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)