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Medicines Writeup

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Introduction

Purpose of the Report In Angiomax, the Medicines Company ("Medicines") has developed its first FDA approved drug for commercial sale to patients undergoing angioplasties. Yet this milestone may prove meaningless unless the Company can devise a profitable marketing strategy to launch its product and begin generating revenues. To achieve this goal, Medicines must determine Angiomax's optimal position, target market, pricing, promotion, and distribution strategy. In the long-run, however, even a highly successful launch of Angiomax may not provide enough revenue to cover the company's fixed costs and generate high returns demanded by investors. Indeed, long-term success calls for matching Medicines' strengths and resources with the specific products in its pipelines to ensure sustainable profitability. Recommendations To maximize profitability, we recommend that Medicines adopt the following roll-out strategy: * First target very high risk angioplasties by promoting primarily to research hospitals, and then expand in high-risk angioplasties at the 700 centers responsible for 92% of procedures. * Position Angiomax as a safer and more effective alternative anticoagulant drug to Heparin. * Set a premium price - $350 per dose for Angiomax. * Use push-based selective demand stimulation directed primarily toward doctors. Furthermore, we recommend that Medicines expand its drug discovery pipeline to include other cardiopulmonary drugs to leverage the customer relationships developed in the marketing of Angiomax. Analysis The Benefits of Angiomax Based on the Phase III trial data performed by Biogen, we have calculated the potential benefits Angiomax (Exhibit 1). ...read more.

Middle

of Angiomax has been established. Our logic rests on three facts: 1) Targeting the VHR segment first will help hospitals to realize a larger financial benefit 2) Targeting the VHR segment first will also reduce the chance that Angiomax fails to produce the appearance of resultsii due to low base rates of complications; 3) Total marketing costs of this tiered approach may actually be less as success in the VHR market will increases word-of-mouth advertising and thus reduces the need to spend money in the HR market. When approaching the VHR and then the HR segment, we recommend that Medicines position Angiomax as a safer and more effective alternative anticoagulant drug to Heparin for the high-risk and very high-risk Angioplasty patients. Pricing Strategy Compared to Heparin, Angiomax should be positioned as a premium product due to its higher effectiveness, predictability, and safety and more importantly (for hospitals) the extra value created. With the same drug, Medicines can not credibly price discriminate between the VHR and HR segments. Thus we recommend one price be set using the aggregate EVC of both segments. Specifically, Medicine should charge $350 per dose. We arrive at this number by first calculating Angiomax' EVC per dose (see Exhibit 2). However, we do not think that consumers can understand EVC and $457 price might be higher than consumers' inherent willingness to pay. ...read more.

Conclusion

Business Model Consideration Rolling out Angiomax is only the first step in the grand plans of Medicines. However, we find that the Company's long-term strategy questionable. First, the model of acquiring abandoned drugs may reduce development costs, but the lack of synergistic drugs in its pipeline may prevent the Company from fully leveraging its resources. Developing Angiomax shows the skills Medicines has in cardio-drugs and builds relationships with Cardiologists. However, targeting drugs in other fields may dilute Medicines brand while also requiring costly marketing in non-cardio medical fields. A second important constraint in the current business model is the availability of new drugs to acquire. Big pharmaceutical companies will not easily give up a drug to Medicines if they feel the drug may be the next blockbuster. One way to remedy these problems would be to enter into purchase contracts for abandoned drugs where the seller will take on marketing responsibilities. This would allow Medicines to leverage the scale of Companies like Merck to ensure cost efficiencies. If this proves impossible, Medicines should at least increase its efforts in finding additional cardiopulmonary drugs to better build brand and leverage resources. i Note that we consider the market to be "procedures" and thus segment by type of angioplasty. We deal with individual decision-makers such as doctors, pharmacists, etc. later in this report. ii In HR patients, only 7% will actually benefit from receiving Angiomax instead of Heparin, while almost 14% of VHR patients will benefit from receiving Angiomax. ?? ?? ?? ?? ...read more.

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