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case study - Developing Franchise Strategy and Pricing Options for Late Life Cycle Products
A biopharmaceutical product area (franchise) within a major healthcare company was facing a potentially severe revenue fall-off. The franchise's lead product was 9-18 months shy of encountering generic competition. Should the company continue its historical focus on this product area, and, if so, how could it ameliorate the impact on sales?

Approach
Our team of strategy consultants, doctors, and analysts created a baseline market and franchise situation analysis, then considered a range of strategic options:
  • Grow aggressively
  • Maintain current revenue
  • Restructure to maintain profitability (with declining revenues)
  • Exit the business
Each option was evaluated for its fit with overall corporate goals, its feasibility, and its broad financial impact. The evaluation process considered many possible building blocks of a strategy. For example, in evaluating the options to grow or maintain sales, were there licensing or merger opportunities that made sense to pursue? Could the market by expanded by re-defining it or could our client's share be increased through further penetration?

Based on a thorough consideration of the possibilities, and the broad criteria listed above, the client and consultant team achieved consensus within the organization to drive towards maintaining current revenues and a platform for potential future growth.

With this strategic direction set, the focus of the effort then shifted to evaluating specific tactics to achieve revenue stabilization:
  • Would it be possible to extend the patent life of the lead product?
  • Could pricing be used to mitigate impending loss of market share?
  • How might our client capture some of the value of the expected generic product?
  • A team of scientists and doctors considered a number of patent life extension alternatives, but eventually rejected all possibilities.
  • To evaluate pricing alternatives, a 10-year financial model was developed to calculate the NPV of various scenarios of market share and
  • price. The same model was used to evaluate several JV/out-licensing ideas that might capture some of the value of the generic version of the client's lead product.


Value Added
Aided by the client/consultant team process, the client was able to develop consensus within the organization and support from corporate for the strategic direction that was chosen and for several key tactics that were implemented, including pricing changes and an innovative out-licensing arrangement. The overall impact on sales and NPV were each in the tens of millions of dollars through the planning horizon.

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