Standing out from the Crowd

By Natalie Brandweiner, Deputy Editor

Mike Cola and Sylvie Grégoire of Shire Pharmaceuticals explain why being different is increasingly important in the dark days of economic recession.

With the state of the pharmaceutical industry beginning to reflect that of the financial markets, we are starting to see big drug companies buying out those unable to maintain a respectable share price. In a multi-billion dollar industry, differentiation from competitors is key to keeping one's head above water, and Shire's entire corporate structure is based upon this principle.

In a bid to stay competitive in the trend of large pharma company buyouts, Shire have adopted a strategy that sets them apart, irrespective of their annual revenue intake or the number of employees. "We're a highly specialized business in that we focus on diseases that are very rare and have a very high unmet meet," explains Sylvie Grégoire, President of Human Genetic Therapies. Shire's focus on genetic diseases sets them apart from other larger pharmaceutical companies, who produce a vast array of drugs for a cross section of patients. "Our populations qualify as orphan, which confers a certain protection in terms of intellectual property from the governments in the US, Japan and Europe.

"An orphan disease is one that hits anywhere between 2000 and 250,000 people in the United States. Our portfolio of products in the Human Genetic Therapies business focuses on the very rare end of the orphan diseases: the target populations we treat are between 2000 and 3000. What that means is that the development programs in order to be able to bring products to the market have to be global in nature because when I say 2000, I mean 2000 worldwide patients," explains Grégoire.

By focusing on a niche area of patient care, Shire must trawl the world to find patients to complete its clinical studies, and as a result must operate in over 43 countries to create a viable business model. Commercialization of product is then very important to completing the model; the success of such a strategy can be seen in two of the company's currently marketed products, Elaprase and Replagal, which are used in over 43 countries as enzyme replacement therapies.

This business strategy has not necessarily been a safe one, but the choice to develop and bring products to the market in such a way has ultimately generated sufficient profits, despite the higher price of such products and the rarity of patients available for treatment. "Governments and the populations we are serving are willing to pay for such products because the impact they have on patients' lives is significant," says Grégoire. "If they don't have replacement therapies or the drugs that we develop, their quality of life results in very high morbidity as well as often early mortality."

New products

Shire' aim is to introduce eight new products to such rare disease populations by 2015, which they hope will bring in $1.5 billion dollars in revenue. The company's expansion is due to the strategic reinvestment of this revenue into new drug development. As a big fish in a relatively small pond, Grégoire believes focusing on a niche market will benefit the company, in comparison to the approach of larger, more generic, pharma companies.

The revenue generators for Shire are those life-changing products within a highly specialized area. "Those are the revenue generators, but they also provide hope for those with rare and dire diseases, and that really motivates our team, who come to work every day with the hope of helping and transforming families' lives as well as the patients' lives."

However, producing drugs with such high-profile capabilities brings with it both challenges and responsibilities. "It's a highly specialized area but within our human genetic therapies business we've developed the internal capabilities to counter this. When you can leverage those capabilities in terms of both the clinical development of the products and the commercial infrastructure you have, once you've done it with success with one product, you can leverage the know-how as well as the capabilities to add products to that particular model, as opposed to being in multiple therapeutic areas.

"It doesn't matter whether the specific therapeutic areas are cardiovascular or GI. Generally, these patients with rare genetic diseases have multi-organ system problems, so it's a general way of developing multi-organ disease expertise, and we can leverage that know-how internally. Clearly, a very good understanding of the regulatory approval process, as well of as pricing and reimbursement, in all of these countries is key," explains Grégoire.

Wider range

Product focus is obviously an essential component of Shire's success. As Mike Cola, President of Specialty Pharmaceuticals explains, the company's Specialty Pharmaceuticals business model is far more wide ranging, with a vast array of drug programs. "We have everything from an orphan drug in Xagrid in Europe all the way to something that's more of a mass marketed product in the US for ADHD, Vyvanse, and in the past, Adderall XR. So it really spans the gamut.

"We have three business units now in our Specialty Pharma business, ADHD, GI and EPU, our emerging products business unit. Within each one of those business units we have sales forces fairly well aligned. These units try to run as semi-autonomous companies within a company focused very much on the needs of the specialist physician, which is very similar to the model in our Human Genetic Therapies business that Sylvie oversees. Within the ADHD area, our lead product is Vyvanse, which we launched about 18 months ago and it is growing nicely. We think it'll be the market leader over time."

EPU is the side of the business that allows the company to become more commercial. "We haven't talked a lot it, but we have a number of Carrierwave initiatives under way. Carrierwave is a technology that was acquired in our 2007 acquisition of New River Pharmaceuticals.  It came along with Vyvanse and we're discovering ways to apply that technology. We hope to be able to share more about it by the middle of 2009.

"Overall the consistency between the two businesses is there. We leverage the same model, the same principles, just a little bit different as far as size and scale. This year we anticipate doing a little over $2 billion in revenue out of our Specialty Pharma business and we'll drop somewhere in the neighborhood of $1 billion to our overall bottom line. So our Specialty Pharma unit is a growing business," says Cola."

Shire's achievements as a specialty pharma company have allowed them to propel themselves into the commercial side of the industry and have brought financial success, even in difficult economic times. As Grégoire explains, "We've had success from a business perspective, achieving $300 million in revenues in 2007, and in 2008, we anticipate being somewhere around $450 million, so our human genetic therapies business is growing very rapidly, and through geographic expansion, we're making these products available worldwide."

Survival

As a specialized pharma company with a much smaller sales force and very few patented products, it's certainly going to be easier for Shire than for the larger and more generic pharma companies to survive the current challenges, given the financial markets.

"Beyond Adderall XR, we do not have a lot of patent exposure. If you look at the IP of our current products it goes out very long into the 2023-2024 range," explains Cola.

"If you look at all our diseases they're highly symptomatic. We create tremendous value for the patient. If these patients don't have their medication they will feel the difference quickly, as opposed to an asymptomatic drug lowering your cholesterol or even your blood pressure, where you may not notice it for a long period of time.

"That differentiating factor - focusing on symptomatic conditions - helps us. We don't have a lot of big products in primary care categories that are high on the radar screen. Most of our products are number one or two in a niche category. They're not typically the things that managed care or Medicaid can go after first. We provide a lot of value for a smaller patient population and that value we don't think will be taken away from these folks through reduced access to healthcare."

The minimal amount of exposure of Shire to Medicare and Medicaid, around 15 percent, only heightens its strong position. With both Medicare and Medicaid now needing states to pay their bills, the Shire model certainly guarantees a much better strategy for coping financially and makes them far more recession proof than other primary care products.

Despite the upcoming loss of patent protection on Adderall , Shire has a portfolio of products wide and big enough for it to cover the gap. Cola relates the company's growth story, and explains that with six new product launches in the last three years, that will continue to drive the company's success. "We know we need to work through the end of the life for Adderall XR. We understand the dynamic of losing the exclusivity in April, but in fact we have a citizens' petition in place. We don't know the impact of the citizens' petition. There may not be multi-source generics but we're not counting on that happening, so it's really a growth story with the new products," he says.

Grégoire attributes a large portion of the company's growth to its recently launched products. "They still have a lot of growth in them, whether it's from our Specialty Pharma business or our Human Genetic Therapies business. From the growth perspective of our currently marketed medicines, and then the pipeline products that we have, we feel it's a nice story for the overall growth beyond the Adderall XR story, which had been a significant part of Shire's history. In our Human Genetic Therapies business, we've added 300 people in 2007 and 2008 to our team, and in 2009 we have plans to add more than 275 people."

"We're projecting to hire in 2009 in a prudent way, based on the fact that we have the uncertainties that come with XR. It's completely justified by the growth of the business and achieving the goals of the business. That growth of course is in the US but also elsewhere in the world where these products are available."

New jobs

Shire's development as a company is largely due to the substantial growth it has undergone in the last two to three years. It currently employs about 3,500 people globally, with a sales force of approximately 1400 to 1500 people; without having thousands of salespeople relying on what's going to be next in the pipeline, the model becomes much more efficient.

"Out of that 3500 people we've hired at Shire, we've hired close to 2500 of them in the last three and a half years; so I've seen tremendous changes. We're trying to consolidate all of those recent hires and make things more efficient. If you think of the state of the company when Matt Emmens took over as CEO in 2003, it really was not in a good place and each year we've added a fair amount of new products and new structure, building new opportunities for Shire," says Cola.

Grégoire explains the company's approach for the future, highlighting recruitment of people to Shire's already expanding operations to be central to strategy. "In our Human Genetic Therapies business, we've added 300 people in 2007 and 2008 to our team, and in 2009 we have plans to add more than 275 people.

"We plan on hiring to support our growing business, specifically, we're launching a medicine in Europe, Firazyr and we are now hiring people to work on that project. We're projecting to hire in 2009 in a prudent way, based on the fact that we have the uncertainties that come with XR. It's completely justified by the growth of the business and achieving the goals of the business," she explains.

Strategy

Her experience in both the traditional and the entrepreneurial aspects of the pharmaceutical industry have contributed to her tenure at Shire at her influence on the company's strategy. As she explains, "These kinds of experiences in terms of business, thinking about how to run a company in a nimble and entrepreneurial fashion and a global view is very important, and is something that helps me in mapping out the potential for our HGT business to grow.

"In just that year and a quarter that I've been here we've added a significant amount of projects to the pipeline through business development and our HGT business has a research component. So we look at what's in our research portfolio and we're always working on different potential new drugs that will enter the pipeline internally, and externally. The economic difficulties that small companies are facing today in terms of raising capital whether they're private or public provide an opportunity for Shire to aggressively consider acquisitions of products that fit our strategy, making sure that we focus on that specialist strategy. We have a courageous way of approaching business opportunities that come from the external world and want to manage the company in a non-big pharma way."

That "non-big pharma way" certainly seems to be an approach that has boosted the company's revenue and allowed them to further their development of new discoveries. However, with the credit crunch expecting to last at least well into 2010, only time will tell if such a strategy will pay off. 

Mike Cola is the President of Specialty Pharmaceuticals. He joined Shire in July 2005 from Safeguard Scientifics, Inc., where he was President of its Life Sciences division. He joined Safeguard in 2000 and is on the board of several of its life science companies. Between 1992-2000, Mike worked for AstraMerck/AstraZeneca and was one of the earliest employees of AstraMerck.

Sylvie Grégoire, President of Human Genetic Therapies, has more than 20 years of pharmaceutical and biotechnology experience. She most recently served as Executive Chairwoman of the Board of IDM Pharma, a biotechnology company in California. Prior to this she was CEO of GlycoFi, and has also held numerous leadership positions at Biogen Inc. in the United States and France.