Chapter 7
PharmaCo – A Forecasting Case Study
Tuesday
Sharon Spring stepped out of the fifth-floor elevator, glanced a quick smile at the executive secretary, and rounded the corner towards the boardroom. She felt prepared for this morning’s meeting with the Vice-President of Marketing and Sales. She readjusted her grip on her laptop briefcase, cleared her throat and quietly passed though the double walnut doors of the meeting room.
Promoted to Forecasting Director six months prior, Sharon had been with PharmaCo’s sales division for almost a decade. As a star sales representative, she had worked her way up to District Manager of Upstate New York. Years of sales experience had developed in her a good intuitive sense about marketing strategy and how a product was likely to perform, but she found forecasting to be a bit more quantitative than what she was used to. It was now her task to forecast the market performance of compounds in PharmaCo’s product pipeline, and to project the future revenues of products that had recently been launched and had some historical sales data behind them. Yesterday after lunch she had received the email summoning her to this morning’s meeting, but the details were unclear. Brian Nolan, the Vice-President of Marketing and Sales, had made it short and to the point, writing ‘We have some new ideas about the product forecasts that we’d like you to have a look at.’
After an affirmative ‘Hello, good morning everyone,’ Sharon situated herself across the table from the marketing team with her back to the windows. Before her was a packet emblazoned with the tricolor PharmaCo logo and a heading which read, ‘Product Portfolio Forecast 2014.’ Then Nolan began, ‘Good morning, Sharon. Sorry about the short notice, but as you know, we’re in a bit of a transition phase right now and things are moving along pretty rapidly. We’re thinking of advancing the launch date of Steadertin, and we’re still not sure how Focalitine’s going to perform after expiration. But that’s only the tip of the iceberg. So I’d like to get things out in the open right off the bat – Sharon, we want you to run a forecast for the whole portfolio. So that includes Steadertin, Focalitine, and the others as well.’
‘What’s our timeline on this?’ asked Sharon, maintaining eye contact as she reached for her briefcase to retrieve a pen.
‘Three months,’ barked the triangular conferencing phone from the center of the table. It was Pam Putnam, PharmaCo’s CEO. ‘Consider this your new priority Sharon. I want you to get a forecast team together and have some results for us by June. Can you handle this?’
‘Yes,’ she replied quickly. ‘I can do it.’
‘Great! I’ll let Brian brief you on the details. Good luck.’ The call ended with a sharp click. Sharon looked back at Brian with her lips parted and her right brow slightly cocked.
‘Excellent. Shall we?’ asked Nolan taking up his packet in both hands and stacking the sheets together several times to make the edges even. Sharon followed suit, already brainstorming the data requests she would need to deliver to the various Product Managers, Market Research Managers, and Analysts later that day.
Wednesday
Sharon plugged in her laptop again at 07:30. She checked her emails thinking to herself, ‘Who could have sent anything between eleven last night and now?’ Nothing but a health club membership upgrade message. Delete. She straightened up and opened her ‘to do’ list and reviewed the agenda she had compiled the night before.
She was especially concerned with modeling factors surrounding demand for Cytoflux. Sharon needed to create a production forecast that was close to the distributors’ actual needs. To do this, she had to reconcile the difference between the demand forecast (like the one she was about to perform for Steadertin) and the actual shipment numbers. She had some data for two distribution channels – retail and hospital – that covered about 95 percent of all Cytoflux sales in 2012–13. She needed to use these numbers to arrive at an adjusted demand forecast for 2014. That seemed to be the easy part – it was just a matter of looking at the historical data to identify a trend from which she could extrapolate the demand. She knew the data sources well enough to know that demand data projections were not a full census and would likely need a ‘bulk-up’ factor applied to them. When she reviewed the Cytoflux data (Exhibit 2), she furrowed her brow and tried to stem the rising tide of stress. The data were showing a divergence between the demand forecast and the ex-factory sales numbers. It was times like this when the urge to escape to the Evian vending machine in the side room off the lobby became fitfully tempting. ‘Time crunch,’ she repressed herself. Back to the task, she tried to make sense of the jagged lines and bars on the chart. After a few minutes of figuring, Sharon added another item to her ‘to do’ list and turned back to the packet from Tuesday’s meeting.
She turned to the launch of Steadertin, which was expected to be the most significant source of revenue for PharmaCo in the near to mid future. Nolan had stressed in yesterday’s meeting that the production process was going to be more expensive than they had previously thought because of an added refinement step. He had specifically asked her to prepare a production needs report by the end of the week so that they could get a better handle on the budget requirements over the next quarter. ‘We really, really need an accurate forecast,’ echoed in her mind.
She went to her project drive and opened the file labeled ‘Patient-based_Steady_Forecast.’ All she had to do now was convert the patient numbers to product volume, but how? ‘Let’s see,’ she thought to herself. ‘I know that Steadertin is once daily, and patients take it every day. How many pills is that?’ Luckily, she had some data for days of therapy for a similar product, Chizophrin, which she could use for Steadertin. From there, she could get to compliance, and from compliance she could get to product volume (see Exhibit 3).
In addition to these production exercises, Nolan had expressed concern over a mysterious trend in Focalitine’s TRx levels over the past two years. ‘Look at this graph Sharon. We have the new indication coming out on Focalitine but I’m worried about this trend. You can see that more and more patients are being treated for ADHD and they should be on our drug, but they’re not. The TRx numbers are dropping. I don’t know if this is because generics are on the horizon or what. Take Cytoflux, Sharon. It’s doing the opposite thing. Look at this – the dollar sales are going up faster that the TRxes. If only we could get all our products to do that!’ She turned to the graphs in her packet and considered phoning their data vendor to see if he could pull some quick data by tomorrow morning. At the same time, she wondered whether Nolan was right about Cytoflux. She seemed to think that comparing the trends between Cyto and Focalitine was like comparing apples and oranges. ‘Yeah, I’d better give our data vendor a call,’ she thought (see Exhibits 4 and 5).
Upon finishing lunch, Sharon discovered an email that Margie Rauen from Market Research had bounced up with some data she wanted, except for one piece. Yesterday, after the meeting, she requested that the market research team compile a list of the current products in the schizophrenia market environment along with their respective shares. She also wanted them to include the results from the uptake curve she had them generate a week earlier. Finally, she had asked the team to assess the amount of share that Steadertin would be expected to take from each competitor product.
Margie explained, ‘We came up with a couple of ways to calculate the share that Steadertin’s going to take from each competitor, but we figured you’d be the best one to decide. I pasted the tables underneath the uptake curve. Regards, Margie.’ Sharon took a sip of her non-fat vanilla latte and clicked open the Excel attachment at the bottom of Margie’s email. She nodded her head and organized her thoughts as her eyes scanned the tables. In addition to the share theft analysis, she noted that Margie had left her adoption pattern intact. She was pleased to learn that the Market Research group concurred with her belief that, in light of its novel mechanism of action and anticipated aggressive promotion, the Steadertin uptake pattern was likely to parallel that of Lipitor. At the bottom of the attachment was another note which read, ‘Note that Schizophrenia TRxes have increased over the past two years, but days of therapy (DOTs) have lagged. Important?’ Underneath was a graph displaying the trend. Why wouldn’t prescriptions follow days of therapy? Probably something to look into (see Exhibit 6).
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