Bristol-Myers Squibb France 53 years down the roadPresented by:Lena Denstad, Clarence Lim & Kerry Lau

Research Objectives

• Why did Bristol-Myers Squibb come to France?• What was Bristol-Myers Squibb’s entry strategy?• What are the key benefits or

constraints in operating in France?• What are the key lessons

for other companies coming to France?

Agenda

• BMS – Worldwide• Why France?• Entry Strategy• BMS – France• Key Benefits & Constraints• Case Study• Key Takeaways• Looking Ahead

Bristol-Myers Squibb Company WORLDWIDE

• Headquarters: New York City• Key business: Biopharmaceuticals• Total Sales: US$20.6 billion

– Pharmaceuticals: 86%– Nutritionals : 14%

• R&D Investment: US$3.59 billion• Employees: 30,000• Subsidiaries: 50• Ranked one of the top 10 pharmaceutical

companies in the world.

… to become more agile, entrepreneurial and accountable to achieve our goals.

Source: BMY 2008 Annual Report: Chairman and CEO Message

Product Lines

• Cardiovascular and Metabolic• Pain• Oncology• Central Nervous System• Virology and Pathology• Immunology

$6,228

$5,603

$2,882

$1,149 $1,290

$1,292

$2,153

Who are the customers?

Decision Influencers

Doctors

Patients

Insurance Companies

Politicians & Regulators

Key Opinion Leaders

Entry Strategy into France

• Why France?– US, France and Japan key pharmaceutical markets to be present in.– Medical care = Top notch

• Facilitates the ability to conduct clinical trials

• Entry Strategy:

1935: Dr. Camille Bru founded l’UPSA (Union de Pharmacologie Scientifique Appliquée)

1956: Squibb establishes its production in France.

1960: Acquired 2 small French Pharmaceutical companies – for distribution channels.

1989: Bristol-Myers mergers with Squibb to form – Bristol-Myers Squibb.

1993: Creation of l’Institut UPSA de la Douleur.

1994: UPSA becomes a 100% subsidiary of Bristol-Myers Squibb.

Bristol-Myers Squibb Company FRANCE

• Headquarters: Rueil-Malmaison• Total Sales: 10% of global sales

– Pharmaceuticals: €1 billion– Nutritionals : €22 million

• Distribution Facilities: – Fontenay

• Production Facilities:– Agen– Epernon– Meymac

• Employees: 3,100 Agen

Epernon

Meymac

Rueil-Malmaison

Integration of Corporate Values to BMS France

• Le Petit Village Gaulois – Small village resistance to every change (especially from the U.S.)

• BMS corporate values– Patients are the heart of BMS– Honor, integrity, respect, excellence, diversity– Not hard to integrate to French culture

• Responsabilite Social de l’enterprise (BMS Foundation)– Global initiative, BMS France employees are involved– TULIP-NGO (France NGO linked with US NGO)– Involvement brings across corporate values to French employees

Our mission is to extend and enhance human life by providing the highest-quality pharmaceuticals and health care products.

Source:

http://www.geert-hofstede.com/hofstede_france.shtml

France: Key Benefits & Key Constraints

• Market• Political, Legal & Regulatory• Economic• Infrastructure

The French as a Consumer of Medical Goods

• Comprehensive healthcare systems• Loyal to brands

– Price is not a primary factor of consideration– Share of generic drugs in 2007: 9.5%

• Believe that everything can be treated with pills and cough mixtures.

• French customers are not so different from others especially with specialist products.

France: Country of hypochondriacsSource: Euromonitor

Market Political, Legal & Regulatory Economic Infrastructure

France: Key Benefits & Key Constraints

Market Political, Legal & Regulatory Economic Infrastructure

Key Benefits:• 4th highest per capita consumptions of medicines in the world ($398). • 3rd largest market in the world for pharmaceutical products (next to US and Japan). • The biggest market in Europe for pharmaceutical products.• “Critical mass”: 63 million consumers as of 2008.

Key Constraints:• Threat of generic drugs.• Increasing complexity of the distribution

channels .• Increased regulation on the roles of the decision

influencers.

French Healthcare System

• Biggest public spending on healthcare in Europe: 11% of GNP• French – all insured under “General Regime”

– Couverture Maladie Universelle (CMU) system • Poorest (1.1 million; 7.1% of population)

– Private Insurance• 87% of population

• Result: Debt of €5.5 billion in early 2000s• Social Security Reform in 2004,

putting procedures and conditions in place– Limited consultations/year– 1 doctor/patient– Prescription guidelines given to physicians

• Do not have freedom to prescribe what they want– Patients and payers have also become

decision influencers

Source: © 2009 AFP (Mychèle Daniau)Une feuille de soins de la Sécurité sociale

Market Political, Legal & Regulatory Economic Infrastructure

France: Key Benefits & Key Constraints

Market Political, Legal & Regulatory Economic Infrastructure

Key Benefits:• President Sarkozy publicly announced in Nov 2009 that the pharmaceutical industry is the

way to build strong economy.• Reforms introduced include: 30% credit tax for R&D in France.• 60% credit tax if partner with public research organisations Contract Research Outsourcing (CRO).

Key Constraints:• Complex labor laws.• Specific measures favoring generic drugs.• Difficult to predict new “temporary” taxes. Makes it difficult to plan ahead.• High social security costs.• “Taxe Professionnelle” : Tax on the amount of fixed assets. Maybe removed next year.

R&D ProcessPatent

ApplicationPre-Clinical

Development Clinical Trials Registration: New Drug Application

Source: http://www.ispor.org/htaroadmaps/france.asp#1 & LEEM (the pharmaceutical industry association)

10 years of R&D 2 - 3 years of Administrative Procedures

Marketing Authorization

(EMEA or AFSSAPS)

AFSSAPS: l'Agence française de sécurité sanitaire des produits de santé

SMR & ASMR assessment

Registration on the Refundable List

(Ministerial Decision)

Reimbursement Rate

(UNCAM Decision)

Price(Negotiation with

the CEPS)

Publication on the Official Gazette

BMS France’s MAIN role

Key Benefit(s):• Good caliber of doctors and hospitals to conduct

clinical trials.• Once approved by Transparency and Pricing

committee Good for 5 years• U.S. have to renegotiate every year.

Key Constraint(s):• Approval process for pricing = 240 days

(vs. 180 days on average for Europe)• Level of sales controlled by parliament based on

budget. If exceed budget, pharmaceutical industry need to reimburse government 70% of exceeding sales. Rebate used as extra income for social health care budget.

Market Political, Legal & Regulatory Economic Infrastructure

France: Key Benefits & Key Constraints

Market Political, Legal & Regulatory Economic Infrastructure

Key Benefits:• Connections with EU countries - Italy, Spain, UK, Belgium and Germany.• Helps BMS to be strong in other markets like Africa.

Key Constraints:• As a result of the financial crisis → Cut in costs. • Make savings on drugs. • France’s 2008 budget limits the growth rate for pharmaceutical

costs to just 1.4%.

France: Key Benefits & Key Constraints

Market Political, Legal & Regulatory Economic Infrastructure

Key Benefits:• Very good infrastructure. • High standard of hospitals and doctors → France # 2 in terms of clinical trials (after the US) • 2,200 per year, 23% in cancer

• Highly recognised competency, high ethical standards → High quality products.• Special to France -> pain business.• Educated labour force. (Grandes Écoles)

Key Constraints:• Quality of Universities: Not comparing well

with the rest of the world.• Late in biotechnology.

Case Study

Management of the disengagement of two production facilities in France.

BMS World’s Future OutlookGlobal Pharmaceutical Industry• Growth slowing down

– 2009-2013: CAGR 3-6% vs. 1999-2007: 9.8% • Need to develop more innovative products

– Overcapacity – 17% of pharmaceutical production are to lose patents from 2009-2012– Drugs for common ailments already developed

BMS Worldwide• Big move from OTC to BioPharma

– 6 specialized departments– Launches of promising drugs set in 2010/2011

offset loss after Plavix and Avapro patent expirations (2011/2012)

• From big to medium-sized company– Announced additional 10% workforce cut on December 2008 – 50% of worldwide manufacturing shut down– Will bring about estimated $2.5 billion cost savings each year

Case: Disengagement of Production Facilities

• Production cut by half• Production volume moved to Agen; balance to be

outsourced to Italy plant.• 380 to be laid off, offered many internal transfer

possibilities with Agen plant. – 100 employees accepted transfer package.

• Search for company to take over sites and employees– Did not find for Epernon, continuing discussions for

Meymac• Collaboration with local and political authorities

Epernon to be closed end of 2009 &Meymac mid-2010

Epernon

Meymac

Process Undertaken for Disengagement

•2 documents required - Economic justification & Social measure that will support employees

•“Work counsel” – communication before decision

•Announced layoff on September 2008

•Build up inventory to buffer against potential strikes•F

ebruary 2009: Around 150 out of 250 went on strike for Epernon and 100 out of 180 for Meymac

•Finished consultation mid-March 2009 (around 6 months from layoff announcement)

•Restructuring currently for field force

• Perception or Reality?– US: You can replace striking workers – France: You cannot operations

stop.

• Big strikes mainly in public companies• Only 10% of French workers are

unionized• Culture of labor relations

– Need for openness and transparency– Agreement need not be reached– Announcement can be for

information purpose• Plant closing process - same timeline

length all over Europe

Source: http://en.wikipedia.org/wiki/Trade_union

Strikes everywhere!Mr. Jean-Luc Fleurial, VP of Human Resources (BMS, France), on Labor in France

BMS Future Operational CoverageFRANCE

Agen

Epernon

Meymac

Rueil-Malmaison

Essential AdviceUnderstand taxation and legalities before dealing with the government and administrative processes. Get good tax and legal advisers!

There are different governments to deal with in different regions in France…All regions compete to attract new companies - Find out each region’s benefits and regulations.

Understand the health system and how pricing is defined.

Enter the country through alliances or make acquisitions to understand the market well, difficult to do green-field.

Make sure the criteria you use are in line with those of Transparency Committee.

Have continuous discussions with the government on unmet needs.

Be transparent with your employees and the government.

In a Nutshell

• The biggest advantage of France is the size and sophistication of its market.

• Costs maybe relatively higher– BUT when quality is considered,

France is still cost-competitive.

• Despite complexities in the business environment, doing business in France is not as difficult as it seems.

Understanding is key!

Looking ahead… Dr. Marion Bamberger, Executive Director for Institutional Affairs, on BMS France’s Future

• What kind of new prices is BMS going to have?• How will it maintain its evaluation with the Transparency

Committee?• Is scientific evaluation going to be moved to the EU body?

In 10 years time, will this be decided on the EU level?

Acknowledgment & References

Secondary Research• Global Investment Opportunities Special Report: Pharmaceutical Industry, Lombard Street Research, 2009• Global Pharmaceuticals Industry Profile, Datamonitor, November 2008• Pharmaceuticals in France Industry Profile, Datamonitor, November 2008• Consumer Lifestyles – France, Euromonitor International, November 2008• The Pharmaceutical Industry in Figures, EFPIA (The European Federation of Pharmaceutical Industries and Associations), 2009• Bristol-Myers Squibb Co. in OTC Healthcare, Euromonitor International, May 2009• http://www.apmhealtheurope.com/story.php?numero=L14225• http://www.internationaltaxreview.com/?Page=10&PUBID=35&ISS=24523&SID=701387&TYPE=20 • http://www.pharmafocus.com/cda/focusH/1,2109,21-0-0-NOV_2009-focus_news_detail-0-493403,00.html• Wikinvest - BMY

We would like to acknowledge and thank:

• Dr. Benoit Gallet, VP Corporate and Business Communications• Mr. Jean-Luc Fleurial, VP Human Resources• Mr. Emmanuel Blin, VP Commercial Operations• Mr. Bruno Lauras, VP Finance and Administration• Dr. Marion Bamberger, Executive Director for Institutional Affairs• Mr. Jehan-Yves Drouin, VP Market Access

For their time and help in this research project.

Thank you for your attention.

Questions?