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Corporate IntelligenceUnited Business InstituteSerbia, Novi Sad April. 2004 Snežana KikićVesna Gavran
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Trends in Pharmaceuticals Trends in Pharmaceuticals industry for next 5 yearsindustry for next 5 years
Globalization1. Global sales2. Consolidation Diversification1. Demographic
group-”Silent population”
2. On-line pharmacy3. Generic Fast pharma
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GLOBALIZATIONGLOBALIZATION 11..Pharma Pharma Global SalesGlobal Sales
Rank
Audited World Therapy Class
2003Sales($bn)
% Global sales
($)
% Growth
(constant $)
1 Cholest.&TriglyceriReducers
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 CalciumAntagonists, 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 & Combinations
8.3 2 3
Total Leading 10 $142.0bn 30% +11%
World AuditedMarket
2003 Sales($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
TOTAL $466.3bn 100% +9%
Source: IMS World Review
2004 52.4
37.317
.4
229.
5
14.3
115.
4
North America European UnionRest of Europe Japan
Asia, Africa and Australia Latin America
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GLOBALIZATIONGLOBALIZATION
05
101520253035
X 1000 000 000 $
1.Pfiz
er
3.M
erck
5.J&
J
7.Bris
tol-M
yers
Squ
ibb
9.Pha
rmac
ia
11.L
illy
13.R
oche
15.T
aked
a
17.B
oehr
inger
-Inge
lheim
19.S
cher
ing A
G
R&D Expenditures Sales
TOP 20 WORLD PHARMACEUTICAL COMPANIESTOP 20 WORLD PHARMACEUTICAL COMPANIES
Top 20 Deliver 81%
of Total Sales
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GLOBALIZATIONGLOBALIZATION 2. 2. ConsolidationConsolidation
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
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GLOBALIZATIONGLOBALIZATION 2. 2. ConsolidationConsolidation
The consolidation and internationalisation of the pharmacy company can be expected to continue.
Gen-specialized Companies
Market Opportunities
5 – Global players
biotechnology Company
100 regionalPh Companies
15-20 Global players
2004 2009
Consolidation activities: acquisitionsin-licensing co-development co-marketingdistribution network
Cooperation between the large pharmaceutical companies and small biotechnology companies.
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DiversificationDiversification
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.
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DiversificationDiversification
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 .
The growth of of the Online Drugs Market
0
1000
2000
3000
4000
5000
6000
1999 2000 2004
Year
Mill
ion
$
Online prescriptiondrugs market
Online OTC drugsmarket
The traditional pharmacy business model may no longer work
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DiversificationDiversification
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.
DevelopmentRisk
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.
DevelopmentTime
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.
DevelopmentCost
The average cost to develop a new medicine is $1.3 billion.
The average cost to develop a generic copy is $1 million.
$100 billion worth of brand name prescription drugs will lose patent protection by 2005.
Cheaper good copies.
3. Generics3. Generics
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Faster PharmaFaster Pharma
Faster developing1. biotechnology2. genome pharma3. 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
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EUROPEEUROPE
SERBIA & MONTENEGROSLOVENIA
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GLOBALIZATIONGLOBALIZATION Pharma Sales in EuropePharma Sales in Europe
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.
Sales Еuro (millions)
5127
5296 84
4,3613
071920 19
5530
942
3733
6
017
000
2408
8
5022
1511
41100
646,
88390063
136
21465
729
584174
2195
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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) Slovenia (SIT)
Spain Sweden (SEK) Switzerland (CHF) United Kingdom (GBP)
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Slovenia, Data Profile Serbia and Montenegro , Data Profile
1997 2000 2001 1997 2000 2001
People People
Population, total 2.0 mill 2.0 mill 2.0 mill Population, total 10.6 mill 10.6 mill10.6
msERBIA ill
Population growth (annual %) -0.3 0.1 0.1
Population growth (annual %) 0.3 0.1 0.1
Environment Environment
Surface area (sq. km) 20,250. 20,250. 20,250. Surface area (sq. km) .. 102.0
thousand 102.0
thousand
Forest area (sq. km) .. 11,070. .. Forest area (sq. km) .. 28,870.0 ..
Economy Economy
GDP (current $) 18.2
billion 18.1
billion 18.8
billion GDP (current $) 16.3 billion 8.4 billion 10.9 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 ..
Source: World Development Indicators database, April 2002 Source: World Development Indicators database, April 2002
Both countries have population 65 years and over 15 %
Country indicator Slovenia
Serbia & Montenegro
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History
Krka1954- 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.
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
At the beginning they were domestic competitors
Former Yugoslavia
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Competitive Fact SheetCompetitive Fact Sheet
Hemofarm Krka
Mission/Vision
Hemofarm is committed to improving health and 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)
Living the healthy life. Our basic task is to enable 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 90,000 m2 of manufacturing area as well as trade of products.
Continued focus on the development and sales of Krka’s generic pharmaceutical productsExtension of the production-distribution network abroad especially Russian Federation.
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HemofarmHemofarm && KrkaKrkaHEMOFARM 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 %
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PRODUCTION IN THE COUNTRY
Totally 11 plants in country
Plants in Podgorica
“Hemomont”
Bački Petrovac
Dubovac
Jasenovo
Srpska Crnja
Plants in Sabac “Zorkapharma”
Five plants in Vršac
Hemofarm group
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Domestic market sales
HEMOFARM GROUP - 43.89 % = 99.6 mil E
JUGOREMEDIJA8.17%
ZDRAVLJE
12.70%
SRBOLEK 1.35%
SLAVIJAMED0.53% FAMPHARM
0.15%
SANITARIJA0.11% REMEVITA
0.15%
HEMOMONT1.19% HEMOFARM
14.26%PANFARMA
17.15%
GALENIKA32.95%
ZORKA PHARMA11.28%
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Krka domestic market salesKrka domestic market sales
KRKA Novo Mesto Slovenia
A new plantNOVOTOL
22000.00m2
DOMESTIC MARKET TOTALY 250.MIL.$
KRKA ( 60mil.$)22%
EXPORT 52% (USA, Germany,
Croatia…)
LEK22%
KRKA LEK EXPORT
Slovenia is currently reforming it pricing policy into a formal reference pricing system, weighted towards imported “cheaper” generic.
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Krka presence in abroadpresence in abroad
KRKA Novo Mesto Slovenia
KRKA FARMA Croatia
KRKA Polska Poland
KRKA- KOZMETIKA DOOEL Macedonia
KRKA- FARMA DOOEL
Macedonia
KRKA Aussenhandels GmbH Germany
OOO KRKA- RUSRussian
FederationOOO KRKA FARMA
Ruian Federation KRKA Ch
Cesh Republic
KRKA PHARMA Dublin Ireland
KRKA PHARMA Dublin Ireland
KRKA Magyarorzag Kft.
Hungary
HELVETIUS S.R.L Italy
KRKA Serbia and
Montenegro
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Export structure according to markets
Sales Market
East Europe 28 %
South- East Europe 20 %
Slovenia 20%
Central Europe 20 %
West Europe and rest of the world 12%
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Hemofarm presence in Hemofarm presence in abroadabroad
HEMOFARM ARABIA
Damascus
HEMOPHARM GmbHGERMANY
Hemopharm USA Pennsylvania Avenue
HEMOFARM KOMERCMACEDONIA
HEMOFARM BUCURESTI, ROMANIA
S.C. HEMOFARM S.R.L. TIMISOARA, ROMANIA
HEMOPHARM Import-Export GmbH Podružnica Ljubljana LJUBLJANA, SLOVENIA
HEMOFARMPEKING, CHINA
JINAN-HEMOFARM Pharmaceutical Co. Ltd., China
HEMOFARM Banja LukaREPUBLIC OF SRPSKA, BiH
HEMOFARMMOSKVA, RUSSIA
HEMOFARMPRAG 4, CECH REPUBLC
HEMOFARM IRAC
HEMOFARM S.R.L. ITALIA
DIPAPHARM CONSTANTINE, Algeria
HEMOFARM KISHINEV, MOLDAVIA
HEMOFARMSWITZERLAND
Serbia and Montenegro
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Export structure according to markets
The Rep. of Srpska15.09%
Russia51.95%
Macedonia10.53%
Germany0.05%
Morocco0.45%
China0.44%
Czech Rep.0.17%
Syria0.46%
Tunisia0.48%
Nigeria0.41% Hum. org.
0.01%
Algeria5.05%
Italy1.48%
Slovenia4.08%
Kosovo1.69%
Romania6.29%
Ukraine1.36%
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Hemofarm Krka1. Global sales đ đ đ
2. Consolidation đ đ đ đ
3. On – line pharmacy đ đ đ
4. Wholesale đ đ đ đ đ đ đ
5. Expansion abroad đ đ đ đ đ đ đ
Sector Trend: Sector Trend: DiversificationDiversification
“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.
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Technology Based Technology Based IntelligenceIntelligence
Hemofarm Sales Information
System Radio-TV
Krka Sales Information
System
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SWOT AnalysisSWOT AnalysisHemofarm
KRKA Hemofarm KRKA
Home market strong positionLast 3 year strong penetration as domestic manufacturer on foreign markets.Diversification of product
Focus on genericInternational experienceBrand name at former YU countries
International presence and profitsLow penetration in EU, NALack of international experienceNot global brand nameCountry in transition period
Weak home market policyNot global brand name
New markets (EU, North America, China, Asia, Africa). Acquisition with global pharmaceutical leaderE-commerce
New markets (EU)Acquisition with global pharmaceutical leaderE-commerce
Internationalization costsNot present in large communitiesSpecial 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.
S Strengths
W Weaknesses
O Opportunities
T Threats
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Future Market FocusFuture Market FocusCountries Hemofarm Krka
EU đ đ đ đ
Russia đ đ đ đ đ
China đ đ đ
North America đ đ đ
Ukraine đ đ đ
Algeria đ đ
Syria đ đ
Serbia đ đ đ đ đ
Slovenia đ đ đ đBosnia and Herzegovina đ đ đ đ đ đ
They are interested in almost same markets.
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FutureFuture
WHO will be able to swim with sharks?
Hemofarm is preparing for FDA 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 costumers-on-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?
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 alreadyEstonia 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.
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SourcesSources
1) 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