Small company competitive strategies – a case study

Greg Kaminski of small pharma company, Absorption Pharmaceuticals, discusses the challenges and advantages of operating as a small company and competing with big pharma.

As a small pharmaceutical company, we are faced with numerous challenges competing against large, established competitors. However, through innovative R&D and marketing strategies, we have been able to establish ourselves as a leader in the large but underserved urological condition of premature ejaculation. This article discusses how to overcome the many of challenges associated with competing with "big pharma".

"A three-phase clinical trial alone far exceeded our original R&D budget."

Thinking differently from the onset

Large pharmaceutical companies require good market information (market size, demographics, etc.) and scientific data (drug discovery) before considering significant investments. However, the premature ejaculation condition makes this very difficult. Prevalence rates range from less than 5% to 70%. Causes range from psychological to biological to neurobiological and are not well understood. This lack of knowledge makes it difficult for senior executives to make the business case to commit resources to enter the market and has been reflected in the dearth of pharmaceutical-grade products.

A small company can take a different approach. Revenue and profit goals are lower. Readily available market data can tell you that the market is big enough to support an effective, safe product even though it can't be quantified very accurately. For example, keyword "premature ejaculation" receives about 400,000 monthly searches globally. Technology success can be based on outcomes without a full biological analysis. Large pharmaceutical companies have difficulty with such an approach.

Small companies can approach a market with on-line sales immediately upon introduction. Large pharmaceutical companies hesitate to do so because of branding and channel issues. Pfizer just announced the sale of Viagra on-line 15 years after introduction and this was primarily a reaction to the numerous counterfeit pills being sold on-line worldwide.

Low-cost R&D

Large pharmaceutical companies primarily engage in the development of oral or injectable drug design. Most therapies require such a route of administration to be effective. In addition, pharmaceutical companies can build intellectual property protection around the molecule and enjoy a long time period of time of profitable drug sales.

Oral routes of administration are expensive to develop and bring to market, and so they are not an option for a small company such as ours. A three-phase clinical trial alone far exceeded our original R&D budget. As a result, we had to explore over-the-counter options which requires an entirely different strategy.

Existing FDA monograph

In 1992, the FDA created a monograph (21CFR 348.10) that allows for the sale of a topical medication for premature ejaculation. Such monographs exist for safe drugs – in the case of lidocaine. Large pharmaceutical companies by nature shy away from creating products based on existing monographs because of the concern over the lack of IP protection and product differentiation. Small companies, on the other hand, can seek novel solutions that adhere to a monograph while also providing improved performance as well as IP protection.

Over-the-counter

Because profit margins for OTC medications are lower than those of prescription medications, large pharmaceutical companies generally won't pursue an over-the-counter solution unless unit demand is both large and somewhat predictable. Often, this occurs when prescription medications move to OTC as a result of large use and safety record.

"Therapy areas with unclear demographic data are excellent targets for small pharmaceutical companies looking to market to patients who tend to not explore treatment from physicians."

As a small company, we were able to take some business risk with less well-defined market size information. For example, it has been documented that only 9% of men seek treatment for premature ejaculation from their physicians. Therapy areas with unclear demographic data are excellent targets for small pharmaceutical companies looking to market to patients who tend to not explore treatment from physicians.

Establish medical viability

As a small company, reaching the consumer is easier than in the past because of the numerous digital media outlets available today. The difficulty, however, is establishing credibility in the mind of the consumer. The internet is rampant with products that claim success with a large variety of conditions. These products confuse the public and generate distrust with legitimate products. It is therefore important for small pharmaceutical companies without an established brand to establish medical viability of the product. In the absence of clinical trial data, testimonials by physicians – especially key opinion leaders –are critical to creating consumer confidence.

Innovative marketing strategies

Traditional advertising such as television and print, commonly used by large pharmaceutical companies, is usually beyond the budget of a small pharmaceutical company. The beauty of digital marketing is that potential buyers can find you at any hour of any day. The downside is that there is a lot of digital "clutter". It's easy to get lost in the noise. Building your brand in the digital world requires the same vigilance and patience as with traditional media.

Compared with large pharmaceutical companies, small pharmaceutical companies can be more aggressive and nimble with digital marketing. Every tweet, post or ad doesn't require approval from multiple product managers and a legal department. You can work with bloggers and smaller media outlets that may not meet big pharma corporate guidelines so reaching micro-demographic audiences is both easier and effective. In particular, large pharmaceutical companies generally have good brand awareness with older people. Although PE affects men of all ages, attracting the 18–45 demographic is often done with non-traditional media.

"Building your brand in the digital world requires the same vigilance and patience as with traditional media."

Difficult challenges

Public relations can be much more challenging for a small company who find it difficult to get attention from large media companies. This is especially true with a product that is not associated with an event (e.g. clinical trial data) or the reduction of mortality rates. Without an accompanying advertising campaign, it's more difficult to convince mainstream media that a new product is a newsworthy event. So it's important to seek a variety of alternative media.

Global distribution is the other area that presents particularly high hurdles for small companies. From distribution to regulation, the costs can be taxing. Here, there are no easy solution other than finding distributors with good local knowledge and alignment with your goals and values.

Conclusions

In order for small pharmaceutical companies to compete effectively against their larger competitors, they must exploit three primary advantages. The first is the ability to enter somewhat unclear market conditions. Apple, a small company at the time, introduced the iPod in 2001 without a public demand for such a product. The second is that a small company can enter a market without traditional drug discovery. A product can be successful with efficacy, safety, and speed to the marketplace. The third is using alternative marketing strategies including direct on-line sales. In the digital world, the advantage is currently with small pharmaceutical companies where being nimble has more advantages than being large.