In February 2006, Dr Nora McCarthy, Executive Editor of IMS Company Profile, interviewed Fred Hassan, the CEO of Schering-Plough who has been widely credited with restoring the company's fortunes following the patent expiry of blockbuster allergy drug Claritin and major manufacturing problems. Edited highlights of the discussion are presented below:
IMS: In 2003 you spoke about a five-point action agenda, “Stabilize, Repair, Turnaround, Build the Base and Breakout”, which you planned to implement over a 6-8 year period. Schering-Plough is now in the 'turnaround' phase. What parameters are you measuring to elicit whether this stage has been successful?
Fred Hassan: “We achieved our major objectives – Vytorin was launched successfully in the USA and its sales surpassed those of AstraZeneca's Crestor, which had been launched a year earlier. Schering-Plough has transformed older brands and maximized their life cycles. For example, Remicade [licensed from Johnson & Johnson has now become five different products. Remicade was launched in its first market in 1998 for the treatment of Crohn's disease. It is now also indicated for rheumatoid arthritis, ankylosing spondylitis, psoriatic arthritis etc. The nasal spray Nasonex has been on the market for eight years – we've reinvented it and are competing very well against GlaxoSmithKline.
“Schering-Plough has also invigorated its R&D pipeline – Schering-Plough's Phase II pipeline has grown enormously within the last two years. Finally, Schering-Plough has rebuilt its relationship with the FDA – we are now getting a string of first action approvals – we are getting an 'approval' letter on the action date as opposed to an 'approvable' letter. Trust is being re-established with the FDA, helped enormously by the fact that Schering-Plough managed against the odds to complete all 212 significant steps and 30 validation actions of its ‘cGMP work plan and validation certification programme’, requested by the FDA (in an attempt to resolve manufacturing compliance issues at the company's New Jersey and Puerto Rico plants) by December 31 2005.”
IMS: You’ve said that more than 50% of Schering-Plough's sales will come from 4-6 growth engine products. What sort of a timeframe are we talking about? What are the products?
Hassan: “I am trying to inspire a cultural shift within Schering-Plough towards product diversity. We never want to be in a situation again whereby we depend essentially on one product, and then have the rug pulled from under our feet, like what happened with Claritin late in 2002. Schering-Plough has turned a corner in this respect – in 2005, six out of ten of our major prescription products grew very nicely. Schering-Plough now has a cholesterol franchise, but in primary care we need another large anchor product beyond cholesterol. This could be another cardiovascular drug such as an antihypertensive, it could be a large CNS drug like Effexor, or a large primary care product which complements the cholesterol franchise. Within oncology, Schering-Plough has a very interesting drug Temodar, for glioblastoma multiforme and we hope to do more in oncology as well.”
IMS: Is the cholesterol joint venture with Merck & Co 50:50? When might we see sales from Vytorin/Zetia affecting Schering-Plough's bottom line?
Hassan: “The joint venture is roughly 50:50 around the world. The US launch expenses are now behind us but we still have to keep investing, as we shall have generics [Zocor] in the market from June 2006. The US has reached break-even and is ramping up, but it’s not a large part of our profit baseline yet. And over the longer term, Vytorin/Zetia is going to become a large franchise in Europe, as well as in other parts of the world. Over the next several years we expect the cholesterol business to be the largest part of our profit base.”
IMS: You've mentioned that a focus on Schering-Plough's US sales force was required in order to stabilise sales of the hepatitis C and Claritin franchises. Could you explain how this was achieved and what the outcome has been? Can we expect to see Schering-Plough clawing back market share in the hepatitis area from Roche?
Hassan: “Schering-Plough's hepatitis C market shares have stabilised in Europe. Indeed, in some European countries Schering-Plough has actually regained market share losses. In the US, Roche's hepatitis C franchise launch was supported by a broad clinical package which gave them labelling advantages, such as approval for hepatitis B and more recently, for patients co-infected with hepatitis C and HIV – Roche subsequently gained more than 50% market share in the US. That market share now appears to be stabilising. Schering-Plough currently has head-to-head studies underway (notably the IDEAL trial), which hopefully will show that PEG-Intron is more effective than Roche's Pegasys, but the results of these trials won't be available for some time. [We] hope to show that weight-based dosing with PEG-Intron is more effective than flat dosing with Pegasys. At the very least, IDEAL should level the playing field.
“Schering-Plough's sales forces have had good results within the respiratory and cardiovascular arenas. Two and a half years ago Schering-Plough was thinking of exiting the respiratory sector. However Schering-Plough now has a series of complementary respiratory products to offer clients - the company breathed new life into the allergy drug Nasonex and the respiratory antibiotic Avelox, with new indications and new formulations; Asmanex was launched in recent years for asthma; and we have Clarinex for allergic rhinitis. Within cardiovascular, Vytorin has been the most successful launch in the USA within the last two years and is a serious competitor to Lipitor, Zocor and Crestor. Schering-Plough needs its salesforce to maximise all its important product opportunities, in particular those offered through its cholesterol business. Those companies who are shrinking their sales forces tend to be those with a sparse pipeline or those with a declining exclusivity base.
“The aim also is to make our salesforce more effective. The reps are now promoting 2-3 products simultaneously, products that complement each other. Single product calls are low productivity calls and hence very expensive.”
IMS: Regarding the Bayer deal, have you been happy with the outcome of this so far? What parameters have you used to measure the success of this collaboration?
Hassan: “We are unhappy that we’ve not been able to get Zetia on the market in Japan as fast as we would have liked – this has largely been as a result of regulatory bottlenecks. Schering-Plough’s US alliance with Bayer has gone very well. We were able to access a lot of Bayer's personnel resources. Avelox's market share has gone up - we’re adding value, and that was the intention of the whole venture. The Bayer deal was more a strategic deal in terms of getting Schering-Plough in front of the primary care physician. The Bayer deal has resurrected Schering-Plough's respiratory franchise that we were rapidly losing after the Claritin expiry; after the difficulties we were having with Asmanex being approved in the US; and after the fact that Nasonex was in the doldrums.”
IMS: In June 2005 you said that you’d be interested in increasing the size of your US business - how do you propose to achieve this? How ideally would you like your pharmaceutical sales to split, in terms of percentage to the US and percentage internationally?
Hassan: “It’s already beginning to happen. Schering-Plough's ‘turnaround’ phase of its recovery strategy was intended to be led by the US. In 2005, on an adjusted basis, Schering-Plough's global business grew 21%, which is amongst the fastest within our peer group. Schering-Plough's US business grew very fast, driven mainly by the cholesterol business, but also by revitalised brands like Nasonex. Schering-Plough in the US is recovering nicely, but we’re still under-represented for an American company - we should have a larger operation in the US, but we’re a lot better off then we were a couple of years ago. The US is no longer Schering-Plough's weak link. More than 50% of the sales should come from the US - Schering-Plough has been very heavily reliant on Europe, Canada and Mexico.”
The full transcript of this interview is available in the latest IMS Company Profile on Schering-Plough, where Fred Hassan also discusses the impact of the Medicare prescription drug benefit, and the importance of the Japanese market.
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