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Transcript of Mankind Pharma
Competitor Analysis: US Market
in the world for pharmaceuticals.
Industry comprised of 1500 firms, creating
200+US$billion in annual revenue
free market structure
for drug research and development to create the most superior drugs.
Entry Mode Options
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.
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?
- Achieve economies of scale and scope by entering an expected $US1.5 trillion market
- Growing demand for cheaper, generic drugs as unemployment rises along with rising healthcare costs.
- domestic market is becoming too saturated
- 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
of the JV has to be coincided with that to be worthwhile for mankind.
Structure: Corporate Governance and Exit Strategies
Each partner will acquire 50% equitable stake in the JV
Equally attached voting rights
Residual claims to all profits
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
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
111 acre campus
Relatively central location in the US
Supply Chain interlinked with Global Strategy
Smaller Scale entry - exporting + licensing
Adopt loss leader strategy and aggressively export + pulp marketing strategy
Licensing agreement with US-based distributor
: Lower investment risk and set-up costs, economies of scale, develop/build a brand awareness in the US-market.
: Difficult create long-term interests in the market - main goal!, lacks product diversification, no long term benefits compete with patent holders
exploit the cheaper costs
(US discovery cost $100-$200 million, whereas in India approx. $10million.
Cost of materials
(US - 40% whereas India - 33.99%
(home specific advantages)
High pressures for cost reductions
Low pressures for local responsiveness
Buy producing & exporting a
, Mankind Lilly achieve economies of scale and scope allowing Mankind Lilly to price more competitively.
Global Standardized Strategy + Aggregation
- low cost + extreme economies of scale).
Food and Drug Administration (FDA)
Intellectual Property Rights
Equity Joint Venture with a US Pharmaceutical company that specializes in branded products.
in return for their distribution/sales network.
Have access to the
'first to file' patents
Cheaper financing costs
India - 8%
US - 0.25% (Risk - fluctuations in exchange rate
Global Supply Change
4 Industry Subsectors; innovative pharmaceutical industry; biopharmaceutical industry; Biologics; generic pharmaceutical industry.
U.S Based, born 1961 in Pennsylvania.
49th largest pharmaceutical company in U.S.
Focused on the production of generic, producing 6.8US$billion annually.
Competitive Advantage driven through the quality of the products.
- ‘Therapeutic Innovation’
to US markets through aggressive challenging of patents.
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.
High transportation costs
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
In order to keep
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
Life of the Joint Venture at least 10 Years
Net Profit Margin: 20%
Growth of Joint Venture: 15.57%
Discounted Cash Flow Analysis:
Profit-Cost Ratio: 0.1713
one giant leap for Mankind...
Presented By: Marcel Barmeier, Matthew Hulme, Thomas Andrew Wilson and Tiffany Koutrouzas.