et al. (2014), where the
assumed common model of the diffusion of innovations is the standard unimodal BM, and
only p and q are estimated (through static characteristics of the competing series). We
emphasize the opportunity to study the temporal evolution of such parameters, especially
with reference to asymptotic market potential.
The total lack of observed information for the late entrant makes the prediction of the
mean trajectory the primary aim. In this case, the identification of possible further seasonal
or autocorrelation effects may not be relevant for the management at this stage. Goodwin
et al. (2014) suggest that seasonal adjustments may be necessary only when the forecasting
period is less than one year. Moreover, this second step may not be feasible using the actual
information obtained only from previous products’ life cycles. Conversely, the contribution
of management judgments could be relevant to refine the prediction of the mean trajectory
to take into account further knowledge.
4. The diffusion of ranitidine in Italy

Ranitidine is a histamine H2-receptor antagonist that normalizes stomach acid
production. This active compound is currently used in the treatment of gastroesophageal
reflux disease, heartburn, and peptic ulcers. It was developed by Glaxo in the summer of
1976 as a response to Smith, Kline and French, which introduced in the same year the first
histamine H2-receptor antagonist, cimetidine, launched in the United Kingdom under the
trade name Tagamet. Ranitidine’s main difference was the substitution of a furan ring for
cimetidine’s imidazole ring. The new active compound introduced a significant
improvement in terms of tolerability with a reduction in adverse drug effects, longer-
lasting action, and excellent activity compared with cimetidine. Ranitidine was
introduced worldwide in 1981 and was the winner in this area.
The drug’s launch in the Italian market dates to the fourth quarter of 1981, 4/81 for
brevity. Zantac by Glaxo (now GlaxoSmithKline) and Ranidil by Menarini (now Menarini
Industrie Farmaceutiche Riunite) were the first two drugs in the ranitidine category.
Additional competing products entered the market with new launches in the following
years: Trigger (4/83), Ulcex (4/83), Ranibloc (2/85), Raniben (4/86) and Mauran (4/86).
Another drug for acid-related disorders based on ranitidine was Ulkobrin, launched in the
fourth quarter of 1988 by Salus Researches.
4.1 Data
The available data, provided by IMS Health, Italy, refer to the quarterly number of packages
sold in Italy through the third quarter of 1991. Figure 1 illustrates the simultaneous
logarithmic trajectories of the number of quarterly packages sold for the
Pre-launch
forecasting
421
Figure 1.
Ranitidine drugs,
Italy: quarterly
packages sold (log
scale of thousands)
various competitors. To improve readability, the labels on the y axis correspond to sales
numbers. Ranidil and Zantac played starring roles. Here t represents the absolute time set to
one at the point when the first entrant was launched in the market – the category’s origin,
4/81 – while in subsequent Figures 2-8, pertaining to single products, we work with
relative time starting at the product’s launch.
4.2 Model estimation for incumbent drugs

In the following section, we examine the dynamics of these drugs, excluding Ulkobrin,
which plays the role of late entrant in the proposed analysis. We fit BMs and GGMs to each
of the seven drugs that entered the market before Ulkobrin (Table I). At the second step,
model selection, performed through R2, F-ratio, Akaike information criterion (AIC), Bayesian
information criterion (BIC), root mean square error (RMSE), and MAPE values (Tables I
and Table II) shows that the GGM is preferred to the BM (see the Appendix for the
Figure 2.
Ranidil, Italy:
quarterly packages
sold (in thousands)
IJPHM
11,4
422
Figure 3.
Zantac, Italy:
quarterly packages
sold (in thousands)
Figure 4.
Trigger, Italy:
quarterly packages
sold (in thousands)
description of the technical methods). We obtained seven different estimates for each
parameter of the GGM; these estimates will be jointly used to forecast the life cycle of
Ulkobrin according to the dynamic meta-analysis described in Section 3.
Zantac was the main driver, sustained and promoted by Glaxo. Ranidil was launched by
Menarini as a parallel product. A comparison of the two products may be of interest.
The introductory analysis, based on the BM, tends to underestimate the life cycle of both
products. The standard and adjusted determination indexes (cumulative data) in Table I
define a good approximation, R2 = 0.99967 and Radj 2
¼ 0:99966 for Ranidil, and R2 = 0.99968
and Radj ¼ 0:99966 for Zantac, but the restriction of the assumed fixed market potential is
2
unable to recognize a learning effect within the system.

The idea that the market potential may present a time-dependent structure is well
described by the GGM, which defines an evident advantage over the BM. In Table I, we
Pre-launch
forecasting
423
Figure 5.
Ulcex, Italy: quarterly
packages sold (in
thousands)
Figure 6.
Ranibloc, Italy:
quarterly packages
sold (in thousands)
observe good determination index levels (cumulative data), R2 = 0.99986 and

2
Radj ¼ 0:99985 for Ranidil, and R2 = 0.99988 and Radj
2
¼ 0:99987 for Zantac. More relevant
is the significance of the squared partial coefficients, R ~2 ¼ 0:58 for Ranidil and
BjGG
~2
R BjGG ¼ 0:63 for Zantac (see the Appendix for definitions). A confirmation of the
significance of the extended GGM compared to the BM (B|GG, for short) in both cases is
highlighted by the high values of the F-ratios, FB|GG = 23.75 for Ranidil and FB|GG = 29.2 for
Zantac. The same conclusion is obtained with the AIC or the BIC. The performance of the
GGM is satisfactory, even if we observe some instability in the definition of the approximate
confidence limits for some parameters. However, due to the limitations of marginal
linearized confidence intervals, what is more important, in our opinion, is the global stability
of the system response, as confirmed by the F statistics.
IJPHM
11,4
424
Figure 7.
Raniben, Italy:
quarterly packages
sold (in thousands)
Figure 8.
Mauran, Italy:
quarterly packages
sold (in thousands)
Some remarks may be of interest. The asymptotic potential of Zantac is similar to that of
Ranidil, 938804 versus 959119, respectively. We observe in Figures 2 and 3 that the
slowdown is positioned at 4/88 for both. This is a typical effect of the GGM and usually
describes a change of regime between the early prevalence of the communication driver
in promoting sales and the standard dynamic of the adoption process.
In the fourth quarter of 1983, we register the introduction of two new competing products:
Trigger by Polifarma (licensed by Glaxo) and Ulcex (Laboratori Guidotti and Lusofarmaco).
Trigger is characterized by typical GGM behavior: an extensive effort during the launch
phase; a deep slowdown, which is a kind of saddle; and a subsequent takeoff (Figure 4). The
absolute dimension is not as high as that for Zantac and Ranidil, and Trigger captures only
a particular niche. Confirmation of the GGM’s relevance, with respect to the BM, is given in
~2
Table I: R ¼ 0:961 and FB|GG = 441.04. The specific firm’s effort during the introduction
BjGG
Product Ranidil Zantac Trigger Ulcex Ranibloc Raniben Mauran

launch date 4/81 4/81 4/83 4/83 2/85 4/86 4/86
Model Par (n = 40) (n = 40) (n = 32) (n = 32) (n = 26) (n = 20) (n = 20)
BM m 164414 158686 3708.88 7121.4 4281.0 3117.39 568.25

(126543) (120224) (3299.71) (6062.42) (283.294) (2673.98) (553.159)
(202285) (197147) (4118.06) (8179.86) (8278.7) (3560.8) (583.342)
p 0.00469 0.00544 0.01232 0.01023 0.00511 0.01333 0.01831
(0.00376) (0.00428) (0.01148) (0.00931) (0.00089) (0.01219) (0.01353)
(0.00563) (0.00660) (0.01317) (0.01114) (0.00933) (0.01448) (0.02309)
q 0.04137 0.00359 0.08747 0.07247 0.07300 0.12424 0.38672
(0.03643) (0.03077) (0.07166) (0.06010) (0.04662) (0.10703) (0.33306)
(0.04632) (0.04114) (0.10329) (0.08483) (0.09938) (0.14144) (0.44038)
R2 0.99967 0.99968 0.99767 0.99868 0.99725 0.99940 0.99598
2
Radj 0.99966 0.99966 0.99751 0.99859 0.99701 0.99933 0.99550
RSS 3838820 3613170 56628.2 78091.2 10319.3 3822.47 3293.39
AIC 612.427 610.004 356.216 366.500 246.286 170.973 167.993
BIC 742.916 740.492 450.723 461.007 315.222 215.900 212.921
GGM K 938804 959119 78329 11171.2 21173.4 80657.7 571.673
(916745) (940973) (76993.8) (9376.03) (151591) (168581) (548.821)
(960863) (977266) (79664.2) (12966.4) (193937) (329896) (594.525)
qc 0.0312267 0.0326493 0.33240 0.480712 1.43856 0.0282058 0.36679
(0.13996) (0.134339) (0.29164) (0.390438) (110.612) (0.362817) (7.36113)
(0.202413) (0.199637) (0.37316) (0.570987) (113.49) (0.419229) (8.09471)
pc 0.180534 0.193608 0.02617 0.0351783 0.830911 0.0741831 0.28390
(0.10202) (0.114981) (0.02096) (0.0243225) (44.104) (0.348946) (1.45413)
(0.259049) (0.272235) (0.03137) (0.0460342) (45.7658) (0.497312) (2.02193)
qs 0.0250518 0.0202599 0.01233 0.0452912 0.0556025 0.0192564 0.35864
(0.023865) (0.0192608) (0.01114) (0.0395886) (0.023808) (0.146107) (0.13730)
(0.0262386) (0.0212589) (0.01352) (0.0509939) (0.087397) (0.18462) (0.57998)
(continued)
Parameter estimates
Pre-launch
on cumulative data
extended GGM based
of the BM and the
425
forecasting
Table I.
11,4
426
Table I.
IJPHM
Product Ranidil Zantac Trigger Ulcex Ranibloc Raniben Mauran

launch date 4/81 4/81 4/83 4/83 2/85 4/86 4/86
Model Par (n = 40) (n = 40) (n = 32) (n = 32) (n = 26) (n = 20) (n = 20)
ps 0.000930818 0.00100218 0.00093 0.00785462 0.0011094 0.00104842 0.02152

(32100000) (23037400) (14436.4) (0.00684625) (0.00780205) (370.27) (0.01641)
(32100000) (23037400) (14436.4) (0.008863) (0.0100209) (370.272) (0.05944)
R2 0.99986 0.99988 0.99991 0.99995 0.99752 0.99947 0.99606
2
Radj 0.99985 0.99987 0.99990 0.99994 0.99705 0.99933 0.99501
RSS 1626360 1372160 2161.89 3014.04 9296.25 3375.06 3228.53
AIC 582.074 575.276 255.720 266.353 247.572 172.483 171.596
BIC 701.185 694.387 339.294 349.928 305.992 207.419 206.532
~2
R 0.57576 0.62500 0.96183 0.96212 0.09818 0.11667 0.01968
BjGG
FB|GG 23.75 29.167 441.04 342.9 1.143 0.9905 0.35
Notes: () marginal linearized asymptotic 95 per cent confidence limits. n denotes the number of observations available for each series. R ~ 2 (squared partial
2
~ and F define the involved nested models: B|GG
multiple correlation coefficient), F-test, AIC, and BIC values are shown for model selection. The subscripts in R
denotes the comparison of the BM and the GGM.
of Trigger in the market category is well described by the parameters qc = 0.33 and Pre-launch
pc = 0.026. Trigger’s slowdown date is 4/88. forecasting
Ulcex is also characterized by typical GGM behavior, with a non-negligible separation between
the launch communication effect and the adoption process. The global performance under the BM
~2
is not satisfactory, while the GGM substantially improves the fit with R ¼ 0:96 and FB|GG =
BjGG
342.9 (Figure 5). The asymptotic performance of the market potential is about 1/80 of Ranidil or
Zantac, which is considered the benchmark. Ulcex’s slowdown date is 2/87. 427
Ranibloc, introduced in the second quarter of 1985 by GlaxoSmithKline, exhibits a
special behavior in the introductory phase. The commercial communication effort is quite
strong, but the observed takeoff is comparatively slow (very small qs and ps values). This
behavior is well described by a standard BM with a reasonable determination index R2 =
2
0.9972 and Radj ¼ 0:9970. The contribution of the GGM in this case is not relevant because
~
R
2
¼ 0:10 and FB|GG = 1.14 (Figure 6). Ranibloc’s slowdown date is 4/88 (from observed
BjGG
data, instead of the fitted model).
Raniben, introduced by Firma in the fourth quarter of 1986, has a limited share, and the
drug’s behavior is described almost equivalently by a GGM or a BM (Figure 7). The F-ratio is
not significant (FB|GG = 0.99). Raniben’s slowdown date is 4/89 (from the observed data).
Mauran, introduced by Coli in the fourth quarter of 1984, achieved limited expansion,
and the drug’s life cycle was very short. In this case, a BM is sufficient for interpretation.
This is confirmed by FB|GG = 0.35, ruling out the need for a GGM (Figure 8). The particular
history of Mauran, very different from the previous drugs and very limited in time, suggests
that this drug should be excluded from the subsequent dynamic meta-analysis. Mauran’s
slowdown date is 4/88 (from the observed data).
4.3 Forecasting accuracy

The forecasting accuracy of the BMs and the GGMs, in terms of their mean trajectory behavior,
is assessed with an out-of-sample analysis with a fixed origin (Tashman, 2000). The test period
comprises the last four observations (h = 4 quarters). The choice of one year is, in our opinion, a
reasonable forecasting horizon for the ranitidine market. In addition, the limited number of
observations for some time series and the large influence of the final data on the estimation
suggest that a wider test period would give unreliable results. We emphasize that four
observations represent 10 per cent of the data for the longest time series and 20 per cent of
shortest time series[1]. The BMs and the GGMs are estimated in the remaining part of the data
(the fit period), and the forecasting errors are evaluated in the test period with two forecasting
accuracy measures: MAPE (per cent) and RMSE (see the Appendix for a description of these
indexes).
The results presented in Table II show that, according to both indicators, for the first four
drugs launched in the market (Ranidil, Zantac, Trigger and Ulcex), the GGM strongly
Ranidil Zantac Trigger Ulcex Ranibloc Raniben Mauran

Table II.
MAPE(%)
Forecasting accuracy
BM 1.73 1.79 5.51 3.12 1.64 1.25 5.55
GGM 0.72 0.39 0.36 1.24 1.28 0.95 6.35 evaluation (h = 4), in
RMSE terms of the MAPE
BM 966.11 981.22 154.14 137.14 25.42 21.40 31.01 (%) and RMSE, for
GGM 410.89 241.75 12.66 61.86 20.04 21.09 35.53 BMs and GGMs
IJPHM outperforms the BM. For two drugs (Ranibloc and Raniben), the GGM outperforms the BM.
11,4 For Mauran, the BM is preferred to the GGM. We reiterate that Mauran represents an
exception for its particular behavior, since the drug expired.
The GGM’s forecasting accuracy for the various drugs confirms the model’s validity as a
common framework.
428 5. Dynamic meta-analysis of a new entrant: Ulkobrin

5.1 Findings
The key idea in estimating the main features of the late entrant in the ranitidine category is
grounded in the hypothesis that subsequent competing drugs may evolve according to the
local opportunities and constraints of the category. The sequential introduction of

competitors that develop with specific characteristics may provide information about the
expandability of the category or its evolutionary contraction.
An important aspect of the GGM applied to Ranidil, Zantac, Trigger, Ulcex, Ranibloc and
Raniben is that the products’ slowdown period is essentially concentrated on a specific date,
which may be related to the launch of successive competitors. This idea is reasonable because a
local depression in sales allows for the introduction of a new entrant with fewer difficulties[2].
According to this reasoning, the launch date for the new competitor would be assessed as the
fourth quarter of 1988, corresponding to the slowdown in the diffusion of Ranidil, Zantac,
Trigger and Ranibloc – the leaders in the category. In addition, Ulcex and Raniben exhibit a
saddle in the neighborhood of that date. This estimate corresponds to the actual launch date of
Ulkobrin. We emphasize that qualitative information could be alternatively used to position the
launch date, applying the subsequent dynamic meta-analysis to the alternative value.
The estimates of the parameters qc, pc, qs and ps of the GGM can be easily interpreted, and
their evolution gives useful information about the category enabling a prediction for the late
entrant. We express the dynamics of the category by fitting convenient time-dependent
data-driven regressive models to the estimates of the parameters K, pc, qc, ps and qs. These
regressive models cannot be theoretically predetermined, because they are specific to the
mean evolutionary features of the category, enabling them to be implemented with
particular attention to the observed trajectories.
In Table III, we summarize, for each parameter, the selected model in terms of absolute
time t based on specific functions that are reasonable for estimating the observed temporal
evolution. Figure 9 shows the graphical representation. For instance, the parameter pc for
Ranibloc exhibits a very different behavior compared to the other products’ estimates. For
Forecasts for
Ulkobrin
Par Function: g(t) Estimates 3s bounds Outliers (t = 4/88)
K (a þ b=t)2 a = 134.782 (11.899, 281.463)

R2 = 0.961 b = 836.570 (584.483, 1088.657) — 26774.7
qc a þ blnðtÞ a = 0.055 (1.055, 1.165)
R2 = 0.239 b = 0.198 (0.333, 0.729) — 0.72308
pc 1=ða þ blnðt ÞÞ a = 8.255 (18.865, 35.375)
R2 = 0.406 b = 6.661 (7.28, 20.602) Ranibloc 0.03259
Table III. qs a þ bt a = 0.025 (0.012, 0.062)
Dynamic meta- R2 = 0.046 b = 4.651 104 (0.0027, 0.0036) — 0.03878
analysis for Ulkobrin. ps a þ bt a = 9.511 104 (0.0008, 0.0011)
Launch: 4/88 R2 = 0.435 b = 5.740 106 (0.559, 1.707) 105 Ulcex 0.00112
Pre-launch
forecasting
429
Figure 9.
Graphical
representation of the
models in Table III
for the dynamic meta-
analysis of Ulkobrin
IJPHM this model, Ranibloc was considered an outlier. The same argument applies to the parameter
11,4 ps, where Ulcex exhibits a very high value, compared to the other products. Because the R2
measures the improvement of a model compared to a constant path, the small value obtained
for qs indicates that the imitation coefficient in the adoption phase has been essentially
stable during the examined period. The last column of Table III includes the suggested
estimates, computed at entry time 4/88, for the late entrant, Ulkobrin.
430 As a measure of uncertainty for the estimates, 3s bounds are given in Table III. They
allow, for Chebyshev’s inequality, a minimum coverage level of 89 per cent, without making
an assumption on the data distribution. These bounds are very conservative, but
considering the size of the available observations, we preferred these bounds to the classical
2s bounds, which ensure a 95 per cent coverage level only if the data are assumed to be
normally distributed.
5.2 Discussion and implications

To assess the adequacy of the proposed procedure from the predictive point of view, we
studied the squared correlation, R2, between the ex post observed values for Ulkobrin and
the ex ante mean predicted values from the suggested dynamic meta-analysis. The level of
this correlation is high, R2 = 0.669675, and the related standard error of estimates is
s = 8.48043. In Figure 10, we show a graphical comparison of the observed Ulkobrin sales,
the dynamic meta-estimate obtained by induction, and the corresponding 6 3s bounds.
Notice that the ex post observed sales are included within the proposed 6 3s bounds. The
agreement appears quite good, even if the stability of single models is sometimes not very
high and the number of older competitors is limited to a few actors. The initial systematic
deviation of the observed sales of Ulkobrin compared to the predicted meta-profile may be
attributed to penalizing mechanisms. These mechanisms are very common, in general and
in the pharmaceutical market in particular, where older competitors play the role of the first-
mover and the late-entrant product is affected by negative externalities.
Figure 10.
Ulkobrin, Italy:
quarterly packages
sold (in thousands)
5.2.1 Comparison with existing approaches. At this point, we believe that a comparison Pre-launch
between Ulkobrin’s life cycle forecast evaluated with our dynamic meta-analysis and the forecasting
predicted life cycle obtained using the mean values of the parameter estimates, as discussed
by Goodwin et al. (2013), is essential. Is the effort of finding a model that describes the
temporal evolution of parameters worthy, even if only a few products are available, or is it
better to use a genuine average? Goodwin et al.’s (2013) proposed method does not face the
market potential-level issue (here, K for the GGM). To perform a comparison, we should
choose between comparing our approach with the following:
431
A) a true ex ante estimation for all the parameters with average values – even if
Goodwin et al. (2013) explain that it may be unreasonable; or
B) the methodology actually applied by Goodwin et al. (2013) – even if it artificially

requires ex post true data, obviously unknown at the time when forecasts are
meaningful.
The first method, (A), generates predictions that are completely incoherent with the
observed sales (see Figure 11). The average of the K ^ i estimates is out of scale, because the
average fails to take into account the evolution of the market potential. For a new entrant
in a category, the available market potential cannot be constant; that is, it cannot be as
high as it was for the pioneers. This time-decreasing behavior of the market potential
estimates, K^ i ; for subsequent incumbents totally agrees with the results obtained in
Urban et al. (1986) and Kalyanaram and Urban (1992). Notice that, to present a fairer
comparison, the averages for pc and ps were evaluated excluding the same outliers
eliminated in the analysis (Table III).
The second method, (B), uses the estimate K ^ – obtained with nonlinear least squares
applied to real ex post data – together with the averages p c ; q c ; p s ; and q s used in (A). This,
of course, does not represent a true forecast, but it may mimic a situation when very good
prior information about K is available from consumer intention surveys or management
Figure 11.
Ulkobrin, Italy:
quarterly packages
sold (in thousands)
IJPHM judgments. The estimated trajectory is shown in Figure 12. Even if K is estimated ex post,
11,4 the trajectory is too far from the data, showing that our approach, based on a dynamic meta-
analysis of the incumbents’ observed life cycles, performs considerably better in predicting
Ulkobrin’s performances.
5.2.2 Some implications. The main implications of this study may be summarized in a few
points:
432 The majority of pharmaceutical drug sales may be individually described and
predicted through innovation diffusion models, namely, the BM or other models
deriving from it, such as the GGM. A special flexibility in the GGM, due to the
dynamic market potential, has been recognized from several applications in the
pharmaceutical context (Guseo and Guidolin, 2011).
The category dynamics of competing homogeneous drugs may be identified
through the temporal analysis of the five interpretable parameters of the GGM. The
dynamics of the category is not inferred through the aggregation of individual life
cycles but enhances the separate available information for each life cycle. We
studied the evolution of the sequence, and we proposed a dynamic meta-analysis to
predict the pattern of a new entrant, that is, an estimate of its life cycle trajectory.
Precise knowledge of the estimated sales performances of a late entrant drug in a
homogeneous category may aid strategy implementation in the pharmaceutical
industry based on a suitable dimensional approach over time. From a different but
complementary point of view, this type of knowledge may be used within an
economic analysis (BIA) for a third party, usually a national health service, to
calibrate the costs and financial exposure over a reasonable time horizon.
The practical implementation of this methodology is simple and avoids the costs of
analytical monitoring of factors that are unlikely to be known for existing
incumbents and new products at different levels.
Figure 12.
Ulkobrin, Italy:
quarterly packages
sold (in thousands)
6. Conclusions and limitations Pre-launch
In this paper, we suggest a new methodology for performing an ex ante assessment of the forecasting
launch date and the evolutionary behavior of a late entrant in an existing homogeneous
category of pharmaceutical drugs. This methodology, based on a dynamic meta-analysis,
is proposed to tackle the problem of forecasting for new products before they are
launched. In the analyzed case, once the diffusion features of the drugs active in the
Ranitidine category were clear, the meta-analysis, based on a study of the dynamic
evolution of the diffusion parameters, allowed us to estimate completely ex ante the life
433
cycle of the late entrant, Ulkobrin. In some sense, we found the sequence of drugs
exhibited an evolutionary structure describing the connections among the observed
products and the late entrant.

Thus, the proposed dynamic meta-analysis relies on three basic points:
(1) The context of the application should be an industrial context with a high degree of
innovativeness.
(2) The product category should be essentially homogeneous and characterized by the
existence of several competitors that may enter the market at different times.
(3) All the products pertaining to the category need to be adequately described by the
same model. In the analyzed case, this model is the GGM, which ensures a certain
degree of flexibility and allows for modeling saddles and dynamic market
potentials. The GGM enriches the model structure compared to the BM, without
covariates or independent variables that “will be known for the analogy, but are
unlikely to be known for the new product” (Goodwin et al., 2014).
Whenever the category under study is not well defined or more heterogeneous, alternative
approaches such as those provided by Goodwin et al. (2013) or Lee et al. (2014) should be
considered.
The context of the application of our proposed method is the pharmaceutical sector,
which presents the desired features for the meta-analysis to be implemented. As highlighted
by Peres et al. (2010), pre-launch forecasting methods are necessary in the pharmaceutical
industry, especially in light of the high investments in R&D for drug development.
Obviously, orphan pharmaceutical drugs cannot be examined with our proposed
methodology, because the learning component is totally absent. In this case, a reasonable
strategy may be the determination of a mean value for the parameters pertaining to similar
products, as proposed by Goodwin et al. (2013).
Although the pharmaceutical sector has its own specificities, as observed in Stremersch and
Van Dyck (2009), we argue that the procedure proposed in this paper is sufficiently general to
be employed in other industrial sectors. One possible candidate for future applications is the
information and communication technology (ICT) sector, where many competing and
essentially substitute technologies enter the market at different times and compete for the same
niche of adopters (mobile phones and related tariffs, operating systems, apps and so on).
Notes
1. Vakratsas and Kolsarici (2008, p. 289) use a test sample of about 12% of their data set and state
that “we are somewhat limited in the number of observations we can leave out of the sample
without losing [. . .] statistical power.
2. In this specific application, it is not plausible that the low-performing (in terms of absolute sales)
latest entrants influenced the two “big” pioneers generating their saddle.
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Appendix: Statistical inference

The methods summarized here can be studied in detail, for example, in Seber and Wild (1989). A
robust inferential methodology for estimating and testing the performance of the models described in
previous sub-sections may be implemented through a nonlinear regressive model, that is:
wðtÞ ¼ h ð b ; tÞ þ « ðtÞ (A1)
where w(t) represents the observed cumulative sales data, and h ð b ; tÞ denotes a systematic mean
rescaled cumulative distribution function of time t and a vector of parameters b typical of the BM,
GBM, and GGM. The residual term « (t) is usually white noise or a more complex stationary process,
if seasonality and/or autoregressive aspects are included as stochastic components.
For estimation purposes, we use a two-phase procedure. First, we apply a robust nonlinear least
squares (NLS) algorithm, which ignores the stochastic structure of « (t), under the Levenberg–
Marquardt correction of the Gauss–Newton
recursive procedure; see, for instance, Seber and Wild
(1989). Second, the prediction h b ^ ; t based on the NLS solution, b^ , may be used in a model based
on a seasonal, autoregressive, moving average process with an input X (SARMAX) to improve the
short-term prediction, which is relevant for managerial applications (when data are available). This
second stage is implemented if the residuals of the first stage do not follow the standard white noise
pattern. The Durbin–Watson statistic may be used as an exploratory test to diagnose whether this
second step is necessary. Notice that the NLS algorithm for cumulative data determines high values of
the standard determination index R2 (or related adjusted version R2adj ). Because any S-shaped model
would be able to describe the main trajectory of the empirical distribution function much better than
a constant path, a good global performance, when dealing with cumulative data, is characterized,
therefore, by levels that are higher than 0.99. The criterion for the model choice, however, is not based
upon the absolute value of the R2 index. When we deal with the comparison of models from different
families, Akaike’s Information Criterion (AIC), Akaike (1974), or Bayesian Information Criterion
(BIC), Schwarz (1978), would be adequate. Conversely, the nonlinear models proposed in this paper
are nested. For this reason, we can exploit this relationship to obtain more powerful statistical tests
as follows (Seber, 1980; Seber and Wild, 1989; Guseo and Mortarino, 2015). The significance of an
extended model, M2, compared with a simpler one, M1, may be studied through a normalized squared
multiple partial correlation coefficient R ~ 2 within the interval [0, 1], namely:

~ 2 ¼ R2 R2 = 1 R2
R (A2) Pre-launch
M2 M1 M1
forecasting
where R2Mi ; i ¼ 1; 2 is the standard determination index of model Mi. An equivalent statistic,
normalized in the interval (0,þ 1), is the corresponding F-ratio. Let n denote the number of
observations, v the number of parameters involved in the richer model M2, and u the incremental
number of parameters that generalize model M2 with respect to the reduced model M1. The dual
F-ratio, which is a standard tool in linear and nonlinear models, has a one-to-one correspondence
437
~ 2 , that is:
with R
h i h i
F¼ R~ 2 ðn vÞ = ð1 R
~ 2 Þu (A3)
Under stronger assumptions for the « (t) term in equation (A1), i.i.d. and normality, the F-ratio is a
statistical variable with Snedecor’s F distribution, FFu;nv . A common upper threshold for the
F-ratio [equation (A3)], without strong assumptions on error distributions, is 4 for u = 1 and lower
for u > 1. We highlight that the F-ratio, which is a robust statistic from a distributional point of view,
is extremely useful in the comparison of nested models. In fact, complex models with v degrees of
freedom are penalized for increasing values of v. Moreover, large differences u of parameter
complexity between nested competing models determine a correct penalization for too-complex
models in favor of simpler versions.
For assessing the forecasting accuracy of the BMs and the GGMs, we used the mean absolute
percentage error [MAPE (%)] and the root mean squared error (RMSE):
T

100 X wð t Þ h b ^ ;t

MAPEð%Þ ¼
T t¼1 wð t Þ
and:
vffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi
u T
u1 X 2
RMSE ¼ t wðtÞ h b^ ; t ;
T t¼1

where w(t) represents the observed cumulative sales data, h b^ ; t the predictions based on an NLS
solution, and T the data collection window.
About the authors

Renato Guseo is full Professor in Statistics, since 1994, at the University of Padua, Department of
Statistical Sciences, Italy. Born in 1951 and educated at the University of Padua, he was Assistant
Professor in Statistics at the Catholic University S.C. of Milan, director of the Department of
Statistical Sciences at the University of Udine. Current research is on diffusion of innovations,
competition and substitution, oil and gas depletion models, diffusion of emerging energy
technologies.
Alessandra Dalla Valle, PhD, is an Associate Professor in Statistics at the University of Padua,
Department of Statistical Sciences, Italy. Born in 1967 and educated in Statistics at the University of
Padua, she had a PhD in “Multivariate skew normal distribution”. Present research is on skew
normal theory and applications, competition modeling, oil and gas depletion models, wind power
technology diffusion models across countries, diffusion of nuclear energy in some developing
countries.
IJPHM Claudia Furlan, PhD, is an Assistant Professor in Statistics at the University of Padua, Department
of Statistical Sciences, Italy. She had a PhD in Statistics. Her research interests include Bayesian
11,4 modelling of natural phenomena, solar radiation, inference for nonlinear models, innovation diffusion
models for wind power systems and nuclear energy, for the epidemic of pleural mesothelioma, and for
the description of competition among brands.
Mariangela Guidolin, PhD, is Assistant Professor at the University of Padua, Department of
Statistical Sciences, Italy. Born in 1978, she has had research experiences at University of Padua and
438 University of Venice, Ca’ Foscari. Her current research interests include innovation diffusion models,
technological forecasting, emerging energy trends.
Cinzia Mortarino, PhD, is an Associate Professor, since 2006, at the Department of Statistical
Sciences at the University of Padova, Italy. She received her PhD degree in Applied Statistics to
Economic and Social Sciences from the University of Padova. Her research interests include design of
experiments, statistical quality control, inference for nonlinear models, innovation diffusion models
for energy sources and for the description of competition among brands. Cinzia Mortarino is the
corresponding author and can be contacted at: mortarino@stat.unipd.it.
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International Journal of Pharmaceutical and Healthcare Marketing

Pre-launch forecasting of a pharmaceutical drug

"Pre-launch forecasting of a pharmaceutical drug", International Journal of Pharmaceutical and

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Revised 23 May 2017

1.1 Literature review

analysis, quantitative marketing, and statistics. Interest in theoretical and empirical

forecast the late entrant’s diffusion framework.

2. Diﬀusion Bass model and Guseo and Guidolin model

due to institutional activity (advertising) and q represents the imitative component

3. Pre-launch modeling of a late entrant

entrant’s mean diffusion process.

dynamic meta-analysis is extremely important to identify possible changes through time in

4. The diﬀusion of ranitidine in Italy

4.2 Model estimation for incumbent drugs

unable to recognize a learning effect within the system.

observe good determination index levels (cumulative data), R2 = 0.99986 and

Product Ranidil Zantac Trigger Ulcex Ranibloc Raniben Mauran

BM m 164414 158686 3708.88 7121.4 4281.0 3117.39 568.25

Product Ranidil Zantac Trigger Ulcex Ranibloc Raniben Mauran

ps 0.000930818 0.00100218 0.00093 0.00785462 0.0011094 0.00104842 0.02152

4.3 Forecasting accuracy

Ranidil Zantac Trigger Ulcex Ranibloc Raniben Mauran

428 5. Dynamic meta-analysis of a new entrant: Ulkobrin

local opportunities and constraints of the category. The sequential introduction of

K (a þ b=t)2 a = 134.782 (11.899, 281.463)

5.2 Discussion and implications

B) the methodology actually applied by Goodwin et al. (2013) – even if it artiﬁcially

products and the late entrant.

Science, Vol. 50 No. S12, pp. 1833-1840.

Appendix: Statistical inference

wðtÞ ¼ h ð b ; tÞ þ « ðtÞ (A1)

About the authors

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