Monday, October 14, 1996
Companies that want to share product marketing with a partner have two basic choices: co-promote or co-market. In the former, companies market a product under the same brand name, while in the latter, the product is marketed under different brand names.
The terms co-promotion and co-marketing often are used interchangeably, with companies themselves sometimes loosely applying one or the other term to describe their marketing agreements. Although companies may refer to their agreements as co-marketing, it appears most are actually co-promotion strategies by definition.
Indeed, co-promotion is clearly the preferred strategy, as companies believe that it encourages a highly collaborative relationship, immersing both biotech company and partner in a hand-in-glove effort to share profits from marketing a single product under a single brand name. In contrast, co-marketing has fallen out of favor with the maturation of the industry.
A number of inquiries to BioCentury on what constitutes co-promotion - and how it differs from co-marketing - prompted an examination of the marketing strategies that some companies have put in place.
"What we see," said Michael O'Connell, executive vice president and CFO of Advanced Polymer Systems Inc. (APOS,Redwood City, Calif.), "is the term being utilized for virtually any kind of arrangement the partners find best for their specific sales goals. Industry people and the media often mix the terms co-promotion and co-marketing, so you are never really sure when you see one or the other term what it really implies for any particular collaboration."
Models under construction
Co-promotion strategies, while adhering to the basic single product/single brand structure, are characterized by a host of varying features driven by the joint capabilities and market interests of the partners. For example, some co-promotion strategies may allow for eventual profit sharing in certain markets or may permit the biotech company to develop customized sales representation in parts of a market where it may have particular expertise or experience.
Other strategies might allow the smaller company to elect to represent sales to a market sector outside the core market jointly pursued by both partners under the terms of the primary agreement.
A growing number of co-promotion models reward for actual sales performance based on concrete measures, such as achieving a face-to-face visit with a physician and follow-up response. Others may reward for actual performance against an annual budget and/or a planning cycle. Still other co-promotion paradigms may revolve around a very specific goal such as developing the market when there are broad applications of a product across different disease states.
In addition to the basic co-promotion agreement, the companies may append other terms related to royalties or licensing. An example is when the biotech company and its partner are co-promoting a compound to the target market, but opportunities exist for the biotech company to license the compound in a reformulated format to another company and receive royalties. In these cases, the large partner can agree to allow the biotech company to capture the additional business.