Introduction

Question 1

What is the definition of a market?

Answer 1

• A collection of buyers and sellers who transact over a particular product or product class
• Various markets: Product markets, labor markets, markets for information

Question 2

A market exchange what?

Answer 2

1) Communication (Industry to buyers)
2) Goods/services (Industry to market/B2C)
3) Money (Sales and buys)
4) Information (Buyers to industry)

Question 3

What defines the market equilibrium in a microeconomic perspective?

Answer 3

P = Price, Q = Quantity, D = Demand, S = Supply
The supply vs. demand curve.
- Increase in price leads to less quantity sold because of a fall in demand.
- Supply quantity increases with price.

The intersection between these two curves is the market equilibrium.

Question 4

Where can you find the excess demand or supply on a market equilibrium graph?

Answer 4

Above the demand line, to the left of the supply line: Excess supply. (Sellers market)
Under the demand line, to the right of the supply line: Excess demand. (Buyers market)

• Meaning if the price is not at the intersection there might excess supply or demand

Question 5

What defines different market structures?

Answer 5

1) number of firms in the market
2) the ease to enter or leave the market
3) the ability to set prices
4) the ability of product differentiation
(think porters here)

Question 6

Mention the different theoretical/ideal markets

Answer 6

1) Competitive markets
2) Monopolistic markets
3) Oligopolistic markets
4) Monopolistic competition

Question 7

Describe competitive markets

Answer 7

1) Firms produce identical (homogenous) products
2) Market entry and exit is easy: many sellers (and buyers)
3) Firms are price-takers: firm cannot influence price.
a. If you divert from this your sales will decrease and you’ll move to the mean again.
4) No notable profits (no long-term profits)
5) Full information and no transaction costs

Question 8

Describe Monopolistic markets

Answer 8

1) Only one producer of a good (no close substitutes)
2) Market entry is difficult (e.g. monopolist holds prohibitive patents)
3) Monopolistic firms are price-setters
4) Substantial profits (price is set above marginal costs)
5) Lower demand than in competitive market
Changing prices has direct impact on the demand area under the curve.

Question 9

Describe oligopolistic markets

Answer 9

1) Product differentiation is possible
2) Small group of firms in the market (aircraft producers, video game market); e.g. based on limited licenses
3) Substantial entry barriers
4) Firms can set prices and affect rival’s actions; incentives to collude (coordinate)
5) Price level is high, and firms can generate profits

Question 10

Describe Monopolistic competition

Answer 10

1) Products are differentiated (e.g. quality, marketing play a role)
2) Typically many firms, low market power
3) Free market entry
4) Firms set the prices (in similar fashion than a monopolist)
5) Spare capacity
6) Price level is high but limited long-run profits (since free entry)

Question 11

Which different points does marketing touch upon?

Answer 11

1) Value creates at a profit: Exploring, creating, and delivering value to satisfy the needs of a target market at a profit
2) Identifies unmet needs.
3) Market sizes: defines, measures, and quantifies the size of the identified market and the profit potential
4) Segments and promotes: Identifies segments the company can serve best and designs and promotes the appropriate products and services

Question 12

What is SG&A? And can work as a proxy for?

Answer 12

Sales, general, and administrative expenses.

• Proxy for marketing expenses.

Question 13

Do pharma companies spend more money on Marketing (SG&A) or R&D?

Answer 13

More on marketing….

Question 14

What is the bullwhip effect?

Answer 14

That the amount of fluctuation becomes larger the further down a supply chain you go. (From the direction of consumers to fabrication).

Question 15

What are the characteristics of a B2B market?

Answer 15

1) Few, large buyers that account for large sales volume
2) Close supplier-customer relationships: proposals, contracts, routines
3) Professional purchasers
4) Multiple buying influences
5) Multiple sales calls
6) Low price-demand elasticity
7) Derived demand: monitoring of end user markets important
8) High demand volatility (fluctuation), “bullwhip” effect
9) Geographic buyer concentration
10) Direct purchasing (no intermediaries)

Question 16

What are the characteristics of a B2C market?

Answer 16

1) Products more important than relationships
2) Emotional considerations affect buying process more strongly
3) Brands and status very important
4) Less sophisticated buyers
5) Single step (impulse purchase) processes, depending on product
6) Intermediaries frequently with important role in selling process

Question 17

Do you go through the same phases when buying something from new vs. rebuy vs. modified rebuy?

Answer 17

No! You skip certain buyphases with straight rebuys and some with customized rebuys.

Question 18

Technology push vs. market pull is?

Answer 18

Technology push: Creating a technology and pushing it into market. Market pull is consumers showing an unmet need and a product developed based on this.

Question 19

What is the 5-stage model of the consumer buying process?

Answer 19

1) Problem recognition
2) Information search
3) Evaluation of alternatives
4) Purchase decisions
5) Post purchase behavior

Question 20

What are some market considerations early-on in pharma product development?

Answer 20

1) Market size of the disease
2) Unmet needs and market potential
3) Product vision and strategy
4) Identifying market segments
5) Minimum clinical and pharma-economic outcome levels.

Question 21

What does the Drug Approval Process look like?

Answer 21

1) Pre-clinical research (Discovery + Animal testing)
2) Clinical Studies (Phase 1: Pharmacodynamics -> Phase 2: Efficacy, Safety and Dosage -> Phase 3: Larger numbers)
3) Completion and submission of NDA (FDA review)
4) FDA Review (Outcomes: Approval, Denial, Approvable with further studies needed.
5) Post-Market Surveillance (Continued observation to monitor side effects and new uses.

Question 22

And NDA in a drug context is?

Answer 22

New Drug Application

Question 23

What are Innovator drugs?

Answer 23

• First-in-class drug
• Unique mechanism of action
  Innovator vs. me-too

Question 24

What are me-too drugs?

Answer 24

• Same / similar mechanism of action
• Typically with improved efficacy, more convenient dosage forms, etc.
  Innovator vs. me-too

Question 25

What are generic drugs?

Answer 25

• Once patent protection / data exclusivity expires
• Small molecules (exact replication)
• Facilitated approval process (Hatch-Waxman act)
  Generic vs. innovator/me too drugs

Question 26

What are biosimilars?

Answer 26

• Generic drug in context of large molecules (still some approval and research needed, but not as much)
• Imitating large-molecule structure, more challenging to scale up production

Biosimilars vs. innovator/me too drugs

Question 27

What is off-label use?

Answer 27

When a drug is prescribed for other medical conditions outside of product’s FDA approved indications

Question 28

What are OTC drugs?

Answer 28

Over the counter drugs
* Patients can buy medicaments without prescription
* Typically lower dosage than related prescription drugs

Question 29

Orphan drugs are?

Answer 29

• Drug targeting rare diseases (approx. thresholds: US: < 6/10000; EU: 5/10000)
• Facilitated regulatory pathway and economic incentives (“Orphan Drug Act” of 1983 & “Rare Disease Act” of 2002), such as additional market exclusivity
• Orphan pathway can sometimes be leveraged for accessing mainstream indications

Question 30

What are some differences between specialist drugs (biotech) and mass-market medicine?

Answer 30

1) Disease: Common vs. rare
2) Prescriber: GP vs. Specialist (need smaller more educated sales force)
3) Price / dose: Low vs. high (need stronger proof for efficacy -> outcome based pricing)
4) Administration: Usually oral vs. infusion/injection (demand patient education)
5) Manufacturing: Easy vs. harder (less vulnerable to patent cliffs and generics)
6) Transport: Easy vs. hard
7) Promotion: Intensive detailing vs. Individual negotiations with large healthcare players.

Question 31

How are biologics different compared to small molecule drugs?

Answer 31

• Administration – often IV or injection – Meaning it could be in a hospital
• Logistics and transportation – They are more difficult to handle and store
• Regulation/approval – More complex/different as small molecule are synthetized, and biologics are often produced in GMO organisms like yest or bacteria
• Manufacturing – Higher price – Biologics are more expensive and complicated to produce
• R&D is much more complex than small molecules and takes longer
• Value-based pricing because of the high impact

Question 32

Pharma vs. biotech on the stock market

Answer 32

Biotechs look to historically have a similar return but be much less profitable. Why do we see similar returns? Often because the biotechs are bought up, and this generates return and an expected event for investors, so they don’t mind they less profitability as they expect an exit.

Question 33

Is biotech growing?

Answer 33

Yes! It’s getting more and more responsible for new drugs.

Question 34

How is R&D productivity right now?

Answer 34

It’s seen an uptick from a low in 2019 and 2020

Question 35

What major tech trend is entering pharma?

Answer 35

Ai

Question 36

What is a major concern for policy right now?

Answer 36

The major price increase in the US compared to other countries for the same drugs.