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A Business Research Proposal in Establishing a Private Local Owned Pharmaceutical Company

Southwestern University Department of Graduate School Research and Statistics (REST). A Business Research Proposal in Establishing a Private Local Owned Pharmaceutical Company. Submitted by: Wayne Chavit and Karl Quipanes MBA-Ex Batch 11. BUSINESS OPPORTUNITIES IN

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A Business Research Proposal in Establishing a Private Local Owned Pharmaceutical Company

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  1. Southwestern University Department of Graduate School Research and Statistics (REST) A Business Research Proposal in Establishing a Private Local Owned Pharmaceutical Company Submitted by: Wayne Chavit and Karl Quipanes MBA-Ex Batch 11

  2. BUSINESS OPPORTUNITIES IN THE PHILIPPINE PHARMACEUTICALS MARKET A Business Research Proposal in Establishing a Private Local Owned Pharmaceutical Company

  3. Manila

  4. I. PHILIPPINE DEMOGRAPHIC AND SOCIO-ECONOMIC PROFILE

  5. ESTIMATED POPULATION BY REGIONAL GROUP Field Health Service Information System 2006

  6. AGE STRUCTURE OF POPULATION NSO, 2000 Census of Population and Housing

  7. AVERAGE LIFE EXPECTANCY BY GENDER 2005 Estimate, National Statistics Office (NSO)

  8. POPULATION AGED 60 AND ABOVE 2005 Estimate, National Statistics Office (NSO) Number of Senior Citizens estimated at 6.3% of total projected population in 2005 (Expected to be more than 10% by 2020)

  9. SELECTED POPULATION STATISTICS World Health Report 2007, National Statistics Office (NSO) THE GOOD NEWS….

  10. Selected Economic Data (March 2008) THE NOT-SO-GOOD-NEWS…. NSO Poverty Statistics

  11. Selected Economic Data (March 2008) (Contd)

  12. POVERTY STATISTICS National Statistical Coordination Board (NSCB)

  13. DISTRIBUTION OF FAMILY EXPENDITURES (2006) Selected Expenditures, % Share to Total

  14. II. THE PHILIPPINE PHARMACEUTICALS MARKET

  15. SALES BY MAJOR CHANNEL TOTAL SALES (2007) = PhP 105.9 Billion * HOSPITAL 11% - 90% private, 10% government Source: IMS, Dec 2007

  16. SALES BY REGIONAL GROUP Source: IMS, Dec 2007

  17. ETHICAL AND PROPRIETARY MARKET Source: IMS, Dec 2007

  18. BRANDED AND UNBRANDED MARKET Source: IMS, Dec 2007

  19. SALES BY SOURCE (VALUE) Source: IMS, Dec 2006

  20. SALESSOURCE (VOLUME) Source: IMS, Dec 2006

  21. PRODUCT SOURCING (2006)

  22. PRODUCT COMPOSITION (2006)

  23. DISTRIBUTION CHANNELS (2006)

  24. DEMAND CREATION

  25. PHILIPPINE PHARMACEUTICAL MARKET • 60% of toll manufacturing for Multinational Companies by IINTERPHIL LABORATORIES • 80% of wholesale distribution through ZUELLIG and METRO DRUG • 60% of retails sale through MERCURY DRUG chain with over 670 outlets • Philippines medicine prices are one of the highest in the world in relation to per capita income

  26. TOP THERAPEUTIC CLASSES (IMS, 2007) Sales and Market Share

  27. TOP THERAPEUTIC CLASSES (IMS, 2007) Growth Rates 2004-2007

  28. TOP 20 PRODUCTS (IMS, 2007) Value (P Billion), Market Share (%), Growth Rate ’06 (%)

  29. TOP 20 PRODUCTS (IMS, 2007) Value (P Billion), Market Share (%), Growth Rate ’06 (%)

  30. TOP 20 CORPORATIONS (Based on sales) MAT (Figures as of Nov 2007)

  31. TOP 20 CORPORATIONS (Based on sales) MAT (Figures as of Nov 2007) * Filipino owned companies

  32. TOP GENERICS COMPANIES (Based on sales) MAT (Figures as of Nov 2007)

  33. PROFILE OF THE HOSPITAL SECTOR • Accounts for 11% of total market sales • 1,928 hospitals, of which 1,146 are private • Private hospitals continue to be the most important market for multinational companies • Listing in Essential Drugs List (EDL) required only for procurement by government hospitals • Tenders required mainly in government hospitals • Hospital pharmacies cater mostly to in-patients • Mark-ups between 20-30%

  34. PROFILE OF THE DRUGSTORE SECTOR • Accounts for 89% of total market sales • Approximately 10,000 licensed retail drugstores, less than half of which are active • Mercury Drug, the major pharmacy chain, has 670 stores nationwide and more than 60% share of retail • Mark-ups average from 8-10% (20-50% on generics) • Agrees to sell medicines by the blister • Plays an important role in influencing buying brand • (But) patient-prompted switching is growing

  35. DOCTOR BEHAVIOR • Among factors which influence brand choice, personal relationship is said to be the most important • Scientific attributes of the drug and reputation of brand owner/manufacturer also influences prescription behavior • Growing acceptance of generics in the informed market sector • Average call duration on a medical specialist is from 1-2 minutes • Specialist able to see up to 40 Medical Representatives per day • Average cost of a Med Rep call on a GP is said to be PhP 500.00 (approximately US$12)

  36. PATIENT BEHAVIOR • Very strongly influenced by doctors’ recommendation or prescription • Majority, if not all, of healthcare expenditures still out-of-pocket • Usually purchases out of the hospital • Average purchase is a weekly dose • Poor compliance due to high cost of treatment • Greater awareness of generics as a choice, especially among the informed patient sector

  37. III. Market Dynamics

  38. MARKET DYNAMICS • Some Insights • PUBLIC HEALTCARE REMAINS LARGELY UNDER-FUNDED AND INEFFICIENT: • Less than 2% of Filipinos have sufficient Insurance Coverage • Budget Allocation for health is only US$31 per capita, approximately 3% of GDP • Less-than-efficient reimbursement scheme • No price regulation or control • 70% of the population has no regular access to essential medicinces (2000 WHO survey)

  39. MARKET DYNAMICS • Some Insights • ACCESS TO HEALTHCARE AND MEDICINE HAS BECOME A MAJOR POLITICAL AND SOCIAL ISSUE: • Greater consumer awareness of high drug prices • Government parallel importation program • On-going efforts to develop an alternative retail distribution network run by the private sector • Universal Accessible Cheaper and Quality Medicines Act of 2008, among other reforms

  40. MARKET DYNAMICS • Some Insights • PATENTS ON 80-90% OF ESSENTIAL DRUGS HAVE EXPIRED, BUT KNOWLEDGE REGARDING STATUS VERY LIMITED • LOCAL INDUSTRY HAS CAPABILITIES TO MANUFACTURE ONLY AROUND 200 MEDICINES OF THE MORE THAN 600 IN THE ESSENTIAL DRUGS LIST • PRIMARILY A BRAND-CONSCIOUS PRESCRIPTION MARKET • (BUT) BRANDED GENERICS SECTOR GAINING GROUND • 29% market share w/c is growing around 20% annually • Growth fueled by increased acceptance by drs/patients • Aggressive entry of Indian and other foreign suppliers • Downward shift in prices observed

  41. IV. STATEMENT OF OBJECTIVES AFFORDABLE, AVAILABLE, ACCESSIBLE

  42. KEY OBJECTIVES • MARKET ECONOMICAL MEDICINES THAT HAVE A DIFFERENCE; PROVE BIO-ASSAYS/BIO-EQUIVALENCE, EFFICACY AND SAFETY • WIN OPINION LEADERS, KEY MEDICAL SOCIETIES, TRAINING HOSPITALS, GOVERNMENT HEALTH AGENCIES AND POLICYMAKERS • BUNDLE BRANDS AND UNIQUE SERVICES FOR DISEASE MANAGEMENT • FOCUS ON BEING THE PROVIDER OF QUALITY MEDICINES AND AN AFFORDABLE PRICE • STARTING WITH THE MOST IN-DEMAND PRODUCTS, COMPANY WILL GRADUALLY ADD MORE PRODUCTS, STARTING ON THE SECOND YEAR AND SO ON AS THE COMPANY PROGRESSES

  43. Specific Objectives • 1. AFFORDABILITY • Offer most competitive prices without sacrificing quality • PRICE POINTS: • BRANDED: position 30% lower • BRANDED-GENERIC: position 50% lower • GENERIC: position 60% lower • Highly-Inflated mark-ups in the local pharmaceutical industry will allow reasonable reduction in margins, achieving the target prices and getting recognition as the price leader

  44. 2. AVAILABILITY • Aggressive promotional and sales/marketing campaign to create awareness: • Print and Media • Direct-mail to buying groups • Ads in trade publications • Point-of-sale materials on retail outlets • Medical Representative • The application of an effective and efficient Inventory Control system will ensure product availability at all times

  45. 3. ACCESSIBILITY • Products will be offered at all drugstores • Assistance in creating cooperatives to encourage the establishment of more drugstores; a network of privately owned and operated accredited pharmacies that offer affordable medicines • Direct sales and distribution strategy to target areas where accessibility is inadequate • Multi-level Network Marketing (on permitted products) can be applied to create livelihood, and further enhance accessibility

  46. V. SALES PROJECTIONS

  47. An investment of PhP50M is needed to successfully launch the start-up company. Allocation of the 50M funds is as follows: • 40% = PhP20M – operations • 60% = PhP30M – inventory • Company will do an average mark-up of 300-400%, which still gives us prices 30-60% lower than competition • the 30M inventory marked-up will equal PhP125M • for the first year, company projects a 2x inventory turn-around, making the annual sales at PhP250M • 5 YEAR SALES PROJECTION:

  48. PROJECTED INVENTORY TURN-AROUND: SALES BREAKDOWN: INDUSTRY MARKET SHARE: MANUFACTURERS: * FORECAST BASED ON LONG –TERM EFFECT OF COMPANY’S ENTRY IN THE MARKET

  49. PROFIT AND LOSS STATEMENT In PhP Millions YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

  50. BIBLIOGRAPH: • With the permission of Hon. Teddie Elson E. Rivera, • Former UnderSecretary of Department of Agrarian • Reform (DAR) and Vice President of Philippine • International Trading Corporation(PITC) • National Statistics Office, 2000, 2005, 2008 • National Statistical Coordination Board(NSCB), 2003, • 2006, 2008 • International Market Survey(IMS), 2006, 2007

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