|
|
Who is
Working to Create the Market?
Celgene (CELG) is headquartered in New
Jersey. It was founded in 1986. Revenue is at an $80M run rate.
What
Is the Market?
In the 1960s, Thalidomide was introduced as a product
to make it easier for pregnant mothers to bring babies to term. It was a
spectacular failure, blamed for numerous birth defects across Europe. It was
not approved for sale in the United States.
Today, Celgene is selling
thalidomide (as Thalomid) into markets that no-one ever expected to see. An
example of almost accidentally creating new markets, Celgene is in position to
profit strongly on this new market.
The most successful and repeatable
path to creating a new market is to solve a specific problem that is strongly
felt by your prospective customers. If the problem is substantial, customers
will work to resolve it. Another path, somewhat harder to follow, is to pick a
less critical problem and then reduce the cost of solving that problem to the
customers to the noise level. In HIV/AIDS medicines there is a clear problem --
stop the effects of the disease and then inhibit the way the virus reproduces.
Celgene is creating and dominating a market there.
What Is the
Market?
All pharmaceuticals are approved for certain purposes- "on
label" uses. Some companies are good at finding other uses and then asking for
permission to use the drug there. Using Aspirin for heart medication is a
famous example, but not a market creator. In HIV, we have several market
creator examples. Thalidomide is one. Thalidomide sold in low volumes until a
few years ago. However, some doctors started to use Thalidomide to treat HIV
symptoms, and sales have taken off. That use is not approved, but the market is
building rapidly with Celgene in dominant position.
The on label sales
for Thalidomide are around $4M. The only on label approved use is for leprosy.
However, off label sales of the treatment are in the range of $55M, mainly
through sales to HIV and some multiple myeloma patients. So, in 2000, perhaps
90% of the sales of this drug were unapproved sales into the HIV community.
Celgene is working to create several new markets in treatments for
difficult diseases. In some cases these are direct cures for a disease
(Thalomid for myeloma). For HIV treatment, the drug is a palliative, treating
the symptoms of wasting that can compound other factors to cause death. In the
United States as well as most of the world, the number of people who are living
with HIV or AIDS is increasing annually. As more treatments extend the lives of
patients, the number of people who will benefit from treatment for wasting
increases dramatically.
How Is Celgene Working to Create That
Market?
The most successful and repeatable path to creating a new
market is to solve a specific problem that is strongly felt by your prospective
customers. If the problem is substantial, customers will work to resolve it.
Another path, somewhat harder to follow, is to pick a less critical problem and
then reduce the cost of solving that problem to the customers to the noise
level.
Here, Celgene addresses an enormous problem, although almost by
accident. When doctors took Thalomid off label to test it on HIV, they did so
without the specific encouragement of the company. The use of the
pharmaceutical off label has been promoted by doctors talking to doctors and
even more by patients talking to patients. The HIV patient community, like the
cancer patient communities, is well organized and has considerable
communication between members. When Thalidomide began to show promise, the
patients did the selling that Celgene did (and could) not. Celgene has,
however, been prominent in working with tests and research. The tests take
years, but the visible activity sells product immediately. The problem is so
acute that Celgene's best strategy may be to simply make it visible.
What Is the Benefit?
Until there is a cure for HIV, patients will be
fighting the opportunist infections that come with the virus for years or
decades. As the treatments work, the number of years that each patient will
take the treatments increases. The result is that Celgene has an opportunity to
sell more and more Thalomid every year.
Is the New Market Working?
A critical factor for success in existing markets is the skill of the
supplier to handle basic operational requirements. If the product does not
work, can't be shipped on time, or if customer service is inadequate, cost
cutting will not overcome the deficiency. These operational skills are less
critical in new markets, but they are still important. A gating factor to
Celgene's success will be basic operational competence. We are not suggesting
that the competence is lacking, but if that competence is missing the new
market may fail. This is especially critical in pharmaceuticals.
The
success of this market will be determined by how seriously the problem is
perceived. Despite a waning attention on HIV in the United States, this problem
is felt very severely by the affected patients, families, health care, and
insurance providers. Thalomid reduces the effect of that problem. The market is
working
|
|
|
Index Examples
Drug-Eluting Stents
Telematics
TiVo
Celgene
and Thalidomide |
