Bone of Contention A MultiIndication Case Study of
“Bone” of Contention A Multi-Indication Case Study (of a Bone Density Compound)
Background 1 HISTORY Joachim Biopharmaceutical Co. (a. k. a. JOB) discovered JF 123, which they believe prevents and can reverse BMD (bone mineral density) loss (osteoporosis). Subsequently, Frederick Pharmaceuticals (a. k. a. FRED) and JOB announced a Joint Venture to develop JF 123. MARKET There are several really large markets, but clearly the highest is in the prevention of hip fractures in post-menopausal women. But there is already a treatment available, GLD STD™. But, to JOB scientists, it is clear that JF 123 has properties superior to GLD STD™. © 2006 Decision Frameworks Inc. All rights reserved. Do not copy. -2 -
Background 2 Medical Setting Bones are constantly losing and replacing their mineral structure. n After menopause, women begin losing bone tissue faster than replacing, which results in brittle bones. n This condition of porous bones is called osteoporosis and leads to fractures. n BMD is a surrogate marker for these fractures, but is not accepted by the FDA due to the fact that anyone can break a bone. n To get a viable indication, pharmaceutical companies must show that their compound prevents bone fractures. © 2006 Decision Frameworks Inc. All rights reserved. Do not copy. -3 -
Background 3 “Bone” of Contention #1 JOB wants to go after the Hip Fracture market while FRED would like to pursue BMD for osteoporosis and simple fractures. JOB’s Argument n Hip fractures are a major medical problem. Unless we pursue it, we won’t be able to compete with GLD STD™. FRED’s Argument We need to get to market as fast as possible and hip fractures will take a long time. n Doctors will recognize the value of BMD protection for any indication. n A once monthly regimen of JF 123 will be more attractive than a once weekly regimen of GLD STD™ and enable quick capture of market share. n © 2006 Decision Frameworks Inc. All rights reserved. Do not copy. -4 -
Background 4 “Bone” of Contention #2 While fretting over which indication to pursue, JOB announces that they want to do a head-to-head study with GLD STD™ as the comparator. FRED is a tad risk averse and asks JOB, “What the #%@# are you thinking? ” JOB replies that they are very confident in JF 123’s prowess. JOB also spent a lot of time and money in the development of JF 123 and wants to make sure that they are well rewarded for their investment. Your Mission Frame and evaluate this decision problem. © 2006 Decision Frameworks Inc. All rights reserved. Do not copy. -5 -
“Bone” of Contention The Problem Frame
Decision Problem Statement What is the best indication strategy to pursue for compound JF 123? Key Questions the Evaluation Needs to Address Is it better to pursue hip fractures, or standard bone mineral density for osteoporosis and minor fractures? n What is the tradeoff between “time to market” and “product profile competitive advantage”? n How do the costs and profiles of the two indications compare? n © 2006 Decision Frameworks Inc. All rights reserved. Do not copy. -7 -
Issues © 2006 Decision Frameworks Inc. All rights reserved. Do not copy. -8 -
Decision Focus (Decision Hierarchy) © 2006 Decision Frameworks Inc. All rights reserved. Do not copy. -9 -
Alternatives (Strategy Table) © 2006 Decision Frameworks Inc. All rights reserved. Do not copy. - 10 -
Strategies Developed © 2006 Decision Frameworks Inc. All rights reserved. Do not copy. - 11 -
Strategies Compared © 2006 Decision Frameworks Inc. All rights reserved. Do not copy. - 12 -
Strategies Chosen for Initial Evaluation The JF 123 compound team decided to first evaluate the indication choice, before evaluating the head-to-head trial decision. © 2006 Decision Frameworks Inc. All rights reserved. Do not copy. - 13 -
Evaluation Model Structure (Influence Diagram) Note: in this case, the same influence diagram (and associated model) may be used for both strategies, with only the input variables changing per strategy. © 2006 Decision Frameworks Inc. All rights reserved. Do not copy. - 14 -
Evaluation Structure (Decision & Risk Timeline) The evaluation structure is laid out in a decision and risk timeline, which is the short hand for a decision tree. © 2006 Decision Frameworks Inc. All rights reserved. Do not copy. - 15 -
“Bone” of Contention The Problem Analysis
Model Equations (from the Influence Diagram) NPV = Sales – Development Costs = (Cost of Trial, $/patient/yr) x (# Patients) x (Time of Trials, years) Years of Sales = Patent Expiration – Launch Date (Evaluation Year + Time of Trials + 2 yrs for submission and approval) n Note: For this simple case, submission & approval years was assumed zero. Sales = Market Size (Disease Prevalence Prevention Sales) x Access Rate x Market Share x Price ($ / treatment / year) x Years of Sales – ½ Years to Peak © 2006 Decision Frameworks Inc. All rights reserved. Do not copy. - 17 -
Model Equations (from the Influence Diagram) NPV = Sales – Development Costs = (Cost of Trial, $/patient/yr) x (# Patients) x (Time of Trials, years) Years of Sales = Patent Expiration – Launch Date (Evaluation Year + Time of Trials + 2 yrs for submission and approval) Sales = Market Size (Disease Prevalence Prevention Sales) x Access Rate x Market Share x Price ($ / treatment / year) x Years of Sales – ½ Years to Peak © 2006 Decision Frameworks Inc. All rights reserved. Do not copy. - 18 -
Deterministic Economic Model Note: The NPV values assume product profile success (POS = 1). Blue lines in the model indicate calculated variables (& match the influence diagram). © 2006 Decision Frameworks Inc. All rights reserved. Do not copy. - 19 -
Input Data Input data is collected for each strategy being considered. Project uncertainties (range variables), risks (chance factors) and known variables are collected; many via Expert Interviews. © 2006 Decision Frameworks Inc. All rights reserved. Do not copy. - 20 -
Competitive Advantage Tornado Diagram Note: The NPV values assume product profile success (POS = 1). © 2006 Decision Frameworks Inc. All rights reserved. Do not copy. - 21 -
Get to Market Tornado Diagram Note: The NPV values assume product profile success (POS = 1). © 2006 Decision Frameworks Inc. All rights reserved. Do not copy. - 22 -
Sensitivity Analyses Compared Note: The NPV values assume product profile success (POS = 1). © 2006 Decision Frameworks Inc. All rights reserved. Do not copy. - 23 -
Tornado Diagram Insights The range of cost per patient per year of the trial does not significantly affect the value in either strategy, given success of the compound. The Get to Market (BMD + Minor Fractures) strategy provides much higher value than the Competitive Advantage (Hip Fractures) strategy: Competitive Advantage n Get to Market n NPV = 8. 2 $billion NPV = 16. 4 $billion The time length of the trial significantly impacts the value of the Competitive Advantage strategy. P 10 NPV = 2. 8 $billion n P 90 NPV = 11. 9 $billion n There is a significant impact on value if we can push toward the P 90 access rate of 60% (NPV = 24. 7 $billion). Does a hybrid strategy for either of the compounds come to mind? © 2006 Decision Frameworks Inc. All rights reserved. Do not copy. - 24 -
Decision Tree Structure Where the tornado diagram tests the sensitivity to range only, the decision tree allows us to add chance variables (or probabilities). The probability of product profile success for both strategies is: Get to Market (BDM + Minor Fractures) n Competitive Advantage (Hip Fractures) n © 2006 Decision Frameworks Inc. All rights reserved. Do not copy. - 25 - POS = 55% POS = 85%
Strategies Compared - Range of Value © 2006 Decision Frameworks Inc. All rights reserved. Do not copy. - 26 -
Evaluation Insights The Get to Market (BMD + Minor Fractures) strategy has a higher upside and a lower downside than Competitive Advantage (Hip Fractures). However, the Get to Market has a greater chance of a downside than Competitive Advantage. Which would you chose? Are there hybrid strategies to investigate further before making a decision? © 2006 Decision Frameworks Inc. All rights reserved. Do not copy. - 27 -
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