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TABLET FILM COATINGS MARKETGLOBAL FORECASTS 2019 - 2021

A Strategic Analysis of the Global Tablet Film CoatingsMarket with a special focus on Market Size, GrowthForecasts, Competitive Structure, plus a Resource and

Strategic Analysis of Selected Companies

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Tablet Film Coatings Market: Global Forecasts 2019- 2021

MARKET INTELDELIVERED

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ISBN: 978 1 78926 976 5

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ABOUT SCIENOPSIS I

TABLE OF CONTENTS II

LIST OF EXHIBITS IV

ACRONYMS AND ABBREVIATIONS VI

CHAPTER 1: INTRODUCTION 1

1.1 OBJECTIVES OF THE REPORT 1

1.2 MARKETS COVERED 2

1.3 REPORT STAKEHOLDERS 2

1.4 DATA COLLECTION METHODOLOGY 3

1.4.1 Primary Research 3

1.4.2 Secondary Research 4

1.4.3 Modelling 4

1.4.4 Market Triangulation 5

1.4.5 Market Share Estimation 5

CHAPTER 2: STRATEGIC ANALYSIS 6

2.1 INTRODUCTION 6

2.2 FUNCTIONS AND TYPES OF TABLET FILM COATINGS 6

2.3 VALUE CHAIN ANALYSIS 9

2.4 MARKET SEGMENTATION 10

2.5 MARKET DYNAMICS 11

2.6 PEST ANALYSIS 12

2.7 FIVE FORCES MODEL ANALYSIS 13

2.8 ANALYSIS OF MARKET SHARE GROWTH STRATEGIC OPTIONS 17

2.9 ANALYSIS OF SECTOR’S MAIN SOURCES OF COMPETITIVE ADVANTAGE 19

2.9.1 Differentiation 20

2.10 STUDY FINDINGS ON KEY MARKET NEEDS 21

2.11 STRATEGIC POSITIONING ANALYSIS AND RECOMMENDATIONS 22

TABLE OF CONTENTS


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CHAPTER 3: MARKET SIZE AND OUTLOOK 23

INTRODUCTION 23

GLOBAL MARKET OVERVIEW 23

REGIONAL ANALYSIS 25

Market Share by Application 27

Market Share by Region 28

TABLET FILM COATINGS MARKET BY APPLICATION 29

NON-FUNCTIONAL NON-MODIFYING TABLET COATINGS 29

FUNCTIONAL, NON-MODIFYING TABLET COATINGS 30

FUNCTIONAL MODIFYING TABLET COATINGS 31

TABLET FILM COATINGS MARKET BY GEOGRAPHY 32

NORTH AMERICA (INCLUDES U.S.A, CANADA & MEXICO) 32

EUROPE, MIDDLE EAST & AFRICA (EMEA) 34

LATIN AMERICA (INCLUDING THE CARIBBEAN (LAC) 36

ASIA PACIFIC (CHINA, INDIA, JAPAN, AUSTRALIA & REST OF ASIA PACIFIC) 37

CHAPTER 4: COMPANY PROFILES 40

INTRODUCTION 40

ASHLAND INC. 41

BASF SE 45

BIOGRUND GmbH 49

COLORCON INC. 53

COREL PHARMA CHEM PVT. LTD 57

EASTMAN CHEMICAL COMPANY 61

EVONIK INDUSTRIES AG 65

FMC BIOPOLYMER INC 69

IDEAL CURES PVT. LTD 73

KERRY GROUP (SHEFFIELD BIO-SCIENCES) 77

ROQUETTE FRERES 81

SENSIENT TECHNOLOGIES 85

SEPPIC 89

WINCOAT COLOURS AND COATINGS PVT. LTD 93

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LIST OF EXHIBITS


Exhibit 1: Data Collection Process Flow Diagram 3

Exhibit 2: Tablet Film Coatings Product Categories 7

Exhibit 3: Tablet Film Coatings Market Value Chain 8

Exhibit 4: Tablet Film Coatings Market Segmentation 9

Exhibit 5: Tablet Film Coatings Market Drivers and Restraints, Opportunities and Trends 10

Exhibit 6: Tablet Film Coatings Market PEST Analysis 11

Exhibit 7: Tablet Film Coatings Market Five Forces Model Analysis 14

Exhibit 8: Tablet Film Coatings Market Product Penetration Rates 16

Exhibit 9: Tablet Film Coatings Market Share Growth Strategic Options 17

Exhibit 10: Tablet Film Coatings Market Needs, Firm Responses and Key Success Factors 21

Exhibit 11: Tablet Film Coatings Proposed Strategic Positioning Framework 22

Exhibit 12: Global Tablet Film Coatings Market Size and Growth (2019 - 2021) 24

Exhibit 13: Global Tablet Film Coatings Market Size by Product Category (2019) 24

Exhibit 14: Global Tablet Film Coatings Market Size by Product Category (2021) 25

Exhibit 15: Global Tablet Film Coatings Market Size by Product Geography (2019) 26

Exhibit 16: Global Tablet Film Coatings Market Size by Product Geography (2021) 26

Exhibit 17: Tablet Film Coatings Market Share by Product Category (2019 vs 2021) 27

Exhibit 18: Tablet Film Coatings Market Share by Geography (2019 vs 2021) 28

Exhibit 19: Non-Functional, Non-Modifying Tablet Film Coatings Market Size and Growth (2019-2021) 29

Exhibit 20: Functional, Non-Modifying Tablet Film Coatings Market Size and Growth (2019 - 2021) 30

Exhibit 21: Functional, Modifying Tablet Film Coatings Market Size and Growth (2019 - 2021) 31

Exhibit 22: North America Tablet Film Coatings Market Size and Growth (2019 - 2021) 32

Exhibit 23: North America Top Three Country Profiles (2019 vs 2021) 33

Exhibit 24: Europe Middle East and Africa Tablet Film Coatings Market Size and Growth (2019 - 2021) 34

Exhibit 25: Europe Middle East and Africa Top Five Country Profiles (2019 vs 2021) 35

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Exhibit 26: Asia Pacific (Including Australia) Tablet Film Coatings Market Size and Growth (2019 - 2021) 36

Exhibit 27: Asia Pacific (Including Australia) Top Five Country Profiles (2019 vs 2021) 37

Exhibit 28: Latin America (Including Caribbean) Tablet Film Coatings Market Size and Growth (2019 - 2021) 38

Exhibit 29: Latin America Top Five Country Profiles (2019 vs 2021) 39

Exhibit 30: Ashland Inc., Resources and Internal Capabilities Analysis 43

Exhibit 31: BASF SE Resources and Internal Capabilities Analysis 47

Exhibit 32: Biogrund GmbH Resources and Internal Capabilities Analysis 51

Exhibit 33: Colorcon Inc., Resources and Internal Capabilities Analysis 55

Exhibit 34: Corel Pharma Chem PVT. LTD Resources and Internal Capabilities Analysis 59

Exhibit 35: Eastman Chemical Company Resources and Internal Capabilities Analysis 63

Exhibit 36: Evonik AG Resources and Internal Capabilities Analysis 67

Exhibit 37: FMC Corporation Resources and Internal Capabilities Analysis 71

Exhibit 38: Ideal Cures PVT. LTD Resources and Internal Capabilities Analysis 75

Exhibit 39: Kerry Group (Sheffied Biosciences) Resources and Internal Capabilities Analysis 79

Exhibit 40: Roquette Freres Resources and Internal Capabilities Analysis 83

Exhibit 41: Sensient Technologies Resources and Internal Capabilities Analysis 87

Exhibit 42: Seppic Resources and Internal Capabilities Analysis 91

Exhibit 43: Wincoat Colours and Coatings PVT. LTD Resources and Internal Capabilities Analysis 95

ACRONYMS AND ABBREVIATIONS


AP ASIA PACIFIC

API ACTIVE PHARMACEUTICAL INGREDIENT

ASTM AMERICAN SOCIETY FOR TESTING AND MATERIALS

CAGR COMPOUND ANNUAL GROWTH RATE

EMEA EUROPE MIDDLE EAST AND AFRICA

FDA FOOD AND DRUG ADMINISTRATION

GDP GROSS DOMESTIC PRODUCT

GMP GOOD MANUFACTURING PRACTICES

IMF INTERNATIONAL MONETARY FUND

IP INTELLECTUAL PROPERTY

IPEC INTERNATIONAL PHARMACEUTICAL EXCIPIENTS COUNCIL

LA LATIN AMERICA

NA NORTH AMERICA

NCE NEW CHEMICAL ENTITY

No. NUMBER

PH. EUR EUROPEAN PHARMACOPOEIA

OECD ORGANIZATION FOR ECONOMIC COOPERATION & DEVELOPMENT

PEST POLITICAL ECONOMIC SOCIOLOGICAL TECHNOLOGICAL

QA/QC QUALITY ASSURANCE/QUALITY CONTROL

QbD QUALITY BY DESIGN

Ro REST OF

R&D RESEARCH AND DEVELOPMENT

SWOT STRENGTHS WEAKNESSES OPPORTUNITIES THREATS

UV ULTRA VIOLET

WHO WORLD HEALTH ORGANIZATION

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CHAPTER 1

INTRODUCTION

OBJECTIVES OF THIS REPORT1

The objectives of this report were:

● To define and measure the global pharmaceutical tablet film coatings market

● To analyze the market structure by identifying the various sub-segments

● To strategically analyze each sub-segment and players with respect to individual growth trends and

contribution to the overall market

● To identify the major market trends and the factors driving or inhibiting growth

● To analyze opportunities in the market for various stakeholders by identifying the high - and low - growth

segments

● To strategically profile the key players in the global tablet film coatings market and analyze their market share

and/or core competencies and/or sources of competitive advantage

● To track/analyze competitive developments such as joint ventures, alliances, mergers, acquisitions, new

product/technology developments, and research and developments within the global film coatings market

1 We adopt a general definition of pharmaceutical coatings as film coatings, herein defined as thin polymer membranes (approximately 50microns thickness), applied onto solid dosage forms to impart certain desired characteristics that are otherwise absent in the substrate.


This chapter sets the background to this research report by outlining the objectives, themarkets analysed/studied and its stake-holders. It also discusses the methods used by theteam to collect data, the sources, models and approaches for data interpretation.

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MARKETS COVERED REPORT STAKEHOLDERS

● Excipient Manufacturers● Chemical Ingredient Manufacturers● Distributors/Wholesalers of Excipients● Agents & Brokers● Excipients End-users (Pharma & Food)● Contract R&D Companies● Contract Manufacturing & Development

Companies● Consulting Firms● Investors into Life science Companies● Fund Managers● Investment Trusts● Investment Banks● Business Angels● Venture Capitalists● University Technology Transfer Offices● Public Sector Organizations & other

government Departments● Healthcare Charities● Any other individuals/organizations

interested in tablet film coatings

Tablet Film Coatings Market, byFunctionality

Tablet Film Coatings Market, by GeographyNorth America (NA)

-U.S.A-Canada-Mexico-Rest of NA

Europe, Middle East & Africa (EMEA)-Germany-France-U.K-Italy-Spain-Rest of EMEA

Asia-Pacific (AP)-Japan-India-China-Australia-Rest of AP

Latin America (LA)-Brazil-Argentina-Peru & Chile-Rest of LA

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For this report, we conducted in-depth interviewsand detailed discussions with a wide range of keyindustry participants and opinion leaders over a2-year period.

Primary research represented the bulk of theresearch effort, which was supplemented byextensive secondary research.

We reviewed product literature, annual reports,press releases and a variety of sources to build amore complete market understanding and aboveboard insights.

Secondary research also included a search ofrecent trade, technical writings, Internet sources,and statistical data from government websites,trade associations and agencies. Proprietarydatabases were also used for cross-reference.

This approach proved to be highly reliable, effectiveand successful for obtaining precise market data,capturing industry participants’ insights andopinions, and also for recognizing businessopportunities.

“We applied highly reliable methodologies to obtain precise market data, capture industryparticipants’ insights, and recognize emerging business opportunities” Michael Taylor

DATA COLLECTION METHODOLOGY

PRIMARY RESEARCH

Primary research involved e-mail, telephonic interviews and face-to-face interviews for each category,segment and sub-segment across geographies. We conducted primary interviews on an ongoing basis withindustry participants in order to validate data and analysis.

Research interviews fulfilled the following functions:

● Provided first-hand information on the market size, market trends, growth trends, competitive landscape,future outlook etc.

● Helped to validate and strengthen secondary research findings● Further developed the Analysis Team’s expertise and market understanding

Participants who took part in such a process included, but were not limited to:● Industry participants: CEOs, VPs, marketing/product managers and national sales managers● Purchasing managers, technical personnel, distributors and resellers● End-users: Senior scientists, middle & senior project managers in large & small companies● Outside experts: Investment bankers, valuation experts, research analysts specializing in fine chemicals

market and academic practitioners● Key opinion leaders specializing in fine chemicals and the excipient sector


Def ine Goals

SpecsNeeded

?

Collect Data

Create CollectionPlans

Analy se Data

Def ine Specs

Yes

No

EXHIBIT 1Data Collection Process Flow Diagram

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The secondary research sources that were used included, but are not limited to:

● Company websites, annual reports, financial reports, broker reports, investor presentations and securitycommission submissions

● Industry trade journals, scientific journals and other technical literature● Internal and external proprietary databases● Patent and regulatory databases● National government documents, statistical databases and market reports● Specific news articles, press releases and web-casts

SECONDARY RESEARCH


MODELLING

Where no hard data were available, we used a proprietary modelling software package that aggregated multipleeconomic and health indices, which we used to obtain estimates and produce preliminary data sets.

A proprietary methodology was then used to develop these data further, which was cross-referenced withavailable hard data to produce final estimates.

Some of the in put variables for this exercise included:● Demographic data● Macro-economic indicators● Industry indicators: expenditure, technology stage & infrastructure, sector growth and facilities.

After the complete market engineering was done using calculations for market statistics, market size estimations,market forecasting, market crackdown, and data triangulation, primary research findings were used to completethe picture and to verify and validate critical numbers and figures.

Further qualitative and quantitative analysis were performed from all the numbers arrived at in the completemarket engineering process to list key information throughout the report.

MARKET SIZE ESTIMATION

Both, top-down and bottom-up approaches were used to estimate and validate the size of the global tablet filmcoatings market and to estimate the size of various other dependent sub-markets in the overall market.

The key players in the industry were identified through secondary research and their revenues determinedthrough primary and secondary research. Sources we used included annual and financial reports of top marketplayers and also extensive interviews for key opinions from leaders, such as CEOs, directors, and marketingexecutives of competitor firms and brokers/distributors.

Unless otherwise indicated, market shares and financial breakdowns were determined using primary andsecondary sources.

All the different variables deemed to influence the market were identified, reviewed in detail, verified throughprimary research, and analyzed to obtain the final data set. The market size and sub-segments were normalizedand the effect of economic cycles and others factors excluded from forecasts.

All the above data were subsequently consolidated and used for the study.

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● Proprietary software package

● Methods triangulation

● Sources triangulation

● Analyst triangulation

● Perspective triangulation

● Secondary data

● Product portfolio analysis

● Geo-economic performance

● Relevant sector indicators

● Validation using primary sources

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After obtaining the overall market size from the estimation process described above, the total marketwas accordingly divided into respective sub-segments. In order to complete the overall marketengineering process and arrive at the exact statistics for all the segments and sub-segments,proprietary data triangulation and market dissection procedures were employed.

MARKET TRIANGULATION

Market share was estimated through secondary data available through paid and unpaid databases andproprietary sources, and by analyzing product portfolios of major players and rating them on the basis of marketperformance.

Market share was calculated using a geo-economic mix of company revenue and sector performance indicators.Primary sources were then used to validate these estimates.

MARKET SHARE ESTIMATION

CHAPTER 2

STRATEGIC SECTOR ANALYSIS


INTRODUCTIONFilm coating of oral solid dosage forms is now an established practice within the pharmaceutical and dietarysupplements industries. Currently over 80% of all newly launched solid oral dosage forms are coated [Source:Bricklane Innovations Research].

FUNCTIONS AND CATEGORIES OF TABLET FILM COATINGS

The main reasons coatings are used include: to support branding; to modify drug release (controlled, sustainedor delayed); to enable product identification and reduce medication errors; to protect sensitive ingredientsagainst moisture, and to enhance patient appeal (e.g aid swallowing & patient compliance).

On the basis of function, film coatings can be classified into the following three categories:

(1). Non-Functional, non-Modifying coatings - which provide aesthetic appeal (colour and gloss), withoutimpacting drug release profile over the uncoated form. This product segment is of strategic importance inbranding and boosting consumer appeal.

(2). Functional, non-Modifying coatings - which provide advanced capabilities beyond the non-functional usesabove, such as moisture or oxygen barrier/protective capabilities or specific consumer benefits, such astaste-masking and ease of swallowing. However, these coatings do not impact upon the drug release profile.

(3). Functional, Modifying coatings, which result in a temporal or spatial change in the drug release therebyaltering the site of and/ or the rate at which the active drug substance is released into the blood plasma or simplyby prolonging its concentrations over a given period of time.

The dietary supplements/nutraceuticals sector focuses on cost, compatibility with food regulations and functionalitywhereas the pharmaceutical industry values technical performance and regulatory compliance, above all else.

Chapter 2 provides a sector-wide strategic analysis of the tablet film coatings market. Theanalysis uses a number of established business tools to describe market structure, the natureof competition and forces operating in the sector, and hence, its attractiveness.

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Cellulosics Opadry®, Opadry® IIAquarius Preferred

HypromelloseHydroxyethylcellulose

Vinyls Kollicoat® IROpadry 200

Polyvinyl alcoholPolyvinylpyrrolidone

Methacrylatecopolymers Eudragit® EAmino methacylate

copolymer

Miscellaneous Lycoat®Cozeen™ 303N

Modified starchZein

Product Class Product ExamplesPolymer Bases

Cellulosics Opadry TMSpectrablend™ MB


Vinyls Kollicoat® IR ProtectOpadry AMB II


Methacrylates Eudragit® EKollicoat® SmartSeal

Amino methacylatecopolymer

Miscellaneous ReadiLycoat® MSCozeen™ 303N

Modified starchZein


Non-functional, non-Modifying

● Also called Conventionalcoatings

● Typically fabricated from watersoluble polymers

● No impact on drug release

Functional, non-Modifying

● Typically protective systems● Typically fabricated from water

soluble polymers● Remain intact for short time

periods but generally limitedimpact on drug release

Functional, Modifying

● Alternative name - Functionalcoatings

● Mainly fabricated from waterinsoluble polymers

● Include Sustained, Controlledor Enteric systems

EXHIBIT 2Tablet Film Coatings Product Categories

Sources: Bricklane Innovations Research

Cellulosics Surelease®CA-398-10NF/EP

EthylcelluloseCellulose acetate

Vinyls Sureteric®Polyvinyl acetatephthalate

Methacrylates Eudragit® NE 40DEthylacylate –methylacrylate copolymer

Miscellaneous Cozeen™ 303NZein

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Cellulosics Opadry®, Opadry® IIAquarius Preferred


Vinyls Kollicoat® IROpadry 200


Methacrylatecopolymers Eudragit® EAmino methacylate

copolymer

Miscellaneous Lycoat®Cozeen™ 303N

Modified starchZein

Product Class Product ExamplesPolymer Bases

FILM COATINGS VALUE CHAIN ANALYSIS

The film coatings sector follows a conventional value chain that starts with basic chemicals as raw materials.These are then elaborated using physical or chemical processes into the final product.

The different participants in this value chain are:● Raw material manufacturers (polymers, pigments, plasticizers, surfactants, processing aids, glidants,

anti-tack agents, flavoronts, preservatives, surfactants, etc)● Raw material wholesalers/distributors/traders/brokers● Finished product distributors● End-users (pharmaceutical companies, nutraceutical companies, contract manufacturing organizations,

contract research organizations, etc).

RAW MATERIALS

The majority of tablet film coatings manufacturers source raw materials from producers of chemical substancesfor allied industries (food, cosmetics, industrial, etc). A few companies are primary producers of chemicals, suchas polymers (hypromellose, methacrylic acid copolymers or polyvinyl pyrollidone), which are manufactured inpharmaceutical grades. Some other firms also serve as distributors of other categories of excipients/finechemicals. No single is fully vertically integrated.

DISTRIBUTORS AND AGENTS

The sector mainly uses two channel strategies: direct sales to end users, and indirect sales throughdistributors/agents. Large customers typically prefer to deal directly with film coatings manufacturers, in effectside-stepping middlemen in the supply chain. In cases where volumes are small or where the product is highlyundifferentiated, even larger end users typically go through distributors/agents.

END-USERS/BUYERS

End users of film coatings include manufacturers of pharmaceutical and nutraceutical products, contract researchand manufacturing organizations, and academic institutions.

Pharmaceutical manufacturers are the largest consumers of pharmaceutical film coatings, followed bynutraceutical manufacturers while contract manufacturing and contract research organizations and academicinstitutions are the smallest.

Large users typically have a list of preferred suppliers contracted to supply according to existing specification.Contract manufacturers are also used by large and small manufacturers to undertake all or a portion of theirmanufacturing to meet specific targets/business objectives.

EXHIBIT 3Tablet Film Coatings Market Value Chain


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MARKET SEGMENTATION

For the purpose of this research report, the global film coatings market is segmented on the basis of threecategories: By chemistry of the base polymer, by application, and, by geography.

On the basis of the chemistry or base polymer, this segment can be further subdivided into four categories, namely:● Cellulose derivative or cellulosics● Vinyl derivatives or vinyls● Methacrylic acid copolymers or methacrylics, and● Others/miscellaneous.

On the basis of application, into three categories, namely,● Non-functional, non-Modifying,● Functional, non-Modifying, and,● Functional, Modifying.

On the basis of geography, into four regions, namely,● North America,● Europe, Middle East and Africa,● Asia Pacific (Including Australia & New Zealand), and,● Latin America (including the Caribbean).


EXHIBIT 4Tablet Film Coatings Market Segmentation


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Growth of the global film coatings sector is driven by developments in the wider pharmaceutical industry. Thesector has undergone a period of sustained expansion over the last decade, driven, foremost, by a revolution inR&D of new drug substances, globalization, and with it, the emergence of Asia as an important hub in thepharmaceutical value chain. These, together with a rapidly ageing population, often with complex chronicdiseases, have all combined to push up demand for higher quality medicines.

However, growth is constrained by declining pharmaceutical R&D productivity, ever increasing regulatoryrequirements, patent expiration and faster pace of genericization, high cost of manufacturing and related supplychain issues, and a highly concentrated market structure, in which the top three firms account for over 90% of themarket share. The introduction of new film coating products is also not expected to have a major impact on thesector’s future growth.

1Market drivers are defined here as macro-economical forces behind ongoing shifts in supply and demand whichact as signals against which market players respond.

MARKET DRIVERS AND RESTRAINTS, OPPORTUNITIES AND TRENDS[1]


EXHIBIT 5Tablet Film Coatings Market Drivers and Restraints, Opportunities and Trends

Growth of the global pharmaceuticalindustryGenericization of patented drugsEnhanced perf ormance of coatings& equipment

Increasing quality demands onproduct manuf acturersDecreasing R&D productiv ityGreater regulatory ov ersight driv enby harmonization/internationalization

Emerging markets & wider ageingpopulation driv ing demand f or drugsImpending patent expirationTechnology -driv en gains inproductiv ity

Sector consolidationHigher productiv ity expectationsf rom productsNatural ingredients (dietarysupplements)

DRIVERS RESTRAINTS

TRENDSOPPORTUNITIES


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P ES T

POLITICAL ECONOMIC

SOCIO-CULTURAL TECHNOLOGICAL

• Healthcare cost inflation• Regulation & deregulation• Trade policy and tariff controls

• Stage of economic cycle• Impact of globalization• Growing levels of disposal income• Change in income distribution• Trade policy and tariff controls

• Global population & age profile• Global population health, education

& socio-cultural change• Life-style & attitude changes

• Research & development activity• Impact of rapid technology change• Technology transfer & information

diffusion

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Many governments have increasingly sought to contain healthcare costs inflation, which are now widely seen asuntenable. Although medicines constitute only a small fraction of overall healthcare costs, politicians increasinglyview the pharmaceutical industry as an easy target, and have been exerting pressure on drug pricing, which has,to different degrees, impacted margins.

Related to the above factor are moves by governments towards regulatory internationalization, a developmentswhich is characterized by greater public oversight and demands for transparency from pharmaceutical firms.These developments are likely to have the effect of eroding arbitrage further, and potentially damaging orimpacting firm profitability going forward.

The pharmaceutical industry has also witnessed an increasing tendency for regulatory agencies to get draggedinto cost and competition issues, beyond their traditional remits of safeguarding quality, safety and efficacy. Thishas had the impact of shifting the regulatory debate onto issues that affect pharmaceutical industry, includingsector competitiveness, marketing & pricing strategies, mergers & acquisitions, and R&D.

POLITICAL FACTORS

PEST ANALYSIS


EXHIBIT 6Tablet Film Coatings Market PEST Analysis


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The most important social-cultural factors as far as the film coatings sector is concerned are an aging populationand lengthening life expectancies around the world. Both factors are resulting in and will continue to have theeffect of generating demand for pharmaceutical products to treat age-related diseases such as Alzheimer’s,diabetes, and rheumatoid arthritis.

The Economist Intelligence Units predicts global life expectancy to increase from an estimated 72.7 years (in2013) to 73.7 years by 2018, bringing the number of people globally over age 65 to around 580 million (approx.10% of the total global population). Expenditure on healthcare for the elderly is projected to rise to more than 50%of the total healthcare budget by 2020 in leading economies.

Concurrently, the world will be increasing in affluence, particularly in the emerging markets of Asia-Pacific, andto a lesser extent, Latin America and Africa. The number of households with incomes over $25,000 is projectedto rise globally by 30 percent, to nearly 570 million by 2020, with over one-half of that growth coming from Asia.The outcome of this will be a rise in global healthcare spending and demand for quality medicines.

Finally, the rise of chronic diseases - fuelled by rapid urbanization, increasingly sedentary lifestyles, adoption ofWestern diets, and rising obesity across the globe, will create a huge need for innovative treatments across thisnew world.

Ten years after the financial crisis, the global economy has continued to expand, albeit at a uneven pace, aspost-crisis adjustments take effect. Governments of major economies have shown consistent commitment tosupporting growth in healthcare per capita expenditure in spite of lacklustre economic indicators.

Pharmaceutical companies have demonstrated the ability to thrive even under periods of economic stress, healthcare spending cutbacks and geopolitical and market upheavals. It is widely acknowledged that this resilience willcontinue for the medium term.

However, the lack of growth in consumer disposable incomes around the world is worrying and will likely have animpact on those countries using health insurance or in those where part/full payment for healthcare is dominant.Another issue that we foresee is that, while the funding and investment climate is showing signs of recovery,many stakeholders still complain about the shortage of opportunities, particularly for early stage funding of newprojects, which is very critical in the new model of pharmaceutical R&D.

That stated, the pharmaceutical industry is expected to continue to show robust growth, generating revenues inexcess of $1.4 trillion by 2020, up from $1.05 trillion in 2012. North America will contribute the largest share ofthe estimated revenues at 41.9%, followed by Asia Pacific at 26.8%, Europe, Middle East and Africa at 19.8%,and the rest, by Latin America and Rest of the World.


Sources: 1 Economist Intelligence Unit, World Health Care and Pharmaceuticals Outlook, 2018;2 Quintiles IMS Global Medicines use in 2020

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The impending shifts in international trade relations, driven by political tensions between the current USadministration and China, coupled with crackdown on chemical producers in China, will likely to impact on globalavailability of essential chemicals, some of which serves as inputs into film coatings and pharmaceuticals. Anyimposition of trade restrictions by the US will likely alter the sector’s competitiveness, impact the pace of priceand factor redistribution, and inevitably create winners and losers in the long run.

On related note, China’s Air Pollution Action Plan aimed at cleaning up the environment and putting brakes onso-called polluting activities has already had wide-ranging impact on the chemical industry and will continue todo so going forward given the role China plays in the industry’s value chain.

ECONOMIC FACTORS1,2

SOCIAL-CULTURAL FACTORS1,2

FIVE FORCES MODEL ANALYSIS[2]

TECHNOLOGICAL FACTORS1

Technology has not only contributed to creating new business prospects both in terms of new therapy optionsand service provisions downstream but also facilitated R&D productivity by accelerating the discovery andcommercialization of new treatments. Technological advancements are also credited with having the mostsignificant impact on healthcare spending growth, estimated to be between 40 to 60% of spending growth.

A summary of the impact of technology advancements on the pharmaceutical industry are:● More efficient knowledge capture and accelerated technology diffusion.● Accelerated convergence in medical science and practice● Development of new treatments for previously untreatable terminal conditions● Overall cumulative effect of incremental improvements, extending the scope of medical science to con-

ditions once regarded as beyond its boundaries

From a manufacturing point of view, technology innovations have helped drive improved economics, flexibilityand product quality, such as the recent on-boarding of continuous manufacturing and advanced manufacturing,to improve scalability and speed time to market.

In our assessment, technological advancements, will be having a significant impact, both on inside and outsidethe industry, including driving pharmaceutical companies to increasingly seek greater ingredient functionality andperformance to service these new capabilities and market demands.

We applied Porter’s five forces model to analyse the film coatings sector, and in particular assess the powerbalance and hence a sector’s competitive environment and attractiveness.

The analysis examined five forces (plus complimentors) as follows:

● Bargaining power of buyers and suppliers● Threat of new competitors● Threat of substitutes● Sector rivalry

The fundamental assumptions that underpined our analysis of the sector when taken as a distinct excipient classwere:

● Maturity: The sector has reached maturity.● Fragmentation: Moderately fragmented (with more than 10 companies competing globally, plus hundreds of

customers producing their own systems for own use)● Role of innovation: Relatively low R&D costs● Business cycles: Long product life cycles (pharma)● Vertical integration: Few opportunities and incentives for verticaal integration● Government intervention: Close to zero chances of targeted government intervention, by way of regulation,

taxation or subsidies.


Sources: 1. Quintiles IMS Global Medicines use in 2020 2. Bricklane Innovations Research

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On this basis, we conclude that film coatings sector is characterised by moderateprofitability due to the following reasons[1]:● Low - Moderately weak supplier power● Low - Moderately weak buyer power● Moderately high entry barriers (mainly due to knowledge & market access barriers)● Few opportunities for substitutes● Intense degree of rivalry, especially in commodity segments, which encourages price

wars, aggressive sales promotion and to a less extent, investment in innovation & newproducts. This is likely to increase costs and lower profits

EXHIBIT 7Tablet Film Coatings Market Five Forces Model Analysis


POWER OF SUPPLIERS[LOW]

POWER OF BUYERS[MODERATE]

THREAT OFSUBSTITUTES

[LOW]

BARRIERS TO ENTRY[MODERATE]

COMPETITIVE RIVALRY[HIGH]

COMPLIMENTORS[MODERATE]

• High capital investment cost• Economies of learning & scale• Market access• Incumbent defensive tactics• Regulatory hurdles

• Limited product differentiation• Importance of product to buyers• Relative insensitivity to price

differentials• Volumes• Threat of backward integration

• Availability of substitutes• Supplier product differentiation• Relative importance of

industry to supplier• Threat of forward integration

• Relative value added• Compliment exclusivity• Buyer perception of

compliments• Barriers to compliment entry

• Limited choices of substitutes• High switching costs• Regulatory hurdles• Price-performance trade-offs

for substitutes

• High market concentration• Commoditization• No. of buyers relative to sellers

14



BARGAINING POWER OF BUYERS

Our research indicates that demand for film coatings will remain moderate over the short to mid-term in line withthe wider pharmaceutical industry growth trends. Competition among suppliers will remain cutthroat and buyerswill increasingly demand customized solutions, against a backdrop of proven technical capabilities and benefits.

Owing to their technical nature, technical support will remain important and buyers will still be less inclined toswitch suppliers, made difficult by the extra effort for implementing post-registration changes to dossiers, wheredivergence exists.

However, the threat of backward integration by buyers as a means of containing costs and curtailing supplierpower will remain low due to the low strategic unimportance of film coatings relative to other inputs.

BARGAINING POWER OF SUPPLIERS

To film coatings suppliers, raw materials typically account for 30-50% of film coatings cost base, consequently,they have the greatest impact on margins. Current fluctuations in the prices of raw materials will continue to havea negative impact on the profitability of all players.

While some companies will be able to pass on this cost to the end-user, it is not the most popular option andoften, many others have will have to absorb these costs.

That said, the threat of forward integration will remain low to moderate as most players prefer to focus on theircore competencies. But since the cost of switching raw material sources will remain low (because the vastmajority of inputs are commodities with few regulatory hurdles) our conclusion is that on the balance of things,the bargaining power of suppliers will remain so in the near to mid-term.

THREAT OF SUBSTITUTES

There are no substantive substitutes for film coatings currently. Technologies such as sugar coating, meltcoating, enrobement, and, soft and hard capsules lack the required productivity and technological capabilitiesthat film coatings provide. Thus, the threat of substitute products is expected to remain low in the near to longterm for the film coatings sector.

COMPLIMENTORS

Complimentors to film coatings are defined here as all those products, services, technologies and entities thatcustomers perceive as adding value and therefore, have the effect of increasing desirability of film coatings.Complimentors were identified to include the following:

(1) Products such as printing inks, innovative ingredients such as candurin pigments, and, anti-tack andanti-adherent substances

(2) Service providers such as auditing and certification agencies, CROs, consultants, and training providers

(3) Technologies such as the numerous equipment and apparatuses such as coating pans, spray nozzles,pumps, and stirrers, etc, used during the application of coatings.

(4) Online portals and formulation tools where customers can obtain technical documents, request informationand samples, obtain troubleshooting information, etc.

15

DEGREE OF COMPETITION

The competitive structure of the film coatings market approaches an oligopoly - there are few truly differentiatedproducts, and competition is almost always based on non-price tactics. The sector is also highly concentrated,with just one company holding over 50% market share with the rest of the park chasing just 20% (see Exhibit 6).

The on-boarding of Indian and Chinese manufacturers, who mainly offer cheaper products and compete on price,has complicated the field further. Moreover, among the most profitable segments, the sector is skewed in favourof two leading players: Colorcon Inc., and Evonik Industries AG, whose products now appeared in no less than99% of all product registrations in the last three years (Sources: Review of US FDA and EMA data). Given thelong product development cycles, high entry barriers, high customer inertia and stable buying habits, the situationis unlikely to unravel soon.

MARKET OUTLOOKOur research indicates that film coatings penetration continues to grow, equally among research-intensive firms,generics and nutraceutical manufacturers. In the pharma sector, data from 2013-2015 revealed that more than44% of ALL new product registrations were film coated tablets. This ratio increased to 80% for all solid dosages.

Given that approx. 60% of all existing solid dosages are not currently coated, there still remains slack in themarket for further growth. This, combined with our finding that nearly 25% of pharmaceutical companies still usein-house film coatings that could be potentially converted to use ready-formulated products, the outlook for thesector is a positive one.

We are also of the view that emerging countries, particularly Turkey, Russia, Brazil and Mexico present thebiggest opportunities for companies to capture new business and grow market share. However, market entry isbest undertaken via commission agents with requisite product knowledge rather than distributors as the latterrarely have the extra resources and time nneded to support new business development.

Most importantly, we urge companies to consider bundling their offers with value-adding solutions as a sure wayto building long-term partnerships and value capture even in new markets.

Film Coating Penetration in AllMarketed Solid Dosages

Total Market Share for Colorcon vs In-house coating vs Competitors

Film Coating Penetration inNewly Launched Products


EXHIBIT 8Tablet Film Coatings Market Product Penetration Rates

Uncoated60%

Film Coated40%

In-houseformulation

25%

Colorcon55%

All Others20%

Uncoated20%

Film Coated80%


16

Increase Market Share(Market Penetration Strategy)

-Attractive pricing-Active promotion

-Operational efficiencies-Portfolio optimization

Add Products/Services(Product Development Strategy)

-Adding value to existing products-Product-line extensions

-New delivery models (bundling)

Enter New Markets(Market Development Strategy)

-New geographies-New customer segments

-New business models

Add Products/Services(Diversification)

-Diversification into related products-Down/upstream integration

Strategies Used to Expand Products/Services

Strategies used to Expand the Market

Existing Products/Services New Products/Services

Exis

ting

Mar

kets

New

Mar

kets

1. INCREASING MARKET SHARE

Our view is that since the film coatings market is highly concentrated, wholesale application of market penetrationstrategies by followers would be ineffective as the competitive space is very small. Instead, follower companiesshould focus on those untapped customers, such as the 25% who we found were currently using in-houseformulations or not using film coatings at all (currently 60% of all solid dosage forms), especially those inemerging countries.

Identifying particular products that suits this class of customer and coupling this with solid technical competenciesand using them as a lever to demonstrate value to the market will be fundamental to follower companies.

In our view, a growth and profitability in the film coatings market will primarily derive from four maintactics, namely: growing market share, entering new markets, product innovation from R&D, anddiversification. These strategies are illustrated in Exhibit 9 below:

ANALYSIS OF MARKET SHARE GROWTH STRATEGIC OPTIONS

EXHIBIT 9Tablet Film Coatings Market Share Growth Strategic Options


SOURCES: Ansoff H.I (1984) Implanting Strategic Management, Prentice Hall: NJ, pp455

17

2. ADDITION OF NEW PRODUCTS/SERVICES

Introducing new products requires companies to engage different levers (R&D organization, technologies andprocesses, people and products) in order to pull off this tactic. But even if a company were to successfully bringto market an innovative film coating product, the low adoption rate for new excipients represents a barrier tosuccessful commercialization. Therefore, introducing radical new products strategy as a way to gain marketshare is not be strategically prudent.

That said, several companies have successfully pursued incremental innovation, especially around improvingusability and productivity (high solids products) and this seems to be paying off.

In our view, ‘servitization’ is the next best option to grow market share, particularly as it is becoming difficult todifferentiate products solely on features. This, however, requires a fundamental shift, from a products logic to toa services and solutions logic. As an example, Colorcon has managed to introduce a suit of services, includingBEST programme, Technical Service Laboratories and Formulation Schools.

Our research shows that there is further scope to introduce more services, such as joint R&D.

3. EXPANSION INTO NEW MARKETS

A strategy of entering new markets is wrought with great risk and adopting the most optimum new market entrystrategy will be of crucial strategic importance.

New GeographiesOn the balance of factors, entry into new geographies would be best done through an established agent and/orexperienced distributor with the requisite market access in the geography of interest. The level of technicalsupport precludes exporting or green field or brown field investment.

New Customer SegmentsOne of the fastest customer segments currently is the nutraceuticals/dietary supplements manufacturerssegment, which represents a strategic base to grow market share. This strategy of nichemanship has allowedsome companies to identify specialised markets, learn about their sophisticated requirements and use thisknowledge to extract value.

New Business ModelsThere is scope for the sector to experiment with innovative business models such as payment by results wherepayments for products are linked to achievement of pre-agreed results (e.g profitability). As with innovation, thereare significant material risks for vendors, including cashflow constraints. Thus, we are yet to see new businessmodels in the sector.

4. DIVERSIFICATION

We consider diversification strategy the most risky strategy owing to the demand on resources on several fronts- expansion into areas that are outside a company’s core activities and domains of experience and a differentcustomer base. Typical options include introduction of new, related products or services to existing customers,introduction of new markets for existing products or introduction of new products for new markets.

We recommend companies carefully weigh up the risks and costs of opting for diversification strategy against anybenefits. Nevertheless, a number of companies have successfully applied this strategy, for example Ideal Cures(India) also sells R&D tablet coaters and flavours; Colorcon Inc., doubles as an excipient distributor for Dow andhas, with time, transformed itself into a product development company. Sensient Technologies, for example, alsodevelops and sells colours for food and pharmaceutical industries.

Our research shows that there are further opportunities to enter into the food and agricultural coatings as well asfood and technical inks.


18

Sources of competitive advantage for the tablet film coating sector are discussed below. They were identified toarise from many places beyond simply the product and service mix. The analysis is supported by data, researchand the experience of those we interviewed and all lie all along the value chain model first proposed by MichaelPorter’s seminal work on Competitive Advantage1.

ANALYSIS OF THE SECTOR’S SOURCES OF COMPETITIVE ADVANTAGE

1. ECONOMIES OF SCALE

Our research showed that economies of scalehad an impact on costs. The larger firms wereable to decrease the average unit cost while alsoincreasing output through their greaterbargaining power with suppliers of rawmaterials. Also, larger firms were able todistribute certain fixed costs (e.g. R&D,promotion, etc) across a wider footprintcompared to smaller players.

2. ECONOMIES OF LEARNING

Owing to complexity of coatings, we found thatthose companies that invested in technicalassets had managed to achieve unassailableleadership through experience-based learning,which was allowing them to boost productivityand realise R&D synergies while also managingto achieve better coordination of differentfunctions within their firms.

3. BUSINESS PROCESSES

Firms that integrate different businessprocesses and functions, such as inventory andproduction strategies, e.g Made to Order,Enterprise Resource Management, Outsourcing(of non-core activities), Total QualityManagement, or inculcate a company-widemarket orientation, consistently stay ahead ofthe competition.

4. CO-LOCATION

We also found a correlation between co-locationwithin or near important or strategic customerclusters and performance. These companiesinnovated faster, probably due better informationflow or better customer intimacy andresponsiveness compared with those in far flunglocations. As the saying goes, location, location,location!

No single firm today has all the capabilities to compete effectively. Also, knowledge has become a key driver forproductivity. Therefore, competitive advantage increasingly derives from the speed at which firms acquireknowledge. Firm partnerships and linkages have become critical to learning about new opportunities and actingupon them faster than the competition.

In our research, we identified several linkages in operation, including R&D contractual relationships withcustomers, suppliers or academic institutions, joint ventures with competitors, suppliers or customers, co-marketing partnerships, and participation in learning communities (e.g. Controlled Release Society, AAPS, etc.).However, only two companies (Colorcon and Evonik) appear to have successfully applied this strategy to cementtheir leading market positions. It will be critical for all companies to build alliances for effective competition

5. STRATEGIC ALLIANCES

1. Porter, Michael E., “Competitive Advantage”. 1985, Ch. 1, pp 11 - 15. The Free Press. New York


19

Sources of competitive advantage through the differentiation include:

PRODUCT FEATURES AND PERFORMANCE

Firms have been creating products that best match the technical demands of the market. A number of companies,for instance, are providing customers with a wide selection of products with built-in features and services thatbuyers appreciate (e.g technical support & training, regulatory information, tablet core formulation, etc).

QUALITY OF INPUTS AND PRODUCT INTEGRITY

In the tablet film coating sector, as is any other technically intense sector, we found that a company’s qualityperformance was only as good as the quality performance of its suppliers.

CUSTOMER EXPERIENCE-ENHANCING PROCEDURES

Those companies that focused on making company-customer interactions pleasurable were found to gaincustomer bonding more effectively compared with those that did not. Some of the strategies being used includeavailing multi-channel communication channels (mobile, live chat, self-service & social media support), acting oncustomer feedback, being open and transparent, and delivering on promises, thereby demonstratingdependability and confidence.

DIFFERENTIATION FACTORS

VERTICAL INTEGRATION

Ashland, for instance, being a primary producer of some of the inputs into film coatings, is able to influence thecompany’s ability to control many input and intermediate processes and capture even more value for thecustomer.

BUNDLING

By providing a range of complementary products and services, for instance, printing inks, colours, otherexcipients, product design service, etc., some firms have been able to create and offer attractive valuepropositions for their customers.

INTENSITY OF MARKETING ACTIVITIES

Just like any other business sector companies operate in, gaining sustainable competitive advantage in the tabletfilm coatings sector requires investment in an effective marketing function. Therefore, companies that havemastered effective ways of identifying customer needs and delivering the right products to the right customer areable to outperform their peers in sales and brand awareness.


20

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Sustaining competitive advantage requires companies to understand what customers seek and design solutionsthat meet those needs. From interviews with customers, we have distilled a number of key requirements andcategorised as follows: Product & Performance, Technical Support, and Supply Chain Competence. These areelaborated in Exhibit 10 below:

OUR FINDINGS ON MARKET NEEDS[1]

EXHIBIT 10Tablet film Coatings Market Needs, Firm Responses and Key Success Factors


21


STRATEGIC POSITIONING ANALYSIS AND RECOMMENDATIONS[1]

Its is our view that companies responding to the afore-mentioned needs is not enough. Firms should aim to movethe customer to a new strategic position of Lock-in and away from the default strategies of competition based onproduct/service economics. This illustrated in Exhibit 11 below:

BEST SERVICE STRATEGIES (LOW COST, HIGH QUALITY & SPEED OF RESPONSE)We classify these strategies as house keeping strategies that are not sustainable in the long term. For example,there can only be one lowest cost producer in any market, thus, pursuing this strategy tends to encouragecommoditization of customers and product standardization and intensify competitive rivalry. In our analysis, thevast majority of companies currently operate in the Best Service quadrant.

TOTAL SOLUTION (ECONOMICS, QUALITY & DIFFERENTIATION)This approach requires knowledge of the unique needs of the customer and implementing steps of providing aunique product/service that meets those needs better than any one else. While a focus on differentiated productmixes can enable a company to demand premium rents however, as soon as the differentiated product emerges,imitators are drawn in, which erodes competitive advantage. Some companies, for example, Roquette, wereoperating in the Total Solution (Differentiation) quadrant.

TOTAL SOLUTION (CUSTOMER INTEGRATION)This strategy seeks to provide full support to the customer’s activities by going beyond the traditional domain ofproduct/service and instead providing a full suite of customized solutions i.e a one-stop shop. In effect, companiesallocated knowledge and resources and sought to become an extended arm of the customer through a networkof added value services positioned to boost the customer’s economics. An example of this strategy in practice iswhen a company collaborates with a customer to improve time to market. Ashland Inc., in particular, operated inthe Total Solution (Customer Integration) quadrant.

CUSTOMER LOCK-INCustomer Lock-In is the holy grail of competitive positioning because it seeks to create significant barriers tocompetitors, thereby making switching costs high and restricting access to the market. These can be in form ofsupply contracts/exclusive supply arrangements, patents and trade-marks, unique and other features that wereimpossible to imitate (e.g colours/flavours), co-product development, etc. In our analysis, only Colorcon Inc., wascurrently operating in the Customer Lock-in quadrant.


EXHIBIT 11Tablet Film Coatings Market Proposed Strategic Positioning Framework

Best Service Strategy(Low cost, High quality or

Speed)

Total Solution(Customer Integration)

Hig

hLo

w

Product Complementarity

Total Solution(Economics, Quality &

Differentiation)

Customer Lock-in(Best Service, Economics,Quality & Differentiation, &

Customer Integration)

Low High

Bre

adth

of S

ervi

ce

1. Sources: Bricklane Innovations Research

22

CHAPTER 3

MARKET SIZE ANALYSIS AND FORECASTS

GLOBAL MARKET OVERVIEW

In 2018, the global market for tablet film coatings was estimated to be worth $878 million and 27,941 metrictonnes. We expect the sector to grow modestly in 2019 to $934 million at an annual rate of 6.4 and 30,073 metrictonnes at an annual growth rate of 7.6%. Taking 2017 as a baseline, the sector will grow at a 5-year CAGR of5.2% to reach $1065 million, and at 6.3% to 35,287 metric tonnes by 2021. Growth will be primarily driven bydevelopments in the wider pharmaceutical industry, notably, ongoing investments in R&D, continuing growth inAsia Pacific, population ageing and urbanization, which will help push up demand for quality medicines (SeeExhibit 12).

Fast forward to 2020, our expectations are that the sector will grow modestly and achieve annual sales of $996million (annual growth rate of 6.4%) and volumes of 32,509 metric tonnes (growth rate of 7.6%) over 2019. Ourmodelling reveals 2020 to be a pivotal year as the sector will be expected to hit the $1 billion dollar mark, and by2021, sales will be $1065 million and volumes of 35,286 metric tonnes). Thus, between 2018 and 2021, the sectorwill have added $187 million in value and 7,300 metric tonnes of volumes, 50% of which is expected to derivefrom growth in the functional film coatings category and emerging economies, including Asia Pacific.

The largest product category will be the non-Functional, non-Modifying segment throughout 2019 to 2021. In2018, this segment will have been responsible for a share of 66.9% of the total tablet coatings market andachieved a total value of $587.5 million, rising to $677.5 million in 2021, a 5-year CAGR of 3.9% over 2016figures. Corresponding volumes during this period will be 17,725.8 metric tonnes, rising to 21,719 metric tonnesby 2021 at a CAGR of 5.4% (See Exhibit 13).

The smallest segment will be Functional, non-Modifying film coatings with a share of 7.7% of the global tablet filmcoatings market. Annual global sales will be $67.6 million in 2018, rising to $98.0 million in 2021 at a CAGR of10.1%. The segment’s output will correspondingly be 2,917 metric tonnes in 2018, rising to 4,273 metric tonnesin 2021, at a CAGR of 10.9% (see Exhibit 14).

Chapter 3 provides a breakdown of the market size, both at a global, regional and product typebasis. overview of the tablet film coatings sector, statistics and forecasts over the next fiveyears. The analysis is based on market segmentation and product category by function.


23

24.4026.06

27.9430.07

32.51

35.29

6.3

6.8

7.2

7.6

8.1

8.5

3

4

5

6

7

8

9

0

5

10

15

20

25

30

35

2016 2017 2018 2019 2020 2021

Volume Growth

Volu

me

(met

ric to

nnes

'000

)

Gro

wth

(% ra

te)

Volume (Metric Tonnes)

EXHIBIT 12Aggregate Global Tablet Film Coatings Market - Size and Growth (2019 - 2021)

EXHIBIT 13Global Tablet Film Coatings Market Size by Product Category - 2019

594.865.8

225.0

2017

Non-functional, non-Modifying Functional, non-Modifying Functional, Modifying

Sources: QuintilesIMS Global Medicines Use 2020, Deloitte Global Health Care Outlook 2018Bricklane Innovations Research, OECD - Health at a Glance, Primary Interviews


24

780.2826.9

878.2934.1

996.0

1065.3

5.66.0

6.26.4

6.67.0

1

2

3

4

5

6

7

8

0

200

400

600

800

1000

2016 2017 2018 2019 2020 2021

Value Growth

Valu

e ($

milli

on)

Gro

wth

(rat

e %

)

Value ($ million)

594.865.8

225.0

Value ($ million) 2017

17819.42929.8

7368.7

Volumes (Metric Tonnes) 2017Volume (Metric Tonnes)

2019Value ($ million)

2019


594.865.8

225.0

2017

Non-functional, non-Modifying Functional, non-Modifying Functional, Modifying

678.187.4

297.5


20806.54205.6

9881.3

Volumes (Metric Tonnes) 2020

EXHIBIT 14Global Tablet Film Coatings Market Size by Product Category - 2021

REGIONAL ANALYSISAs depicted in Exhibit 15 and 16, North America still remains the largest market for film coatings in 2018 with atotal value of $305 million (translating into 8,094.9 metric tonnes). Sales will grow to reach $366 million(corresponding to 9532 metric tonnes) by 2021, respectively at a CAGR of 5.0% and 4.4% over 2017 values. TheUSA will account for the lion share of North America’s value and volume usage ($218.2 million and 6120.7 metrictonnes in 2018), which is expected to rise to $279.24 million and 7454.4 metric tonnes in 2021.

Europe Middle East and Africa (EMEA) will be the second largest region ($251 million by value in 2018) but thirdby volume (6,979 metric tonnes). EMEA growth will be slow over the next four years to reach a value of $289 andvolumes of 8117 metric tonnes in 2021, respectively at a CAGR of 3.8% (value) and 4.0% (volumes). Over thisperiod, EMEA’s share of the tablet film coatings market will decline from 24.9% (in 2018) to 23.1% (in 2021) forvolumes, and 28.6% (in 2018) to 27.2% (in 2021) for revenues. The top three sub-markets in EMEA will beGermany, France and Italy and remain so through the study period.

In 2019, Asia Pacific (AP) will achieve revenues in excess of $200 million and 9,9500 metric tonnes. As thesector’s engine for growth, we expect the region to top $259.8 million by 2021 and at a 5-year CAGR of 7.1%.AP’s volume tally will reach 8,906 metric tonnes (in 2018) and rise to 12,623.8 metric tonnes by 2021 (5-yearCAGR of 8.8%). China will be the most important sub-market in AP, and account for $50.48 million (2,403.15metric tonnes) in 2018 which will grow to $80.85 million (3891 metric tonnes ) in 2021 at a CAGR of 12.8%.

With a share of just 13.8% of the total market (or $121.4 million in 2018), Latin America (LA) will remain theworld’s smallest market for tablet film coatings going forward. It is expected that market share by value will riseto 14.1% (or $148 million in 2021) at a CAGR of 6.0%. The region’s volumetric usage in 2018 will be 3,952 metrictonnes (14.1% of the global output), rising to 5,014 metric tonnes in 2021, at a CAGR of 8.8% (market share ofglobal output of 14.4%). Brazil, Argentina and Colombia will be the region’s main sub-markets.


25

Volume (Metric Tonnes)2021

Value ($ million)2021


0

EXHIBIT 15Global Tablet Film Coatings Market Size by Geography - 2019

2016

North America (US, Can & Mex) Europe Middle East Africa Latin America Asia Pacific

EXHIBIT 16Global Tablet Film Coatings Market Size by Geography 2021

2016

North America (US, Can & Mex) Europe Middle East Africa Latin America Asia Pacific

304.7

251.3

121.4

200.8


8094.9

6978.63961.6

8905.8

Volume (Metric Tonnes) 2017

366.0

289.5

150.0

259.8


9,532.4

8,117.05,013.6

12,623.8

Volume (Metric Tonnes) 2020



26






65.9

8.1

26.0

63.4

9.1

27.5

0

10

20

30

40

50

60

70

Non-Functional,non-Modifying


Functional,Modifying

2019 2021

Con

tribu

tion

to m

arke

tval

ue (%

)

62.5

10.7

26.8

61.0

12.1

26.9

0

10

20

30

40

50

60

Non-Functional,non-Modifying


Functional,Modifying

2019 2021

Con

tribu

tion

to m

arke

tvol

ume

(%)

MARKET SHARE BY PRODUCT APPLICATIONIn 2019, non-Functional, non-Modifying tablet film coatings will account for 66% market share by value and 63%market shareby volume. Over the next three years, market share, both by value and volume, for these productswill erode, respectively to 63% and 61% (see Exhibit 17). The main factor driving market share attrition aretechnology maturation and growth in popularity of other product categories.

The second largest segment, both by value and volume, will be Functional, Modifying tablet film coatings, whichwill account for 26% by value and 27% by volume in 2019. By 2021, this segment will have marginally increased,coming in, by value and volume, at 28% and 27%. This increase will mainly be driven by patentedpharmaceuticals R&D expansion and the wider adoption of this technology.

The smallest segment, by product categorization, will be the Functional, non-Modifying segment, which will beresponsible for market shares of 8% for value and 11% for volumes in 2019. Functional, non-Modifying willwitness an increase in their market share (both by value and volume) to 9% and 12% as these products gainwider utilization by the pharmaceutical industry and the dietary supplements sector.

The data and modelling we have done shows that over the next five years there will be a re-adjustment in marketshare, with Functional, Modifying, and Functional, non-Modifying segments gaining a match over the non-Functional, non-Modifying segment, whose share is projected to fall by 4 percentage points during this period.

The above-mentioned share movements will primarily be driven by the projected $300+ billion expansion of thewider pharmaceutical market and, in particular, the increasing use of more expensive medicines in developingcountries and a faster pace of genericization of patented medicines.

EXHIBIT 17Tablet Film Coatings Market Share by Product Category (2019 vs 2021)


27

Volume (Metric Tonnes)Value ($ million)


28.4

24.3

14.2

33.1

27.0

23.0

14.2

35.8

0

5

10

15

20

25

30

35

North America(US/Can/Mex)

Europe MiddleEast Africa

Latin America Asia Pacific

2019 2021

Con

trib

utio

n to

mar

ketv

olum

e (%

)

34.6

28.1

13.9

23.4

34.4

27.2

14.1

24.4

0

5

10

15

20

25

30

35

North America(US/Can/Mex)

Europe MiddleEast Africa

Latin America Asia Pacific

2019 2021

Con

trib

utio

n to

mar

ketv

alue

(%

)

MARKET SHARE BY GEOGRAPHYAs mentioned previously, the North American region will account for the largest share of tablet film coatings in2019, with an aggregate share of 35% by value and 29% by volume. Over the next three years, this share willdecrease only slightly to 34% for value and 27% (in 2021) as Asia Pacific usage grows.

Europe Middle East & Africa (EMEA) region will be the second largest region by value (accounting for a marketshare of 28%) but the third largest by volume, accounting for a market share of 24%. Our research shows thatEMEA will witness a contraction in market share, both by value and volume to 24% and 23% respectively, whichwill in effect, transform EMEA into the third largest market from its current rank by 2021. This contraction will bedriven by manufacturing retrenchment in EMEA.

Share growth in Latin America (LA) will be lacklustre, meaning that this region will remain the smallest market interms of value and volumes in 2019 and through to 2021. We estimate market share for LA to be 14% both byvalue and volume, and threfore hardly growing over the next three years.

Asia Pacific (AP) will be the third largest region by market value, with a share of 22.9% in 2019. However, interms of volumes, AP’s market share by volume willl be 31.8%, making it the second largest region by volumes.The disparity between value and volumes points to the lower average prices typically commanded by products inAP. By 2021, AP’s market share by value will have expanded by approximately two percentage points to 24.4%and a whopping 10 percentage points to 35.7%, making this region the largest by volume.

EXHIBIT 18Tablet Film Coatings Global Market Share by Geography (2019 vs 2021)


28



15.8616.72

17.7318.92

20.2421.72

4.5

5.4

6.0

6.86.9

7.3

0

1

2

3

4

5

6

7

8

9

0

5

10

15

20

2016 2017 2018 2019 2020 2021

Volume Growth

Volu

me

(met

ricto

nnes

‘000

)

Gro

wth

(rat

e %

)

534.4560.6

587.5615.6

644.4677.5

4.6 4.74.9 5.0

5.2 5.3

0

1

2

3

4

5

6

7

0

100

200

300

400

500

600

700

2016 2017 2018 2019 2020 2021

Value Growth

Val

ue ($

milli

on)

Gro

wth

(rat

e %

)

NON-FUNCTIONAL, NON-MODIFYING TABLET FILM COATINGS

Non-Functional, non-Modifying tablet film coatings are the main stay film coating as well as the bread and butterfor vendors. In 2018, they accounted for 63.2% of the global volumes and 66.9% of global market sales. Thisproduct category has grown from a base of 8,926 tonnes (or $327 million) in 2005 and was 17,725 tonnes (or$587.5 million) in 2018. Over a three year period, volumes and sales are expected to expand at sluggish pacesto reach $677 million and 21,720 metric tonnes, respectively at 5year CAGR of 4.4% and 3.6% in 2021.

Market share of non-functional non-modifying products will decrease to 63.2% (sales) and 61.0% (volumes)owing largely to the increase in popularity of other product categories as well as faster commoditization. Thebelow sector average growth that this product category will register over the study period is largely attributed tothe predisposition of these products to commoditization and the on-boarding of suppliers from Asia, who mainlycompete on prices, which will result in depression of prices.

A year by year breakdown of the category’s key parameters is represented below in Exhibit 19.

TABLET FILM COATINGS MARKET BY PRODUCT APPLICATION

That said, over the period from 2019 to 2021 the segment will expand in value by $60 million and 2790 tonnes,representing 25% of growth in revenues and 15% in volumes. The lower contribution in value and volumes forthis segment relative to its baseline size is attributed to the compounding factors of commoditization and rise indemand for Functional, non-Modifying and Functional, Modifying products.

Branding (where customers need to differentiate by colour shape and effects) will continue to be the main reasonfor adoption of these products. HPMC and Polyvinyl alcohol will remain the main polymer bases, accounting forover 95% of the products in commerce. Users will continue to prefer systems supplied as fully-formulated andready to use pigmented products rather than those which require reformulation.

EXHIBIT 19Non-Functional, Non-Modifying Tablet Film Coatings Market Size and Growth (2019 - 2021)Sources: QuintilesIMS Global Medicines Use 2020, Deloitte Global Health Care Outlook 2018

Bricklane Innovations Research, OECD - Health at a Glance, Primary Interviews

29



Functional, non-Modifying coatings are used to impart some form of functionality, such as moisture protection,ease of swallowing or taste masking, without impacting drug release. Functional non-modifying tablet coatingshave grown four-fold in volume over a 10-year period (527 tonnes and $18.4 million between 2005 to 2,917tonnes and $67.6 million in 2018).

Looking forward to 2019, we estimate that the Functional, non-Modifying coatings category will be worth 75.7million by sales and 3240 tonnes values (representing 8.1% and 10.4% of global sales and volumes,respectively). Over the next three years, functional non-modifying film coatings will grow, in value and volume to$98 million and 4,272.5 metric tonnes (CAGRs of 7.9 and 10.4%, respectively).

The increasing growth in share of this category as a proportion of the sector’s total volumes and sales revenuesrepresents the rise in recognition of their utility and technological benefits by end-users. Thus, by 2021 the shareby volumes will reach to 12.0% (2021) while sales contribution will be 9.2%.

FUNCTIONAL, NON-MODIFYING TABLET FILM COATINGS

Based on present and forecast segment data, we anticipate Functional, non-Modifying products to add $22million in value and approximately 1000 metric tonnes in volumes between 2019 and 2021. This will equate tocontributions of 17% of the total value and 20% of the total volume expansion despite the low baseline marketshare of just over between 7 and 10%.

A significant proportion of this growth will come from the nutraceutical/dietary supplements sector, wheremoisture control and taste-masking are critical requirements. However, the premium rents that have historicallycharacterized this product group will be tempered by a combination of technology maturity and segmentsaturation as multiple, undifferentiated offerings come on-board.

EXHIBIT 20Functional, Non-Modifying Tablet Film Coatings Market Size and Growth (2019 - 2021)


30

55.561.2

67.6

75.7

85.7

98.0

9.5

10.210.5

11.5

13.2

14.4

5

6

7

8

9

10

11

12

13

14

15

0

10

20

30

40

50

60

70

80

90

100

2016 2017 2018 2019 2020 2021

Value Growth

Valu

e ($

milli

on)

Gro

wth

(rat

e %

)

2,318

2,556

2,917

3,240

3,706

4,273

8.8

9.7

10.2

11.9

13.2

14.4

7

8

9

10

11

12

13

14

15

0

1000

2000

3000

4000

2016 2017 2018 2019 2020 2021

Volume Growth

Volu

me

(met

ric to

nnes

)

Gro

wth

(rat

e %

)



6.226.78

7.40

8.11

8.95

9.88

7.8

8.6

9.7

10.5

11.2

12.2

4

5

6

7

8

9

10

11

12

13

14

0

1

2

3

4

5

6

7

8

9

10

2016 2017 2018 2019 2020 2021

Volume Growth

Volu

me

(Met

ric T

onne

s ‘0

00)

Gro

wth

(rat

e %

)

191.9206.7

223.1242.9

265.9

294.0

7.1

7.7 7.9

8.9

9.5

10.6

3

4

5

6

7

8

9

10

11

12

0

50

100

150

200

250

300

2016 2017 2018 2019 2020 2021

Value Growth

Valu

e ($

milli

on)

Gro

wth

(rat

e %

)

Functional Modifying systems offer advanced technological benefits, including the ability to modulate the locationand rate at which the payload is availed for absorption in the body. Despite the important function this segmentplays, it only accounts for around a quarter of the sectors total volumes and revenues. Notwithstanding, thesegment has grown consistently over the last decade, from a lowly base of 3,100 metric tonnes and $100 millionin 2005 to 7,404 metric tonnes and $ 223 million in 2018.

We expect this growth to continue, albeit at a moderate rate (2017-2021 CAGR of 7.6% for volumes and 6.9%for sales) to reach 9,884 metric tonnes and $294 million. The segment’s share of the total market sales valuewill also increase from 24.8% in 2017 to 27.6% in 2021, while volumes share will also increase from 25.9% in2016 to 27.8% in 2021 as these systems gain more wider penetration, become more entrenched and are morewidely adopted by generic manufacturers.

FUNCTIONAL, MODIFYING TABLET FILM COATINGS

Our modelling has revealed that in spite of the low baseline market share of just over 25%, between 2018 and2021 this segment will add $75.2 million and 2115 metric tonnes to the projected film coatings sector growth inthe coming years, representing a contribution of 40% to the total value growth and 29% of the volume growth.

spending on medicines grows driven by rapidly aging populations and rising incomes in emerging countries,there will be greater demand for more elaborate drug delivery modalities, and this demand will, in part, beserved by products coated with Functional Modifying film coatings.

Our model also shows that enteric coatings will continue to be the main technology going forward, withMethacrylic acid copolymers (Eudragit L30D-55 and Eudragit S - Evonik) being the most frequently usedpolymers, keeping a shareholding in excess of of 70% of total technology uptake.

EXHIBIT 21Functional, Modifying Tablet Film Coatings Market Size and Growth (2019 - 2021)


31



271.7287.4

304.7323.3

343.7366.0

5.55.8

6.0 6.16.3

6.5

1

2

3

4

5

6

7

8

0

50

100

150

200

250

300

350

400

2016 2017 2018 2019 2020 2021

Value Growth

Valu

e ($

milli

on)

Gro

wth

(rat

e %

)7.3

7.78.1

8.59.0

9.5

4.85.0

5.3 5.45.6

5.8

0

1

2

3

4

5

6

7

0

1

2

3

4

5

6

7

8

9

10

2016 2017 2018 2019 2020 2021

Volume Growth

Volu

me

(Met

ric T

onne

s ‘0

00)

Gro

wth

(rat

e %

)

In 2018, North America market remains the largest and most sophisticated market, accounting for 34.6% bydollar value and 29% by volume (equivalent to $305 million and 8,095 metric tonnes). It has the highestpenetration in all product categories and a higher than average take-up than other regions. The three largestmanufacturers account for more than 90% of the North American market. Colorcon Inc., commands a majordominant position, with a market share of approx. 70.5% and the highest take-up among research-basedpharma companies. This makes this market most difficult market to gain market share owing to to the higherconcentration of the most blue chip manufacturers, who are least inclined to switch to alternative suppliers.

In spite of a tepid economic climate, our modelling reveals that the North American region will grow in 2019 ata rate of 6.0% and 4.9%, respectively for sales and volumes, in line with the expected expansion of the widerpharmaceutical industry. Over the next four years, further expansion is expected, at a CAGR of 6.0% forvolumes and 5.8% for value as the global economic expansion gathers pace and healthcare spending growthcontinues. QuintilesIMS predicts healthcare spending growth in North America to rise by 4.5% annuallythrough to 2021, driven mainly by healthcare reforms and population ageing. As a consequence, the region,and the USA in particular, will remain the biggest and most important for the sector.

The biggest risks to the sector will come form uncertainties around the world economy, evolving geopoliticaldevelopments in the US, Middle East and US - China relations. Furthermore, continuing consolidation andmanufacturing activity retrenchment over the coming years is not predicted to decelerate and will thereforeleave a major and possibly transformational effect on the North American region, effectively handing the batonto Asia Pacific as the number one player in the excipients space, and ultimately reducing North America’sshare of the tablet film coatings market to 27.0% by the year 2021 for volumes.

TABLET FILM COATINGS MARKET BY GEOGRAPHYNORTH AMERICA (USA, CANADA, MEXICO & RoNA) 2019 - 2021

EXHIBIT 22North America’s Tablet Film Coatings Market Size and Growth (2019 - 2021)

Sources: Quintiles IMS Global Medicines use in 2020; IMF - Regional economic outlook - Western Hemisphere; Annual CompanyReports, Expert Interviews, Proprietary Databases, Bricklane Innovations Research

32



EXHIBIT 23North America Top Three Country Profiles (USA, Canada and Mexico) (2019 vs 2021)

USAA positive outlook for US pharmaceutical industry is predicted. Pharmaceuticals spending growth is projectedto match health spending growth. And despite negative markdowns by IMF and OECD, economic growth isforecast to strengthen in 2019, ensuring the US remains the most important economy globally. We expect thetablet film coatings sector to remain equally buoyant. Given the size of the domestic market, we expect the USto continue accounting for the lion’s share of the North American tablet film coatings market but also for globalpicture. Aggregate share in 2019 will amount to 80.3% of the regions value (i.e $255.8 million) and 83.6% ofthe region’s volumes (6,876.1 metric tonnes) and remain so for the foreseeable future. By 2021, USA will haveexpanded to $308.6 million and 8294.5 metric tonnes, at a CAGR of 5.2 and 5.0%, respectively.

CanadaNorth of the border, despite the looming risks emerging from developments in the US trade agenda and theglobal economy, Canada’s economic growth is projected to grow at 2.0% by 2018, boosted by a slower paceof contraction in the resource sector and pick-up of activity in the rest of the economy. Healthcare spendinggrowth is also projected to remain strong, at 4.5%, with pharmaceuticals spending closely matching healthcare spending growth. Thus, as the number 10 largest market, the Canadian pharmaceutical market willremain highly viable, aided by a strong industrial base and closer integration with the USA. We estimateCanada to account for 728.8 metric tonnes and $ 24.7 million in 2019, growing to $29.53 million and 754.8metric tonnes in 2021 at a CAGR of 5.4 and 5.3%, respectively.

MexicoWith over 200 companies of different sizes, and generic penetration of approx. 80%, Mexico’s tablet filmcoatings market is estimated at 421.7 metric tonnes and $18.7 million in 2019, rising to 474.6 metric tonnesand $21.2 million in 2021, at a CAGR of 5.5 and 5.3%, respectively. The basis for this solid performance is aresilient Mexican economy that will continue to expand for the near term, albeit at a modest 2.7% as it resetsitself in the face of weak global trade, lower commodity prices and policy readjustment in the United States.Domestic demand will remain the main driver of economic activity. Thanks to the commitment from the currentgovernment, healthcare spending growth will continue on an upward trajectory, averaging 4.7% per year in2017 and 2018. The pharmaceutical sector will likewise remain resilient, maintaining its number four rank inthe Americas and number 11 globally, going by 2017 sales in excess of $11 billion, rising to $14 billion in 2021.


33

255.85

24.76

18.65

308.62

29.53

21.15

UnitedStates(USA)

Canada

Mexico

2019 2021

6,876.10

650.26

421.67

8,294.4

754.9

474.6

UnitedStates(USA)

Canada

Mexico

2019 2021



231.0240.7

251.3262.6

275.2289.5

4.1 4.24.4 4.5

4.8

5.2

0.0

1.0

2.0

3.0

4.0

5.0

6.0

0

50

100

150

200

250

300

2016 2017 2018 2019 2020 2021

Value Growth

Val

ue ($

milli

on)

Gro

wth

(rat

e %

)

6.46.7

7.07.3

7.78.1

4.24.4 4.5

4.85.1

5.6

1

2

3

4

5

6

0

1

2

3

4

5

6

7

8

9

2016 2017 2018 2019 2020 2021

Volume Growth

Gro

wth

(rat

e %

)

Vol

ume

(Met

ric T

onne

s ‘0

00)

Taking 2018 as a basis, Europe Middle East and Africa (EMEA) remains the second largest market for filmcoatings by value (28.6%) and third largest for volume (25.4%). In revenue terms, EMEA market size has nearlydoubled to $251.3 million and volumes by approx. 60% to 6,978.6 metric tonnes when compared to 2005 values(i.e $140.5 million and 4,080.2 metric tonnes). The top five important countries are Germany, France, Italy, UKand Spain owing to a strong domestic presence of several research-intensive and a host of genericmanufacturers. These countries will be responsible for 42.9% of the value ($107.9 million) and 49.0% (3420.3metric tonnes) of EMEA volumes. The leading suppliers/manufacturers in EMEA will be Colorcon (47.6% marketshare) followed by Sensient, Evonik and Seppic (market share of 12.5%, 9.8 and 4.5%, respectively).

Looking ahead, EMEA will continue to be dominated by research intensive customers, ensuring a highpenetration and good margins for suppliers with sales accounts with them. The other countries of interest areSwitzeland, Ireland, Denmark, The Netherlands and Belgium. Turkey and Central European countries, will be thefastest growing market within EMEA, with above-region growth rates at 5.2% year on year, through to 2021.

However, our modelling shows that EMEA will continue to lag behind the sector’s average growth rates owing tocontinuing economic difficulties and a dearth of domestic manufacturing growth across the region. Economicgrowth is broadly projected to remain subdued despite supportive monetary conditions, which will be continue tofoment a weak investment climate, pockets of unemployment, low demand and banking sector fragilities, forexample Italy. We therefore anticipate the picture to change very little over the next three years, as demonstratedby lacklustre CAGR values of 3.6% (revenues) and 3.8% (volumes), not helped by continued retrenchment ofmanufacturing activity and the sustained growth of AP. Finally, EMEA’s share of the tablet film coatings marketwill continue along the declining trajectory to 23.0% in 2021 for volumes, and 27.2% for revenues. That said, itremains an important region going forward.

TABLET FILM COATINGS MARKET BY GEOGRAPHYEUROPE MIDDLE EAST AND AFRICA (EMEA)

EXHIBIT 24Europe Middle East and Africa Tablet Film Coatings Market Size and Growth (2019 - 2021)


34



GermanyThe market for tablet film coatings in Germany is projected to grow from $32.32 million in 2019 to $38.90 millionin 2021 at a CAGR of 4.8%. Volumes will expand from 927.5 metric tonnes to 1106.1 metric tonnes at a CAGRof 4.4% over the same period. Continuing solid economic performance in 2019 and beyond, will underpin thisgrowth, aided by domestic consumption, investment and the federal government’s commitment to healthcareexpenditure above 11% of GDP, and a commitment to health care spending growth of 3.8%.

FranceThe French coatings market will be worth $22.65 million and 799.6 metric tonnes in 2019, growing to $25.7million and 914.0 metric tonnes in 2021. This is thanks to a large public sector at 57% of GDP and a high percapita medicines consumption of $300, backed by a highly productive pharmaceutical industry with revenuesin excess of €36 billion and a high uptake of film coatings. We expect this performance to remain strong, aidedin part by continued GDP growth recovery seen throughout 2018 and strong private consumption.

ItalyDespite projected low economic growth (0.4% in 2018 and 1.2% in 2019), the Italian pharmaceutical industrywill remain one of the largest in the world in 2019, ranking overall 7th, number 1 for exports (70% productionis exported) and number 2 in Europe for production volume. As such we project continued strong performancefor film coatings in 2019, coming in at $20.55 million and 735.5 metric tonnes, and growing to $23.9 million and850.6 metric tonnes by 2021 at CAGR of 3.8 and 3.6% respectively.

United KingdomIn 2018, the tablet film coatings market will rise to $17.80 million and 534.7 metric tonnes, growing to $ 20.8million and 625.5 metric tonnes at a CAGR of 4.0% and 4.1% by 2021, respectively. Although the pharmaceu-tical manufacturing sector is comparatively large at $18 billion with over 500 companies, the top 20 companiesaccount for more than 60% of production output. This, together with a comparatively lower proportion of soliddosage manufacturing, translates into a lower uptake of film coatings relative to the size of the industry.

SpainAfter a difficult period, pharmaceutical manufacturing is on the up again. In 2015, exports were €11.1 billionand are expected to grow annually at 7.5% through to 2020. However, government austerity measures stilllinger as do low drug prices and high usage of generic products. Accordingly, we expect growth of film coatingssector to remain lacklustre during the forecast period from $12.61 million to $14.70 million at a CAGR of 3.6%and volumes of 403.0 metric tonnes to 462.0 metric tonnes at a CAGR of 4.4%.

EXHIBIT 25Europe Middle East and Africa Top Five Country Profiles (2019 vs 2021)Sources: Quintiles IMS Global Medicines use in 2020; IMF - Regional economic outlook - Western Hemisphere; Annual CompanyReports, Expert Interviews, Proprietary Databases, Bricklane Innovations Research

35

32.32

22.65

20.55

17.80

12.61

38.90

25.70

23.90

20.80

14.70

Germany

France

Italy

UK

Spain

2019 2021

927.50

799.60

735.50

534.70

403.00

1,106.1

914.0

850.6

625.5

462.4

Germany

France

Italy

UK

Spain

2019 2021



170.9185.1

200.8

218.3

237.7

259.8

8.18.3

8.58.7

8.9

9.3

6

7

8

9

10

0

50

100

150

200

250

2016 2017 2018 2019 2020 2021Value Growth

Valu

e ($

milli

on)

Gro

wth

(rate

%)

Asia Pacific (AP), while a region of great diversity both culturally and geographically, is denominated by one thing:nearly two decades of economic growth are transforming the region into an economic powerhouse to the extentthat it now accounts for over 25% of global economic output. And despite China’s current economic slowdown,Asia pacific remains a key player in the global economy and is on track to deliver solid performance for the nearterm. By 2021, AP will account for nearly 50% of the world’s economic output!

The pharmaceutical sector, too, remains buoyant, helped by increasing private wealth and roll-out of publichealthcare programmes in several countries. The film coatings sector is one which AP has benefited from thiseconomic change, emerging as the sector’s engine for growth and is on track to register near double digit growththroughout the study period. Sales in 2018 reached $200 million and are expected to grow to $218 million in 2019before going on to hit $260 million in 2021. Growth of sales is projected to pitch at an average of 8.8% (5-yearCAGR of 7.0%) which will lead to an increase in the region’s market share from from 22.4% in 2018 to 24.4% in2021, ensuring it remains firmly third behind EMEA. However, in terms of volumes, 2017 was a pivotal year forAP because it overtook North America as the largest region at 8,000 metric tonnes (compared with NA’s 7,462metric tonnes). Based at current growth rates, AP will use 9,957 metric tonnes in 2019, rising to 12,624 metrictonnes in 2021 (5-year CAGR of 8.8%), equating to 35.1% of global output 2021.

The basis for this solid growth is the projected growth in annual healthcare spending across the region, which isexpected to average 6.6% between 2016-2020, with the strongest expenditure coming from India, and China,South Korea and Australia all expected to register growth of over 4%. In spite of its current economic situationand depressed healthcare spending, Japan, too, is expected to continue pulling its weight, remaining the thirdlargest pharmaceutical market by sales, after the USA and China.

TABLET FILM COATINGS MARKET BY GEOGRAPHYASIA PACIFIC (CHINA, INDIA, JAPAN, AUSTRALIA & RoAP)

EXHIBIT 26Asia Pacific Tablet Film Coatings Market Size (2019 - 2021)

Volume

Sources: Quintiles IMS Global Medicines use in 2020; IMF - Regional economic outlook - Asia and Pacific; Annual Company Reports,Expert Interviews, Proprietary Databases, Bricklane Innovations Research

36

7.28.0

8.9

10.0

11.2

12.6

10.110.5

11.2

11.8

12.412.8

7

8

9

10

11

12

13

14

0

2

4

6

8

10

12

2016 2017 2018 2019 2020 2021Volume Growth

Gro

wth

(rat

e %

)

Vol

ume

(Met

ric T

onne

s ‘0

00)



2,403.2

1,293.4

803.6

262.5

208.9

3,890.6

1,900.5

969.3

308.3

268.8

China (PRC)

India

Japan

Australia

South Korea

2019 2021

50.48

28.50

18.72

7.80

3.85

80.86

42.34

22.32

9.44

4.91

China (PRC)

India

Japan

Australia

South Korea

2019 2021

EXHIBIT 27Asia Pacific Top Five Country Profiles (2019 vs 2021)

ChinaChina, as the second largest pharmaceutical market, with sales forecasted to reach $180 billion by 2020, agrowth rate of 10.5% over 2016. Per capita pharmaceuticals sales are currently estimated at $78, equivalent to17% of healthcare costs. However, the market is highly fragmented and dominated by generics, which accountfor 80% of total sales. Demand for tablet film coatings is projected to grow from $50.48 million (2,403.15 metrictonnes) in 2019 to $80.85 million (3890.62 metric tonnes ) in 2021 at a CAGR of 12.8%.

JapanJapan is the third largest pharmaceutical market in the world. The market is estimated by the Ministry of Health,Labour and Welfare to exceed $92 billion in 2018, 66.6% of which is local production. Despite a challengingeconomy, the pharmaceutical market is still expected to grow, albeit slowly, due to the demands of an ageingpopulation. In 2019, film coatings demand will be $18.7 million and 800 metric tonnes, growing to $22.3 millionand 970 metric tonnes by 2021 at CAGR of 2.8 and 2.5% respectively.

IndiaThe Indian pharmaceutical industry, as the tenth largest by sales ($30 billion) and third largest by volumes, isprojected to grow to $55 billion by 2020 at 5-year CAGR of 14%. It has over 15,000 pharmaceutical producers ofdifferent sizes and capabilities, together contributing to a manufacturing output of $15 billion. Generics play animportant role in the Indian market (80% market share). In 2019, the film coatings market will reach $28.5 millionand 1,294 metric tonnes, and grow to $42.34 million and 1,999 metric tonnes by the year 2021.

AustraliaDespite a population of 24 million, Australia is ranked number 12 largest pharmaceutical market at an aggregatesize by sales of $32 billion. Healthcare spending, which is mainly public, is projected to reach $186 billion in 2018.With over 50 large multinational and over 300 local companies generating exports of $3.0 billion, the market fortablet film coatings market is projected to grow from $7.81 million and 262.50 metric tonnes in 2019 and reach $9.44 million and 308.25 metric tonnes in 2021, respectively at a CAGR of 5.8% and 5.7%.

South KoreaSouth Korea’s rapid economic growth has transformed the country into number 13/14 market for pharmaceuticals($18.1 billion in 2020, growth rate of 4.0%). With a per capita pharmaceutical sales of $301 there is an advanceddomestic pharmaceutical manufacturing industry, which is dominated by large generics producers. The tablet filmcoatings sector will grow at moderate pace, from a value of $3.8 million and volumes of 208.9 metric tonnes in2019 to $4.90 million and 268.78 metric tonnes in 2021, respectively at CAGR of 6.2% and 5.7%.

Sources: Quintiles IMS Global Medicines use in 2020; IMF - Regional economic outlook - Asia and Pacific; AnnualCompany Reports, Expert Interviews, Proprietary Databases, Bricklane Innovations Research

37



106.6113.7

121.4129.9

139.4150.0

6.46.6

6.87.0

7.3

7.6

4

5

6

7

8

9

0

50

100

150

2016 2017 2018 2019 2020 2021

Value Growth

Valu

e ($

milli

on)

Gro

wth

(rat

e %

)

3.43.7

4.04.3

4.6

5.01

7.1 7.27.5

7.8

8.28.5

4

5

6

7

8

9

10

0

1

2

3

4

5

2016 2017 2018 2019 2020 2021

Volume Growth

Gro

wth

(rat

e %

)

Volu

me

(Met

ric T

onne

s)

As the smallest market, the Latin American (LA) tablet film coatings sector is expected to see above-averagegrowth in the medium term against a backdrop of a resurgent regional pharmaceutical industry. In 2018, theregion’s revenues for film coatings are estimated to equal $121.19 million, a 100% increase over 2005 values.However, LA’s share of the global market in 2018 will be 13.8% (12.7% in 2005) and is not expected to changesignificantly by 2021 (14.1%) when it reaches a value of $150.0 million. In terms of tonnage, LA will use 3,961.6metric tonnes in 2018, rising to 5,013.6 metric tonnes in 2021, equivalent to a 5-year CAGR of 5.4%. This willtranslate into market share of 14.2% (both in 2018 and 2021), ensuring Latin America remains the smallestmarket for the period. Brazil, as the region’s largest pharmaceutical market and a major player on the worldstage, will also be the region’s most important market, and account for nearly one fifth of the region’s total valueand volumetric consumption, and represent the main engine for growth for Latin America. Other countries ofsignificance, however, are Argentina, Colombia, Chile and Peru.

Looking ahead, after years of economic stagnation, LA is expected to return to economic growth and incomeconvergence with OECD countries. The health sector is projected to see meaningful gains as a result of ongoinginvestments and moves to widen access to healthcare in light of growing needs of rapidly ageing populations andchanging lifestyles. As a result, pharmaceutical sales are expected to grow at rates of between 8 and 12% acrossthe region, which will see demand in the likes of Colombia, Chile and Peru, hitherto nominal players, grow, evenafter taking into account variances in economics, resource base, healthcare systems and approach topharmaceuticals use. However, Venezuela remains unpredictable and we have discounted it in our projectionsfor the entirety of the study period.

That said, there are inherent risks to LA’s growth, which mainly emanate from the legacy of weak fundamentals,and in particular, a relatively small demand baseline to build upon, deeply entrenched income inequalities,decades of political instability, lack of competitiveness and volatility of commodity prices, that will continue to bea drag on the region’s prospects going forward. We therefore expect LA to remain as the smallest market for filmcoatings through to 2019/2021.

TABLET FILM COATINGS MARKET BY GEOGRAPHYLATIN AMERICA (INCLUDING THE CARIBBEAN)EXHIBIT 28Latin America Tablet Film Coatings Market Size (2019 - 2021)

Sources: Quintiles IMS Global Medicines use in 2020; IMF - Regional economic outlook - Latin America; Annual Company Reports,Expert Interviews, Proprietary Databases, Bricklane Innovations Research

38



EXHIBIT 29Latin America Top Five Country Profiles (2019 - 2021)

BrazilBrazil’s tablet film coatings sector is projected to grow from $26.22 million in 2019 to $34.11 million in 2021 at aCAGR of 6.7%, representing volumes of 903.5 metric tonnes and 1185.7 metric tonnes at a CAGR of 7.1%.Pharmaceutical sales are expected to exceed $30 billion by 2019, making the country number 8 largest marketin the world. The government’s commitment to healthcare access together with increased participation bymultinational companies in the local scene will help drive usage and market growth.

ArgentinaDiscounting Venezuela, Argentina is the second largest pharmaceutical market in LA. Although persistentinflation and economic deceleration have eroded past gains, the pharmaceutical sector will achieve growth of 5- 6% in 2018 and 2019 with sales topping $6.9 billion. Thanks to a very well-developed local manufacturingsector, with a share of 80% of market value by volume, coatings usage is expected to grow from $6.42 million(209.5 metric tonnes) to $8.04 million (256.6 metric tonnes) at a CAGR, respectively of 5.5% and 5.3%.

ColombiaSound macro-economic management and investment have transformed Colombia into a mini regionalpowerhouse. An improving economy has led to an increase in demand for drugs; thus pharmaceutical sales areexpected to top $4.2 billion in 2020. With several multinational and local companies supplying local and regionalexport markets, we forecast robust demand for film coatings in 2019, which will come in at $4.25 million and148.55 metric tonnes, growing to $6.18 million and 215.98 metric tonnes by 2021 at CAGR of 9.8.

ChileIn 2019, the film coatings market will be worth $2.18 million and 73.7 metric tonnes and grow to $3.13 millionand 106.6 metric tonnes in 2020 at a CAGR of 9.5% and 9.6%. Chilean pharmaceutical sales will continue to bethe fastest growing in the region, at 10.5% reaching $3.5 billion in 2017. Economic growth is projected to edgeup over 2017/2018 figures as the world and regional economies continue to recover and pick up.

PeruAlthough Peru is the smallest player market here, it offers the greatest growth potential thanks being one of thefastest growing economies in Latin America. GDP growth is expected to continue at 4.5% GDP through to 2020with pharmaceutical sales forecast at $1.6 billion, expanding to $2.5 billion by 2020. The tablet film coatingssector will be worth $2.18 million in 2019 and expand to $3.13 million by 2021 at a CAGR of 9.6%. Volumes willbe 73.67 metric tonnes in 2019 and expand to 106.31 metric tonnes by 2021 at a CAGR of 10.4%.

[1]Sources: Quintiles IMS Global Medicines use in 2020; IMF - Regional economic outlook - Western Hemisphere; Annual CompanyReports, Expert Interviews, Proprietary Databases, Bricklane Innovations Analysis

39

106.3

154.0

215.9

256.6

1,188.7

73.7

105.2

148.6

209.5

903.5

Peru

Chile

Colombia

Argentina

Brazil

2019 2021

3.13

4.65

6.18

8.04

34.11

2.18

3.12

4.25

6.42

26.22

Peru

Chile

Colombia

Argentina

Brazil

2019 2021



Chapter 4 mainly aims is to provide a concise strategic audit of the different companiesoperating in the tablet film coatings space as a means of measuring each company’s past,current and anticipated performance.

CHAPTER 4

COMPANY PROFILES

INTRODUCTIONThe following companies are reviewed:● Ashalnd● Biogrund GmbH● Colorcon - BASF● Corel Pharma Chem● Eastman Chemical Company● Evonik AG● FMC Corporation● Ideal Cures● Kerry Group (Sheffield Biosciences)● Roquette Freres● Seppic● Sensient Technologies● Wincoat Colours and Coatings

For each company profile the following topics are presented:● Overview, covering an introduction to the company and its organization● Products and services offered● Financial overview (mainly turn over and size of the coatings business),● Business strategy,● Resources and capabilities, including SWOT analysis and direct competitors,● Competitive advantage analysis, which includes a score of competitiveness● Recent developments● Contacts

40


ASHLAND

OVERVIEW

Ashland Inc., is a long-established American Fortune 500 corporation headquartered in Covington, Kentucky,U.S.A., The company is a founding member of International Pharmaceutical Excipients Council and a premieringredients vendor. The company manufactures and distributes specialty chemicals, excipients and film coatingsto a wide variety of industrial sectors.

The Specialty Ingredients unit is the commercial arm under which pharmaceutical sales fall. This unit isresponsible for its range of well-known cellulosic and vinyl pyrrolidone polymer brands, which are currently in useas tablet binders, sustained release agents, superdisintegrants, solubilizers, and fully formulated ready-to-usefilm coating systems.

Ashland’s market position is underpinned by a global network of sales, distribution and technical serviceinfrastructure that supports operations in over 100 countries around the world. Cellulosic and vinyl pyrrolidonebase polymers are manufactured at Calvert City, Kentucky, Parlin, New Jersey, Hopewell, Virginia, and TexasCity, Texas. Film coatings are elaborated from Wilmington, Delaware.

The company also operates pharmaceutical centers of excellence in Wilmington, DE, and Hyderabad, India, andregional supporting laboratories in Düsseldorf, Germany; Istanbul, Turkey; São Paulo, Brazil; Buenos Aires,Argentina; and Shanghai, China.

FINANCIAL ANALYSIS

Ashland’s revenues for 2018 fiscal year were expected to be $3.7 billion, with the Specialty Ingredients businessunit accounting for revenues in the region of $2.5 billion. Out of this, sales to pharmaceutical customersrepresented a 16% contribution. Group EBITDA was $683 million.

We estimate that the tablet film coatings portfolio is around $50 ± 15 million, approx. 40% of which is generatedin the USA, 30% in EMEA, 15% in AP, with the remainder coming from RoW.

Based on these figures, Ashland’s share of the global tablet film coatings is estimated at 8 - 9%.

PRODUCTS

Ashland’s pharmaceutical film coating systems are currently marketed under a single corporate identity –Aquarius™. The company offers the following products:

Non-functional, non-modifying● Aquarius™ Preferred HSC, Aquarius™ Genesis, Aquarius™ Nutra TF● Aquarius™ HSP● Aquarius™ Prime● Aquarius™ Prime LS

Functional, non-modifying● Aquarius™ Preferred MG● Aquarius™ Preferred TG● Aquarius™ Preferred OG

Functional, modifying● Aquarius™ Control ENA● Aquarius™ Control SRX

41


BUSINESS STRATEGY

Ashland has been focusing on expanding its manufacturing facilities in a bid to increase its production capacityin anticipation of growth in demand of excipients. Currently, the company has 93 manufacturing facilities and 38R&D/Tech centres, which are primarily located in the Americas, Europe, and Asia-Pacific. Film coatings aremanufactured in the USA only. There are no plans for expansion of film coating manufacturing capabilities intoother regions.

Ashland mainly uses both direct to the consumer channel strategy. We don’t expect this to change in the nearbyfuture. Thanks to a strong manufacturing and distribution footprint, the company is ranked among the top 5excipients companies in the world. This global reach allows the company to meet diverse market needs, whichhas enabled it to strengthen its market position.

While Ashland has a highly profitable position in the wider excipient market, the strategy of followership used forfilm coatings business has yet to deliver significant market share growth. The acquisition of InternationalSpecialty Products enabled it to double the size of the business and also brought with it valuable new resourcesand capabilities, which allowed it to better capitalize on opportunities. The recent acquisition of PharmachemLaboratories will bring much added scale to the nutraceutical business line, enabling it to grow into this rapidlygrowing sector.

RESOURCES AND CAPABILITIES ANALYSIS

Ashland’s main strength is its highly skilled polymer scientists who are best positioned to translate their skills intosolutions for pharmaceutical customers. To this end, Ashland provides training and technical materials to supportcustomer’s projects and aims to support them extract maximum value out of their products. The service coverswork on novel active pharmaceutical ingredients, and reformulation of an immediate-release product for sus-tained or controlled release, or developing of generic formulations. Being a founding member of the InternationalPharmaceutical Excipients Council (IPEC) , Ashland is well versed on regulatory developments, such as QbD,Falsified Medicines Directive requirements, etc, allowing it to serve its customers reliably.

SWOT ANALYSIS

Opportunities● Impending expansion of the global pharmaceutical market ($200 billion in new NCEs) opens up opportuni-

ties to gain market share over the market leader● Expansion into emerging markets (India, China, Russia, etc), or promising product niches through acquisi-

tions and/or mergers

Threats● Regulatory and economic headwinds, including deteriorating business confidence● Competition, domestically and worldwide, especially low cost manufacturers from India and China, with

similar product/service mix but at a substantial price discount.

DIRECT COMPETITORS

● Colorcon● Dow - Dupont● Evonik AG

42

Weaknesses● Focus on commoditized products● Limited IP● A lack of a robust defensive strategy● Asia Pacific & other emerging economies

Strengths● Strong brand● Strong scientific base (polymer sciences)● Vertical integration (polymers)● Pharmachem acquisition (nutraceuticals)


COMPETITIVE ADVANTAGE ANALYSISAshland’s sources of competitive advantage, analysed in terms of resources and internal capabilities, aredescribed below. Accordingly, Ashland was scored 300 out of 800 (see Exhibit 28).

CAPABILITIES KEY PERFORMANCEINDICATORSSTRATEGIC RELEVANCE WEIGHT

(0-10)SCORE(0-10)

CorporateFunctions

No. of ProfessionalManagers

Corporate Governance forProductivity 4 7

R&D Strength Record of R&D andCommercialization

Critical for EnterpriseRenewal 7 2

OperationalExcellence

Flexibility, Agility &EfficiencyCritical for Value Capture 6 5

MarketingExcellence

Brand PromotionEffectiveness

Ability to CommunicateValue Proposition 5 2

Customer Service No. of Application Labs inMajor Markets

Essential for CustomerConfidence 9 3

RESOURCES KEY PERFORMANCEINDICATORSSTRATEGIC RELEVANCE WEIGHT

(0-10)SCORE(0-10)

Factories &Location, etc

No. of Factories/Offices inNA, EMEA & APProximity to Major Markets 5 4

Recruitment Skilled & Motivated Staff,Low Turnover

Ability to Attract & RetainStaff 5 7

Staff Skills &Experience

Strength of Technical &Commercial Resources

Knowledgeable &Customer-oriented Staff 8 8

ProprietaryTechnology

No. of Patents Critical toPast/Future Success

Patents, Trademarks & otherIP 5 2

DistributionNetwork No. of Distribution RoutesGlobal Access to Buyers 5 2

Brand Company Reputation as aFC SupplierVisibility & Trustworthiness 5 4

Finances Investment into R&DAbility to FinanceInnovation, Acquisitions, etc 5 5

Partnerships &Structures

No. of Collaborations/JVs,Alliances, etcAbility To Access Knowledge 5 1

43

EXHIBIT 30Ashland Inc., Resources and Internal Capabilities Analysis



RECENT DEVELOPMENTS

February 2015EXCiPACT Certification for Calvert City, Kentucky facility.

May 2017Divestiture of Valvoline business (IPO into stand-alone business)

May 2017Acquisition of Pharmachem Laboratories

May 2018Launch of Aquarius™ Nutra TF

October 2018Launch of Aquarius™ Genesis

COMPANY CONTACTS

50 E. RiverCenter Blvd.P.O. Box 391Covington,KY 41012-0391U.S.

Tel: 1-859-8153-333Fax: 1-859-8155-188

Website: www.ashland.com

44


Overview

Founded in 1865, BASF is the world’s largest multinational chemicals, plastics, crop protection and oil andperformance products company with a staff base of 115,500 employees. The company is headquartered in theindustrial town of Ludwigshafen, Germany, with presence in 80+ countries.

BASF operates through thirteen divisions, which are divided into five segments; chemicals, performanceproducts, functional materials and solutions, oil and gas, and agriculture solutions. Pharmaceutical ingredientsand excipients are delivered through BASF’s Pharma Ingredients and Services business unit, which itself fallsunder the performance products segment.

BASF’s Pharma Ingredients and Services business unit operates the production and technical centres on fourcontinents as well as a global network of sales representatives in through its subsidiaries in more than 100countries. Kollicoat®, the corporate brand name for the company’s pharmaceutical film coating products, areproduced in Ludwigshafen, where the company also has fully equipped R&D laboratories and technical servicecentre. Further technical service centres are located in Tarrytown, USA, São Paulo, Brazil, Mumbai, India andShanghai, China.

BASF

PRODUCTS

BASF’s tablet film coating systems are currently marketed under a single corporate identity – Kollicoat™. Thecompany offers the following products:

Non-functional, non-modifying● Kollicoat® IR

Functional, non-modifying● Kollicoat® Protect● Kollicoat® Smartseal 30D

Functional, modifying● Kollicoat® MAE 30DP● Kollicoat® MAE 100P● Kollicoat® SR 30D

FINANCIAL ANALYSIS

In 2017, BASF had revenues in excess of €64.5 billion and income (EBITDA) of €12,5 billion. In 2018, revenuesare expected to increase to between €66,5 to 68.5 billion, representing an average (annualised) increase of 3%across the board.

BASF’s performance products business approximately 25% of BASF revenues (or €16,6 billion). Official companyreports attribute 13% of performance products division revenues to pharmaceutical actives and excipients.

From a geographical perspective, the company’s home market (Europe) is its largest at 45%. North America andAsia Pacific,account for 24 and 22% while the RoW contributes just under 10%.

With no further breakdown about the division’s tablet film coatings portfolio, we’ve resorted to using our modelsto estimate BASF’s film coatings business at between €5 ± 2 million.

45



BASF’s core competency is a deep understanding of chemistry and customer value chains and using them asdrivers to create functionalised materials and solutions. Presence across the globe, a highly collaborative andoutward-looking culture, coupled with a global workforce of 100,000+ employees have served BASF well,enabling it to consistently outperform its peers across many indicators.

However, the company has not been able to translate this success to the film coatings sector and lags behindits competitors. Diseconomies of scale and a lack of a workable operational model necessary for requiredcustomer intimacy mean that the BASF does not have deep customer knowledge as well as insights into theirneeds, leading to chronic under-performance.

SWOT ANALYSIS

Strengths● Number 1-3 market position in 75% of business segments it operates● Strong focus on innovation and collaboration with all stakeholders● Strong earnings & high cash flow generation● Diversified product covering agriculture, automotive, energy, healthcare, & construction● Concept of Verbund● Economies of scale● Diversified workforce

Weaknesses● Increasing commoditization of key products and competition from low cost producers● No significant solutions in health and wellness sector (plant extracts, nutraceuticals, etc)● Low expenditure on R&D compared with peers● Potential diseconomies of scale● Low profitability, especially commoditized products


ties to further cement its position as a market leader● Expansion into emerging markets of India, China, Russia, etc, or promising product niches through

acquisitions and/or mergers

Threats● BASF's business is subject to numerous regulations.● Increasing competition, domestically and worldwide

DIRECT COMPETITORS

● Evonik AG● Ashland Inc.● Dow - Dupont● Colorcon

BUSINESS STRATEGY

BASF is one of the leading players in the pharmaceutical excipients market, a position it has achieved throughcontinuous innovation, market orientation, and long standing partnerships with customers and researchorganizations. BASF’s portfolio management strategy means that the firm focuses on attractive segmentswhere it can achieve clear market leadership and strong earnings. To excel operationally, BASF has also beenfocusing on extending its global presence in order to ensure a reliable supply chain for addressing the demandsfrom its customers across the globe.

46


COMPETITIVE ADVANTAGE ANALYSIS

BASF’s sources of competitive advantage, analysed in terms of resources at its disposal and internalcapabilities, are described below. Accordingly, BASF was scored 581 out of 800 (see Exhibit 29).


(0-10)SCORE(0-10)

















(0-10)SCORE(0-10)

CorporateFunctions







MarketingExcellence





47

EXHIBIT 31BASF SE Resources and Internal Capabilities Analysis



COMPANY CONTACTS

Carl Bosch Str. 3867056 Ludwigshafen am RheinGermanyTel: 49-621-6004-9Fax: 49-621-6042-525

Website: www.basf.com

RECENT DEPLOYMENTS

May 2016Partnership with Colorcon Inc for marketing and distribution of Kollicoat™ coatings portfolio

April 2016Launch of Kollicoat™ MAE 100-55 coating system

48


OVERVIEW

Biogrund is a company that was founded in 1999 to manufacture and market a range of tablet film coatings andexcipients for the pharmaceutical and allied sectors. It is headquartered in Hünstetten, Germany but withadditional manufacturing facilities in Sterling, Virginia, USA.

With sales presences across Europe and USA, Biogrund operates through three divisions: film and sugarcoatings, tableting excipients, and colours. These materials are sold to pharmaceutical and nutraceuticalcustomers worldwide.

By focusing on customizing solutions to small and medium customers in both the pharmaceutical and nutraceu-tical sectors, Biogrund has been able to build strong sales traction over the last 10 years. Currently, the firm alsoprovides assistance in all aspects of pharmaceutical development as well as optimization of film coatingprocesses, scale-up and training.

PRODUCTS

Biogrund’s tablet film coating systems are currently marketed under the following brand identities that coverthese product classes:

Non-functional, non-modifying● AquaPolish®● AquaPolish® PVA● AquaPolish® G● AquaPolish® HS● AquaPolish® STA● AquaPolish® PRO● BonuWax®● BonuWet®● BonuLac®● IsuPolish®● IsuPolish® FSC● IsuPolish® S

Functional, non-modifying● AquaPolish® MS● AquaPolish® TC● AquaPolish® OM

Functional, modifying● AquaPolish® R● AquaPolish® E● AquaPolish® ME

FINANCIAL ANALYSIS

Biogrund’s estimated total revenues for 2018 are projected to be in the region of $6.5, an increase of 7% whencompared to the company’s revenue in 2017. We attribute this strong growth in revenue is to an expandedproduct mix, expansion into the US, and investment in active promotion.

BIOGRUND GmbH

49



Biogrund’s core competency is its ability to offer individualised solutions to selective customers and collaboratingwith them to speed up market entry. The company is very innovative and has been able to introduce its own lineof high performing products for pharmaceutical and nutraceutical customers. The majority of these products aredesigned on the concept of “ready-to-use” design.

However, Biogrund faces competitive pressures from low cost manufacturers, especially within the tablet filmcoatings business. Indian producers, in particular, have entered Europe, either directly or through distributors andare increasingly encroaching on its home markets in Europe. This will have the effect of depressing margins and,for the long-term, volumes.

SWOT ANALYSIS

Strengths● Diversified product mix● Highly successful “ready-to-use” excipients business line● Innovative and entrepreneurial culture● Knowledgeable and skilled workforce● Small and agile enterprise

Weaknesses● Increasing commoditization of key products & competition from low cost producers● Low expenditure on R&D compared with peers● Lack of economies of scale● Limited exposure to Asia Pacific, especially India and China

Opportunities● Impending expansion of the global pharmaceutical market● US market● Expansion into emerging markets e.g Russia, Brazil, Indonesia, etc.

Threats● Numerous regulations● Slowing down of Europe (Home market)● Increasing competition, domestically and worldwide.

DIRECT COMPETITORS

● Kerry (Sheffield Biosciences)● Ideal Cures● Corel Pharma Chem

BUSINESS STRATEGY

Although Biogrund is a small player in the tablet film coatings sector, it has nevertheless been able to build abusiness based on a strategy of differentiation and cost leadership. The company achieves differentiation througha strategy of personalizing solutions to individual customers. Cost leadership is achieved through a low cost basewhile working to build volumes and market share in its home market and in the nutraceuticals segment.

Products and solutions are modelled along those of Colorcon, with additional solutions targeted at segmentsvacated by Colorcon (for instance, sugar coatings and shellac-based products).

50Tablet Film Coatings Market: Global Forecasts 2019- 2021


Biogrund’s sources of competitive advantage, analysed in terms of resources and internal capabilities, aredescribed below. Biogrund was scored 215 out of 800 (see Exhibit 30).


(0-10)SCORE(0-10)

















(0-10)SCORE(0-10)

CorporateFunctions







MarketingExcellence





51

EXHIBIT 32Biogrund GmbH Resources and Internal Capabilities Analysis



RECENT DEVELOPMENTS

● Nil

COMPANY CONTACTS

Neukirchner Str. 5Hunstetten, 65510GermanyPhone: 49-6126952630Fax: 49-61269526333

Website: www.biogrund.com

52


OVERVIEW

Colorcon, Inc. is a privately owned company with headquarters in West Point, Pennsylvania, U.S.A. The companyis develops, manufactures and markets a range of excipients, film coating systems and modified-releasesolutions aimed for the pharmaceutical and nutritional sectors. As a privately-held entity, Colorcon does not availits financial information publicly. However, based on our own estimates, the company generated revenues in theregion of $750-850 million in 2018.

Colorcon operates through four business units, namely, immediate release film coatings and excipients, modifiedrelease technologies, printing inks and colours, and, nutritional film coatings, food and confectionery. Coatingsoffered by the company cover immediate-release coatings, enteric-release coatings, sustained-release coatingsand controlled-release coatings and nutritional film coatings.

Colorcon maintains a presence through its 18 technical service laboratories, manufacturing facilities, andbusiness offices in the U.S., U.K., Brazil, Argentina, Colombia, France, Germany, Turkey, China, Japan, India,Mexico, Singapore, and Hungary. In addition, the company has sales offices in many other counties in L.America, Europe, Middle East, and Asia Pacific regions.

PRODUCTS

Colorcon’s tablet film coating systems are currently marketed under several brand identities as detailedbelow:

Non-functional, non-modifying● Opadry®● Opadry® II (30-59 Series)● Opadry® II (85 Series)● Opadry® QX● Opadry™ fx● Opagloss™

Functional, non-modifying● Opadry™ AMB● Opadry™ AMB II● Opadry™ TM

Functional, modifying● Surerlease®● Opadry™ CA● Opadry™ EC● Enteract®● Opadry® Enteric

COLORCON INC

FINANCIAL ANALYSIS

Colorcon is a privately owned entity and does not avail financial information to the public. Out of theestimates sales revenues of between $750± 100 million in 2018. Of this, we attribute $500 ± 50 millionto the firm’s film coatings business, where it enjoys a market share of 55%.

53

● Acryl-EZE, Acryl-EZE II● Ethocel® HP● Nutrateric● Sureteric● Surerelease

● Opalux®● Nutrafinish®● Nutrafinish® Titanium Free● NutraPure™● Opadry® EZ


BUSINESS STRATEGY

Colorcon is one of the leading players in the excipients market. The company has strengthened its position in themarket through acquisitions, continuous innovation, education, new market expansion activities, and longstanding relationships with its key customers and research organizations.


Colorcon’s main strength lies in its ability to combine a strong entrepreneurial culture and rational product renewalwhich have allowed this company to consistently remain the undisputed market leader in the film coatings sector.The company has, in recent times, transformed itself into a “drug development” company as a strategy fordisrupting the current business model which is heavily pivoted towards products rather than services/solutions.

However, Colorcon inhabits a sector that is increasingly competitive, particularly in the commoditized productsegment and in the emerging markets of Asia, where low cost producers and niche players are graduallybecoming noticeable and eroding market share. Going forward, Colorcon will need to focus on what it does best,namely, innovation but combine this with fast response times (a problem we found when interviewing customers)to consolidate its leadership position.

SWOT ANALYSIS

Strengths● Wide customer base, very strong brand & consistent economic performance● Strong supply chain and distribution channel● Highly knowledgeable & experienced employees● Strong partnership with universities, research institutes & prime customers● Highly innovative and a strong entrepreneurial culture

Weaknesses● Increasing commoditization of key products● Patent expiry of key products & a clear lack of alternative defensive strategies● Lack of vertical integration for raw material inputs & risk of price fluctuations

Opportunities● Impending expansion of the global pharmaceutical market ($200 billion in new NCEs) opens up

opportunities to further cement its position as a market leader● Expansion into emerging markets of India, China, Russia, etc, or promising product niches through

acquisitions and/or mergers

Threats● Colorcon's business is subject to numerous regulations.● Increasing competition, domestically and worldwide, threatens Colorcon's bottom line because they, for

the most part, offer the same types of products and services but often at a substantial price discount.

DIRECT COMPETITORS

● Ashland Inc.● Evonik● Sensient Pharma● Kerry (Sheffield Biosciences)● Ideal Cures

54



Colorcon’s sources of competitive advantage, analysed in terms of resources and internal capabilities, aredescribed below. Accordingly, Colorcon was scored 541 out of 800 (see Exhibit 31).


(0-10)SCORE(0-10)

















(0-10)SCORE(0-10)

CorporateFunctions







MarketingExcellence





55

EXHIBIT 33Colorcon Inc., Resources and Internal Capabilities Analysis



COMPANY CONTACTS

Global HeadquartersColorcon, Inc.275 Ruth RoadHarleysville, PA 19438Tel: 215-256-7700Fax: 215-256-7799Website: www.colorcon.com

RECENT DEVELOPMENTS

February 2018Launch of Opadry® EZ

June 2016:Acquisition of Sugar spheres business of Paulaur Corporation

May 2016:Launch of formulation/applications laboratory in Colombia

Launch of new film coatings manufacturing plant in Brazil

Partnership with BASF film coatings business

April 2016:Launch of a high productivity, high performance film coating, Opadry QX

March 2015:Launch of Opadry AMB II

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Corel Pharma Chem is an Indian-based manufacturer of acrylic-based polymer excipients and other finechemicals for the pharmaceutical, nutraceutical and cosmetic sectors. The company was established in 1990 andis headquartered at Ahmedabad, India. Initially the company set itself to manufacture acrylic-based excipientsand fine chemicals (methacrylic acid copolymers and carbomers) for the pharmaceutical and allied sectors. It wasinfact one of the first Indian companies to produce acrylic-based excipients. Over the years, Corel has expandedits offering beyond acrylic chemistry to include poyloxyethylenes, castro oil derivatives and polycarboxylic acids.

CoreCorel’s main target market is South Asia and the Middle East, however, its products are also sold to a smallextent in over 30 other countries through agents and distributors. As a result, the company has expanded itsrange of offerings beyond acrylic chemistry to include

Corel Pharma Chem is ISO 9001, WHO GMP and EXCiPACT accredited. Products are manufactured inAhmedabad, India, where there is also an analytical laboratory, R&D laboratory and technical service laboratory.A recent alliance with Azelis as a channel partner allows Corel to gain exposure to Europe and North America,which will enable the company gain valuable access to customers outside of Asia.

PRODUCTS

As a primary manufacturer of acrylic polymers, Corel Pharma Chem offers both drug delivery polymers andready-to-use film coating systems. Currently, the company’s tablet film coating systems are marketed underseveral brand identities as follows:

Non-functional, non-modifying● Colorcoat™ FC4● Colorcoat™ SC4● Colorcoat™ FL4● Colorcoat™ GLO● Acrycoat E● Colorcoat™ PEARL

Functional, modifying● Colorcoat™ EC4● Acrycoat® L100● Acrycoat® L30D● Acrycoat® S100● Acrycoat® FS30D● Acrycoat® E30D● Acrycoat® E40D● Acrycoat® RL● Acrycoat® RS● Nutracoat EC25D

FINANCIAL ANALYSIS

Corel Pharma Chem is a privately held company and does not release its financial affairs to the public. However,based on our own research, modelling and interviews with agents/distributors, we estimate that in 2017, thecompany generated revenues in the region of $2.5 and $2.8 million, 80% of which were from its home market ofAsia. We expect revenues for 2018 to remain in this region.

COREL PHARMA CHEM PVT. LTD

OVERVIEW

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Functional, non-modifying● Colorcoat™ MB4● Colorcoat™ EC4● Colorcoat™ SW4


BUSINESS STRATEGY

Corel has ambitions to be a major developer and supplier of film coatings, primarily based on the acrylic polymerplatform, which will be complemented with fully-formulated products formulated from conventional polymers.Products are produced to meet international quality standards, including USP – NF, EP and JP. A state-of-the artR&D ensures the company undertakes research into polymers with the aim of developing the next-generationproducts with added functionality.

Although the company is predominantly Indian based, alliance with distribution houses (IMCD and Azelis) hasallowed Corel to gain access to international markets, such as Europe, North and South America. As a low costmanufacturer, Corel mainly competes on price, and together with flexibility to meet customer requirements, thecompany has been able to build a viable business


Corel’s core competency is its technical knowledge of acrylic. It has deployed these capabilities as a lever toproduce lower cost excipients for its home and international customers. Feedback from the market indicates thatAcrycoat and Colorcoat grades perform just as well as leading brands (e.g Eudragit® and Opadry), to which Corelseeks to compete against.

Going forward, partnership with experienced chemicals agents is key, however, if Corel is to accelerate marketentry into lucrative accounts in Europe and North America. As is the case with similar companies domiciled inemerging economies, understanding the unique service demands of European and American customers will becritical, otherwise exposure to international end-markets without matched service can backfire and erode brandequity.

SWOT ANALYSIS

Strengths● Low cost advantage● Broad product range● Vertical integration of acrylic polymers● Growing list of impressive customers

Weaknesses● Might struggle to match service standards expected from international standards● Low brand equity internationally● Small size - limited capacity● Perception of risk to supply security due to concentration of manufacturing in India

Opportunities● Impending expansion of the global pharmaceutical market● Expansion into emerging markets e.g Russia, Brazil, etc.● Anticipated expansion of healthcare in India

Threats● Management transition from founders to professional

DIRECT COMPETITORS

● Ideal Cures● Kerry Group● Wincoat Colours & Coatings

58



Corel’s sources of competitive advantage, analysed in terms of resources at its disposal and internal capabilitiesare described below. Accordingly, Corel was scored 116 out of 800 (see Exhibit 36).


(0-10)SCORE(0-10)

















(0-10)SCORE(0-10)

CorporateFunctions







MarketingExcellence





59

EXHIBIT 34Corel Pharma Chem Resources and Internal Capabilities Analysis



RECENT DEVELOPMENTS

● July 2016: EXCiPACT Certification

COMPANY CONTACTS

COREL Pharma ChemGota, Ahmedabad - 382 481Gujarat – IndiaPhone:+ 91 - 79 - 27665556 / 58 / 59Fax:+ 91 - 79 - 27661754, 27682653

www.corelpharmachem.com

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OVERVIEW

Eastman Chemical Company is a global specialty chemical company that manufactures and sells a broadrange of advanced materials, chemicals and fibres for use across many sectors. The company begun life in1920 with the aim of manufacturing chemicals for Kodak’s photography business. Today, Eastman is a highlysuccessful outfit in its own right, with multiple manufacturing sites across the Americas, Asia and Europe, andwith market access to over 100 countries. The company’s stock is publicly traded on the NYSE and has itscorporate headquarters in Kingsport, Tennessee.

Eastman Chemical Company operates through five divisions, namely Additives and Functional Products;Adhesives and Plasticizers; Advanced Materials; Fibres; and Specialty Fluids and Intermediates that servemany end markets, including transportation, building, tobacco, food and agriculture, consumables, industrialchemicals, and health/medical sectors. The excipients portfolio, which includes pharmaceutical film coatings,falls under the Advanced Materials division. In 2017, Eastman had revenues of $9.6 billion.

PRODUCTS

Eastman’s film coating systems are currently marketed under the Eastman™ brand identity as detailed below:

Non-functional, non-modifying● Nil

Functional, non-modifying● Eastman™ C-A-P Cellulose Acetate (CA-320S NF/EP)

Functional, modifying● Eastman™ C-A-P Cellulose Ester NF (Pellets)● Eastman™ C-A-P Cellulose Ester NF (Powder)● Eastman™ C-A-P Cellulose Acetate (CA-320S NF/EP)● Eastman™ C-A-P Cellulose Acetate (CA-398-10 NF/EP)● Eastman™ C-A-P Cellulose Butyrate (CAB-171-15 NF)

FINANCIAL ANALYSIS

In 2017, Eastman’s revenues were $9,6 billion and a net income of $1.4 billion. Basing on 2018 Q4 forecasts,revenues for 2018 will top $10 billion. The North American market accounts for 45% of Eastman’s revenues.The Advanced Materials business unit is responsible for 25% of the firm’s evenues. When decomposed bysector, health and personal care markets accounted for 7% sales contribution, which is equivalent to approxim.$670 million. There is no further information on specific sub-segments, making it difficult to precisely determinethe size of the tablet film coatings portfolio.

However, based on our own in-house modeling and interviews with main accounts, we estimate Eastman’stablet film coatings business to be in region of $5 ± 2 million, approx. 40% of which is generated in the USA,30% in EMEA, 15% in LA and the reminder from the rest of the world.

EASTMAN CHEMICAL COMPANY

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As a global specialty chemical company that produces a broad range of products, Eastman strategy is based oninnovation and collaboration with industry stake holders and strategic partners. Using a market driven approach,Eastman uses its organic chemistry insight, skilled workforce and technology to deliver products and solutionswhile maintaining a commitment to safety and sustainability. Within the film coatings sectors, the companypursues nichemanship based around cellulose acetate polymer which finds application as an enteric andsustained release coating.


Eastman’s Chemical Company’s core competence is using fundamental coating science based on celluloseacetate to produce premium film coatings for the pharmaceutical. With 50+ years of experience in supplyingproducts to the medical and pharmaceutical industry under its belt, Eastman understands the demands of itscustomers and is able to use this insight to provide total solutions and deliver value due to its broad portfolio ofproducts and solutions.

In our analysis, Eastman’s film coatings business potential has not been fully tapped and there’s thereforeenormous latent potential for further growth, provided the right product/service mix and channel strategy isdeveloped. We would recommend partnering with an established player with the requisite market and productknowledge to achieve this.

SWOT ANALYSIS

Strengths● Fortune 500 firm with global presence● <10k employee base with diverse skills & strong innovation culture● Strong and well-known brands throughout the world● Strong supply chain and distribution channels● Strong partnership with universities, research institutes & prime customers

Weaknesses● Relatively narrow product mix, based on ethylcellulose polymer that limits applicability for conventional

coating applications.● Direct channel strategy which limits market reach● Limited into nutraceuticals/wellness market


ties to further cement its position as a market leader● Growth in nutraceutical and wellness sector

Threats● Increasing competition, domestically and worldwide,● Commodity price fluctuations

DIRECT COMPETITORS

● Dow-Dupont● BASF● Evonik AG● Colorcon● Ashland

BUSINESS STRATEGY

62



Eastman’s sources of competitive advantage, analysed in terms of resources at its disposal and internalcapabilities are described below. Accordingly, Eastman was scored 466 out of 800 (see Exhibit 38).


(0-10)SCORE(0-10)

















(0-10)SCORE(0-10)

CorporateFunctions







MarketingExcellence





63

EXHIBIT 35Eastman Chemical Company Resources and Internal Capabilities Analysis



RECENT DEVELOPMENTS

● Nil

COMPANY CONTACTS

EASTMAN CHEMICAL COMPANYCorporate HeadquartersPO Box 431Kingsport, TennesseeUnited States

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EVONIK INDUSTRIES AG

OVERVIEW

Evonik Industries AG is a publically-traded corporation headquartered in Essen, Germany. The company is oneof the leading manufacturers and suppliers of specialty chemicals in the world. Although the Evonik name cameinto being only in 2007, Evonik Industries traces its roots to several predecessor companies, notably Rohm &Haas, Degussa, and Huls, that date back to the 19th century. The company generated revenues of €14. billion in2017, >80% of which were obtained outside of Germany (i.e 20% NA; 21% AP, Rest of Europe 30%, LA & RoW10%).

Currently, business operations of Evonik are organised through three core business units, namely, PerformanceMaterials, Resource Efficiency, and, Nutrition and Care. The Nutrition & Care business unit is responsible forspeciality chemicals offerings, which includes the company’s well-known EUDRAGIT® pharmaceutical filmcoating products and technologies.

PRODUCTS

Evonik’s coating systems are currently marketed under the Eudragit™ brand identity as detailed below:

Non-functional, non-modifying● Eudragit® ReadyMix

Functional, non-modifying● Eudragit® EPO,● Eudragit® E100,● Eudragit® E12.5,● Eudragit® ReadyMix

Functional, modifying● Eudragit® L30 D-55● Eudragit® NM 30D● Eudragit® NE 30D● Eudragit™ NE 40D● Eudragit® RS12.5● Eudragit® RS 30D● Eudragit® RL 12.5● Eudragit® RL 30D● Eudragit® FS 30D● Eudragit® FL 30 D-55

FINANCIAL ANALYSIS

Evonik Industries sales revenues in 2017 were €14.4 billion and a net income of €2.4 billion. The Nutrition & Caredivision generated revenues of €4,5 billion and a net income of €750 million, representing a 30% contribution tothe firm’s output.

The company does not give a further attribution on how these revenues arise, in terms of showing the size of theEudragit® portfolio. However, we’ve estimated that the portfolio is around $90 ± 30 million, where it enjoyssubstantial leadership in the enteric and controlled release coatings sub-sector.

65



Under its Pharma Polymers business unit, Evonik is a major player in the film coatings market and provides awide range of products and added value services. The company’s core competence lies in its ability to combineskills and knowledge in polymer chemistry, material science and pharmaceutics to deliver solutions that sustainlevels of performance customers expect. Through its well-known EUDRAGIT® product platform, the companyprovides film coatings and matrix that are well known for their reliability, versatility and consistent performance.Beyond this, however, the company’s product mix is relatively narrow, and the entry of low cost producers in Indiaand China will increasingly pose a threat to its leading market position.

SWOT ANALYSIS

Strengths● Highly profitable home market as well as operations in North America● Strong and well-known brand through out the world● Strong supply chain and distribution channels● Strong partnership with universities, research institutes & prime customers● Vertical integration

Weaknesses● Unfavourable cost structure● Long-expired patents for its acrylic polymers & a lack of alternative defensive strategies● Relatively narrow product mix, based on acrylic polymers, that have limited appeal among nutraceutical

customers


ties to further cement its position as a market leader● Expansion into emerging markets of India, China, Russia, Turkey, etc.● Growth of wellness/nutraceuticals sector

Threats● Increasing competition, domestically and worldwide,● Commodity price fluctuations● Slowing down of China

DIRECT COMPETITORS

● BASF● Colorcon Inc.● Ashland Inc.● Biogrund● Eastman Chemical

BUSINESS STRATEGY

As a leading specialty chemicals company, Evonik’s strategy is to achieve sustained and profitable growth byconcentrating on products where it can gain market-leadership. Since Eudragit® polymer platform is now amature technology, Evonik has been focusing on growing total market through increased product output andmarket penetration through the identification of new users in its established and emerging markets, while alsopricing its products in a manner consistent with the value customers derive from its products.

66



Evonik’s sources of competitive advantage, analysed in terms of resources at its disposal and internalcapabilities, are described below. Accordingly, Evonik was scored 485 out of 800 (see Exhibit 32).


(0-10)SCORE(0-10)

















(0-10)SCORE(0-10)

CorporateFunctions







MarketingExcellence





67

EXHIBIT 36Evonik AG Resources and Internal Capabilities Analysis



RECENT DEVELOPMENTS

March 2016:Launch of EUDRATEC™ ADD

April 2015Launch of Eudragard® nutritional supplements film coating

COMPANY CONTACTS

RellinghauserStraße 1–1145128 EssenGermanyTel: 49-201-1770-1Fax: 49-201-1773-475Website: www.evonik.com

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OVERVIEW

DowDuPont is a ‘new’ name for two long-standing players in the specialty chemicals business that was createdlast year after the merger of Dow Chemical and DuPont. Prior to this merger, DuPont had acquired the specialtychemicals business of FMC Biopolymer. What we have now is a business with interests in the Agriculture, MaterialsScience and Specialty Products industries.

Some of the products that the new entity will be marketing include well-known brands from FMC Biopolymer andDow Chemical, and include Aquacoat®, Ac-Di-Sol®, AFFINISOL™, Alubra®, AMBERLITE™ and DUOLITE™,Aquateric™, Protanal®, Protacid® &, Manucol®, Avicel®, ENTERACT™, ETHOCEL™, Gelcarin®, SeaSpen®& Viscarin®, METHOCEL™, POLYOX™, SeaGel® and WALOCEL™.

There are further plans in the offing to organise the company into three separate businesses to be floated to thepublic in 2019. We anticipate pharmaceutical ingredients business to fall under the Specialty Products Industriesunit when the reorganization is completed. How the global manufactuing footprint will pan out is anyone’s guessat the moment. We can, however, expect some level of asset rationalization in order to realise synergies soughtthrough the merger.

Nevertheless, given the specialised nature of pharmaceutical and medical materials, the manufacturing units inNewark, Delaware, and Rockland, Maine, USA that were acquired earlier from FMC will likely be retained. It isnot clear what market channels will be deployed (Dow has had a long-established relationship with Colorconwhile DuPont was working with distributors).

DOW DUPONT

PRODUCTS

Different brand identities are in use at the moment, as detailed below:

Non-functional, non-modifying● Ethocel® HP

Functional, non-modifying● None

Functional, modifying● Aquacoat® CPD● Aquacoat® ECD● Aquacoat® ARC

FINANCIAL ANALYSIS

In 2015, FMC generated a total revenue of $0.786 billion from its specialty chemicals business. The company’sfilm coatings are well known brands within the industry and consistently register strong sales figures. We estimatethat the company’s film coatings portfolio remains around $5 ± 1.5 million, where it enjoys substantial leadershipin the ethylcellulose-based enteric and controlled release coatings segment. It is not clear how the merger hasaffected business performance.

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There is a lot of uncertainty and we’re not yet clear the strategic direction of DowDuPont. That said, the companystands to benefit from a 100 year+ legacy of knowledge, experience and innovation in chemistry to commercialiseinnovative solutions that improve pharmaceuticals products performance. The new company will most likely seekto focus on high growth areas where it has clear leadership, combined with the strategy of partnering withcustomers to assist them accelerate market entry at lower cost. This will be achieved through its global operationsnetwork that will enable the company to serve the needs of international and multinational customers.


The core strength of DowDuPont lies in the ability to produce premium excipients based on natural chemistriesfor the pharmaceutical and nutraceutical sectors. Over the last 80 years, the company will have built a library ofknowledge and experience in this area and is able to use them to deliver solutions for customers. We expect thecompany to continue leading in the provision of innovative solutions to its customers by leveraging its applicationknow-how as well as differentiating the manufacture and delivery of our market leading products through best inclass Quality, Service, Reliability (QSR). A strategy of streamlining its organizational and manufacturingfootprints, implementation of Manufacturing Excellence programs and a focus on technology will allow it to drivedown operating costs and remain competitive in a sector that is increasingly commoditized.

SWOT ANALYSIS

Strengths● Global reach from presence in >50 countries worldwide● Well-known brands● Strong and well-known brands throughout the world● Strong supply chain and distribution channels● Strong partnership with universities, research institutes & prime customers

Weaknesses● Limited IP & defences against competition● Relatively narrow product mix, based on ethylcellulose polymer that limits applicability for

conventional coating applications.


opportunities to further cement its position as a market leader


DIRECT COMPETITORS

● Eastman Chemicals● Colorcon Inc● Evonik AG● Ashland Inc.

BUSINESS STRATEGY

70



DowDuPont’s sources of competitive advantage, analysed in terms of resources at its disposal and internalcapabilities are described below. DowDuPont scored 445 out of 800 (see Exhibit 33).


(0-10)SCORE(0-10)

CorporateFunctions







MarketingExcellence






(0-10)SCORE(0-10)
















71

EXHIBIT 37FMC Biopolymer Resources and Internal Capabilities Analysis



RECENT DEVELOPMENTS

November 2017Dow Chemical - DuPont Merger

July 2017DuPont acquisition of FMC Health & Nutritions

March 2015Capacity expansion for Alubra™

January 2015Name Change from FMC Biopolymer to FMC Health & Nutrition

COMPANY CONTACTS

1735 Market StreetPhiladelphiaPennsylvania 19103U.S.Phone: 1-215-2996-000Fax: 1-215-2995-998Website: www.fmc.com

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Ideal Cures is a privately owned business headquartered in Mumbai, India. The company develops and marketsits own range of tablet film coatings, sugar spheres (non-pareils) and controlled release co-processed excipients.Founded in 1999, Ideal Cures has experienced phenomenal growth over the last decade and currently boasts ofthree EXCiPAct-certified manufacturing plants, all located in India at Vasai, Jammu and Khambat, along with twoR&D facilities at Mumbai and Vasai. These capabilities are complimented by technical services and customertraining, as value adding propositions.

Ideal Cures’ main target is its home market of India, however, the company’s products are now sold in 30 othercountries through agents and distributors. Ideal Cures is ISO 9001, WHO GMP and EXCiPACT accredited.

PRODUCTS

Ideal Cures’s tablet film coating systems are currently marketed under several brand identities. Instacoatcomprises the company’s ready-to use products while Ecopol are products based on acrylic polymer chemistry.This is exemplified below:

Non-functional, non-modifying● Instacoat● Instacoat EHP● Instacoat EHP 250● Instacoat AQUA II● Instacoat EHA● Instanute DR● Instacote UNIVERSAL● Instacoat P4● Instacoat SFC & Instacoat CFC

Functional, non-modifying● Instacote EMB● Instanute MB● Instamoistshield AQUA II

Functional, modifying● Instacoat EN-SUPER-II● Instacoat EN SUPER-IV● Instacoat EN-HPC-P● Instacoat EEN● Instacoat EEN SF● ECOPOL™ L100● ECOPOL™ S100● ECOPOL™ L30D-55● Instamodel BLEND● Instamodel ER

IDEAL CURES PVT. LTD

FINANCIAL ANALYSIS

Ideal Cures is a privately held company in India and does not release its financial affairs to the public. However,we estimate that in 2015, the company generated revenues in the region of $4.0 ± 1 million, 80% of which weregenerated from its home market.

OVERVIEW

73


BUSINESS STRATEGY

Since its establishment in 1998, Ideal Cures has sought to be a full service excipients producer for the globalcustomer. This has been materialised through an increase of its product and service mix while also working toachieve international levels of quality but at the lowest cost to the customer. Long term, the company aims to beamong the top five producers of film coatings producer in the world, achieved through bigger volumes, betterprofitability and the lowest cost base.


Ideal Cures is predominantly a low-cost producer/distributor of film coatings for emerging markets. The companycore competency is how to use its lower cost production base and niche product mix to service cost-mindedcustomers.

Ideal Cures understands how to rapidly take advantage of opportunities in the marketplace by utilizing thisexpertise and network in India and overseas. For instance, using what was a mature and stable film coatingtechnology, Ideal Cures initially set itself to meet the particular demands of local customers and competed mainlyon the basis of well-established relationships with these customers. This allowed the company to gain significanttraction which it has used to launch international expansion.

SWOT ANALYSIS

Strengths● Strong brand in the Indian market● Low cost base● Growing product portfolio

Weaknesses● International competitors● Low brand equity internationally● Minimal entry into high margin, blue-chip accounts● Perception of risk to supply security due to concentration of manufacturing in India

Opportunities● Impending expansion of the global pharmaceutical market● Expansion into emerging markets e.g Russia, Brazil, Nigeria, etc● Anticipated expansion of healthcare in home market (India)

Threats● Management transition from founders to professional managers

DIRECT COMPETITORS

● Corel Pharmachem● Biogrund GmbH● Kerry Group● Wincoat Colours and Coatings

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Ideal Cures’ sources of competitive advantage, analysed in terms of resources at its disposal and internalcapabilities are described below. Ideal Cures was scored at 134 out of 800 (see Exhibit 35).


(0-10)SCORE(0-10)

CorporateFunctions







MarketingExcellence






(0-10)SCORE(0-10)
















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EXHIBIT 38Ideal Cures Resources and Internal Capabilities Analysis



RECENT DEVELOPMENTS

● May 2015: EXCiPACT Certification

COMPANY CONTACTS

Ideal Cures PVT. LtdA 223-229, Virwani Industrial Estate,Western Express Highway,Goregaon (East),Mumbai - 400 063INDIA.+(91)-(22)-6676 4491 / 92 / 93 / 94

http://www.idealcures.co.in

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OVERVIEW

Kerry’s current tablet film coatings outfit traces it’s origins to 1841 when Sheffield Biosciences was establishedas Sheffield Products in New York. For over a century, Sheffield Biosciences operated as an independentbusiness supplying lactose excipients, film coatings and several bioscience ingredients for vaccines, proteintherapeutics and inhalation. Following a series of acquisitions, the business is now a fully integrated arm of KerryGroup, an Anglo-Irish ingredients group listed in Dublin, IRE and London, UK.

The company’s tablet film coatings business, however, remains headquartered in Norwich, New York, USAwhere the main manufacturing base is located. An additional manufacturing base exists in Vadodara, India.Products are sold through agents in Europe, Middle East & Africa and directly to customer where the companyhas its own sales offices (Sao Paolo, Brazil and Shanghai, China).

In 2015, the Kerry Group had revenues of €6.1 billion.

PRODUCTS

Kerry’s tablet film coating systems are currently marketed under the Sheffcoat™ brand identity that cover theseproduct classes:

Non-functional, non-modifying● Sheffcoat™● Sheffcoat™ PVA● Sheffcoat™ CG● Sheffcoat™ Glide● Sheffcoat™ Enhance● Sheffcoat™ MP● Sheffcoat™ HP● Sheffcoat™ Pro● Sheffcoat™ VLV

Functional, non-modifying● Nil

Functional, modifying● Sheffcoat™ ENT● Sheffcoat™ EC

KERRY GROUP (SHEFFIELD BIOSCIENCES)

FINANCIAL ANALYSIS

In 2017, the Kerry Group generated total revenues of €6,4 billion, operating profits of €781 million and net profitsof €588 million.

EMEA is the group’s largest market and accounts for close to half of its sales revenues. Pharmaceuticalsingredients are integrated into Kerry’s Taste & Nutrition division unit, which generated total revenues of €4.7billion, representing nearly 70% of the group’s revenues for 2015 financial year.

Despite being a long-established manufacturer of coatings of exceptional quality, Kerry’s coatings business hasnot grown as much as its American counterpart, Colorcon or Ashland. The current management seems commit-ted to growing sales and have partnered with the distribution group, IMCD for European customers.

We were unable to obtain primary data on the size of pharmaceutical ingredients business sales and profits.However, based on our own secondary research, interviews and modelling, we estimate the tablet film coatingsportfolio to be worth $8 ± 2 million per year.

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BUSINESS STRATEGY

Kerry is a middle tier full service manufacturer of film coatings. The company aims to lead on cost and speed ofresponse by providing GMP-compliant products at low cost to customers through agents and distributors.Products and solutions are modelled along those offered by Colorcon and Ashland and do not appear to besignificantly differentiated in the market. However, the company is able to bundle its products with other excipientproducts to deliver a “total solutions” package to its target customers.


Being part of a major player in the taste, nutrition and functional ingredients sector, Kerry’s tablet film coatingsbusiness benefits from insight, technology and experience gained from many years of individualising solutions todiverse customers. However, Kerry appears to pursue a followership strategy rather than identifying emergingtrends and creating solutions to meet them.

The company has however innovated by introducing its own line of high performing products for pharmaceuticaland nutraceutical customers, some of which clearly leverage taste optimization capabilities.

SWOT Analysis

Strengths● Global group, plus US home market● Knowledgeable and skilled workforce● Global distribution through third parties● Well-being & life-style product portfolio

Weaknesses● Increasing commoditization of key products● Competition from low cost producers● Low expenditure on R&D compared with peers● Lack of economies of scale● Low profitability, especially commoditized products● Indirect channel strategy

Opportunities● Impending expansion of the global pharmaceutical market● Expansion into emerging markets e.g Russia, Brazil, etc.

Threats● Numerous regulations.● Increasing competition, domestically and worldwide● Small size of business

Direct Competitors

● Ashland Inc.● Sensient Technologies● Biogrund GmbH● Seppic● Ideal Cures● Wincoat Colours and Coatings● Corel Pharma Chem

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Kerry’s sources of competitive advantage, analysed in terms of resources at its disposal and internal capabilities,are described below. Accordingly, Kerry was scored 200 out of 800 (see Exhibit 34).


(0-10)SCORE(0-10)

















(0-10)SCORE(0-10)

CorporateFunctions







MarketingExcellence





79

EXHIBIT 39Kerry Group (Sheffield Biosciences) Resources and Internal Capabilities Analysis



RECENT DEVELOPMENTS

● March 2016: Launch of Sheffcoat™ CG, Sheffcoat™ Enhance & Sheffcoat™ Glide

COMPANY CONTACTS

AMERICAS REGIONAL HEADQUARTERS3400 MillingtonRoadBeloit, WI USATel: +1-608-363-1200

www.sheffieldbioscience.com

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OVERVIEW

Roquette is a family-owned French multinational company headquartered in Lestrem, France. It was founded in1933, it is involved in the development, manufacture and supply of polyols, starches, protein derivatives,cyclodextrins and organic acids. As of December 2018, Roquette generated revenues in excess of $3.3 billion.

Roquette operates through five business units, namely, Food, Animal Nutrition, Pharmaceuticals and Cosmetics,Paper and Corrugated Cardboard, Chemicals and Bio-industries, and Performance Plastics. The company’spharmaceuticals and cosmetics division supplies pharmaceutical excipients, which includes pharmaceuticaltablet film coatings. Sales presences is in more than 100 countries through a network of 40 sales offices and 40production sites.

Roquette’s pharmaceutical coatings are manufactured in Lestrem, France, where the company also has atechnical service laboratory.

PRODUCTS

Roquette’s tablet film coating systems are currently marketed under the Lyccoat® brand identity as detailed below:

Non-functional, non-modifyingLycoat® RS 780Lycoat® RS 720Lycoat® - ReadiLYCOAT

Functional, non-modifyingLycoat® - ReadiLYCOAT MS

Functional, modifyingNone

FINANCIAL ANALYSIS

Roquette generated revenues of $3.3 billion in 2018. 12.6% of this was attributed to its pharmaceuticals andcosmetics business unit, which includes several excipients, including film coatings.

Owing to Roquette’s narrow product mix, the company’s total share of the global film coatings market is small, atless than 1%, which we have estimated to be in the region of <$2 million.

ROQUETTE FRERES

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Roquette is a major player in the starch industry whose core competence is in extracting value out of plant-basedraw materials. Since its founding over 80 years ago innovation has been a key focus for Roquette to the extentthat the company’s R&D adopts an approach they term “permanent innovation” that enables it to create productsand solutions that match the needs of their customer base. For instance, within the tablet film coatings sector,Roquette has successfully commercialised a new polymer base, pregelatinized hydroxypropyl pea starch, whichout-performs HPMC in having lower viscosity and facilitates higher percent solids coatings.

SWOT ANALYSIS

Strengths● Demonstrable value● Strong supply chain and distribution channels● Blue ocean markets & barriers to entry● Vertical integration● Natural polymers - attractive to nutraceutical customers

Weaknesses● Narrow product mix● Limited IP● Indirect channel strategy (not ideal for coatings)


opportunities to further cement its position as a market leader● Expansion into emerging markets of India, China, Russia, Turkey, etc.


Direct Competitors

● Sensient Technologies● Biogrund GmbH● Seppic


BUSINESS STRATEGY

Roquette aims to leverage its scientific expertise in formulation, chemistry and process design, biology and starchchemistry to innovate and meet emerging market needs of pharmaceutical excipients users. The company strivesfor continuous market expansion, especially in in high growth Asian markets of India and China, as well aspromising niches to widen its excipient portfolio.

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SOURCES OF ROQUETTE’S COMPETITIVE ADVANTAGE

Roquette’s sources of competitive advantage, analysed in terms of resources at its disposal and internalcapabilities are described below. Accordingly, Roquette was scored 378 out of 800 (see Exhibit 37).


(0-10)SCORE(0-10)

















(0-10)SCORE(0-10)

CorporateFunctions







MarketingExcellence





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EXHIBIT 40Roquette Freres Resources and Internal Capabilities Analysis



RECENT DEVELOPMENTS

October 2014: Launch of Application Development Centre Lestrem, France

March 2016:EXCiPACT Certification

COMPANY CONTACTS

62080 LestremFranceTel: 33-321-6336-00Fax: 33-321-6338-50Website: www.roquette.com

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OVERVIEW

Sensient Technologies (formerly Universal Foods) is an American-headquartered corporation that traces itsorigins to 1882. One of the leading manufacturers and marketers of colours, excipients, flavours and fragrancesfor the food, cosmetic, pharmaceutical and industrial sectors, Sensient is publicly listed on the NYSE. Theexcipients business, under which tablet film coatings business belongs, is operated under SensientPharmaceutical, which itself belongs to the Colours business unit.

Sensient Pharmaceutical is both ISO 9001/GMP accredited. The business is responsible for the manufacture ofpharmaceutical-grade colours, flavours, printing inks and tablet coating systems. Manufacturing plants arelocated in Kings Lynn, UK and St. Louis, Missouri, USA and sold directly to customers throughout the world usingthe company’s own sales force. In 2015, Sensient Technologies had revenues of €1.5 billion.

PRODUCTS

Sensient’s tablet film coating systems are currently marketed under several brand names that cover theseproduct classes:

Non-functional, non-modifying● FlexiCoat™● SPECTRACOAT™● SPECTRABLEND™● SPECTRABLEND™ II● SPECTRABLEND™ II CLEAR● SPECTRABLEND™ NATURAL BRILLIANCE● SPECTRAGLOSS™● SPECTRABLEND™ CC

Functional, non-modifying● PROTECT™● SPECTRABLEND™ MB● SPECTRABLEND™ MB-CLEAR● SPECTRABLEND™ MB-H

Functional, modifying● PROTECT™ ENT● SPECTRASHIELD™ EN-K

FINANCIAL ANALYSIS

Sensient Pharmaceuticals business does not provide a breakdown of its financial information to the public.However, based on market share calculations and interviews with distributors and opinion leaders, we estimateSensient’s total tablet film coatings business to range between $10 and $15 million per year.

SENSIENT TECHNOLOGIES

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BUSINESS STRATEGY

Sensient Technologies main strategy is to use its expertise in colours, flavours and fragrances to provideinnovative GMP-compliant tablet film coatings at low cost to customers. Low cost strategy is partly achievedthrough alliances with ingredient manufacturers combined with a smaller global footprint.

Technical teams provide customer support and technical development and training seminars to aid new projectdevelopment and troubleshooting.


Sensient Technologies’ core competence is expertise in colours and leveraging this to create innovative tabletfilm coatings and related solutions for customers. Sensient Technologies pursues a followership innovationstrategy - by identifying emerging trends and creating solutions to meet them. The company has innovated byintroducing its own line of high performing products for pharmaceutical and nutraceutical customers, some ofwhich clearly display leverage of natural colour understanding.

Following is a SWOT analysis of Sensient Technolgies:

Strengths● Part of a global group● Workforce knowledgeable and skilled in colours, fragrances & flavours● Highly driven sales force

Weaknesses● Increasing commoditization of key products● Lack of investment in customer support facilities/capabilities● Competition from low cost producers● Limited economies of scale● Low profitability, especially commoditized products


Threats● Numerous regulations.● Increasing competition, domestically and worldwide.

DIRECT COMPETITORS

● Kerry Group● Biogrund GmbH● Corel Pharma Chem

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Sensient’s sources of competitive advantage, analysed in terms of resources at its disposal and internalcapabilities are described below. Based on this criteria, Sensient’s aggregate is 246 out of 800 (see Exhibit 39).


(0-10)SCORE(0-10)

















(0-10)SCORE(0-10)

CorporateFunctions







MarketingExcellence





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EXHIBIT 41Sensient Technologies Resources and Internal Capabilities Analysis



RECENT DEVELOPMENTS

● February 2016: Launch of Flexicoat™

COMPANY CONTACTS

Sensient Colors LLC2515 N. Jefferson Ave.St. Louis, Missouri 63106-1903Tel 314-889-7600Fax 314-658-7318www.sensient-tech.com

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OVERVIEW

Seppic (Société d’exploitation pour les produits de l’industrie chimique) is a French-based chemical company thatdevelops and markets specialty ingredients - excipients and actives - for the pharmaceutical, cosmetic, nutritionand vaccine markets. The company has operations in 14 countries and a worldwide network of 80 distributors.Seppic traces its origins to 1943 when a French chemist André Bondouy set up Société d’exploitation pour lesproduits de l’industrie chimique. In 1986, Seppic became a fully owned subsidiary of Air Liquide Groupe (groupturnover € 16.4 billion in 2015).

Seppic operates through three main divisions: health, cosmetics and industrial specialties. The health businessunit develops and markets several excipients, which includes tablet film coatings. Through an international salesorganization in Europe, North America, Asia Pacific and Latin America, customer service centres and an efficientlogistics network, Seppic is well positioned to reach its global customer base.

PRODUCTS

Seppic’s film coating systems are currently marketed under the Sepifilm brand identity as detailed below:

Non-functional, non-modifying● Sepifilm Classic● Sepifilm Gloss● Sepifilm NATurally COLored

Functional, non-modifying● Sepifilm LP● Sepifilm SN

Functional, modifying● None

FINANCIAL ANALYSIS

As indicated above, Air Liquide, Seppic’s parent, generated revenues in excess of €16 billion and a net incomeof €1.7 billion. Seppic does not provide separate financial reports to which we can infer however, the healthcarebusiness line of Air Liquide to which Seppic belongs generated revenues of €2.8 billion.

Seppic has a comparatively high penetration in France but relatively low market share elsewhere. From our ownresearch and interviews of sales managers, competitors and other opinion leaders, we estimate the company tohave a global market share of approximately 0.8%, which would give Seppic an aggregate tablet film coatingsbusiness that is worth $ 8 ± 2 million annually.

SEPPIC (SOCIÉTÉ D’EXPLOITATION POUR LES PRODUITS DEL’INDUSTRIE CHIMIQUE)

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Seppic has been involved in the film coatings business for over 30 years and is highly regarded for the quality ofits products and added value services. The company’s core competence lies in its ability to develop and marketinnovative products and continously expanding this range to meet existing and emerging customer requirements.

Through its applications service centre, Seppic provides a package of services that include formulation assist-ance, analytical assistance, technical and regulatory support, as well as training through its well known Sep-school. A majorr disadvantage, however, is the company’s relatively narrow product mix, and the emergence oflow cost producers in India and China who directly compete with Seppic.

SWOT ANALYSIS

Strengths● Highly profitable home market (France & Europe)● Strong supply chain and distribution channels● Strong partnership with universities, research institutes & prime customers● Strong basket of products that includes active ingredients & excipients.

Weaknesses● Unfavourable cost structure● Long-expired patents & a lack of alternative defensive strategies● Relatively narrow product mix, based on HPMC polymer technology● Small size of sales force and ability to offer technical support outside of Europe


ties to further cement its position as a market leader● Expansion into emerging markets of India, China, Russia, Turkey, etc.

Threats● Increasing competition from low cost producers● Commodity price fluctuations

DIRECT COMPETITORS

● Kerry Group● Biogrund GmbH● Sensient Technologies

BUSINESS STRATEGY

Seppic aims to leverage its scientific expertise in formulation, chemistry and process design, biology andregulatory affairs to deliver innovative products and solutions for its pharmaceutical excipients users. Seppicembodies four values: passion, partnership, diversity and inventiveness, which allow the company to remain atthe forefront of tablet film coating technology for over 35 year time period.

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Seppic’s sources of competitive advantage, analysed in terms of resources at its disposal and internal capabilitiesare described below. Based on this criteria, Seppic was scored 416 out of 800 (see Exhibit 41).


(0-10)SCORE(0-10)

















(0-10)SCORE(0-10)

CorporateFunctions







MarketingExcellence





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EXHIBIT 42Seppic Resources and Internal Capabilities Analysis



DEVELOPMENTS

January 2016:Opening of Customer Technical Service Centre, Brazil

March 2014EXCiPACT Certification

COMPANY CONTACTS

Headquarters22, Terrasse Bellini - Paris La Défense92800 Puteaux CedexFRANCETel. +33 (0)1 42 91 40 00Website: www.seppic.com

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OVERVIEW

Wincoat Colours & Coatings PVT Ltd is a privately owned excipients business headquartered in Thane District,Maharashtra State, India. It is one of the smallest, independently owned tablet film coatings manufacturercurrently but was one of the first locally-owned Indian tablet film coatings manufacturer (established in 1993).

The company develops and markets its own range of ready-to use tablet film coating systems for pharmaceuticaland nutraceutical markets. Initially the company was established under the name, Tamhane Coatings andsubsequently merged with Wincoat Colours and Coatings Pvt. Ltd.

The company’s main target is its home market although products are now increasingly being sold around theworld in over 50 countries, mainly through agents and distributors. Products are currently manufactured in thecompany’s owned facility at Ambernath, 60 kms from Mumbai. The company currently has ISO 9001:2008, ISO14001: 2004, WHO GMP certification and EXCiPACT accreditation is in process.

PRODUCTS

Wincoat Colours & Coatings tablet film coating systems are all designed as “ready-to-use” products and currentlymarketed under the Wincoat™ brand identity as as follows:

Non-Functional, non-Modifying● Wincoat™ WT● Wincoat™ WT-S● Wincoat™ WT-AQ● Wincoat™ WT-QCS● Wincoat™ WT-QCAQ● Wincoat™ WT-MP● Wincoat™ WT-MPAQ● Wincoat™ WT-N● Wincoat™ WT-NAQ● Wincoat™ WT-TR● Wincoat™ WT-PRL

Functional, non-Modifying● Wincoat™ WT-MP● Wincoat™ WT-MPAQ

Functional, Modifying● Wincoat™ WT - N● Wincoat™ WT - NAQ

FINANCIAL ANALYSIS

Wincoat Colours and Coatings PVT. Ltd being a privately owned entity does not publish its financial informationin the public domain. However, based on our interviews with agents, market share estimates and opinion leaders,we estimate that the company generated a revenue in the region of $2.0 ± 0.8 million in 2017. Out of this, 80%was generated in India.

WINCOAT COLOURS & COATINGS PVT. LTD

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BUSINESS STRATEGYAlthough the smallest global player in the tablet film coatings sector, Wincoat Colours and Coatings is a quality-driven outfit that clearly punches above its weight when it comes to standards of professionalism and innovation.From its inception, Wincoat has pursued a differentiation focus by concentrating on the provision of high quality,fully-formulated non-modifying coating systems, mainly for the pharmaceutical industry in its home market. Thecompany is judged to be strong on innovation and quality standards. Lately, Wincoat has started exploring ways ofusing this accumulated knowledge to expand globally, starting with neighbouring countries in South East Asia,Middle East & Africa, and eventually into Europe and North America.


Wincoat Colours and Coatings has developed into a highly focused producer of low-cost but high quality tabletnon-modifying film coating systems for emerging markets. As one of the oldest established indigenouscompanies, Wincoat’s core competency is deploying experience to produce competitively priced products thatmeets demands of its home market, and increasingly, global customers. However, the company will need toovercome the constraints of scale by working with carefully selected and experienced strategic partners in thekey markets of Europe, North America and Latin America to realise new growth.

SWOT analysis

Strengths● Strong brand in the Indian market● Low cost base● High quality & professional image

Weaknesses● International competitors● Low brand equity internationally● Limited range (lack of functional modifying systems)● Minimal entry into high margin, blue-chip accounts


Threats● Management transition from founders to professional

DIRECT COMPETITORS

● Corel Pharma Chem● Ideal Cures● Biogrund GmbH● Sensient● Kerry

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Wincoat’s sources of competitive advantage, analysed in terms of resources at its disposal and internalcapabilities are described below. Based on this criteria, Wincoat’s score is 289 out of 800 (see Exhibit 41).

EXHIBIT 43Wincoat Colours and Coatings Resources and Internal Capabilities Analysis



(0-10)SCORE(0-10)

















(0-10)SCORE(0-10)

CorporateFunctions







MarketingExcellence





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DEVELOPMENTS

Dec 2014: Launch of Wincoat™ QUICKCOAT

COMPANY CONTACTS

HeadquartersS-2/152, Vedant Commercial Complex, Pokhran Rd, No. 1, Vartak NagarThane (W) - 400 606, MaharashtraIndiaTel. +91 (0)22 2585 5214Website: www.wincoat.com

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NOTES

ScienopsisCEME CampusMarsh Road, Rainham, LondonRM13 8EU, UK

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