Genzyme: The Synvisc-One Investment Decision Case Solution

 2. Analysis of the current situation

The current situation for Genzyme is critical as competition is rising in the category of viscosupplement products. While currently there are five or six main players in the category, each player is large and has its comprehensive strategy for the category. The Synvisc-One is an outcome of the success of Synvisc among the range of products of Genzyme. Synvisc, over the years, has been a source of successful treatment for osteoarthritis of the knee. This has encouraged the senior management to develop another new product, the Synvisc-One, which would require just one injection dosage. This would be breakthrough as most competitor medicines require three injections for a full treatment of 6 ml dosage. However, Synvisc-One will be a single dosage of 6 ml.

The current situation for the company and the whole industry is such that research and development are critical to staying ahead of the competition. Especially for the kind of treatments and indications that Genzyme focuses upon, it is critical to ensure regular and extensive research. Research itself is a costly affair in the pharmaceutical industry.  

However, it must also be noted that Genzyme does not have many issues with raising finance. It has had a successful history with raising funds for new product launches. So raising a large amount of capital flow would not be difficult for a well-renowned company such as Genzyme. In addition, the company has a history of acquiring other companies as a part of its global expansion plans. It was through an acquisition that Synvisc came under the portfolio of Genzyme on a global level.

While formulating the Synvisc-One, the company’s researchers and engineers also need to take into account the customer insight. The existing data points out that the patients look for certain features in a medicine or treatment before agreeing to administer. For example, how many weeks of pain relief do the medicine proud? How much of the medicine needs to be injected? How painful is the entire process? In addition, how many injections are required in total? All these issues are points of concern for the patients and the physicians alike.

The costing in this industry and for developing new medicines comprise of the costs of the product as well as that of the procedure. Both costs are on the higher side. However, the product cost is cheaper than the procedure. With more breakthrough products, the pharmaceutical companies have been able to charge very high prices to the patients. For example, Genzyme had priced Synvisc at $180 per dose. There is tremendous profit margin for such companies with breakthrough products as, for example, the product cost for Synvisc was a mere $20 per dose. This serves to keep the industry attractive to the manufacturers and gives them incentive to invest in research and development, critical to this industry.

The issue of ethics is also important in this industry. However, since Genzyme has not been producing life-saving drugs, it would not be considered unethical to charge hefty prices for its products. In particular, the Synvisc and Synvisc-One concern the well-being of the knee. In addition, the industry is starting to have even higher costs with its marketing and sales efforts. The success in the pharmaceutical industry is highly dependent on an effective and well-trained sales force. The pharma sales reps are paid high salaries and significantly add up to Genzyme’s selling and administrative expense, as depicted in its financial statements presented in the Exhibits at the end of the case.

The current scenario, as presented in the case, also points to the threat of new entrants for knee pain treatment. Currently, the industry in the United States is dominated by local players. However, 2011 onwards, more international players are expected to compete for both inflammation and pain reduction techniques for knee patients. The current situation also requires an understanding of the dynamics of pain relief. That is, the effectiveness of a treatment in terms of number of weeks or months of pain relief. Such decisions will tend to attract the end consumer towards a certain procedure and treatment for their knee inflammation and pain.

3. Key Issues

The primary issues relate to the complexity of the trial. Firstly, the ultimate success of the trial depends upon the approval of FDA for the product to be marketed in the United States. With a 25 percent rejection chance even after a successful trial, there is a lot to decide before investing hefty amounts. The dilemma for Synvisc-One is the low probability of success with FDA even after a successful trial that is costing millions of dollars.

Secondly, it would take time till 2009, at the earliest, to get FDA approval for marketing Synvisc. In the meantime, competition can catch pace with the company. This is also expected as several patents will be expiring in a few years’ time. Hence, the time horizon for Synvisc-One is also significant.  With millions of dollars going into the trial and then the approval with the FDA, this is a serious concern. While the overall category growth has been much larger, Synvisc has not followed suit and has grown more slowly.

Another issue is that some international companies are likely to enter the US market by 2011 for osteoarthritis of the knee. This would further complicate the situation and timing for Synvisc-One. Genzyme already finds itself in hot waters as there is intense competition in its various other categories of medicines. With more international players coming up in the near future for knee pain and inflammation, Genzyme needs innovation and customer satisfaction to sustain its position.

4. Objectives

The objectives of Genzyme, as always, have been to come up with innovative medical solutions targeted towards niches. The approval and production of Synvisc-One are in sync with the company’s philosophy over the years. It has not run in mass markets and not engaged itself in mass production techniques. The company has primarily targeted treatments that other companies have so far not paid attention to. For this reason, the initial objectives would be to prove that Synvisc-One is rated superior to placebo. This, in turn, is a prerequisite to seeking approval from the FDA for production and marketing the product in the United States. This can be accomplished with good lobbying with the FDA and relevant politicians. As discussed in the case, the regulatory bodies are important players in the pharmaceutical industry.

On the whole, Genzyme hopes to continue its innovation through Synvisc-One. If it succeeds in the approval by FDA, it would then be extensive work for marketing and sales personnel to take the product to the market.

5. Marketing Strategies

For effective marketing strategies, it is important to understand the dynamics of the pharmaceutical industry. The marketing strategies must be applied keeping the main industry players in mind. These include the patients, physicians, payers, and the politicians/regulators. The marketing in the pharmaceutical industry is much different from marketing to consumer goods industry. This industry places many restrictions on the manufacturers to market their products. It is usually easier and without regulation to market the Over the Counter (OTC) products to the end-consumers. For various other medicines, they can be marketed to the physicians only.

Since Synvisc-One will fall into the category of treatment that is to be prescribed and administered by a practitioner, it becomes more challenging for Genzyme to devise a marketing strategy. Perhaps the most important link in this category is the pool of physicians who need to be made aware of the benefits of Synvisc-One as a succession to Synvisc. The salient features on which Synvisc-One can compete and be attractive to the physicians are: convenience of administering and short duration of treatment, one-stop solution for the patients, and serve to be a rather long term treatment. These advantages, while ultimately to the benefit of the patients, will seek to attract more patients towards this treatment.

In this whole scenario, the physician holds a strong position as the patients highly trust the opinions of the orthopedics specifically. It must be noted here that the physicians for this category would classify as orthopedics or other specialists. However, it is the seasoned orthopedics, with many years of work experience, which influence the patients’ decision about drug administration.

Surgery is a highly specialized field and well-respected field. It would take totally different incentive programs and advocacy to convince senior surgeons and orthopedics about the efficacy of Synvisc-One. As a matter of fact, Genzyme may have to recruit additional talent to approach the orthopedics more effectively. Such marketing initiatives would be costly and time consuming as proper orientation will have to be provided to the senior sales representatives who will approach well-known physicians and specialists for promoting Synvisc-One.

Currently, the market for knee pain and inflammation treat is differentiated by number of treatments that each manufacturer provides. Specifically, this means the number of injections required for a full treatment. No competitor is currently using a single injection as a full treatment for osteoarthritis of the knee. Most treatments administer three doses in three time periods for a full course of medicine. This process is both time-consuming and cumbersome to the physicians and the patients. Synvisc-One must capitalize on its unique selling proposition (USP) of a single 6ml dose treatment. The benefits of such a treatment should be clearly communicated to the physicians and pharmacists, who would then advocate the medicine to the patients.

For this reason, positive publicity and word of mouth techniques in today’s world can do wonders for Genzyme and its relevant division. A more common technique in the world of health sciences today is the use of electronic word of mouth (E-WOM) to inform and receive feedback from patients.

6. Action Plan

The action plan here will relate to the procedure for getting approval from the FDA for Synvisc-One. However, a primary pre-requisite is to clear the clinical testing. To ensure more positive result in the clinical testing, it is recommended to have all checks and balances in place before the testing. As for the financial part, it must be noted that the company is investing huge amounts to the testing. For this reason, it must take all measures to have a positive result so that it can then aptly apply to the FDA. An enormous amount, totaling to $75 million is required for the testing. The success of the test can be strengthened by selecting the right pool of patients to have results more accurate than the placebo.

Secondly, the action plan would be the marketing strategy to take Synvisc-One ahead of the competition. The good news for the company is that there is currently no other pharmaceutical company providing a one-time injection treatment for knee pain relief. This should serve as a unique advantage and clearly communicate to all stakeholders. Hence, in this period, the company should lobby with the physicians and specialists to create hype about the new medicine and procedure. In addition, the politicians and regulators are powerful personalities in this scenario. The company needs to build good public relations (PR) for Synvisc-One. This will work through organizing symposiums, seminars, and conferences about knee pain and its effective treatment.