Corporate Intelligence United Business Institute Serbia, Novi Sad April. 2004 1 Vesna Gavran Snežana Kikić Trends in Pharmaceuticals industry for next 5 years 2. Global sales Consolidation Diversification 1. 3. Demographic group”Silent population” On-line pharmacy Generic Fast pharma 1. 2. 2 Globalization GLOBALIZATION 1.Pharma Global Sales Ran Audited World Therapy Class 2003 Sales ($bn) % Global sales ($) % Growth (constant $) 1 Cholest.&Triglyceri Reducers 26.1 6% +14% 2 Anti-ulcerants 24.3 5 9 3 Antidepressants 19.5 4 10 4 Antirheumatic Non-Steroidals 12.4 3 6 5 Antipsychotics 12.2 3 20 6 Calcium Antagonists, Plain 10.8 2 2 7 Erythropoietins 10.1 2 16 8 Anti-Epileptics 9.4 2 22 9 Oral Antidiabetics 9.0 2 10 10 Cephalosporins & Combination s 8.3 2 3 Total Leading 10 $142.0bn 30% +11% k World Audited Market 2003 Sales ($bn) % Global Sales ($) % Growth (constant $) North America 229.5 49% +11% European Union 115.4 25 8 Rest of Europe 14.3 3 14 Japan 52.4 11 3 Asia, Africa and Australia 37.3 8 12 Latin America 17.4 4 6 $466.3bn 100% +9% TOTAL Source: IMS World Review 2004 North America Rest of Europe Asia, Africa and Australia 3 European Union Japan Latin America GLOBALIZATION TOP 20 WORLD PHARMACEUTICAL COMPANIES X 1000 000 000 $ R&D Expenditures Sales 35 30 25 20 15 10 5 0 Top 20 Deliver 81% of Total Sales 4 GLOBALIZATION 2. Consolidation Partnerships between the large pharmaceutical companies and small biotechnology companies allow the large pharmaceutical companies to gain access to the latest technology and allow biotechnology companies to finance the development of their drugs 5 GLOBALIZATION 2. Consolidation The consolidation and internationalisation of the pharmacy company can be expected to continue. Consolidation activities: acquisitions biotechnology Company 100 regional Ph Companies 15-20 Global players in-licensing co-development co-marketing distribution network Gen-specialized Companies Market Opportunities 5 – Global players Cooperation between the large pharmaceutical companies and small biotechnology companies. 2004 6 2009 Diversification 1. Demographic group ”Silent Generation” consumers over 65. An aging population will soon drive 65 million baby boomers into the ranks of late middle age and senior citizenship, driving prescription sales to explosive growth levels. (New York Times, feb.2000) According to IMS Health, prescription sales rose another 11.3 percent last year, to $182.7 billion, with drug chain sales rising 8.4 percent to a commanding $73.4 billion. Instead of serving and selling to one population pharmaceutical companies now need to respond to smaller groups based on age group, therapeutic area or disease and in the future genetic sub-group. 7 Diversification 2. Online Drugs Market Progress on the electronic prescribing and communications front. Rapid onset of mail-order pharmacy, whose sales jumped 21.7 percent in 2002 . 6000 5000 Million $ The growth of of the Online Drugs Market Online prescription drugs market 4000 3000 Online OTC drugs market 2000 1000 0 1999 2000 2004 Year The traditional pharmacy business model may no longer work 8 Diversification 3. Generics INNOVATIVE MEDICINE GENERIC COPY Drug Discovery Discovers millions of promising molecules for development using the latest research technologies. No discovery or advancement research. Chooses to copy the most commercially successful innovative products. Developm ent Risk Only 1 in 10,000 molecules discovered actually makes it to market. The generics pick only the high revenue products for copying. Thus, generics face zero risk. Developm ent Time It takes 10 to 15 years to develop a single medicine. Approximately 2 to 3 years to develop a chemically identical &biologically equivalent generic copy. Developm ent Cost The average cost to develop a new medicine is $1.3 billion. The average cost to develop a generic copy is $1 million. Cheaper good copies. $100 billion worth of brand name prescription drugs will lose patent protection by 2005. 9 Faster Pharma 10 Faster developing 1. biotechnology 2. genome pharma 3. information technology -(microchips control release that can be swallowed or implanted) Faster commercialization of new product. 1. period of expiration of new brand is shorter EUROPE SLOVENIA 11 SERBIA & MONTENEGRO GLOBALIZATION Pharma Sales in Europe Sales Еuro (millions) Austria Belgium Croatia Czech Republic (CZK) Denmark (DKK) Finland France Germany Greece Hungary (HUF) Ireland Italy Netherlands Norway (NOK) Poland (PLN) Portugal Romania (USD) Russian Federation (USD) Slovak Republic (SKK) Spain Sweden (SEK) Switzerland (CHF) Slovenia (SIT) United Kingdom (GBP) After May 2004 pharmaceuticals markets in EU will expand to 25-member states. It will be 450 million people market. The inclusion of the CEE pharmaceutical industry will boost the growth of the European “cheaper”generic market. 12 Country indicator Slovenia, Data Profile 1997 Slovenia Serbia and Montenegro , Data Profile 2000 2001 People 1997 2000 2001 10.6 mill 10.6 mill 10.6 msERBIA ill 0.3 0.1 0.1 Surface area (sq. km) .. 102.0 thousand 102.0 thousand Forest area (sq. km) .. 28,870.0 .. 16.3 billion 8.4 billion 10.9 billion People Population, total Population growth (annual %) 2.0 mill 2.0 mill 2.0 mill -0.3 0.1 0.1 Environment Population, total Population growth (annual %) Environment Surface area (sq. km) Forest area (sq. km) 20,250. 20,250. 20,250. .. 11,070. .. Economy Economy 18.2 billion 18.1 billion 18.8 billion GDP growth (annual %) 4.6 4.6 3.0 GDP growth (annual %) 10.1 5.0 5.0 Inflation, GDP deflator (annual %) 8.8 5.7 9.9 Inflation, GDP deflator (annual %) 29.2 76.8 89.0 Exports of goods and services (% of GDP) 57.4 59.1 .. Exports of goods and services (% of GDP) .. 31.6 24.9 Imports of goods and services (% of GDP) 58.3 62.7 .. Imports of goods and services (% of GDP) .. 50.4 44.6 Trade in goods as a share of GDP (%) 97.4 103.9 .. Trade in goods as a share of GDP (%) 46.0 64.2 .. GDP (current $) Source: World Development Indicators database, April 2002 GDP (current $) Source: World Development Indicators database, April 2002 Both countries have population 65 years and over 15 % 13 Serbia & Montenegro History Former Yugoslavia At the beginning they were domestic competitors Hemofarm 1960 June 1,- Hemofarm was established with only thirty employees in Yugoslav republic Serbia. 1964-1970-period of stagnation. 1973 –in mid August, constructing a new factory. A year later the first significant export was recorded. 1980- A young Technology Engineer Miodrag Babić came to the head of the company and gathered a team of inventive experts. 1991-first enterprise abroad founded. It was in Frankfurt. 1993-A joint venture with the Company Fresenius, Factory is called Hemomed. 1994-established factory Hemomont in Montenegro. 1995- the first Yugoslav-Chinese mixed enterprise was signed between Hemofarm and the local pharmaceutical company Jinan Yongning Pharmaceutical and the Belgrade company MAG 1996-The enterprise was founded as a joint venture of Hemofarm and Čajavec from Banja Luka. 2000-, infusion solutions in China with Yongning Pharmaceutical. 2002- Zorkapharma becomes sub diaries of Hemofarm group. 2003- In SAD opened a office representative of Hemofarm 14 Krka 1954- Krka was founded with just nine employees in Yugoslav republic Slovenia. 1965-1974 -construction of the new plant for processing raw materials 1975-1984 approval granted by the American Food and Drugs Administration (FDA) for the production of antibiotics. Operations commence at the Dawa pharmaceuticals factory in Kenya 1985-1994 construction of the Novoterm insulation materials factory. expansion of the marketing network abroad — establishment of companies and representative offices. Co-operation with leading pharmaceutical companies in the world 1995-1999 ranking among the top pharmaceutical companies in central and eastern Europe, and penetration into the west European markets. 2001 - Opening of the production and distribution centre in Warsaw. 2002 - construction of the modern pharmaceutical plant (Notol) for producing drugs in solid dosage form, in Novo Mesto, Slovenia. Competitive Fact Sheet Hemofarm Krka Hemofarm is committed to improving health and Living the healthy life. Our basic task is to enable the quality of life. High-quality product range, rounded-out drug pallet, respect among customers and suppliers in the country and abroad are ongoing objectives and preconditions for further developmental expansion of the Hemofarm Group. The Group is therefore entering the 21st century with ambitions to further specialize in its activities, to extend the presence abroad and develop into a multinational company. (1) people to lead a healthy, good quality life. We are continually consolidating our position as one of the leading pharmaceutical companies on the markets of central and eastern Europe, and are also expanding to the markets of the European Union. We intend to realize our vision as a renowned and penetrating generic pharmaceutical company which will most rapidly develop its range of top quality, readily available pharmaceutical products, while enabling a broad spectrum of people worldwide to regain and maintain their health. (2) Strategy The strategy of the Group is directed towards a powerful penetration to foreign markets. Apart from classical export, Hemofarm realizes different types of co-operation and invests in establishing local productions in other countries. Constant development and sale growth of generic product under our brand name. Maintaining close constant with the costumer. Investing in development and marketing and economizing the business process. Activities Hemofarm core activity is drug production on Continued focus on the development and sales of 90,000 m2 of manufacturing area as well as trade Krka’s generic pharmaceutical products of products. Extension of the production-distribution network abroad especially Russian Federation. Mission/ Vision 15 Hemofarm & Krka 16 HEMOFARM KRKA 2002 Sales (mil) E 135,8 E 370, 9 1-Year Sales Growth 10.30% 11 % Domestic Sales (%) 73.80 23% Foreign Sales (%) 26.20 77% 2002 Employees 2800 4332 1-Year Employee Growth 15 % 7% University degree 20 % 26.60% Marketing 115.6 % 10.55 % R&D - 89.33% 7.9 % Drug registration 111.44% 5.6 % PRODUCTION IN THE COUNTRY Five plants in Vršac Srpska Crnja Bački Petrovac Plants in Sabac “Zorkapharma” Hemofarm group Plants in Podgorica “Hemomont” Totally 11 plants in country 17 Dubovac Jasenovo Domestic market sales SANITARIJA REMEVITA SLAVIJAMED FAMPHARM 0.11% 0.53% 0.15% 0.15% JUGOREMEDIJASRBOLEK GALENIKA 1.35% 8.17% 32.95% ZDRAVLJE 12.70% ZORKA PHARMA 11.28% HEMOMONT 1.19% HEMOFARM 14.26% PANFARMA 17.15% HEMOFARM GROUP - 43.89 % = 99.6 mil E 18 Krka domestic market sales Slovenia is currently reforming it pricing policy into a formal reference pricing system, weighted towards imported “cheaper” generic. DOMESTIC MARKET TOTALY 250.MIL.$ A new plant NOVOTOL 22000.00m2 EXPORT 52% (USA, Germany, Croatia…) KRKA Novo Mesto Slovenia KRKA ( 60mil.$) 22% LEK 22% KRKA 19 LEK EXPORT Krka presence in abroad KRKA- KOZMETIKA DOOEL Macedonia OOO KRKA- RUS Russian Federation KRKA- FARMA DOOEL Macedonia OOO KRKA FARMA Ruian Federation KRKA Ch Cesh Republic KRKA PHARMA Dublin Ireland KRKA PHARMA Dublin Ireland KRKA Magyarorzag Kft. Hungary 20 KRKA FARMA Croatia KRKA Novo Mesto Slovenia KRKA Polska Poland KRKA Aussenhandels GmbH Germany HELVETIUS S.R.L Italy KRKA Serbia and Montenegro Export structure according to markets Sales Market West Europe and rest of the world 12% Central Europe 20 % Slovenia 20% 21 East Europe 28 % South- East Europe 20 % Hemofarm presence in abroad HEMOFARM S.R.L. ITALIA HEMOFARM Banja Luka REPUBLIC OF SRPSKA, BiH HEMOFARM IRAC HEMOFARM ARABIA DIPAPHARM CONSTANTINE, Algeria Damascus HEMOFARM KOMERC MACEDONIA HEMOPHARM GmbH GERMANY Serbia and HEMOFARM SWITZERLAND Montenegro Hemopharm USA Pennsylvania Avenue 22 HEMOFARM BUCURESTI, ROMANIA S.C. HEMOFARM S.R.L. TIMISOARA, ROMANIA HEMOFARM PEKING, CHINA JINAN-HEMOFARM Pharmaceutical Co. Ltd. , China HEMOFARM KISHINEV, MOLDAVIA HEMOFARM MOSKVA, RUSSIA HEMOFARM PRAG 4, CECH REPUBLC HEMOPHARM ImportExport GmbH Podružnica Ljubljana LJUBLJANA, SLOVENIA Export structure according to markets Nigeria Czech Rep. Hum. org. Morocco 0.41% 0.17% 0.01% 0.45% Syria China The Rep. of Srpska 0.46% Germany Tunisia 0.44% 15.09% 0.05% Algeria 0.48% 5.05% Italy 1.48% Russia 51.95% Slovenia 4.08% Romania 6.29% Ukraine 1.36% Kosovo 1.69% 23 Macedonia 10.53% Sector Trend: Diversification Hemofarm Krka 1. Global sales 2. Consolidation 3. On – line pharmacy 4. Wholesale 5. Expansion abroad “Krka”-Is in a better position in EU market, because Slovenia has become a member of EU in 05/2004. “Hemofarm”-Is in a better position in Russian market, because Serbia has special trade agreement with Russian Federation. 24 Technology Based Intelligence Hemofarm 25 Sales Information System Radio-TV Krka Sales Information System SWOT Analysis Hemofarm Home market strong position Last 3 year strong penetration as domestic manufacturer on foreign markets. Diversification of product KRKA Focus on generic International experience Brand name at former YU countries Hemofarm KRKA International presence and profits Low penetration in EU, NA Lack of international experience Not global brand name Country in transition period Weak home market policy Not global brand name S W Strengths Weaknesses O New markets (EU, North America, China, Asia, Africa). Acquisition with global pharmaceutical leader E-commerce 26 Opportunities New markets (EU) Acquisition with global pharmaceutical leader E-commerce T Threats Internationalization costs Not present in large communities Special Trade agreement with Russian Federation is going to expire in 2005 . Getting stronger competition at home market. Becoming a member of EU is going to lose free trade rights at former ex-Yu markets. Future Market Focus Hemofarm Krka Russia China Ukraine Algeria Syria Countries EU North America Serbia Slovenia Bosnia and Herzegovina They are interested in almost same markets. 27 Future Krka as generic company is preparing for the expansion to EU markets. But, before placing own product on the EU market it must have a marketing authorization. Slovenia must complete harmonization of regulatory practices relating to product approval, complicated pricing, reimbursement policy. During the transition time national legislation will be valid in Slovenia but not in the rest of EU. To insure own competitive advantages in order to capitalize fully revenue opportunities Krka has to re-position strategies. On the EU market will be already Estonia and Lithuania and rest of the new 10 CEE countries which pharmaceutical manufactures are producing generics too. But, it shouldn’t forget ex-Yu market where it has strong brand name. 28 Hemofarm is preparing for FDA P WHO will be able to swim with sharks? certificate after which is getting chance to penetrate to the North America pharmaceutical markets. How successful it is going to be? It depends on a marketing policy. •It has to increase own competitive advantage to be prepared for strong, efficient marketing sharks. •Developed countries markets have increased on-line costumerson-line sale should be established •But it shouldn’t forget to build stronger position at ex-Yu markets. Special Trade agreement with Russian federation is expiring very soon (2005). - What will happen with Hemofarm’s biggest export market? Sources www.Hemofarm.co.yu 2) www.Krka.si 3) www.imhealth.com 4) www.resaerchandmarket.com 5) www.buisnis.doc.gov 6) www.dcc2.bumc.bu.edu 7) www.ims-global.com 8) www.aesgp.be 9.) www.pharmatiech.com 10.) www.m-t.pl 29 1)