Crisis Management - A lesson to learn in Corporate Communication

All businesses mess-up on occasion

What to do when it (all) goes wrong?

• Growing Up Is Hard to Do
• Crisis need not strike a company purely as a result of its own negligence or misadventure.
• Often, a situation is created which cannot be blamed on the company - but the company finds out pretty quickly that it takes a huge amount of blame to hit the ball in its response.
• Clearing the Hurdles & Accelerating the Business

High-profile incidents in the bio/pharmaceutical industry

• Product integrity is constantly challenged, from patent infringement to counterfeits to life-threatening side effects during first-in-human clinical trials.
• Each step of the product life cycle, from idea inception to post-marketing surveillance and product retirement, raises potential legal, commercial, financial and ethical risks.
• Product protection risks should be managed through an anticipatory, proactive approach employing mechanisms found to be successful in monitoring, controlling, and correcting vulnerabilities throughout the product’s life cycle.

Johnson & Johnson and Tylenol Poisoning

• In 1982, Tylenol - 35 % of the US over-the-counter analgesic market - represented 15 % of the company's profits.
• Unfortunately, at that point one individual succeeded in lacing the drug with cyanide. Seven people died as a result, and a widespread panic ensued about how widespread the contamination might be.
• By the end of the episode, everyone knew that Tylenol was associated with the scare. The company's market value fell by $1bn as a result.

Cost and benefit analysis

• The cost was a high one. In addition to the impact on the company's share price when the crisis first hit, the lost production (destroyed goods) and public law suits as a result of the recall were considerable.
• Within five months of the disaster, the company had recovered 70% of its market share for the drug - and the fact this went on to improve over time showed that the company had succeeded in preserving the long term value of the brand.
  

What did the company do?

• They acted quickly, with complete openness about what had happened, and immediately ordered recall from every outlet - not waiting for evidence to see whether the contamination might be more widespread
• They showed themselves to be prepared to bear the short term cost in the name of consumer safety. That more than anything else established a basis for trust with their customers
• Developed better product protection- tamperproof packaging that would make it much more difficult for a similar incident to occur in future.
• They achieved the status of consumer champion.

What the company didn't do was to avoid responsibility.

Vital Communications: Internal & External

• On all media interviews, expressed sympathy and regret for all those affected and immediately promised that the company would pay all medical costs.
• Conducted regular company-wide conference calls on a daily basis, giving employees the chance to ask questions and get the latest information. This approach proved so popular that the practice of quarterly calls survived the crisis.
• Within 24 hours, the company had an explanatory web site (its first) that received 20,000 hits in 48 hours. The company spoke to the press, appeared on TV and carried out direct advertising with the website address. All possible attempts were made to provide up to the minute, accurate information.
• There were critics who refused to credit the company with any integrity whatsoever - but was considered that as an exercise in crisis management

What can other businesses learn from such a biotech blow-up?

• Could J&J have done anything differently?
• Present-day threats and potential costs associated with recalls have never been higher -- one recall can put you out of business. As companies seek to increase their control and in turn, minimize their risks, they discover that varied activities within and outside the organization must be considered, and operations up and down the supply chain must be addressed.
• When potential issues are identified, you can quickly determine the underlying cause, make the necessary corrections, and provide supporting documentation.

Please share your thoughts over this case!

Crisis Management –Technology competent, product license terminated Biotech Company

There are many examples to quote for the major challenge faced by the world’s most successful as well as start-up biotech companies: how to overcome the crisis of technologically competent, product license terminated situation of biotech companies. The question is with little or no money situation, how to generate the sufficient clinical data for the re-evaluation of the drug by the regulatory bodies and how to stay alive until the supporting clinical data is generated! Here, the three best possible options are addressed to overcome this situation and you are welcome to add more to it!

The ‘Tripod’ business model offers a solution:

1. Seek government funding for the better development of the drug and the technology.

If the public health is a major concern, government would most likely to take initiative to support funding a clinical programme and the associated technology development with the industry in collaboration. This way the company can pursue the government agency as a licensing partner in the similar areas of clinical development and generate revenue.

2. Develop the next-stage technology platform and license it for multiple techno-based applications.

The main interest of this strategic management would be to progress the marketing of products based on the technology platform. It would build future values in the form of royalties and potential royalty payments could generate future profits for the company in question. This would ultimately build the company’s own manufacturing capacity.

3. Drive the revenues by selling the drug-associated research reagents and increase recognition of the company.

The technology-related research reagents could be added to the company’s portfolio. This would generate revenues and create awareness and acceptance of the next-stage technology. In addition to building a strong customer base, it would lead to licensing and partnership opportunities.

All the above strategies could go hand-in-hand by partnering with other biotech companies for a secure and manageable future of the company.

Please drop me a line to have your say on this issue.

Risk-reduced cost management practices (No. 5)

5. Drug-Device hybrid model

The biotech investments are volatile in nature considering the probability that the drug would fail during clinical trials phase II or III, after much of the time and money has been spent. It is characterized by high risk, in terms of capital commitment and probability of success, and high reward, in terms of profit potential and exit scenarios.

For example, in India, the diabetic drug insulin is manufactured by Torrent Pharmaceuticals, under licence from Novo Nordisk India, and distributed by Abbott India verses the blood glucose measuring device called ‘AccuCheck’ is manufactured and marketed by Roche diagnostics alone. In this scenario, although the cost or risk is reduced the profit is also shared.

The best way to describe the drug-device hybrid is to look at one of the most successful examples set forth by Johnson & Johnson, who created the market opportunity for the drug coated stents used in the coronary artery diseases. As a result, start-up device companies have been formed to develop drug coated stents, or are adapting their strategies to do so. The prospective for the biotech market indicates that the drug-device combination products will experience a promising future and this drug-device hybrid companies would impact the investment allocations by decreasing the cost and lowering the risk.