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Mankind Pharma

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Tiffany Koutrouzas

on 28 May 2014

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Transcript of Mankind Pharma

Mankind Pharma Ltd.
Eli Lilly
Mankind Pharma
Competitor Analysis: US Market
Currently the
largest market
in the world for pharmaceuticals.
Industry comprised of 1500 firms, creating
200+US$billion in annual revenue
.
Favourable
free market structure
for drug research and development to create the most superior drugs.
Entry Mode Options
JV option
Recommended
Equity joint venture

Value Added Opportunities
Also establish good relationships with a US company for
long term interests
instead of short term successes.

Mankind do not have the financial capabilities to pursue numerous patent challenges thus we believe the JV would be best for a
first timer expanding into a developed country.
However one of the main priorities’, is finding a strong partner who holds numerous expiring patents ,worldwide distribution network as well as a good strategic fit.
Formal Institutions
Executive Summary
Economic, operational and financial motivations
Equity Joint Venture with a US-based firm
Implemented within the next 1-2 years
Expected to last for at least 10 years
Contingency Plan and Exit Strategies
Motivational Drivers - why the US?
Cost driver
- Achieve economies of scale and scope by entering an expected $US1.5 trillion market
Market Driver
- Growing demand for cheaper, generic drugs as unemployment rises along with rising healthcare costs.
Competitive Driver
- domestic market is becoming too saturated
Government Driver
- Intensifying the 1970 Patent Act - direct threat to generic drug companies sales

Products are sold in roughly 125 countries making it the
10th largest corporation
in terms of by global sales.
Patent expirations expected to be valued at
$8 billion dollars
Of these $8 billion dollar expirations $4.5 are scheduled for a

2014- 2017 expiration
and thus the
timing
of the JV has to be coincided with that to be worthwhile for mankind.


Structure: Corporate Governance and Exit Strategies
Deal Structure
Each partner will acquire 50% equitable stake in the JV
Equally attached voting rights
Residual claims to all profits
Corporate Governance:
Board will consist of 6 directors (3 from each firm)
Expected to last at least 10 years
Evaluation phase every 6-months:
- A functions supply chain are operating and integrated efficiently
- Analyze the ventures progress
- Identify any new opportunities
- Ensure partner compatibility within senior levels
Exit Strategy:
Default, insolvency or serious breach - there will be a pre-determined sale price to purchase that partner's interest at a discount.
Location and Product Range
Eli Lilly´s Headquarter in
Indianapolis, Indiana
111 acre campus
Relatively central location in the US

Supply Chain interlinked with Global Strategy
Contingency Plan
Smaller Scale entry - exporting + licensing
Adopt loss leader strategy and aggressively export + pulp marketing strategy
Licensing agreement with US-based distributor
Benefits
: Lower investment risk and set-up costs, economies of scale, develop/build a brand awareness in the US-market.
Disadvantages
: Difficult create long-term interests in the market - main goal!, lacks product diversification, no long term benefits compete with patent holders

India
-
exploit the cheaper costs
associated with:
-
Drug discovery
(US discovery cost $100-$200 million, whereas in India approx. $10million.
-

Cost of materials
-
Wages
-
Tax
(US - 40% whereas India - 33.99%

Operational Arbitrage
(home specific advantages)
High pressures for cost reductions
Low pressures for local responsiveness
Manufacturing?
Buy producing & exporting a
standardized product
, Mankind Lilly achieve economies of scale and scope allowing Mankind Lilly to price more competitively.
(
Global Standardized Strategy + Aggregation
- low cost + extreme economies of scale).
Global Standardized
Strategy
Arbitrage
Aggregation
Food and Drug Administration (FDA)
Intellectual Property Rights
MedicAid
Option 2:
Equity Joint Venture with a US Pharmaceutical company that specializes in branded products.
Provide
contract

manufacturing
in return for their distribution/sales network.
R&D collaboration

Have access to the
'first to file' patents
Option 1:

Cheaper financing costs
India - 8%
US - 0.25% (Risk - fluctuations in exchange rate
Financial Arbitrage
Global Supply Change
4 Industry Subsectors; innovative pharmaceutical industry; biopharmaceutical industry; Biologics; generic pharmaceutical industry.

Mylan Inc.
U.S Based, born 1961 in Pennsylvania.
49th largest pharmaceutical company in U.S.
Focused on the production of generic, producing 6.8US$billion annually.
Competitive Advantage driven through the quality of the products.
- ‘Therapeutic Innovation’

Direct Exporting
to US markets through aggressive challenging of patents.
Advantages
:
Nearly
$US150 billion
worth of patent-protected drugs will expire between 2013-2020.
6-month exclusivity window
(most profitable period)
Direct export eliminates the need intermediaries
Potential to make at least a
$300-$600 million profit
on each patent if successful.
Disadvantages
:
High transportation costs
&
tariff barriers
when exporting to the US.
Prices drop rapidly after 6-month period.
The only way to beat the cyclical nature is to have more than one six-month window in a year =
huge financial depth to file several patent challenges at a time
Disadvantages:
In order to keep
capacity constraints
Mankind might need to either acquire further plants or build their own to keep up with demand .
Quality concerns and lack of control
surrounding the products could potentially cause some conflict between the JV .
Intellectual Property right Loss
Product Expansion:
BCG-matrix
Chronic Drugs
Personal Care
Products
O-T-C
Acute Drugs
Assumptions:
Life of the Joint Venture at least 10 Years
Risk-Free-Rate: 2.65%
Net Profit Margin: 20%
Growth of Joint Venture: 15.57%

Discounted Cash Flow Analysis:
Break-Even Point
Profit-Cost Ratio: 0.1713
INDIA
UNITED STATES
one giant leap for Mankind...
Presented By: Marcel Barmeier, Matthew Hulme, Thomas Andrew Wilson and Tiffany Koutrouzas.
Full transcript