Insulin industry
Eli Lilly introduced the first GLP-1 drug, Byetta®, in 2005, and this totally new drug category grew in popularity driven by the increased Type 2 diabetes prevalence: September 2008, more than 6.6 million prescriptions had been dispensed14 and the sales had reached 0.59 billion USD15.
In 2006, Pfizer introduced the world’s first inhaled insulin, Exhubera®. This product was, however, withdrawn again from the market by yearend 2007 due to slow market acceptance and concerns about increased risks of longue cancer. As a consequence, Novo Nordisk stopped its development project for inhaled insulin (AERx) from January 2008.
Sanofi-Aventis, who already had massive success with their Type 2 targeted insulin Lantus®, in 2007 launched this drug in a new prefilled device, called Solostar®, which was perceived as being on par with the FlexPen® from Novo Nordisk. For the first time, Novo Nordisk did not have absolute device leadership.
Tablet treatment for Type 2 diabetes ran into problems. Several new products showed to have side effects of increased cancer risk. These problems resulted in growing interest for insulin and GLP-1 treatment in the fight against the explosion of Type 2 diabetes.
Corporate management cognition
When asked if he regretted the PDS period, an executive informant replied: “Yes and no. I of course could regret that the PDS period implied that we got a bit behind within the classical disciplines, because we had a different focus. The reason why I don’t regret it is that it meant renewed focus on the drug delivery part, which we lacked; it gave the device area a feeling like ‘we are somebody – they count on us, we are important, we are an organization with independent responsibility’ and so on. And I think it also created some thoughts at corporate management that this [device] innovation needs attention. It should not just be an appendix to the drug; it is in itself a differentiating factor. So I don’t think PDS lived in vain”.
14 Source: FDA (2010-06-26 at)
http://www.fda.gov/Drugs/DrugSafety/PostmarketDrugSafetyInformationforPatientsandProviders/ucm 113705.htm
15 Source: http://www.faqs.org/periodicals/201001/2019750421.html, accessed 2011-06-25
121 The organizational response to the failure of the PDS strategy was to integrate devices within the drug research, which until then had been organized in the Discovery unit. Drug research was now split in two functional areas: Diabetes Research Unit (DRU) and Biopharmaceuticals Research Unit (BRU) – the latter taking care of research within other diseases than diabetes. According to an informant, the reason for this split was to create transparency regarding input and output within each research area. The device innovation was transferred to DRU, since most of the devices were targeted for diabetes. An executive informant explained: “The logic behind was to gather
responsibility for all diabetes innovation in one place with the formation of the DRU unit”.
The problems with side effects from new tablet treatments for Type 2 diabetes opened for an
expansion of the insulin market. “The insulins got a renaissance” as an executive informant puts it. He continues: “Today you can say that the proteins have moved forward from being the severe final treatment to something you can apply much earlier in the treatment. Also now with GLP-1, which is another protein, you can perhaps even start before the onset of diabetes, to prevent the disease. This means that our core competence area, where we are world champions, suddenly gets a much broader application to many more patients – even before diabetes and perhaps for prevention, in future. This understanding has emerged over time” (my emphasis). The executive here explains the gradual growth in application of treatment of diabetes with protein-based drugs: First, insulin was used only for the relatively small market of Type 1 diabetes. Then, insulin got accepted for treatment of the much larger Type 2 diabetes market. And finally, the other protein, GLP-1, potentially opens the market for prevention of Type 2 diabetes.
Medical device level
When PDS was discontinued in August 2005, the device activities were divided into three functional areas, which were integrated into the new Diabetes Research Unit, DRU. Besides the device activities, DRU consisted of the drug research areas from the former Discovery unit. See organizational chart in figure IV-14.
122 Figure IV-14. The device area placed as three VP areas within DRU, from August 2005.
The strategy for DRU was to secure the leadership of Novo Nordisk within the diabetes care market by building on the strength and synergy of integrated drug and device development within one
organizational unit. The core competence was termed the “value added pharmaceutical product” as a description of the integrated drug-device system. The activities were focused, and the most radical innovation projects from the PDS phase were stalled. “It was back to basics: let’s do what we are good at and know we can do”, as one informant commented. Another informant calls it a return to the logic of the period of Medical Systems (1992-2001). One can say that the new strategy was still based on system integration, but now only integration of drug and device using the existing product systems, which Novo Nordisk had introduced two decades ago in terms of the durable and prefilled insulin pens. The system integration towards glucose monitoring as a parallel business to insulin delivery was given up.
A statement from an informant may illustrate the integrative view: “That is our strength: we are the only [pharmaceutical] company, where device development is integrated; because it’s two different worlds [drugs and devices], and when it comes to quality and production, you can learn from devices.
That’s the innovative and smart about it. The competitors cannot make the same quality, and it’s not integrated in their setup. So they’ll stay behind – at least, that’s my philosophy.”
At project level, new drug candidates required new device innovation projects, GLP-1 being the most significant. To support the new drugs, a range of new device projects were started up – most were incremental, but also radical and explorative projects were initiated. However, within the relative short lifetime of the DRU phase, only few new products were launched. The only major product launch was NovoPen® 4 in 2006, and this rather incremental innovation project was actually started up years before the DRU period. The DRU phase was discontinued by yearend 2008 – for reasons, I cannot disclose, since these point into the next phase.
Novo Nordisk Research & Development
Diabetes Research Unit
Biopharm Research Unit
Preclinical &
CMC Supply
Global Development
Device Innovation &
Development
Device Research &
Technologies
Device Dev.
Systems &
Support
3 drug areas
123 Concluding on the formation of the DRU strategy (2005-2008)
The background for establishing DRU should be understood as a strategic retreat from the former PDS period. External events had large impact on the withdrawal from the PDS strategy: the financial shake in 2002 implied decreased risk willingness, amplified by the failure of the tablet treatment project NN622 (see the description of the PDS period). These events moved top management to focus inwards, on control systems, profitability etc. This was clearly a mode of exploitation (March, 1991) at corporate level, which of course undermined the explorative strategy behind PDS. Furthermore, the fierce competition within the classic insulin pens threatened Novo Nordisk’s historical device leadership, and also this external factor drove management towards a retreat from the explorative
‘closed loop’ strategy.
Another external event was the failure of certain competitors’ tablet products in the market, displaying cancer risk, which increased the request for insulin and GLP-1 for treatment of Type 2 diabetes. This growth opportunity might have reinforced the investment in the ‘closed loop’ strategy, but instead led to a return to a purely drug-based strategy. The technical problems with the advanced device solutions, combined with the fear of getting behind within the classic insulin pens, pushed management in the direction of retreat rather than investment in the PDS strategy.
Thus, the DRU strategy was a return to a drug-based innovation strategy. Top management perceived the market changes as a ‘renaissance’ for the classic core competencies – therefore, the strategy of DRU was induced – it was ‘back to basics’, staying within the well-known territories. Similarly, medical devices changed role from being core assets for innovation in the PDS strategy to being complementary assets in the DRU strategy – seen as value-adding.
Conclusively, the strategic learning cycle of the DRU period was anchored in a theory of ‘back to basics’, which again was a result of negative reinforcement of the PDS strategy. Since the process held an element of learning from the mistakes of the previous period, one can see the evolution as
experience-based, learning from trial-and-error. The strategic search of DRU aimed at exploitation of the classic skills. See figure IV-15.
Figure IV-15. The strategic learning cycle of DRU; based on the negative experiences from the PDS period.
Failure of advanced systems
‘Back to basics’
Exploitation of classic
skills Partly
successful
Search of classic
skills
DRU 2005-08
124