Biogen Defends its Specialist Market

Biogen quickly became the leader in the multiple sclerosis market, growing Avonex into a billion-dollar drug. Now Biogen's dominance is being challenged by Serono and its new partner Pfizer, co-promoting another interferon, Rebif, which came to market with head-to-head data showing it's better. Biogen maintains that Avonex is the best treatment, and is working to support its contention. The biotech is confident that the relationships it has built over time, and strengthened through services, will be hard for newcomers to push aside. The potential for leverage is what attracts Pfizer to this specialist market: it aims to sell Rebif broadly. Its 300 neurology sales reps will carry other products for the co-morbidities MS patients suffer--so the ROI could be good, even if Rebif itself isn't a huge seller. An industry whose pipeline is far richer in niche than GP products will be watching this marketing battle: will Biogen's focus carry the day--or can Pfizer turn a late-entry specialist product into a market leader and in the process, make significant money for itself?

Biogen is sticking with a focused strategy against Serono and its new co-promotion partner Pfizer, which aims to redefine "Big Pharma blockbuster" and still drive good ROI.

Deborah Erickson

• Biogen quickly became the leader in the multiple sclerosis market, growing Avonex into a billion-dollar drug.

• Now Biogen's dominance in MS is being challenged by Serono and its new partner Pfizer, co-promoting another interferon, Rebif, which came to market with head-to-head data showing it's better.

• Biogen maintains that Avonex is the best treatment for this chronic disease, and is working to get clinical proof to support that contention. The biotech is confident that the relationships it has built over time, and strengthened through services, will be hard for newcomers to push aside.

• The potential for leverage is what attracts Pfizer to this specialist market: it aims to sell Rebif broadly, not just to specialists, but to community neurologists Biogen doesn't call on. Its 300 neurology sales reps will carry other products for the co-morbidities MS patients suffer—so the ROI could be good, even if Rebif itself isn't a huge seller.

• An industry whose pipeline is far richer in niche than GP products will be watching this marketing battle: will Biogen's focus carry the day—or can Pfizer turn a late-entry specialist product into a market leader and in the process, make significant money for itself?

Biogen Inc. has made its fortune by promoting a single drug, Avonex, its own version of interferon beta-1a, as a treatment for multiple sclerosis. Launched in 1996, Avonex quickly surpassed another form of interferon already on the market for the same disorder. Biogen grew Avonex into a billion-dollar drug, by wielding data that showed its product was better, and by building relationships with patients and key neurologists. The company became a poster-child for the merits of niche marketing, much like Genzyme Corp. before it, which grew rich selling an enzyme to a small group of patients with a rare genetic disease.

Many other biotechs and mid-sized companies have made this focused model their own—aiming to sell high-value products into markets deemed too small to interest a major drugmaker. The strategy was logical. The M&A binging among the biggest pharmaceutical players made those firms ever larger and hungrier for blockbuster products that could drive growth off a massive base. It seemed obvious that behemoths like GlaxoSmithKline PLC , Pfizer Inc. , Novartis AG , Aventis SA and AstraZeneca PLC would attend to mass markets for ubiquitous conditions like high blood pressure, elevated cholesterol, depression and diabetes—sending out thousands of sales reps to do the job—while smaller players would focus on specialty markets more suited to their stature.

All along, companies focused on specialty markets have assumed that most of their risk lay with the technology and in the clinic, perhaps in getting the money to see a program through—but the beauty of the model was, that once drugs made it through the regulatory gauntlet, small companies could sell those products effectively with sales forces of just 40 or 60 or 100 people. Some firms managed to drop marketing risk even lower, by getting products designated as "orphan" drugs worthy of seven years marketing exclusivity precisely because they were developed for small markets.

Now the reasoning that encouraged biotechs and mid-sized players to focus on specialty markets—and that has lately drawn them to each other, rather than to Big Pharmas, for licensing deals —is coming under question. Big Pharma companies are starting to see potential in specialty markets they didn't give a second glance a few years ago. They don't so much have visions of individual blockbusters dancing in their heads: the captivating concept is more like a network, a means of leveraging a portfolio—the idea that people who buy one product are more likely to buy others linked to it, as shampoo is linked to conditioner to hair gel and blow dryers. Why pass up the opportunity to sell a customer more?

Biogen is one of the first biotech companies to feel the repercussions of Big Pharma's vision shift. Successfully competing against Schering AG 's Berlex Laboratories Inc. , Teva Pharmaceutical Industries Ltd. and Serono SA , it is now being challenged anew by Serono, which signed on Pfizer, the largest pharmaceutical company in the world, to co-promote its own version of interferon beta-1a, Rebif. Serono began selling the drug in the States on its own in March 2002; that summer, it announced the partnership with Pfizer, which first headed into the field in the fall.

Currently, Rebif is capturing about seven percent of new prescriptions in the MS market, and Biogen retains its lead. Pfizer and Serono figure 2003 is the year the market will witness the effects of their synergy, but Biogen's managers say they're confident they can remain the dominant player in the market. To do it, they're sticking with the specialty-marketing strategy that made them successful in the first place. They believe science will keep Avonex on top, and trust that the relationships they've built with patients and neurologists will not easily be put asunder.

The marketing battle will be a test of focus vs. informed muscle. Will Biogen's concentration on serving physicians and patients—and the insights it has into these people and their needs—help it hold the market? Or will the partnership of Serono and Pfizer, fueled by multiple products, prove that might makes right?

Portfolio breadth is a distinctly big-company advantage, and it could become a self-perpetuating one. Large firms aspiring to reap a healthy return on investment by spreading the cost of marketing across selections of products, are also eyeing another sort of strategic pay-off. If they can demonstrate success in specialty markets and show themselves to be good co-promotion partners—as Pfizer hopes to do in MS with Serono—big companies may once again become partners of choice for biotech licensing deals.

Ultimately, however, focus may carry the day. Biogen has the whole company thinking about Avonex versus Rebif, and doing whatever needs to be done to respond to Serono/Pfizer, in a coordinated way. Big size does not always deliver victory in marketing: witness Eli Lilly & Co. 's schizophrenia treatment olanzapine (Zyprexa) out-selling Pfizer's ziprasidone (Geodon). Similarly, Cor Therapeutics Inc. (a division of Millennium Pharmaceuticals Inc. ) is making a success of etifibatide (Integrilin) in the cardiovascular market, despite competition from Merck & Co. Inc. and Johnson & Johnson .

Biogen Emphasizes Antibodies

When Biogen launched Avonex in 1996, only Berlex was selling interferon for MS. The Berlex version of the protein interferon beta-1b, marketed as Betaseron, had been on the market for two and a half years when Biogen came along. On the strength of data showing that Avonex could both slow the accumulation of physical disability and decrease the frequency of neurological attacks in people with relapsing forms of MS, Biogen won special protection for Avonex under the Orphan Drug Act, thus gaining seven years' marketing exclusivity.

Avonex became the market leader seven months after launch, and has remained the most-prescribed treatment for MS, even after Teva, a generic manufacturer based in Israel, introduced glatiramer acetate injection (Copaxone) a non-interferon treatment. Biogen's executives believe their success stems from having a superior product, and from their focus on marketing to a core group of 5,000 neurologists, who write 80-90% of all prescriptions for MS patients. The company is also proud of the relationship it has built with patients; some 100,000 have given Biogen permission to contact them directly.

The drug is now a billion-dollar product. Sales have been slowing—Biogen itself predicts product growth for 2003 will be zero to 2%—but Avonex is clearly vital to the company, which only just got its second product, alefacept (Amevive), approved in the US at the end of January for moderate to severe chronic plaque psoriasis.

Biogen distinguished its product from Berlex's Betaseron, in part by emphasizing that MS patients taking Avonex generate fewer neutralizing antibodies (NAbs). The biotech company hopes the same argument will favorably differentiate Avonex from Serono's interferon, which broke Biogen's exclusivity by demonstrating clinical superiority to Avonex in a head-to-head trial. Serono won its marketing approval and orphan-drug designation based on data gathered 24 weeks into its head-to-head EVIDENCE trial. It was the first time a drug had ever broken another's orphan status on the basis of efficacy. Biogen had broken Berlex's, based on its safety data.

Biogen believes that over time, an increase in NAbs mitigates the efficacy of interferon treatment. Says Rob Perez, Biogen's head of US sales and marketing: "Evidence is showing that a high titer of neutralizing antibodies essentially makes biological therapy about as effective as a placebo," by attacking and neutralizing the drug itself.

Teva's MS treatment Copaxone is a chemical, not a biological agent. It's the fastest-growing product in the MS marketplace, but Perez thinks it strikes out on the basis of potency and convenience. "Copaxone is generally regarded as less effective than the interferons," he asserts, and patients need to take daily injections. Perez says new research to be presented at the American Academy of Neurology meeting at the end of March will show that people form antibodies to Copaxone, "and they may be neutralizing." To his mind, the battle for market share remains between the interferons.

Biogen is working to get in position to jab its newest opponents on the neutralizing-antibody issue. In November 2002, it received FDA's permission to change the label of Avonex, to show that the drug generates antibodies less frequently than the product originally tested in Phase III trials. Now the drug's label notes that patients given Avonex for more than one year show neutralizing antibodies at a rate of 5% (13 of 261 patients) versus 24% of patients given the original drug. Biogen suspects the difference may be attributable to changes it has made in the manufacturing process. The company points out that product package inserts show that after two years 24% of patients taking Rebif develop NAbs, and that 45% of Betaseron recipients do.

The trouble is, in the near term, Biogen's marketers can't make any claims that neutralizing antibodies actually matter in the treatment of MS. That's because FDA does not yet consider the assembled data sufficient to support a ruling, one way or the other. To get data to back up its contention that antibodies do matter, Biogen last year began a 5-year, head-to-head study of Avonex versus Rebif, comparing the long-term safety, tolerability and efficacy of both drugs. The first phase of the trial is a retrospective analysis of patients who have taken either drug for at least 15 months and no more than 21; the second phase will follow them for up to three years more.

Biogen hopes to direct the market's focus "away from short-term efficacy, to what happens over the long term," Perez declares, adding that his firm's new message is "Efficacy that lasts." The slogan is clearly a swipe at Rebif. Biogen was "disappointed" that Serono could win approval and bump its own orphan drug status with just 24 weeks of data, Perez says: "We didn't think the science was enough. If people are going to have this disease for more than six months [and of course they will; it's a chronic, progressive condition] we think they ought to know for sure that their treatment is still working." He notes that Biogen's EVIDENCE trial was done in two six-month blocks: at the 12-month mark, NAbs were evident in just 2% of patients on Avonex, but present in 24% of Rebif patients.

Absent data demonstrating the clinical relevance of those antibody counts, Biogen is relying on inference and association to make the case that MS patients should be concerned—and choose Avonex, the interferon least likely to generate an immune response. Perez notes that NAbs are an issue with alpha-interferon and with clotting factors, and they've lately been recognized as an issue with the red-blood-cell stimulator erythropoietin (EPO). In fact, NAbs are now the latest battling point between Amgen Inc. and its licensee Johnson & Johnson, long engaged in a bitter rivalry. Amgen markets its version of EPO in the US as Epogen, while J&J manufactures and markets its versions as Procrit in the US and as Eprex in Europe.

The versions of EPO are ostensibly identical, just as Avonex and Rebif are both interferon beta-1a, but clinical differences are turning up between them. In early February, a study published in the New England Journal of Medicine reported that European patients with chronic renal failure treated with Eprex are at risk for forming neutralizing antibodies against EPO. French researchers documented 13 cases where NAbs attacked the form of EPO naturally found in patients' bodies as well as that given therapeutically. The immune reaction ended up totally shutting down patients' ability to make red blood cells, a condition called pure red-cell aplasia.

Amgen's marketing team has been taking advantage of the fact that so far only one case of red-cell aplasia has been associated with Epogen, while approximately 75 cases have been linked to Eprex. It's not certain whether this distinction will persist or if red-cell aplasia will turn out to be a "class-effect" problem related to all forms of EPO. For now, Amgen is making hay while the sun shines: emphasizing the difference in its manufacturing method to position Epogen in better light.

Biogen is "just starting to see interest from managed care" about neutralizing antibodies, and the possibility that "they could be paying fifteen to seventeen thousand dollars per year for a patient on Rebif who's getting no benefit," Perez says. He believes, "The future will find managed care forcing all companies to test for neutralizing antibodies, and that will be excellent for us."

At the moment, though, there's simply no consensus on the role of neutralizing antibodies in MS. Biogen acknowledges that there are different schools of thought. Some neurologists discount their importance, which supports the positioning of Berlex and Serono. The FDA and the American Academy of Neurology consider it an open issue, while other neurologists think NAbs are definitely a matter of concern.

Perez believes, "the noise being generated about the neutralizing antibody issue is a plus for us. The MS community is hyped up about it, and Pfizer/Serono are having to explain it, as opposed to touting Rebif's efficacy." Indeed, chat rooms on MS websites do reveal many posts about the subject. But it's not as though Biogen is tarring only its competitors. Numerous posts on its own website are from patients complaining about their antibody responses to Avonex.

Not everyone thinks the antibody issue is a market-mover. Bill Tanner, an analyst with Leerink Swann in Boston, who follows Biogen, says that the company's arguments are "perfectly logical. Biogen is not grasping at straws, because this issue is a problem with other biologicals." But in a recent call his firm sponsored with neurologists, he says it became apparent that, "This is not on physicians' radar screens yet. Maybe in a year or two it will be, but it isn't yet. There just doesn't seem to be a sense of urgency about this among clinicians, and that's probably because there is no clinical data proving it is a problem in MS, as it is in other areas."

Biogen may be hammering so hard on the questions about antibodies, to get itself into an offensive position, rather than the defensive position it has been squeezed into before. Questions about dosing have dogged Biogen for years. Apparently many clinicians, encouraged by Biogen's competitors, have raised doubts as to whether the once-weekly 30 mcg. dose of Avonex approved by FDA is in fact potent enough. Biogen responded to the pressure by running a clinical trial testing a 30 mcg. dose of Avonex against a 60 mcg. dose—and the data revealed at the end of 2002 found no difference.

"We felt we had to defend ourselves, and we probably spent too much time reacting to the high-dose issue," Perez declares. Once that matter was, from Biogen's perspective, resolved, he says the charges against Avonex suddenly shifted. "Then they started saying, ‘Oh, it's not the dose, it's the frequency' [that supposedly makes other interferons better.] What can I say? That's competitive marketing." Patients on Avonex take a 30 mcg. dose by weekly injection; Rebif patients get 44 mcg. three times a week by injection. "Pfizer and Serono are trying to create the perception, that higher dose means higher efficacy," Perez asserts.

In coming rounds of the marketing fight, Biogen is determined not to go on the defensive. "We could talk about problems with their trial, but that's defensive. We're going to play our game," says Perez.

Connecting to Patients

At the moment, Biogen's biggest strength seems to be strong relationships with doctors and patients—relationships strengthened by services the company provides. Biogen boasts about using "leading-edge technology" to differentiate Avonex through programs and services, but Perez declined to go into detail. "We don't want to lay out a roadmap to what we're doing."

This much is clear: the company has been gathering a lot of information from patients and doctors through two websites, which it also uses as vehicles for offering services. Avonex.com provides information specifically about the drug, and MSActivesource.com general news and information about the disease. It is an unbranded site, a place where people can come to learn about the disease, and Perez says it has won numerous awards.

Given the state of electronic interaction these days, it's a safe bet that Biogen is tracking every move of every person that visits its sites—not just how long they stay (an average of ten minutes) but how often they come, where they go, what they look at. In order to access chat rooms and message boards, or to get personalized therapy support or information for families—almost anything other than Biogen's news selections—a site visitor must become a site "member" detailing much more than age and gender. Members have to identify whether they actually have been diagnosed with MS, or if they're just a friend—and if a friend, questions are asked about the patient: when diagnosed, whether on therapy, what sort, etcetera.

Biogen first established a Web presence in 1999, after Teva had created its own basic-information site, MSWatch.com, and its drug site, Copaxone.com. "We knew MS patients were high information seekers, and would respond to this medium," Perez says, noting that Biogen had watched its competition, and learned that people were having problems accessing a number of different 800 phone numbers. "We felt there would be a competitive advantage in making a simple, effective way of getting information," he explains.

Through MSActivesource.com, Perez says, "We try to get as many patients as possible into a program where they get a monthly ‘touch.' It benefits patients and the business," Perez says. The company also runs a phone line that handles over 1,000 calls a day, he notes. "We invest a lot in patients. We've got more people in customer service than in sales." The phones are manned by young, college-educated people who are for the most part science majors.

The phone line is just one type of service Biogen offers as a way of expanding its patient relationships. Others are clustered in particular phases that people go through with the disease—from awareness and diagnosis, to therapy choice, to Avonex compliance. The objective, obviously, is to get patients on the drug and keep them on it. So basic programs to make people aware of Avonex when they're first diagnosed ramp up to serious hand-holding: live and telecast educational events are part of the package, but a patient can also get a personal Avonex coordinator, reimbursement counseling, training in administering the drug and other support. To assist patients in the compliance phase, Biogen runs pharmacy programs and will also assign a personal nurse counselor.

The goal is to provide patients with a single point of contact, and to help with every aspect of managing the disease. "So when Serono/Pfizer comes around, and tries to target our patients, they're going to find them very satisified," Perez declares.

Biogen is also proud of the relationships it has established with specialists, whom the company also seeks to serve. The firm has helped neurologists create their own websites, which assists them in educating patients. And Biogen's support of newly-diagnosed patients reduces pressure on doctors' offices that might otherwise be expected to facilitate insurance claims and training.

The small number of neurologists specialized in MS is one of the market attributes that has helped Biogen be so successful. Just 5,000 neurologists write 80-90% of prescriptions, and only 500 write 36% of prescriptions, Perez points out. In seven years of marketing, Biogen has gotten to know these doctors well. The biotech firm knows that there are some 15,000 neurologists across the US, but it has concentrated on detailing to those that specialize in MS, some of whom are in major treatment centers. The ability to market cost-effectively to high prescribers is a fundamental attraction for biotechs in other specialty markets, such as oncology.

Market structure, relationships that have been built over time and strengthened through services, and growing concern about neutralizing antibodies—Perez believes all of these factors will help Biogen stay in control of the MS market. "And it's not like Pfizer has forever to take over," he adds, explaining that Biogen has high hopes for natalizumab (Antegren), a drug candidate management hopes will be a successful follow-on to Avonex. Because it is a fully humanized antibody, Antegren isn't expected to generate any immune reaction at all, and it will be given via a monthly infusion. Perez figures that plenty of people would drive to their doctors once a month for an effective treatment.

If all goes well, Antegren could come to market in 2005 or 2006, and Biogen is betting "it will be a game-changer." Biogen is developing Antegren, and will market it, with Elan Corp. PLC [See Deal], whose Athena Neurosciences Inc. division created the drug in the mid-1990s. The antibody, which sprang from a research program investigating cell trafficking, kicked around Athena for a while. Now Perez notes that, "it's generating the best Phase II data anyone has ever seen for this disease." In the meantime, despite all its preparations and investment in relationships, Biogen is in for a tough fight. The biggest drug company in the world wants in to the market that Biogen itself took over from another company seven years ago.

Pfizer's Big Interest

Serono announced in July 2002 that Pfizer would co-promote Rebif in the US. The Big Pharma paid $200 million up front, and agreed to share further development costs [See Deal]. Serono will book all sales and Pfizer will get only a portion of profits. The percentages weren't released, but analysts at SG Cowen believe Pfizer will collect about 25-30% of revenues: perhaps $55 million on $220 million in 2003, and $210 million on $600 million in 2006. What attracted a huge company like Pfizer, to an opportunity like this?

Pfizer VP and neurology group leader John Krayacich says his company had been looking for an MS product for a while, because it saw MS as a growing marketplace. Pfizer found Rebif attractive because Serono could produce head-to-head data against the US market leader, demonstrating that Rebif is a superior product, and also because Rebif was already number one in the rest of the world. But it wasn't so much the product as the chance for synergy with Pfizer's own assets that got the deal done. "Rebif complements the rest of our neurology portfolio of products that are best in class, or close to being best in class," Krayacich declares.

"We have Neurontin for neuropathic pain, Zoloft for depression and Aricept for cognitive dysfunction. We treat the co-morbidities that many MS patients suffer," he points out. He explains that it's more effective for Pfizer to send out a sales rep, if the cost of that detail can be spread across a number of products, instead of pinned to just one or two. Any investment in education can also be leveraged across different products.

Pfizer is known for crushing competitors in primary care markets by sending forth legions of sales reps—and it will attempt to do the same in the MS market, albeit on a much smaller scale. Just a sliver of its massive sales force will do. Pfizer has 300 neurology sales reps, and is putting all of them on the job for Rebif. That means it's fielding more reps than the three other players, combined. Biogen boosted its sales force from approximately 75 to 90 since Serono and Pfizer came in, but it won't go much higher than that.

Pfizer's bigger sales force, carrying multiple neurology products, can go where Biogen can't—to community neurologists. "Strategically, we believe we can build the market beyond MS specialists," Krayacich says, explaining that there's a large group of community neurologists who treat all kinds of things outside of the MS area, everything from stroke and epilepsy to pain and Parkinson's and Alzheimer's. "We think we can be especially effective in places where there is no sub-specialist. Our breadth can help us," he asserts.

Pfizer not only has more wherewithal than Biogen and other biotech companies, it has a different mindset. "We think biotech products are just like any other product—you can develop them broadly; you don't have to sell only to specialists," Krayacich says. The difficulties of an injectable drug are no big deal, he maintains: every product has its issues; they just have to be managed, whether it's adverse events or complicated regimens or long infusion times.

Pfizer sees MS as a patient-driven marketplace, and thus it's planning to apply the disciplines it has developed over time in direct-to-consumer advertising, medical education, direct selling and developing markets. Beyond its expertise, the Big Pharma will also be wielding its financial might. There's already been a lot of direct-to-patient contact from all the companies in the MS market, Krayacich notes: "We'll increase the volume of that, and increase the breadth of offerings to patients." The co-promoters aim to give patients more information to understand the disease and its co-morbidities, so they can enter into better dialogue with their physicians.

Krayacich believes the biggest challenge to growing the market and taking share will be increasing awareness of the disease, and convincing doctors of the need for earlier diagnosis and the value of earlier, more aggressive treatment. Biogen has been trying to do the same, but sales have been slowing and the company says that's because the market is maturing. Will being bigger help Pfizer do a better job? Krayacich says it's not an issue of size. "We'll do it by placing more emphasis on science. That's where Serono and Pfizer see eye to eye—we will continue developing the science."

Their message for Rebif: more aggressive, more frequent treatment produces greater results—less progression of the disease. "The head-to-head trial with Avonex has shown that," he says. Styled that way, the pitch seeks to make a virtue of the fact that Rebif requires three injections per week, vs. a weekly shot of Avonex, and it also emphasizes the potency issue.

Phase IV studies will be key to the partners' strategy, says Krayacich, who believes there are still a lot of unanswered questions and unmet needs in the MS market. "We'll continue exploring the merits of earlier, more aggressive treatments; the ability to diagnose; and the impact of beginning treatment before relapses occur," he explains. But Pfizer and Serono don't intend to spend much time or money investigating the scientific issue that Biogen sees as vital.

"The jury is still out on neutralizing antibodies: what they do, how to measure them, and what it means when they're present," Krayacich declares, so Pfizer and Serono are focusing instead on "translating clinical endpoints into things that matter to patients," in contrast, he implies, to Biogen's emphasis on neutralizing antibodies. The endpoints in Serono's EVIDENCE trial, for instance, showed that Rebif reduces relapses of the disease, and reduces active brain lesions. "We'll try to take the high road. We'll try to clarify, rather than increase confusion in marketplace," he says.

Aside from growing the MS market and helping patients, Krayacich acknowledges that there's another agenda driving Pfizer's relationship with Serono. He expects the co-promotion to be something that Pfizer can point to, to show biotechs that it can be a good collaborator—one that can actually make money for its partners, turning even late-entry products into market leaders. He says: "We're really looking at this, jointly, as an opportunity to demonstrate that Big Pharmas and biotechs can work together effectively. Pfizer really should be the licensing partner of choice for biotechs."

Biogen: Respectful, but Confident

Biogen says it respects Pfizer's strengths, but is unconvinced that the Big Pharma's skills will be meaningful against it in the MS marketplace. Rob Perez says his firm hasn't seen much difference in the market, since Pfizer started fielding its sales force in October, as back-up to Serono. "Some new prescriptions are being written for Rebif, but other patients are coming back to Avonex," he says, adding that Rebif's launch has been slower than any other drug in the space. He considers that "testament to the job we've done."

MS remains a market suitable for specialty sales, he insists, adding that to him, Pfizer's strategy is "like the British redcoats. They're marching the same in every market." He describes Biogen's sales reps as "the guys shooting from behind every rock. We know the landscape in MS." Perez even goes so far as to say that he hears Pfizer's reps are having difficulty answering specialists' questions, and that this bodes well for Biogen. "Science sells, not soundbites. We'll win by playing our game, not Big Pharma's," he argues.

Even though Biogen sales reps can't make claims about antibodies, Perez believes, "We don't have to, because the science is moving on." The company says the subject is hot at neurology meetings, and that the word is getting out.

Mostly, Biogen draws confidence from the relationships it has developed with specialists and patients. Perez says that many of the firm's reps are on a first-name basis with doctors; they get access and time to talk about the most recent data. He believes that the direct relationships Biogen has established and nurtured with patients are a huge and enduring competitive advantage. The website MSActivesource.com is a key part of that, he says: "It's like having a big wall around our patients—it's going to be tough for Pfizer and Serono to get to them. It's a hugely leverageable asset, not subject to scale." Perez says the bottom line is this: "Biogen's relationships are not something that size can push aside."

Biogen maintains that its focus is a key advantage in specialty markets like MS, because "doctors and patients have unique needs. We can react to those needs quicker than Pfizer can," Perez asserts, adding, "We wake up in the morning thinking about people with MS and how to maximize Avonex, and we go to bed thinking about the same things. Pfizer is trying to leverage Rebif into a franchise that has lots of reps doing different things. This is all we do. Their reps may tell stories, but we're meeting the needs of people."

How Valuable are Relationships?

Not everyone is convinced that the advantages Biogen has built up with its physician relationships, its consumer programs and by fanning concerns about neutralizing antibodies will be enough to keep Pfizer at bay. Some industry observers see Biogen's belief in the primacy of science and relationships as "classic biotech thinking"—a theory that won't hold true in modern markets, and certainly not against a powerhouse like Pfizer. Hari Mahadevan, SVP of Rosetta Marketing Strategies in Princeton, NJ, says, "The idea that ‘science sells' is more purist than how doctors actually behave. Pfizer won't dumb down the science, but they won't rely exclusively on it. They rely on repetition. With their huge sales forces, they drown out anyone else, and numb the doctors. They go in and beat the same message over and over again till it becomes true."

"To be fair to Biogen," Mahadevan says, "specialists may be more influenced by data than general practitioners are, but the extent of that truth is not as widespread as biotechs may believe." When it comes to responsiveness to detailing, specialists behave the same way as general practitioners (GPs), he says: "Look at depression—companies market to psychiatrists as well as GPs. With both groups, if you increase the detail, you get a response." Mahadevan figures that, "unless some of Biogen's people have experience in primary-care markets, they're not going to know what hit them."

A senior marketing executive with experience in the neurology market observes, "Relationships do count for something; they shouldn't be undervalued. So Pfizer won't be able to win overnight. But reps turn over and money talks. More money means more ability to sponsor programs for patients, and more support for doctors too—in whatever way works, be it research grants, consulting arrangements or Phase IV studies." Pfizer can afford to do more than Biogen—more than almost any other company in the industry, and more is better.

Bob Caprara, VP of advanced analytics at ImpactRx Inc., a Mt. Laurel, NJ based firm that tracks the influence of detailing on pharmaceutical sales, observes, "I'm in the promotion research business. I see the effect of detailing. If Pfizer trains them guns on ya, I'm sorry. At the very least, it's like erosion—they'll gradually wear doctors down. Or it might just be like opening a floodgate. You can talk about relationships, but if a Pfizer or a GSK gets into a market, unless your drug is much superior to theirs, you can't keep the Huns at the gate."

It remains to be seen how much investment Pfizer will make in this market, when it is expected to have a dozen drugs each earning a billion dollars-plus. The company's pipeline is four times larger than the average of other Big Pharma companies. So it's got lots of other things competing for funding.

Why Pfizer Wants the MS Market

Why is a specialty market like MS worth the while of the world's largest drug company? Because Pfizer is strengthening a franchise. Big Pharmas can afford to create franchises, because they can go out and buy products. Once the franchise is established, the company can leverage marketing costs over a broad, related portfolio. Pfizer can build the value of the franchise not only by marketing this product, but by cross-development of other products. Multiple products = better ROI. Pfizer is good at figuring out all the different niches a product can go for, then doing the trials to prove that. The firm cites this ability as key to the growth it's enjoying now.

If Pfizer spends a lot of money, it has good odds of making it back—not necessarily on interferon, but on other products with which marketing is synergistic. The idea is that once the company establishes a sales channel to a particular group of patients and doctors, it can sell other things through that channel.

"We're redefining the term ‘blockbuster,'" Krayacich declares. He says Pfizer now realizes that a blockbuster product doesn't necessarily have to be a billion dollar drug. It may be a 700, 800 or maybe even a $500 million drug, depending on the investment required. "For a Big Pharma—for us—the ability to invest less means that smaller products can be just as lucrative—because they don't require a massive sales force to sell them." But biotech products do "need a lot more science behind them, and thus more clinical-trial support," Krayacich observes.

Pfizer won't cut back on its GP sales forces, he says—but it will "evolve some people from primary-care into specialist reps." It requires a different kind of person, he acknowledges, but apparently the company has enough people with the proper skills. Krayacich notes that Pfizer's neurology team was recently ranked #1 by neurologists, according to a study by market research firm Scott Levin. "We've already got a credible, talented team in neurology. MS can add to our portfolio," he declares.

Rebif's slow start was just that, he says: a slow start, but by no means an indication of how the co-promotion is going to turn out. Pfizer came in after Serono had already done all the pre-launch work, and although the Big Pharma may seek to come into other specialty markets earlier, he doesn't regret the delay. By the time the deal got done, Rebif had bumped the orphan-drug status of an existing product, on the basis of efficacy. Pfizer and Serono are gearing up, he says: "You'll see the impact within 2003. As we move into the new year, and our new marketing strategy, we'll demonstrate the value of increased reach."

Focus Versus Product Breadth

Maybe. Pfizer is certainly capable of spending what needs to be spent.

But even a company of its resources has to think carefully about ROI.

Perhaps the most important competitive question is the value of focus—Biogen's on Avonex—vs. sheer product breadth and corporate marketing power. Pfizer certainly has more money than Biogen, and thousands more sales reps, but Biogen derives $1.1 billion in revenues from Avonex, which allows it to profitably fund its Avonex marketing activities at a substantially greater level than Serono and Pfizer put together. Serono can certainly put Pfizer's $200 million up-front fee to good use in buying additional marketing activities, but it's also giving away, in the short term at least, a substantial chunk of the revenues. And Serono has other products which require its marketing spend.

Meanwhile, Pfizer also must face the task of matching Biogen's spend with much smaller interferon revenues to compensate. And it will have to learn, albeit with Serono's help, the ins and outs of MS marketing, which Biogen has spent seven years doing. Moreover, the downside of franchise marketing is a loss of focus: a Pfizer rep going in to sell four products to neurologists can't focus on all four—more realistically, two at any one time. But Biogen's 90-person sales force is always detailing Avonex. Pfizer can detail Rebif only a maximum of half the time, which in effect turns its 300 reps into 150 reps, and those 150 reps are covering a much broader population of neurologists.

Pfizer can certainly make money, but it may make more money through expanding the market to neurologists not prescribing today than by taking share from Biogen. Any increase Pfizer can bring to the market could actually be good news for Biogen since once a community neurologist starts prescribing an interferon, he might experiment with prescribing the different products.

A Glimpse of the Future

Biogen's situation gives a glimpse of what the drug industry could look like in a few years: small companies that innovate and dominate in a niche may suddenly find themselves competing with bigger players that can do the same as they can, and more, simply because they've got more means. But the battle between Biogen and Serono/Pfizer is almost a distraction from the more important issue inherent in the Rebif co-promotion: the increasing attention that large companies may need to pay to specialist markets.

Says Caprara: Pfizer is smart to start figuring out how to handle specialty marketing now, "instead of waiting till Lipitor and Norvasc come off patent, and two new erectile-dysfunction drugs are on the market." He's convinced that other Big Pharmas will follow Pfizer into specialty markets, and soon. Here's why: when all the big classes of drugs start coming off patent—anti-hypertension medicines, statins, SSRIs, asthma drugs, all the big categories where a lot of companies compete, "eventually those companies will have to go after designer drugs and illnesses. What else is there to tackle?"

It's going to be awfully hard to come out with a blockbuster drug good enough to convince people successfully treated with Lipitor or Norvasc to switch, Caprara asserts: "Where are you going to grow profits, where are you going to make money? They're going to have to fight this thing house to house. That's the next realm."

Caprara is not the only industry observer thinking this way. Susan Adler, a VP in the health care practice of Braun Consulting, says that she and colleague Isabel Kalofonos have been gathering data that suggests blockbuster products may reach peak sales faster, but specialty products have better ROI because of lower marketing costs.

Ongoing depression in the financial markets could help Big Pharmas move into specialty markets, as cash-strapped biotech firms whose innovations are finally ripening find they need help finishing clinical trials and launching products. In recent years, biotech firms have steered clear of Big Pharmas, convinced their niche products would be neglected and they themselves cut out of the equation. Biotech licensing deals have increasingly involved mid-sized firms and fellow biotechs, who've argued they'll pay attention to products. Elan agreed to share Antegren with Biogen, for instance, and OSI Pharmaceuticals gave Genentech Inc. US rights to its promising cancer drug, erlotinib (Tarceva) [See Deal]. But if big companies like Pfizer demonstrate that they can succeed in specialty markets, then they may once again become desirable partners.

Big Pharma can bring a more disciplined approach to marketing, Krayacich says, because "we've had more resources to apply to more products." A large company like Pfizer can do extensive market research early on, and continue to do research and analytics to support positioning. "Mid-sized players until now have not been able to do that," he points out. A biotech partner, as its contribution, brings knowledge of a disease area, relationships with specialists and strategic insight into markets. "We think Pfizer's marriage with Serono makes a virtue of our differences—and MS is a great opportunity to match the skills and competencies of Big Pharma and biotech," says Krayacich.

Pfizer clearly likes the idea of specialist markets. It signed up with Eyetech Pharmaceuticals Inc. in a similarly expensive deal for its macular degeneration product, Macugen [See Deal]. (See "EyeTech: Primary Care Dollars for Specialty Pharma," IN VIVO, January 2003 (Also see "EyeTech: Primary Care Dollars for Specialty Pharma" - In Vivo, 1 Jan, 2003.).) Many other Big Pharmas have also dived into markets once considered insufficiently remunerative, such as cancer and HIV. Pfizer's move into MS is philosophically similar, yet complicated by the highly competitive market.

An industry whose pipeline in aggregate is far more rich in niche than GP products will closely watch the outcome: if Pfizer can figure out how to make significant money in this business, it will have made a big step toward answering a question that has bedeviled major drug makers for the past two decades--how to profitably deploy organizations geared to primary care products in smaller but more prevalent markets for specialist medicines?