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Time consuming
Resource intensive
Heavily regulated
3 phases

1. Phase 1-Safety of the drug

2. Phase 2 Drug is tested for its clinical efficacy
3. Phase 3 Expansion of safety and efficacy studies and gathered data forms
the primary basis for the FDAs approval of a drug.

New drug development at Bayer

Structured process based on the principles of decision analysis to
evaluate the technical feasibility and the market potential of the
new drug.
Formed strategic planning department whos responsible for the
commercial evaluation of a new blot clot bursting drug.
Drug BAY 57-9602
Drug category thrombolytic drug therapy
Benefits safer and more effective

Combined the leadership committee with cross functional project team.
Members of the project team4 research scientists
1 clinician
1 regulator
1 production engineer
1 industrial engineer
1 marketer
1 decision analyst

Members involved for the

1. Leadership committee

2. Cross functional project team

3. Strategic planners
4. Scientific and marketing experts

Commercial evaluation
methodology and process
1st meeting
1. Defined the scope and purpose of the project
2. Developed team ownership of the project &
3. Discussed various perspectives related to the project

Commercial evaluation
methodology and process
Techniques used
back-casting, and
role-playing techniques to uncover additional issues.


Commercial evaluation
methodology and process
Data collected after the meeting includes
1. Time
2. funds needed to develop BAY 57-9602;
3. the likelihood of BAY 57-9602 succeeding in each stage of
4. the cost of manufacturing and marketing it; and
5. the size of the PAO market and BAY 57-9602's potential share
of that market. T

Product Target Profile

o Central to data collection is the product target profile (PTP).
o The PTP is for assessing the technical feasibility and commercial potential of a
new drug.
o If the PTP changes, Pharma re quires collecting data anew from the functional
o Pharma requires that each PTP must specify how efficacious the drug will be in
treating the disease, how safe the drug will be to patients taking the drug, and
how convenient it will be to administer the drug to these patients.

To create the PTP of BAY 57-9602,

Project team was asked to list the
1. major benefits and drawbacks of the current standard therapy,
2. the changes needed, and
3. what therapies other drug companies might be working on.

Decision point 1
Preclinical drug development
o Estimated that the preclinical drug development would cost around $1
million and take about 24 months
o Probability of technical success (PTS)
o (animal data should be safe and efficacious)
o Each scientist was asked to estimate the probability of success of BAY 57-9602
(average 65%)

Decision Point 2
Clinical Drug Development
(Testing in humans)
o Most expensive stage
o Phase 1: to test the safety of the drug
o Phase 2: to identify the optimal dose to be

used in phase 3

o Phase 3: Statistically designed study for proving efficacy clinical end point or
safety clinical end point
o Clinical development plan is devised
o 2 types of costs: 1. External costs
2. Internal costs

What is estimated?

External and internal costs

Time needed to enroll patients
Time needed to conduct each study
Time to analyze data and report results

Phase 1
Approx 12 months

Phase 2
Approx 18 months

Phase 3
Approx 30 months
Safety end point
Approx 36 months

PTS for all three phases was calculated on basis of the

clinicians expertise
PTS for Phase 1:
Clinicians: 80%
Benchmark: 75%

PTS for Phase2:


PTS for Phase 3:

Benchmark: 75%

PTS benchmarking values were used for further decision analysis

Production Process

DP 3 and DP 4
o Higher yield results in lower labor costs, material costs and plasma costs

o Depreciates capital using 15 year straight line method

o Pharma assumes that capital investment for the production for the production
facility occurs approximately five years before the launch date

o $2000-$4000- thrombolytic drug therapy in US
o Therapy in USA=therapy in Canada
o Cost of Europe=1/2 cost of US
o Cost of Japan=3/4 cost of US
o Market believed that BAY 57-9602 could demand 20% over
thrombolytic drugs

o Presented BAY 57-9602 in three levels of pharma decision makers
o November 1999- BP leadership committee awarded DP1 status to
BAY 57-9602
o January 2000 BP began preclinical development

Regulatory Approval
o Pharma PTS benchmark of 90%
o According to the regulator, BAY 57-9602 must obtain fast track
submission before receiving a fast track review of the biological
license application

BAY 57-9602
obtaining fast
track submission
was 75%





Orphan Drug Status

o BAY 57-9602 could be eligible for orphan drug status
o FDA approved orphan drugs receive a 7 year period market
exclusivity in the US guaranteeing that no other drug may be
approved for the disease unless it demonstrably provides
better efficacy and safety

o Bayer estimates that the marketing cost of BAY 57-9602 <
marketing cost of an asthma drug since fewer physicians treat
PAO than treat asthma
o BAY 57-9602 could be launched in 8 countries: US, Canada,
France, Germany, Italy, Spain, UK and Japan

Size of the PAO market

o Probability estimates from the marketer for the annual growth
rate of patients with PAO
o She estimated that a typical PAO patient could receive one
thrombolytic drug treatment/year and one out of 4 patients could
receive 2 treatments

Class share & Product share in

PAO market
Two classes of treatment
1. Thrombolytic drugs
2. Surgery

Current share of thrombolytic drugs :

USA and Canada (80%)

Europe (40%)

Japan (25%)

Class share & Product share in PAO market

o Products in the thrombolytic drug class that are marketed for
treating PAO are called plasminogen activators
o Limitations in efficacy and complications of bleeding
o BAY 57-9602 has a sustainable competitive advantage
o The project team expected BAY 57-9602 to be the 1 st product of
its type available in the thrombolytic drug class for treating PAO

o If BAY 57-9602 was to obtain orphan drug status, it would lose
20% of its market share to a me-too competitor after the
exclusivity expired
o Also the probability of a recombinant competitor entering PAO
market to approx. 20%