To Market, To Market.

Have you missed me? I apologize for the brief hiatus - real life intervened. 


I guess by now you will have realized that this blog is less about reporting daily and current events but more a meandering stroll through the back alleys of the things that I think about from time to time. As I have previously mentioned, if you want to keep up with the very latest on the developments of Cellestis and QuantiFERON, then there is no better place than Rogs place. I am however ever hopeful that my musings will be of some use to you - perhaps even acting as a springboard for your own adventures into wandering thoughts. 


While making personal explanations, I have one more. A couple of people have contacted me asking about the strange title of my blog - Forrest thinks. (I love hearing from you - if you don't want to post public comments, please feel free to email me directly. If you have subscribed to my email alerts you will have my email address). I can see that it could be misinterpreted as "The thoughts of Forrest" but  my ego is not that big - I'll leave that to people like Mao! It is in fact just a statement  - it's what I do. There are many things that I don't do well - remembering things is one of them (Wednesday night is apparently rubbish night). However, I really love thinking about things, contemplating scenarios and applying logic. It is our (humans) distinction that we are given those abilities - we should use them, even if it is not for personal gain. It distresses me that much of our education system seems less about that and more about passing exams - but that's a whole 'nother rant. 


The next step along from thinking is communicating. I am working hard to improve my ability to communicate effectively, particularly through the written word. I have set myself the challenge to express things that I know or have thought about in a concise, understandable and useful way. As I have been embarking on that task, I have stumbled across the realization that it is a never ending challenge - it can always be improved (in my eyes). My ongoing "Cellestis Story" series of posts are an example. I set myself the task of cutting through ten years of collected bits and pieces of knowledge to develop something that communicates the importance of the story in a clear, concise and readable form. One of the hard parts of that is to be careful that in doing so, the sense of the story is not lost because of the fine details that must be, at times, glossed over. When I judge what I have done so far (and in this type of exercise, I am the most important judge of myself), I find that I am quite happy with what I have achieved with that story so far but I know that I can do better - I think that will always be the case. Perhaps it's a Libra trait!


It's also a matter of perspective. We all have different perspectives of a topic. Depending upon who we are, what we believe and where in life we find ourselves, we may well have quite different knowledge and information needs. For example, if we take the very narrow part of our life that is the share market then we can easily see that different participants will have different objectives and different information requirements. We could divide the market participants up in any number of ways. A younger person may have quite different needs in this field than somebody in their retirement years - aside from the impact of experience it may simply be a totally practical difference. A younger person has much more time to overcome adverse events and may therefore have a different view on investment risk than an older person. That is a very broad brush distinction but you get the idea. Another distinction may be between those that consider themselves market investors and those that prefer to be market traders. That is a very interesting distinction - one that has been discussed innumerable times and one that I plan to post on at some time in the future. 


If it is of any interest to you in deciding upon the value of my musings then I happily declare that I am 50+, retired and consider myself to be an investor, rather than a trader. I also have two acres of lawn to mow and 30 acres of paddock to slash - that's when I do a lot of my thinking. I also have two Border Collies.


Just in case you haven't noticed, this happens to me all the time. I sit down to write about something and end up wandering down an entirely different path.  I thought I was going to throw in a couple of sentences at the beginning of this post before getting into the meat but look what happened! I guess that is just my style - I can only hope that it is not too unbearable.


Anyway. To the meat.


In my wandering around the forums I have noticed that the age old topic of the marketing direction of Cellestis has arisen again. It's an important topic. After all, if we don't market we don't sell and if we don't sell we don't make profits. (Just a reminder - my perspective on this is as somebody that is interested in the Company succeeding as a business - quite a different perspective from those whose success is defined by being able to buy a share at a low price and sell it at a higher price. I'm not criticizing that aim - just pointing out that my considerations may not necessarily resonate with everybody).


So. Ultimately, if we want to sell QuantiFERON, we need to get somebody to buy it. To do that we need to undertake that very ill defined task of "Marketing". I'm no marketing guru - any marketing that I did in my business was really more accidental than intentional. However, if we step back from the topic, wash out our preconceptions and examine the topic with fresh eyes, any of us can have input to the topic (I'm going to).


I suspect that when we think of marketing our first thoughts go to advertising and salespersons. Those may or may not be a component of the general topic of marketing but they certainly can achieve that aim of selling product. Surely, though, there is so much more to it. And, it has to be very dependent upon exactly what it is you are selling and who you are selling it to. There is a well known saying in business - "I know that half of my advertising is wasted - I just don't know which half". 


One of the thinks that I did learn in my years as a business owner is that the person to sell to is the decision maker. That may seem obvious but it is not always obvious when you are in the thick of it. It is easy to spend enormous resources convincing somebody of the advantages of what you are selling, only to have it dismissed out of hand by those higher up the decision making chain. I am sure that there are also situations where the opposite can apply also - the boss buys your product but for whatever reason, the underling is against the idea - the ideal recipe for a business relationship to fail.


As I said, I'm no marketing expert but just in that cursory examination above it becomes clear that there is no "one size fits all" marketing process.Every product, service, relationship, customer and environment is different.


To Cellestis. In this situation the absolute end user - the patient - has close to zero influence on whether they use QuantiFERON or not. Yes, there may be cases where a groundswell of patient activism might influence medical direction but it is rare and almost certainly not applicable to Cellestis at this time. Advertising QFT on television during the Superbowl is unlikely to be a sensible use of marketing budget! 


So, we are left with looking at the medical system. A daunting task. There are many levels within the system and many different objectives of the people within the system. They range from the family Doctor through specialists, laboratories, medical academics, medical advisory committees, Government authorities and all the way up to Government budgetary committees. Everybody in that long chain (including those I have forgotten) can and do influence the uptake of a new product like QFT to greater or lesser degrees.


We all love a good analogy - me most of all. Unfortunately, analogies rarely are as valid as a cursory inspection might imply they are. I have seen QFT being compared to Beta vs VHS and the Apple iPod. Whilst they are both good case studies in marketing they probably don't really help too much in the QFT marketing exercise.


Beta vs VHS is, of course, the classic example of a superior product (Beta) being beaten in the market by an inferior product (VHS). One assumes that this was a result of marketing at some levels. We might try to stretch this analogy over the QFT(superior) vs TST(inferior) situation that CST is dealing with. However there are many parts of this story that do not fit the analogy. VHS and Beta were two products that both provided exactly the result that the end users required - there was little real difference between them from most end users perspective. QFT and TST provide vastly different outcomes for the end user. Those differing outcomes are easily shown. Neither VHS nor Beta were entrenched products - they both hit the market at around the same time. TST is massively entrenched and QFT is the usurper. And on it goes. That is not to say that nothing can be learned from the Beta vs VHS case for CST - it just doesn't directly translate.


I have to admit that in my naivety when I first became an investor in CST I would have thought "Well, clearly QFT is a better product - just shout it from the rooftops - job done". Maybe a variant on that marketing "strategy" might work for iPods - it won't work for a medical product. 


Marketing medical products is a very special case. As we know, there are huge hurdles to reaching market. It is not simply convincing somebody in the chain that the product should be used. There are actually hurdles at every level of the chain. Each one of those hurdles must be overcome - all the way from the regulatory authorities down to the family physician. In an ideal (and unrealistic) world you would like to round them all up and convince them all at once. That is simply not possible. So, you need a strategy that is continually moving through that chain to reach the same end (everybody on board). In general, it seems that the strategy that CST have used could be loosely termed "top down". That is, working from the regulators down through the chain to the coal face. It's easy to express it in that way but if we look a little closer at what the Company have been doing, it has involved a lot more than that.


The question at the beginning of this journey would have been "Who are the decision makers". At first thought my answer to that may have been the FDA and the CDC (in the USA and similar bodies elsewhere). However, the FDA only make a decision to allow a product to be used and the CDC only act when driven by events or others bodies. Cellestis could and did get approval from the FDA by providing the appropriate scientific data (not really a marketing process). Cellestis alone would have little chance of persuading the CDC to change their guidelines. So, for their purposes, the CDC is not the answer to the question "Who are the decision makers?". 


The real people who drive the decision to adopt a product like QFT are a mixed group of TB researchers, academics, experts, practitioners, medical authors and so on. It seems that it is not easy to convince this mob of anything (with good reason). They need to be thoroughly convinced by sound scientific process and, as far as I can tell, they don't even trust each others results. Each one needs to conduct their own process (usually trials) to convince themselves. It's a hard road - that is why so few promising medical products actually make it through this process. Whilst it is frustrating, I am sure it is a good thing - without a rigorous process such as this, medical advances can just as easily kill people as cure them.


It goes without saying that being scientists themselves our Directors were fully aware of this and, no doubt, had a strategy to negotiate this road. I suspect that one of their earliest and most important coups was to convince Dr. Catanzaro of the value of QFT and recruit him to the board. As a well respected expert in the field I don't doubt that he is at least partly responsible for bringing QFT to the attention of those very people that we needed to make the decision to switch to QFT possible. 


It is patently obvious that CST knew that studies, papers and results produced by themselves would actually carry little weight in convincing these people. It is only independent studies that have any real value. Furthermore, it is only peer reviewed studies that command any respect - that is, studies that have been published in respected medical journals for other medical experts to review and comment on. I have no idea what was involved in actually convincing people to conduct these studies but I imagine it took a lot of work. The result is that there are now over 400 peer reviewed papers published - all about a little diagnostic product developed by a tiny company in Australia - a remarkable result.


There is a little more to this marketing exercise though. Largely in parallel to the above, the Company have convinced all the important medical laboratories in the US to run the QFT test. This actually provides two benefits. Firstly, because they make money from the QFT (usually they would not have had any involvement in TST tests) they are a "free" front line sales force. It is in their benefit to convince medical practitioners to use the QFT diagnostic. Secondly, because they are there, ready and in place to conduct the tests it is one "objection" to switching to QFT that potential QFT customers will not need to worry about.


When you look back on it, it has been a huge exercise. Maybe they could have done it differently? I really don't know. However, I don't think that throwing a pile of money at this marketing exercise would have achieved any better results (and maybe worse).


CST now have a worldwide network, they have all support structure in place and have the goodwill of the medical community. When the (long awaited) CDC guidelines are released ("real soon now") CST will be exceptionally well placed to capitalize on the marketing work done to date.


Incidentally, there is different marketing route that the Company could have taken. It is one that so many other Aussie startup biotechs have taken. It means selling a different product to a different market. It means only making one sale. They could have dressed up the Company real nice and then flogged it to the first "big pharma" that came sniffing around. In my opinion we are very fortunate that they didn't follow that path.