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Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: Twitter: Dereklowe

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October 22, 2007

Surveying the Exubera Crater

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Posted by Derek

Pfizer has pulled the inhaled insulin Exubera from the market, and not because of the FDA, and not because of the lawyers. They’re giving up on it because they can’t take the pain any more. The company sold 12 million dollars worth of the stuff so far this year, a horrifyingly tiny amount. That represents about 0.3% of the insulin market, which we can round off to "zero". The ticket out is a mere 2.8 billion dollar charge against earnings. It's the first time I can remember a company pulling a drug just because it was losing so much money - of course, Pfizer is not a normal company, and these are not normal times, especially for them.

There are plenty of post-mortems around, from the front page of the Wall Street Journal onward. (See the Journal’s Health Blog, Matthew Herper’s blog at Forbes, Pharmalot and the folks at Invivoblog for more). I have my own, naturally, since a disaster of this size admits of many interpretations. Here’s what it says to me:

1. Marketing isn’t everything. The next time someone tells you about how drug companies can sell junk that people don’t need through their powerful, money-laden sales force, spare a thought for Pfizer. The biggest drug company in the world, with the biggest sales force and the biggest cash reserves, couldn’t move this turkey. People didn’t want it, and they didn’t buy it.

The flip side of this is that even the drugs that folks love to hate, the ones that no one can figure out why they do as well as they do, must be doing something for some people. Perhaps other, cheaper drugs would do something quite similar, and we can discuss cost/benefit ratios, but you couldn’t sell them if people didn’t feel that benefit in the denominator. Not many people felt it from Exubera.

2. Internal sales estimates can be a joke. People inside the drug companies have known this for a long time, although they’d often rather not think about it. Analysts have known it, too, but they're forced to pay attention to those numbers anyway. But man, look at the magnitude of this one. Just as Warner-Lambert tried to kill Lipitor before they brought it to market (who needs another statin?), Pfizer was telling analysts a few years ago that their projections for Exubera sales (a billion dollars a year) were just too darn low. Two billion a year by 2010, thank you and please correct the error. Only off by a factor of one hundred, and what’s two log units between friends?

Sales forecasts are not science, and they only bear a superficial resemblance to math (where the phrase "imaginary number" is rather more strictly defined). They are guesses, and some of them are good guesses and some of them are awful, and unfortunately when you first look them over, they all smell about the same.

3. Groups aren’t necessarily smarter. This is the flip side of all the “Wisdom of Crowds” stuff, which only works when a lot of people (who think of a lot of different things) all get a crack at a subject. Inside a company, though, diversity of opinion sometimes doesn’t get much respect, and the problem gets worse in areas like marketing (and worse as you go into the higher ranks). Think of what would have happened to a Pfizer exec who forecast a 0.3% market share and a 2.8 billion dollar charge for Exubera when everyone else was revising their figures up a billion. It would have taken a fantastic amount of nerve to make a call that contrarian, and the rewards for being right (if any) would definitely not have been worth it. Even if someone had a terrible suspicion, it was surely much safer to keep quiet.

Groups of people can, in fact, be quite stupid. People will deliberately not bring their minds to bear on a problem, in order to get along with their co-workers, to not stick their heads up, or just to make the damned meetings end more quickly.

4. Pfizer is in vast amounts of trouble. While not an original thought, it's an unavoidable one. We all know the problems they have, and believe it, they do too. But what to do? I remarked a few weeks ago that Pfizer's situation reminded me of a slow-motion film of a train running toward a cliff, and a colleague of mine said "Yeah, me too, but in this case they're still boarding passengers and loading their luggage".

Comments (19) + TrackBacks (0) | Category: Business and Markets | Diabetes and Obesity | Drug Industry History


1. Kay on October 22, 2007 7:54 AM writes...

Marketeers CAN sell junk that people do not need (nexium vs. omeprazole). Given the size of the device, needles continue to look good.

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2. burt on October 22, 2007 8:03 AM writes...

So now what, St. Louis? I hope not.

This is what happens when you put pea-brained MBA sales types in a science job (Kindler).

"Groups of people can, in fact, be quite stupid. People will deliberately not bring their minds to bear on a problem, in order to get along with their co-workers, to not stick their heads up, or just to make the damned meetings end more quickly."

Just look at the Bush Pentagon.

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3. MolecModeler on October 22, 2007 9:14 AM writes...

Makes you wonder why Groton and Pfizer Cambridge are hiring like crazy. Two of my friends just got positions in Groton...makes me worry. When their Lipitor revenue goes from $13B/year to maybe $1B/year, what are they going to do?

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4. Biologist Turned Consultant on October 22, 2007 10:46 AM writes...

In Kindler's defense, he didn't create the problem---but ended it. And there is a lot to be said about being a sensible (and sometimes ruthless) business man making swift decisions like this one. However, it remains to be seen what tricks this guy can pull out to save the dying giant...

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5. Elwoodcity on October 22, 2007 11:46 AM writes...

A commonly overlooked fact is that the wisdom of crowds only applies when no one in the crowd is talking to each other. The majority, as INDIVIDUALS, make the right decision. In this case, they consulted and collectively came to the wrong decisions.

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6. smallpharmarep on October 22, 2007 7:19 PM writes...

the main problem with exubera was the forecast, not the product. If the product was a option for needle phobic type 1 diabetics, which is a much smaller market, it would never have seen the light of day. The person who forecast it to be an adjunct to oral therapy for all type 2 diabetics, was the person with the 3 billion dollar mistake on his/her resume.

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7. Pfryed on October 22, 2007 8:28 PM writes...

To me the marketing of Exubera was abysmal. The commercials aimed at the consumer were way too little way too late. I still don't get it. The roll out of this product was flawed and extremely slow.
While the decision to drop Exubera was a blindside to the workforce manufacturing the product, it was not a total shock. Up until the time of the email from Mr. Kindler the plant operated as if nothing was wrong. Up until the end the workforce was optimistic that this product would eventually sell at a point that would sustain the plant.

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8. ira on October 22, 2007 10:28 PM writes...

Well Pfizer the drug company for me. After finding something that worked so well and didn't require sticking myself with a needle 3 times a day or cold transporting and was easy to use and made compliance easy, Exubera was a blessing. I hate needles so much now I can look forward to being out in the cold again. Thanks Pfizer. I guess it was all about the money all along. Living with diabeties sure has it's perks.

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9. Petros on October 23, 2007 2:35 AM writes...

And on Deerek's point 4

Lipitor's sales are sliding and it's still 3 years away from (US) patent expiration

"Lipitor revenues in the third quarter of 2007 were $3.2 billion, a 5% decline from the same period in 2006. In the U.S., Lipitor revenues declined 13%, while revenues in international markets rose 9%, due primarily to the favorable impact of foreign exchange and, to a lesser extent, operating growth. We estimate full-year 2007 worldwide Lipitor revenues to be 3% to 5% lower than 2006. The U.S. statin market in particular continues to be highly competitive, with both branded and generic competition in an increasingly cost-sensitive environment. We continue to respond to this competition with an integrated multi-channel effort."

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10. SteveM on October 23, 2007 7:24 AM writes...

There have been volumes written about common flaws in (group) decision making. A couple of readable books on the subject are Judgment in Managerial Decision Making by Max Bazerman and Decision Traps by Russo and Shoemaker. I'm sure an audit of Pfizer's decision process for Exubera would uncover one or more of the dysfunctional archetypes.

Now I don't know what kind of marketing studies Pfizer did, but people are much more rational consumers when doing a personal benefit/cost assessment of a product's relative convenience rather than its efficacy. For Exubera, if the primary value prop was convenience, it seems like standard consumer product testing and preference surveys should have predicted the market (non) acceptance of the product.

Given the sophistication of market testing and information management, the fact that these huge, costly product bombs still drop is actually kind of amazing.

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11. watchin the wheels on October 23, 2007 11:34 AM writes...

The inhaled insulin causes chronic (well at least sustained) breathing problems --- not a good side-effect for this product that doesn't work that well anyway. Mannkind better figure out if they are going to have the same issues before spending too much money.

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12. Idiots! on October 24, 2007 12:15 PM writes...

I have been on Exubera for 7 months and have NO breathing problems or side affects! It is the best NON-INVASIVE insulin therapy avilabale for Type I diabtics. And the schmucks running Pfizer marketed this product towards Type 2 diabetics who are know for being uncontrolled, fat, and lazy. Awful marketing campaign and now Pfizer is screwing those of us who love it!

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13. hibob on October 24, 2007 3:11 PM writes...

marketing works just fine at selling junk. If it can sell chromium and homeopathy, it can sell anything.
It just can't sell to everybody, and the people it can't sell to are people who 1, make decisions on formularies, and 2, have the option of only approving cheaper forms of insulin. I think you pointed that out in an earlier post.

If exubera was widely available with the same copay as injectable insulin, marketing would have done fine.

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14. Cary on October 24, 2007 4:44 PM writes...

It is unprecedented how fast Pfizer pulled the plug on this one. Pfizer CEO Jeff Kindler said, “Despite our best efforts, Exubera has failed to gain the acceptance of patients and physicians. We have therefore concluded that further investment in this product is unwarranted.”

It didn’t gain acceptance cause those who were using it kept flashing back to their college dorm room days. I am curious to see how many more failed products and mishaps it will take before Kindler gets the boot from Pfizer.

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15. Cary on October 24, 2007 4:45 PM writes...

It is unprecedented how fast Pfizer pulled the plug on this one. Pfizer CEO Jeff Kindler said, “Despite our best efforts, Exubera has failed to gain the acceptance of patients and physicians. We have therefore concluded that further investment in this product is unwarranted.”

It didn’t gain acceptance cause those who were using it kept flashing back to their college dorm room days. I am curious to see how many more failed products and mishaps it will take before Kindler gets the boot from Pfizer.

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16. Wavefunction on October 24, 2007 6:25 PM writes...

"Only off by a factor of one hundred, and what’s two log units between friends?"

That really cracked me up!

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17. Larry martin on March 24, 2008 4:20 PM writes...

There seems to be a difference of opinion, those that use and know the product and business people that make uniformed statements. I have used exubera for over a year and my lung functions are now the same as a 20 year old,(current age 63). I had no problem of using my inhaler in a restaurant like when you pop out a syringe stick your stomach, I am not a heroin user. Not once did anyone stare at me when I use an inhaler. Asthma sufferers use them and never any stares. My doctor did not want to put his patients on exubera in case some side effects showed up. I ended up being the only one on exubera. Patients quite often take new drugs because reps give samples to doctors. My doctor never received samples. Why are most drug reps in their 20's or 30's and attractive men or women? This is where the real marketing takes place. My doctor did not know how to train his patients to use the inhaler. My doctor sent me to another doctor 30 miles away to be trained in using the inhaler. It becomes a quality of life question To eat and travel the US and count your carbohydrates or be tied to your needle.

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18. Bob Douglas on April 14, 2008 8:24 PM writes...

I so agree with the previous poster, I also have used Exubera for over a year and absolutely loved it. Not having to take injections, storage was much easier and it went into my system faster were all great reasons for using it. I also had trouble with being the only one in my doctors office using this and had to wait until a company rep could train both my doctor and myself in using the inhaler. I also had to give my pharmacy lead time in refilling my prescription as they didn't keep any onhand due to me being the only one to ever request it.

The packaging of the product was awful though, you had to take set amounts of both 3mg and 1mg packets irregardless of what you were prescribed to take. This would leave the patient with an overabundance of one or the other since the mathmatics of the dosages didn't really add up. Example: Three 1mgs = about 9 units and one 3mg = 8 units of insulin.

It's really a shame that such a good product was just allowed to die like that.

Posted by Bob Douglas at April 14, 2008 8:21 PM

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19. Zolpidem No Prescription on June 11, 2011 1:37 AM writes...

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I’ve learned a lot from your blog here, Keep on going, my friend, I will keep an eye on it,

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