example storiesfuture index storiestemplate of index coveragemore informationthe Meyer Group home page

The Meyer Index home page

subscribe to the index

Celgene and Thalidomide
Being Pulled Into the HIV Treatment Market

examples index

Who is Working to Create the Market?

Celgene (CELG) is headquartered in New Jersey. It was founded in 1986. Revenue is at an $80M run rate.

What Is the Market?

In the 1960s, Thalidomide was introduced as a product to make it easier for pregnant mothers to bring babies to term. It was a spectacular failure, blamed for numerous birth defects across Europe. It was not approved for sale in the United States.

Today, Celgene is selling thalidomide (as Thalomid) into markets that no-one ever expected to see. An example of almost accidentally creating new markets, Celgene is in position to profit strongly on this new market.

The most successful and repeatable path to creating a new market is to solve a specific problem that is strongly felt by your prospective customers. If the problem is substantial, customers will work to resolve it. Another path, somewhat harder to follow, is to pick a less critical problem and then reduce the cost of solving that problem to the customers to the noise level. In HIV/AIDS medicines there is a clear problem -- stop the effects of the disease and then inhibit the way the virus reproduces. Celgene is creating and dominating a market there.

What Is the Market?

All pharmaceuticals are approved for certain purposes- "on label" uses. Some companies are good at finding other uses and then asking for permission to use the drug there. Using Aspirin for heart medication is a famous example, but not a market creator. In HIV, we have several market creator examples. Thalidomide is one. Thalidomide sold in low volumes until a few years ago. However, some doctors started to use Thalidomide to treat HIV symptoms, and sales have taken off. That use is not approved, but the market is building rapidly with Celgene in dominant position.

The on label sales for Thalidomide are around $4M. The only on label approved use is for leprosy. However, off label sales of the treatment are in the range of $55M, mainly through sales to HIV and some multiple myeloma patients. So, in 2000, perhaps 90% of the sales of this drug were unapproved sales into the HIV community.

Celgene is working to create several new markets in treatments for difficult diseases. In some cases these are direct cures for a disease (Thalomid for myeloma). For HIV treatment, the drug is a palliative, treating the symptoms of wasting that can compound other factors to cause death. In the United States as well as most of the world, the number of people who are living with HIV or AIDS is increasing annually. As more treatments extend the lives of patients, the number of people who will benefit from treatment for wasting increases dramatically.

How Is Celgene Working to Create That Market?

The most successful and repeatable path to creating a new market is to solve a specific problem that is strongly felt by your prospective customers. If the problem is substantial, customers will work to resolve it. Another path, somewhat harder to follow, is to pick a less critical problem and then reduce the cost of solving that problem to the customers to the noise level.

Here, Celgene addresses an enormous problem, although almost by accident. When doctors took Thalomid off label to test it on HIV, they did so without the specific encouragement of the company. The use of the pharmaceutical off label has been promoted by doctors talking to doctors and even more by patients talking to patients. The HIV patient community, like the cancer patient communities, is well organized and has considerable communication between members. When Thalidomide began to show promise, the patients did the selling that Celgene did (and could) not. Celgene has, however, been prominent in working with tests and research. The tests take years, but the visible activity sells product immediately. The problem is so acute that Celgene's best strategy may be to simply make it visible.

What Is the Benefit?

Until there is a cure for HIV, patients will be fighting the opportunist infections that come with the virus for years or decades. As the treatments work, the number of years that each patient will take the treatments increases. The result is that Celgene has an opportunity to sell more and more Thalomid every year.

Is the New Market Working?

A critical factor for success in existing markets is the skill of the supplier to handle basic operational requirements. If the product does not work, can't be shipped on time, or if customer service is inadequate, cost cutting will not overcome the deficiency. These operational skills are less critical in new markets, but they are still important. A gating factor to Celgene's success will be basic operational competence. We are not suggesting that the competence is lacking, but if that competence is missing the new market may fail. This is especially critical in pharmaceuticals.

The success of this market will be determined by how seriously the problem is perceived. Despite a waning attention on HIV in the United States, this problem is felt very severely by the affected patients, families, health care, and insurance providers. Thalomid reduces the effect of that problem. The market is working

Index Examples

Drug-Eluting Stents

Telematics

TiVo

Celgene and Thalidomide

email: Peter@MeyerGrp.com
phone: (831) 439-9607

the Meyer Index home page | example stories | future index stories | template of index coverage
more information | the Meyer Group home page

© 2014 The Meyer Group | All rights reserved