By: Peter Muratore, Alex Ortiz, Abhi

Verma, Charles Mandala, and Rocco

Fiore (Group 2)

BuccalVaxAn Alternate Delivery Method To Solving A Flu Pandemic

“Being able to deliver flu vaccines in a gum form will completely revolutionize the alternate delivering method market and be the first truly successful alternate vaccine form.”

Mission Statement

Novartis Mission Statement

What business are we in?

We want to discover, develop, and successfully market innovative products to prevent and cure diseases, to ease suffering and to enhance the quality of life.

Portfolio Analysis

Novartis Company Portfolio

Stars- Alcon, Pharmaceuticals

Cash Cows-Sandoz, Consumer Health

Question Mark - Vaccines and Diagnostics

Dogs - None

Situation Analysis

Market Size and Growth

The adult market is 39% of the adult population

The youth market is 40% of the youth population

The possible market increases every year as the population increases

Market Dynamics

The world vaccines market is dominated by five companies: Merck & Co., GlaxoSmithKline, Sanofi Pasteur, Wyeth, and Novartis.

The four largest firms, whose reported vaccine sales exceeded $2 billion each in 2007, held a combined 91.5% of the market

The US accounts for 40% of the world vaccine market

Market Dynamics

Manufacturers producing more doses with government support - 166 million doses in US for 2011/12 season

Total US flu vaccine market $1.3 billion

Flu shots—typically $24.99 to $29.99 at most retailers—carry profit margins between 30% and 50%

Price per dose reached a maximum of $12.59 in 2007, but has been decreasing as supply has increased - price per dose in 2010 was $8.60

© Datamonitor© Datamonitor

Infectious Diseases Vaccine Market Overview: Key Companies & Strategies

Reference Code: HC00004-001

Publication Date: 10/2010

Datamonitor

12© Datamonitor

HC00004-001: Vaccine Market Overview(10/2010)

The vaccines market has re-emerged as key growth driver for Big Pharma

Commoditized sector without large revenue potential

Attractive revenue stream in times of the decline of the traditional blockbuster

1980s

2010

New productsTechnology advances

Increased investment in

research

Higher pricing and value

Increased awareness and

demand

• Improved legal situation

• Little risk of genericization

• Launch of first vaccine blockbusters

• Most recently: H1N1

FURTHER DRIVERS

13© Datamonitor

HC00004-001: Vaccine Market Overview(10/2010)

The previous rapid growth of the market is showing signs of slowing down

*2006: Novartis: Vaccines & Diagnostics figures only from April onwards

Rapid market growth, CAGR: 32%

0

5

10

15

20

25

2004 2005 2006 2007 2008 2009

Va

ccin

e s

ale

s (

$ b

illio

n)

Novartis (V&D) / Chiron

Sanofi Pasteur (including SPMSD)

GlaxoSmithKline

Merck & Co (including SPMSD)

Sales of five key vaccine players, 2004-2009

* 2009 data: incomplete for Merck & Co, Wyeth/Pfizer due to M&A-associated changes in reporting

*

*

Wyeth (now Pfizer)

Significantly slower growth, YoY: 11%

H1N1 pandemic vaccines

Other vaccines

Reasons for stagnation:

Maturation of novel blockbuster vaccines (Gardasil, Prevnar)

Delay in development of new vaccines with blockbuster potential: easy targets are gone!

14© Datamonitor

HC00004-001: Vaccine Market Overview(10/2010)

The H1N1 pandemic led to significant windfalls for the major flu companies

Source: Company annual reports

H1N1 pandemic vaccines

Other vaccines

Pandemic influenza vaccine sales versus other vaccine sales for GlaxoSmithKline, Sanofi Pasteur and Novartis($m), 2009

* 2009 data: incomplete for Merck & Co, Wyeth/Pfizer due to M&A-associated changes in reporting

• Revenues derived from pandemic vaccines sales will be short

lived as the hype surrounding H1N1 has significantly subsided

• Vaccine uptake, particularly in Europe has been limited and

governments have tried to renegotiate with manufacturers to

cut back on the supplies that were initially ordered.

Combined pandemic vaccine sales of $3 billion for major

flu players in 2009 alone

15© Datamonitor

HC00004-001: Vaccine Market Overview(10/2010)

Improved technologies will be instrumental in overcoming the development hurdles for novel vaccines

Adjuvants

• Substances which enhance the immunogenicity of a vaccine

• Can bias immune response along Th1 or Th2 pathways

• Allow antigen-sparing

Manufacturing

• Faster, more flexible manufacturing technologies

Administration

• New approaches:

• Mucosal (oral, nasal, pulmonary)

• Dermal (patches, microneedles, powder injectors)

Emerging technologies

Key role:

Vaccines for elderly, therapeutic vaccines,

pandemic flu

Key role:

Influenza

Key role:

Influenza, traveller’s vaccines

BOOST!!

16© Datamonitor

HC00004-001: Vaccine Market Overview(10/2010)

Five Big Pharma companies dominate the vaccines market

Source: Company annual reports

Company Vaccine sales 2009

Key franchises Key products

THE ALL-ROUNDER $5.8 billion Infant combinations, hepatitis, influenza, HPV, rotavirus

Infanrix-franchise, Rotarix, Cervarix, Fluarix, Pandemrix

THE CUSTOMIZER $5.7 billion Infant combinations, meningococcal vaccines, influenza

Menactra, Daptacel, Adacel, Pentacel, Fluzone

THE INNOVATOR >$4.4 billion(incomplete reporting for 2009; 2008: $5.1 billion)

HPV, rotavirus, MMR-V vaccines

Gardasil, RotaTeq, M-M-R II, Varivax / Proquad

THE ONE-HIT-WONDER >$1.8 billion(incomplete reporting for 2009; 2008: $2.7 billion)

Pneumococcal vaccines Prevnar, Prevnar 13

THE NEWCOMER $2.4 billion (Vaccines & Diagnostics)

Influenza, meningococcal vaccines,

Fluvirin, Menveo, Focetria

17© Datamonitor

HC00004-001: Vaccine Market Overview(10/2010)

Influenza and pediatric franchises drive Sanofi Pasteur’s sales

Sales performance by vaccine class, 2004-1H 2010

• Sanofi is the clear market leader in influenza vaccines and made substantial revenues from its pandemic vaccines franchise

• Sanofi Pasteur is joint leader of the pediatric combination market with GlaxoSmithKline

• Menactra is the only truly innovative vaccine in Sanofi’s portfolio but has lost its previous monoply position in the important US market following the US launch of Novartis’ Menveo in 2010

Source: Company annual reports

CAGR 2004-09 = 18.5%

18© Datamonitor

HC00004-001: Vaccine Market Overview(10/2010)

Novartis’ current key focus is on influenza and meningitis vaccines

Sales performance, 2004-1H 2010• Vaccines accounted for 72% of combined Vaccine &

Diagnostic sales in 2007. Due to the strong H1N1 pandemic windfalls in 2009, this percentage is likely to be higher in 2009

• Strong growth from 2008 on 2009 driven by the company’s influenza vaccine franchise and pediatric vaccine QuinVaxem

• Significant, but narrowing gap compared to sales of other key vaccine players

Geographic spread, 2004 – 1H 2010

• Relatively balanced spread between different key geographies

• US likely to replace Europe as most important market in 2010

Source: Company annual reports

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

2004 2005 2006

(since April

- acquisition

of Chiron)

2007 2008 2009 1H2010

Ov

era

ll V

&D

sa

les

($

m) CAGR 2006-09: 36.4%

Market Segments

The portion of the unvaccinated population that chooses not to get vaccinated because they are phobic of needles

People who do get vaccinated, but are scared of needles.

SWOT Analysis

StrengthsThere are no successful injected vaccine alternatives for Flu.

5% of unvaccinated people dislike needles.

Easier delivery method; no appointments, no hassle.

Advances in vaccine production will allow the gum method to meet the mass production needs of the population.

Weaknesses

Some people may be skeptical of the effectiveness of this new method.

People may not chew the gum long enough for the vaccine to be absorbed through the gums.

Choking hazard if used by small children.

Opportunities

This method allows for the possibility for booster vaccines to become available.

An opportunity to gain control of a larger portion of the vaccine market.

Ability to increase capital/revenue due to investors and new users.

Threats

The number one threat would be people staying loyal to the traditional compliment of flu vaccines.

Government regulation.

The nasal version of this vaccine.

Generic versions of this vaccine (post patent expiration).

Proposed New Product Line To Enter

Marketing Mix

Positioning

BuccalVax is a brand of flu vaccine from Novartis that provides a patient preferred alternative to other forms of delivery

The Four P’sPlace- Pharmacies throughout the United States

Price- would be based off of a multitude of costs incurred to produce the vaccine, R&D, FDA approval, patent fees, and the costs of marketing and shipping.

Product- Unique nano-particle technology enables rapid buccal absorption of the vaccine with equivalent immunity to flu virus.

Promotion- Through retailing pharmacies (ex. CVS, Walgreens, Walmart, etc.), through advertisements, and directly to doctors.

Product

Unique nano-particle technology enables rapid buccal absorption of the vaccine with equivalent immunity to flu virus.

Year 1,2Standard BuccalVax marketed to all agesYear 3,4,5Alternative flavors introduced, slightly more targeted towards children (thus, increased marketing for longer term growth)Year 5+Brand extensions beyond chewing gum

Price

Production Cost: $10 Years 1,2Selling Price:$24Pricing Strategy: Skim MarketYears 3,4,5Selling Price:$28+

Promotion“Live life more lively”

Have a cogent brand identity of living, ease of product use. Market directly to consumers. Aggressively advertise through channels competitors do not utilize, or under utilize, such as social media and TV years 1,2. Years 3,4,5 market with experienced based promotion, such as in store events. Market directly to doctors all years.

PromotionYear 1Advertising IntensiveYear 2Roll back advertising, increase leaner, experience based marketing Year 3Increase advertising in accordance with product line extensionsYear 4,5Roll back advertising, increase leaner, experience based marketing

Place

Pharmacies & Doctor’s offices throughout the United States

Current Product Line/Value

Proposition

Source of Business

Would be 50/50 between those people who are scared of needles & those who do not have time.

Market Target

The primary target of this product would be to the 5% of people who dislike needles who do not get vaccinated

The secondary target would be to those who do not get the vaccine because it would be difficult to get ahold of but this product will be simpler to get ahold of.

Lastly, this would target those who feel that taking this would deprive those who truly need it because this product has the opportunity to be truly mass produced.

Frame of Reference

The main competitors would be the nasal version of this vaccine.

Other competitors may be the traditional vaccine.

Point of Difference

There are currently no successful injected vaccine alternatives on the market.

This product uses a completely new route of entry for the vaccine to enter the blood.

Consumer Based Estimate

Consumer BasedEstimate

• Adult market = 39% (age 30 – 84)

• 177 million people x .39 = 69.03 million people

• 69.03 million people x 1 vaccination x $24 = $1,656,720,000

• Youth Market = 40% (age 5 – 29)

• 106 million people x .40 = 42.4 million people

• 42.4 million people x 1 vaccination x $24 = $1,017,600,000

Consumer BasedEstimate

Minimum Business Proposition

• >= 6 months 0

• >=18 years 302,055 (80% of current market)

• 18-64 years 97,973 (40% of current market)

• 65+ years 13,263 (10% of current market)

• MBP=413,291 units x $24 = $9,918,984

Optimal Scenario

• >= 6 months 0

• >=18 years 377,569

• 18-64 years 244,933

• 65+ years 132,636

• OS=755,138 units x $24 = $18,123,312

Best Estimate

• >= 6 months 0

• >=18 years 339,812(90% of current market)

• 18-64 years 159,206(65% of current market)

• 65+ years 26,527 (20 % of current market)

• BE= 525,545 units x $24 = $12,613,080

Market Based Estimate

Market Based Estimate

Every year recently launched products boost their net sales

Market Based Estimate

• Working with Novartis increases our market.

• Every year recently launched products boost their net sales.

• Influenza vaccines are a core franchise of the Novartis division.

• Today, Novartis is among the world’s largest producers of influenza vaccines.

5 Year P&L StatementProjected 5 Year Income StatementFor BuccalVax

2012

2012 2013 2014 2015 2016 TOTAL

INCOME              

Revenues              

Sales   $12,613,080.00 $14,505,042.00 $17,616,268.40 $20,880,953.94 $24,111,689.27 $89,727,033.61

Less sales returns   $- $- $- $- $- $-

Service revenue   $- $- $- $- $- $-

Less discounts given   $- $- $- $- $- $-

Net sales revenue   $12,613,080.00 $14,505,042.00 $17,616,268.40 $20,880,953.94 $24,111,689.27 $89,727,033.61

EXPENSES              

Production Expenses   $5,255,450.00 $5,255,450.00 $5,255,450.00 $5,255,450.00 $5,255,450.00 $26,277,250.00

Advertising/promotions   $700,000.00 $500,000.00 $600,000.00 $400,000.00 $400,000.00 $2,600,000.00

Factory Expenses             

Miscellaneous expenses   $- $- $- $- $- $-

              

Salaries/wages   $- $- $- $- $- $-

Inventory   $- $- $- $- $- $-

Total Expenses   $5,955,450.00 $5,755,450.00 $5,855,450.00 $5,655,450.00 $5,655,450.00 $28,877,250.00

               

Net Profit   $6,657,630.00 $8,749,592.00 $11,760,818.40 $15,225,503.94 $18,456,239.27 $60,849,783.61