■ Demographic forecasting■ Asia’s OTC power base■ Private equity for India■ Views from the region

Issue 37 | July 2007

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In the newsRecent events and people makingnews at Zuellig Pharma Asia Pacific

Private partyForeign private equity investorsare pouring money into promisingIndian firms

China holds the keyTrends reveal an OTC power base is emerging in East andSouth-East Asia

Looking aheadDemographic forecasting offersinsights for the pharmaceuticalindustry

Promotional planningCan scientific research similar to that used to develop brands be applied to promotional strategies?

Views from the regionOur country managers in AsiaPacific speak out on the issuesthat concern them the most

& CompanyInformation about Zuellig Pharma

We live in exciting times in Asia.As the region grows ever-moresignificant within the global eco-nomic context, many industrieshave recognized that the driversof future market growth lie withthe vibrant, emerging countriesand large, increasingly affluentpopulations that live in this partof the world. The healthcareproduct sector is one of the keyplayers in this regard.

However, difficulties oftenarise in locating reliable data andmethodologies to understand thedifferent dynamics at work in thecontrasting cultures of Asia and

to accurately assess the futureneeds and direction of Asian soci-eties, individually, collectively andin comparison with each other. Inthis issue of The Market Partner,we look at different ways to assistsuch strategic planning.

In our Feature Story, health-care demographics specialist Dr.Susan Ward highlights in the firstof a two-part series some of theways that pharmaceutical compa-nies can benefit from demographicforecasting data and the insightssuch information provides formore accurate therapy forecastsand decision-making within countries and across the Asianregion as a whole.

Meanwhile, IMS focuses on the need for a more analyticapproach to promotional

contents letter from the chief executive officer

in house

Issue 37, July 2007. Entire contents © Copyright, 2007. Zuellig Pharma Asia Pacific. All rights reserved. Reproduction in whole or part without express written permission is prohibited. It is hereby expressly stated that neither Zuellig Pharma Asia Pacific nor any of its subsidiaries, affiliates or their respective directors, employees or representatives makes any representations orwarranties, expressed or implied, with respect to any information or materials contained in this publication. No liability whatsoever, whether in contract, tort or otherwise and including liability fornegligent misstatement, is accepted by any member of Zuellig Pharma Asia Pacific for accuracy orcompleteness of any of the information provided or opinions expressed by or on behalf of ZuelligPharma Asia Pacific or for any errors, omissions or misstatements.

The Market Partner is published by Zuellig Pharma Asia Pacific Corporate Office. Editor: Mr. Joshua Leung, jleung@zuelligpharma.comDesign: Minick Jiao Design, Hong Kong

Please address any comments to our office: Zuellig Pharma Asia Pacific, Corporate Office, 13th FloorShui On Centre, 6-8 Harbour Road, Wanchai, Hong Kong, Tel: +852 2845 2677, Fax: +852 2877 5647www.zuelligpharma.com/ip

Fritz HorlacherChief Executive OfficerZuellig Pharma Asia Pacific

management. The article outlineshow pharmaceutical companiescan optimize their marketingresources and produce higherreturns – of key importance to companies in the face of regulatory challenges, increasingcompetition, and the globalizingmarket.

In our regular article fromOTC experts Nicholas Hall &Company, the importance of Eastand South-East Asia in drivingOTC increases is examined. Thepotential in China looks particu-larly promising, while markets inIndia and South Korea are contin-uing to flourish. The first interna-tional merger and acquisitionactivity in China is also underwaywith Bayer out to capture theOTC cough and cold business ofTopsun subsidiary QidongGaitianli PharmaceuticalCompany.

India comes further under thespotlight with an analysis by theEconomist Intelligence Unitexamining the boom in foreignprivate equity funds in the coun-try. The surge in investment hasbeen fuelled by the expandingeconomy and the huge profits thatcan be made from fast-growingdomestic firms. The Indian phar-maceutical industry, which hasproved such a success story inrecent years, is among the mostpopular sectors drawing attentionfrom outside investors.

In Zuellig Pharma news, I amdelighted to report that we havenow got our corporate team large-ly in place in our latest countryoffice in Bangladesh, with newmembers of staff introduced inour People to Watch section. Asalways, all the latest on Asian mar-kets and Zuellig Pharma movesfrom our country managers can befound in Views From the Region.

Wishing you a happy and prof-itable summer.

Zuellig Pharma Thailandcompletes softwareinfrastructure upgradeApril was a busy month for ZuelligPharma Thailand which upgraded itssoftware infrastructure to SDS Version8, the latest version of Zuellig PharmaAsia Pacific’s corporate ERP system.

A team of more than 10 IT specialistswent to Thailand from Zuellig PharmaAsia Pacific’s regional InformationServices Group (ISG) in the Philippines tocarry out the upgrade, which had been ayear in the planning and involved invest-ment of close to US$2 million.

The upgrade is in line with ZuelligPharma Asia Pacific’s

drive for continuousdevelopment of its

cutting-edgetechnology systems and

facilitiesthroughout its

network of countryoffices in order

to provide superiorservices to both

principals and customers.

| in the newsC O M P A N Y D E V E L O P M E N T S

Avian Flu UpdateOur initiatives to fight bird flu around the region

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Avian flu has fortunately been relatively quiet in April and May,although Indonesia is still struggling

with its bird flu

manage-ment. At

Zuellig Pharma,our preparations for

a possible pandemiccontinue with our

country offices keepingup their testing and drillexercises on a regularbasis. Our Indonesian

office is in the process ofupdating procedures toalign with current develop-ments. Meanwhile, our teamin Vietnam is monitoring thesituation in the country

During the workshop, Dr. JoseMiguel Curameng of the ZuelligFoundation gave an overview of avianinfluenza, its symptoms, manner oftransmission and the risks involved,including the flu’s epidemiology andstages of development. The film Fatal

Contact, which dramatizes the impactof an avian flu pandemic, was alsoscreened.

To ensure business continuity in the event of a catastrophic event, such as an avian flu pandemic, Ms. Elsa A. Velasquez, Assistant Vice-President, Logistics & Projects,Zuellig Pharma Philippines, led work-shop participants through businesscontinuity planning beyond disasterrecovery, going through the process of identifying risks and developingcontingency plans for the differentoperational functions of our business. Ms. Velasquez stressed country readi-ness through the implementation ofregional templates and policies, personnel backup training and crisissuccession planning. She also introduced Crisis Management Teammembers and their backups.

In the latter part of the workshop,participants worked in groups to prepare continuity plans for differentscenarios using what they learned.

Zuellig Pharma Asia Pacific wouldlike to thank all who participated andmade presentations at the workshop.

closely after farm outbreaks and acase of human infection.

A workshop on Avian InfluenzaPandemic Preparedness andDisaster Response was also con-ducted recently for officers andstaff in our Distribution and HumanResources divisions at ZuelligPharma Philippines.

BangladeshMr. An-Nurul Masud has been appoint-ed Operations Manager at Zuellig

Pharma Bangladesh. Masud previouslyworked at GlaxoSmithKline BangladeshLtd., where he gained more than 20years’ experience in the pharmaceuticalindustry. Work areas included sales,marketing, and more recently, ware-housing and distribution, purchasing oflocally manufactured andimported finished prod-ucts and MIS in his roleas Commercial ServicesManager. Masud will play akey role in managing the transition ofGlaxoSmithKline’s distribution opera-tions in 11 branches around the countryto Zuellig Pharma. He has a Bachelor ofPharmacy from JahangirnagarUniversity in Dhaka and a Master ofBusiness Administration from DhakaUniversity. He reports to Mr. BrettMarshall, General Manager.

Mr. Ashfaq A. Chowdhury has joinedthe company as Human Resources

Manager. Ashfaq was formerly HumanResources Operations Manager atPacific Bangladesh Telecom Ltd., an

affiliate of the SingTel group of compa-nies. As Human Resources OperationsManager at PacificBangladesh Telecom, hewas responsible for HRplanning and services,resource organization,recognition and remuneration, relation-ship management, and administrationand community relations. Ashfaq alsospent 10 years with Nestle BangladeshLtd. He reports to Mr. Brett Marshall,General Manager.

Mr. Md. Mashiur Rahman hasbecome Information Tech-

nology Officer. Mashiurjoins from the Bay Groupwhere he was a SystemsAdministrator, involved innetwork and desktop support and instal-lation and IT security policy documenta-tion and implementation. Mashiur has aBachelor of Science (Hons) in ComputerInformation Systems from DaffodilInstitute of Information Technologyunder the London MetropolitanUniversity. He reports to Mr. An-NurulMasud, Operations Manager.

Mr. Md. Mokarram Hossain has been

appointed Finance Officer. Previously,Mokarram worked at Hoda VasiChowdhury & Co., the professional firmassociated with DeloitteTouche Tohmatsu. As asenior member of theaudit team, he gainedexperience in accounting,taxation, audit and advisory services.Mokarram has a Bachelor of Commercefrom Dhaka National University andcompleted his Chartered Accountantarticleship with the Institute ofChartered Accountants of Bangladesh.He reports to Finance Manager Mr. Md.Zahid Hossain.

Ms. Umme Sharmeen Hyder hasbecome Supply Chain Officer.Sharmeen has completed internshipswith GlaxoSmithKline Bangladesh inquality assurance andShinepukur Ceramics Ltd.as a research and devel-opment analyst in theQuality Control Department.She has a Bachelor of Science inChemical Engineering from BangladeshUniversity of Engineering & Technology.She reports to Mr. An-Nurul Masud,Operations Manager.

Ms. Humaira Tubassum has joinedthe company as Administration Officer.Humaira has studied at NorthSouth University, taking aBachelor of BusinessAdministration majoringin Finance andAccounting. She reports toMr. Brett Marshall, General Manager,Zuellig Pharma Bangladesh.

IndonesiaMr. Wong Pao Njan has been appointedVice-President Information Technology

and Management Information Systems

at Zuellig Pharma’s Indonesiandistribution companyAnugerah PharmindoLestari (APL). Pao hasextensive experience ingeneral and sales manage-ment, ERP system implementation, andB2B application service provider designand development. He reports to Mr.Christian Stoeckling, President Director.

MalaysiaMr. Aloysius Chan has joined Zuellig

Pharma Malaysia as Human Resources

in the news |

Manager. Aloysius has had 10 years’experience in HR. He has been activelyinvolved in training and development inthe retail field, as well asmanpower planning andformulating staff policiesand procedures. Aloysiusmajored in HumanResources with a Bachelor of Commercedegree from the University of Tasmania,Australia.

Ms. Barbara Lin, has been appointedBusiness Development Manager.Barbara brings with her adver-tising, communications,promotions, and market-ing experience, essentialin helping to expand busi-ness. Barbara was previouslyour Assistant Product Manager atConsumer Healthcare. She has a Bachelorof Economics (Business Administration)from the University of Malaya, Malaysia.

Both Aloysius and Barbara report toMs. Doreen Yew, Director of HR andBusiness Development, Zuellig PharmaMalaysia.

PhilippinesMs. Lourdes (Des) R. Aguila, wasappointed Information Technology

Director for Zuellig Pharma Philippines.Des joined Zuellig Pharma inApril 2004 and brings over18 years’ IT experience tothis position. She graduat-ed cum laude with a degreein Computer Management from thePolytechnic University of the Philippines.She is a member of the ExecutiveCommittee and reports to Zuellig PharmaPhilippines President and Chief ExecutiveOfficer Mr. Mike Becker.

TaiwanZuellig Pharma Taiwan has appointedMr. Joseph Lai to the position of Vice-

President Sales and Marketing. Josephbrings sales management skills andextensive knowledge of the pharmaceuti-cal market in Taiwan, having worked atMSD, Novartis and GlaxoSmithKline. Prior to joining the compa-ny, Joseph was anAssociate Director andSales Head of the ChronicCare Division at MSD. AtZuellig Pharma Taiwan, he reports toGeneral Manager Mr. Yves Hermes.

P E O P L E T O W A T C H

On the Move The new Market Partner talents who are responding tothe demands of our ever-expanding businesses

Private Party Foreign private equity investors are pouring money into promising Indian firms, many of which are seeking to expand overseas

By A U Sekhar

and 11.2% respectively in 2006-07.) Theimpressive performance of these sectors hascreated a cycle of corporate growth: the effortsof Indian firms to expand their scale andenhance productivity boost the economy, whilethe buoyant economy presents them with moreand more growth opportunities.

Indian firms have been chasing three typesof opportunities in particular. The first is tomeet global sourcing needs by leveragingIndian strengths, especially low-cost skilledlabor and raw materials. Outstanding examples

Despite a phenomenal rate of

growth, there is likely to be no

shortage of tantalizing

opportunities for private equity

firms in India for years to come

Private equity funds have flooded into India inthe past few years, attracted by an abundanceof opportunities to profit from fast-growingdomestic firms. According to data compiled byVenture Intelligence, a Chennai-based consul-tancy, private equity investments in India morethan tripled between 2005 and 2006, reachingnearly US$7.5 billion. Despite this phenome-nal rate of growth, there is likely to be noshortage of tantalizing opportunities for privateequity firms in India for years to come.

Investors have been especially drawn by theoutstanding success of India’s IT, business-process outsourcing (BPO), telecoms and phar-maceutical companies. Although buying equityin Indian companies is no longer cheap, privateequity firms continue to enter the market, con-fident of spotting lucrative deals. Whileinvestors are lured by the prospect of highreturns, many Indian firms welcome privateequity as a way to gain expertise and financetheir own overseas expansions.

Opportunities beckonIndia’s expanding economy is providing anideal setting for firms to grow rapidly, makingit easy for private equity funds to locatepromising companies. A key factor in India’sextraordinary economic growth in recent years– which is estimated to have hit 9.2% in fiscalyear 2006-07 and averaged 8.6% per year since2003-04 – has been the vigorous expansion ofthe industrial and service sectors. (India’s man-ufacturing and services sectors grew by 11.3%

Table 1 Private equity in India

Year Investments (US$ m)

2003 507

2004 1,629

2005 2,200

2006 7,460

Source: Venture Intelligence

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phone connections embody these trends. (Thetelecoms sector accounted for 18% of privateequity investment in 2006, according to GrantThornton India.) The third opportunity arisesfrom India’s acute need for a wide variety ofintermediate products and, especially, for moreand better infrastructure.

Big numbers of small companiesPrivate equity firms in India have little troubleidentifying promising investments given the

are India’s IT, BPO and pharmaceutical sec-tors. In 2006, the IT and BPO sectors account-ed for 21% of total private equity investmentsin India, according to Grant Thornton India, acorporate advisory firm.

The second opportunity follows from therapidly expanding local markets for a growingvariety of goods and services, combined withthe rising purchasing power of local con-sumers. The spread of organized retailing andthe dramatic growth in the number of mobile-

Table 2 Private equity investment in India: top sectors in 2006

Number of deals Total value (US$ m) % of total

IT and IT-enabled services 87 1,470 20

Manufacturing 55 962 13

Total 299 7,460 100

Source: Venture Intelligence

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large number of small and medium-sized compa-nies listed on the Indian stock market. In manyindustrialized countries, it would be consideredpremature to list such relatively small companies.However, in India, these small firms were forcedto raise equity through the capital market severalyears ago when there were few venture capital orprivate equity firms to provide risk capital.

Huge profits have been made by

a number of private equity

funds in recent years

Although many of these small companieshave been listed for many years, their shareprices do not necessarily reflect their potentialvalue, particularly if growth capital was utilizedto expand their operations. As a result, consider-able potential for raising the valuation of thesecompanies remains and private equity firmshave been drawn to investing in many of them.Indeed, these so-called “private investment inpublic entity” (PIPE) investments are now amajor form of private equity investment inIndia.

Economic reforms and growing competi-tion have spurred many Indian firms to implement corporate restructuring strategies,enhancing their international competitiveness.Partly as a result, Indian entrepreneurs andfirms have become much more confident andambitious. This is strikingly reflected in theburgeoning number – and increasing value – of foreign acquisitions by Indian companies.The value of such acquisition deals rose by131% in 2006. To implement such global forays and their ambitious domestic expansionplans, Indian entrepreneurs require enormousamounts of growth capital. Although otherfunding options are also available, many entrepreneurs have turned to private equity.

Adding valueMany Indian companies have opted for funding from private equity firms because, inaddition to the money they bring and theirfinancing skills, they offer expertise in a num-ber of beneficial areas. One is their network-ing capabilities, through which private equityfirms can open doors for the firms in whichthey invest, for instance, to gain access to newcustomers or potential collaborators. Anotheris their expertise in mergers and acquisitions(M&A), which enables them to find suitable

candidates for their target companies toacquire, and to help in implementing M&Astrategies. As a result, private equity firms canprovide vital assistance in globalizing the company’s operations.

Private equity firms have also often beeninstrumental in improving corporate gover-nance standards and transparency within thecompanies in which they invest. This in turncan help improve performance considerably,especially in the case of small and medium-sized firms, which often have relatively limitedexperience. Private equity firms can also addvalue in many other ways, for instance, by providing strategic advice and recruiting topmanagers.

The fundamental business model of privateequity firms is to invest in a company, raise itsvaluation through expanded scale and betterperformance, and then sell off the stake forhigh returns. As a result, exit opportunities,either through the capital market or sales tostrategic investors, play a key role in definingthe attractiveness of a market. Private equityfirms have found India appealing in this regard,given the existence of a relatively mature andwell-functioning capital market.

Indeed, huge profits have been made by anumber of private equity funds in recent yearsthrough their exits. Many of the leading fundshave had no problem generating an internalrate of return of over 30%, which is typicallythe minimum expectation of their investors.This not only reflects the successful efforts ofentrepreneurs and their private equity partnersin raising the company’s valuation, but also theboom in the Indian capital market since 2003.The high returns being earned by some privateequity firms in India have naturally attractedothers to enter the market.

Success stories: leading firms and landmark deals

A large number of Indian and foreign private equityfirms are active in the Indian market. Even in the caseof the Indian firms, a large proportion of their fundsare sourced from foreign investors. The leading firmsinclude:

ICICI Venture, a subsidiary of ICICI Bank, India’ssecond-largest bank, is the largest private equity firmin India, with over US$2 billion under management. It is also one of the oldest private equity firms inIndia. Its origins can be traced to the setting up of aventure capital firm, TDICI, in 1988 by two large Indianfinancial institutions, ICICI and UTI. UTI’s stake wasthen acquired by ICICI in 1998 and TDICI was renamedICICI Venture.

Mumbai-based ICICI Venture manages four fundsand has invested in about 50 companies. The firm hasproven adept at spotting the potential of sunriseindustries in India, investing in several companiesthat have developed into leaders in these sectors. In the retail sector, for example, ICICI Venture investedin companies such as Pantaloon Retail and Shoppers’Stop in the late 1990s. These companies – particularlyPantaloon – sparked the retailing revolution in Indiaand are now giant success stories.

ICICI Venture also began investing in the emergingbiotechnology sector in 2000. One of its investeecompanies, Biocon, has grown rapidly to become theleading biotechnology firm in India. Biocon had a suc-cessful initial public offer (IPO) in 2004, with its mar-ket value crossing US$1 billion on the day of listing.

ChrysCapital was founded by two young Indianinvestment professionals, Ashish Dhawan and RajKondur, who returned from the US to set up the com-pany in 1999. ChrysCapital has since grown rapidly tobecome the second-largest private equity firm inIndia, managing about US$1 billion. The company hasfour funds with global investors and has made around40 investments.

One of ChrysCapital’s success stories has beenSpectramind, a business-process outsourcing (BPO)company which played a pioneering role in the cre-ation of India’s huge third-party BPO industry. WhenSpectramind was set up in 2000 by Raman Roy, anIndian heading US-based General Electric’s back-

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office operations in Gurgaon (near Delhi), India’snascent BPO industry consisted only of some smallcaptive back-office operations run by multinationals.ChrysCapital partnered in the new venture, investingUS$10 million.

With the subsequent tremendous growth in outsourcing by firms in industrialized countries,Spectramind’s operations grew by leaps and bounds– the company had an employee strength of 2,700within a couple of years. Leading Indian softwarecompanies also began diversifying into the BPO sector, attracted by its enormous potential. WhenWipro, a giant Indian software firm, acquiredSpectramind for about US$100 million in 2002,ChrysCapital sold its stake for US$60 million.

Warburg Pincus, a global private equity firm withan Indian portfolio of 12 companies, has been activein the country since 1999. The Indian operations ofWarburg Pincus have been extremely profitable.Indeed, the returns from its investment in India’s top mobile-services company, Bharti Airtel (known earlier as Bharti Tele-Ventures), are nothing short of legendary. Warburg Pincus invested US$292m in Bharti in 1999-2001, when Bharti was a young,unlisted company (established in 1995) attempting to take advantage of the liberalization of India’s tele-coms policies. With Warburg Pincus’s support, Bhartiwas able to expand its mobile-services operationsrapidly, establishing a national footprint throughacquisitions of other mobile-service providers.

In 2002, Bharti went public and was listed on thestock exchange. Warburg Pincus sold its stake inBharti in 2004-05, partly in the stock market andpartly through a strategic sale to Vodafone of theUK. The returns of Warburg Pincus from these salestotaled a gigantic US$1.6 billion, making this themost profitable exit in the history of private equity in India.

Other private equity firms with large operations inIndia include Actis (UK), Baring Private Equity

Partners, Citigroup Venture Capital International

(US), General Atlantic (US), IL&FS Investment

Managers (India), Intel Capital (US), SAIF Partners

(Hong Kong), Sequoia Capital (US) and Temasek

Holdings (Singapore).

The value of foreign acquisition

deals by Indian companies rose

by 131% in 2006

ConstraintsDespite these attractions, there are severalconstraints on private equity firms operating in India. Ironically, although rising valuationshave helped existing private equity investorsearn high returns, they are now making itmore difficult to locate promising new invest-ments. This is because many Indian firmsbeing chased by private equity funds are

billion – or nearly one-third of the value forthe whole of 2006.

Queries can be sent to David Line, Senior Editor,Economist Intelligence Unit, davidline@economist.com The Economist Intelligence Unit is the world leader inglobal business intelligence. It is the business-to-businessarm of The Economist Group, which publishes TheEconomist newspaper. The Economist Intelligence Unit provides geopolitical, economic and business analysis onmore than 200 countries, as well as strategic intelligence onkey industries and management practices. With over 300full-time professionals in 40 offices around the world, sup-ported by a global network of more than 650 contributors,the Economist Intelligence Unit is widely known for itsunparalleled coverage of major and emerging markets.

state-owned firms has offered rich opportuni-ties for private equity investors. However, inIndia, progress with privatization has beenhalting, providing far fewer opportunities forprivate equity funds.

Nevertheless, there is likely to be nodearth of opportunities to locate promisingfirms and take them up the growth ladder.India’s growth story is well established, andthe continuous influx of new private equityfirms into the Indian market is evidence oftheir strong belief in this potential. In thefirst two months of 2007 the value of privateequity deals had already reached US$2.2

demanding a high valuation at the outset, making them less attractive to the funds.

Another constraint has been the strongattachment of many Indian entrepreneurs totheir ventures, which makes them reluctant tosell their stakes and accept minority ownership– even when it is clear that the ventures wouldbe managed better by new owners. For thisreason, the incidence of private equity buy-outs has been much smaller in India than inmany developed countries.

The relatively slow pace of reform inIndia’s state sector is also a limiting factor. Inmany emerging markets, the privatization of

Table 3 Private-equity financed deals involving pharmaceutical and biotechnology firms in India Mar 31 2004-April 1 2007

Acquirer name Acquirer country Target name Target country Deal value US$m Deal status

Carlyle Group US Claris Life Sciences India 20.00 Completed

Sequoia Capital US Paras Pharmaceuticals Pvt India 12.00 Completed

New Vernon Private Equity India JB Chemicals & Pharmaceuticals India 9.86 * Completed

Westbridge Capital Partners LLC Mauritius Dr Lal PathLabs Pvt India 9.62 Completed

Citigroup Venture Capital UK Nectar Lifesciences India 8.21 Announced

ICICI Venture India Metropolis Health Services India 7.79 Completed

Financierings-Maatschappij voor Ontwikkelingslanden NV Netherlands Avestha Gengraine Technol. Pvt India 6.00 Completed

Actis Venture Capital UK Paras Pharmaceuticals Pvt India 5.37 Completed

IL & FS Venture Corp India Arch Pharmalabs India 4.57 * Completed

Aureos Capital UK Accutest Research Labs Pvt India 3.94 Completed

Goldman Sachs US Fulford (India) India 2.79 Completed

Swiss Technology Venture Capital Fund Mauritius Arch Pharmalabs India 2.06 Completed

Xenox US Grandix Pharmaceuticals India 2.02 Completed

Citigroup Venture Capital UK Nectar Lifesciences India 1.77 Announced

Kerala Venture Capital Fund India vFortress Network Security Pvt India 0.44 Completed

ICICI Venture India Ranbaxy Animal Health Division India n.a. Completed

ICICI Venture India Ranbaxy Diagnostics India n.a. Completed

ICICI Venture India Ranbaxy Fine Chemicals India n.a. Completed

Malladi Drugs and Pharmaceuticals Ltd India Novus Fine Chemicals LLC US n.a. Completed

MBO team - Germany Germany Lubrizol Corp’s pharma ingredient & Germany/India n.a. Completedintermediate compounds business

Actis Venture Capital UK Paras Pharmaceuticals Pvt India n.a. Completed

Source: Zephyr, Bureau van Dijk Electronic Publishing * estimated value

.mp

China holds the key An OTC power base is emerging in East and South-East Asia

By Sarah Toms ■ sarah.toms@nicholashall.com

| future trendsE Y E O N A S I A

Japan apart, Asia drives growthIn a repeat of its performance in 2005, theglobal OTC market generated an upturn of4.2% in 2006. Declining sales in Japan andFrance were offset by excellent performancesfrom emerging markets such as Brazil andSouth Korea, maintaining a positive pictureoverall.

Owing to the appreciation of the euroagainst the dollar in 2006, Western Europe

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recaptured its position as the largest regionglobally with a 27% share, compared to 26%for North America. Germany, Europe’slargest market, remained flat in 2006 and stillhas much ground to recover before it match-es pre-2004 levels before the wide-scaledereimbursement that dealt a severe blow toOTC sales. In fact, sales in Germany havedeclined 6% over the past four years.

France had an even worse year in 2006,

with dereimbursement again the main con-tributing factor to a 3% fall in OTC sales. InMarch 2006, over 150 semi-ethicals (particular-ly cough, cold & allergy and derma brands)were struck off the reimbursement list by thegovernment, causing categories such as circula-tory aids to register double-digit declines.However, industry observers remain positivethat the situation could lead to a change inmarketing strategy for some companies, with

more focus on consumer-oriented promotionof OTCs.

Other major European markets producedbetter results, with Italy leading the way due tostrong gains in gastrointestinal and analgesicsales and the hope of better returns in thefuture thanks to the opening of the mass mar-ket in 2006.

Both the UK and Spain witnessed a slow-down in sales compared to 2005. However,growth in both countries was better than theregional average. Some key switches in theUK in 2006 helped account for its positiveperformance, for example, sumatriptan in theform of Imigran Recovery (GlaxoSmithKline),although Germany got there first with the Rx-to-OTC switch of naratriptan in January 2006.

Switch was also partly behind modestgrowth in North America, with Prilosec OTConce again responsible for driving antacid salesin the US and generating a 7% upturn in gas-trointestinals turnover. However, that was offsetby a 1% decline in cough, cold & allergy salescaused principally by pseudoephedrine restric-tions. Canada still outpaces the US but itsgrowth slowed again in 2006 falling to just 3%.

In the US, the Food and DrugAdministration showed signs of a shift awayfrom the conservative stance it has adoptedover recent years, which could see the estab-lishment of a long-awaited “third class” ofOTC medicines. After numerous delays,emergency hormonal contraceptive Plan B(Barr Laboratories) was finally approved forOTC sale in August 2006. Crucially, Plan Bbecame the first medicine in the US to havedual status – available OTC to women aged 18and over, but Rx to under-18s – and its unique

status means it is only sold in pharmacies andis not available for self-selection. However,thanks to the rising trend of in-store clinics inmajor retail outlets such as Wal-Mart, advisoryOTCs such as Plan B look set to thrive.

Other key Rx-to-OTC switches in the USin recent months point to a likely improvementin the market’s performance in 2007. Principalamong these is GlaxoSmithKline’s weight-lossaid Alli (orlistat 60mg). This is expected to goon OTC sale in summer 2007, available in astarter pack that includes a step-by-step guideto starting a weight-loss program. In Canada,nicotine lozenges were granted an Rx-to-OTCswitch in July 2006.

Outside North America and WesternEurope, the emerging power base is East &South-East Asia, driven by double-digitincreases in China and South Korea. Two fac-tors in China’s dynamic progress are the grow-ing affluence wielded by an expanding urban

Per capita OTC spends remain

very low in China, indicating

the vast potential for a market

that looks set to overtake Japan

in 2008, due to increasing

affluence and the penetration

of rural areas

Global OTC sales by region 2006

Rank Region 2006 sales Index

US$bn 06/05

1 Western Europe 20.5 101

2 North America 19.8 102

3 East & South-East Asia 10.8 110

4 Japan 6.8 99

5 Latin America 5.6 111

6 Central & Eastern Europe 4.6 108

Global OTC market sales & growth 2002-06

(US$bn) 2002 2003 2004 2005 2006

Global sales 64.6 67.2 69.2 72.2 75.2

% growth 4.0 3.1 4.2 4.2

fast-paced development of the smoking controlcategory and various Rx-to-OTC switches. Asfor Latin America, strong advances in Braziland Mexico – which combined account for overtwo-thirds of regional turnover – were drivenlargely by price rises, while 15% growth forRussia was at the heart of a continued upturn inCentral & Eastern Europe.

M&A activity still vibrant

Since 2004, the emphasis behind many high-profile mergers affecting the OTC industryhas changed from those driven by Big Pharmaconcerns to more OTC-specific deals. Giventhat OTC has long been notorious as a frag-mented field, many top players are in searchof more critical mass – a trend highlighted bythe key deal in 2006, Johnson & Johnson’sacquisition of Pfizer Consumer Healthcare.Valued at €12.6 billion ($16.6 billion), thedeal is characteristic of the high multiplesnow being paid in the OTC industry, a trendthat some see as unsustainable and a diversionfrom the real need for organic growth.However, Johnson & Johnson will take plea-sure from seeing its number one positionenhanced enormously in 2006.

Global Top 10 OTC companies 2006

Rank Marketer 2006 sales Index

US$bn 06/05

1 Johnson & Johnson 5.8 102

2 Bayer 3.0 106

3 GlaxoSmithKline 2.7 102

4 Wyeth 2.5 101

5 Novartis 2.5 105

6 Procter & Gamble 1.8 111

7 Boehringer Ingelheim 1.6 104

8 Sanofi-Aventis 1.4 106

9 Taisho 1.3 93

10 Reckitt Benckiser 1.2 105

middle class and the increased penetration ofOTCs into rural areas. Per capita OTC spendsremain very low in China, indicating the vastpotential for a market that looks set to overtakeJapan in 2008. Two Asian markets that areshowing continued signs of rejuvenation areIndia and South Korea, the latter boasting oneof the highest per capita OTC spends outsideJapan and now ranked among the Top 10 OTCmarkets globally.

Although Japan remains in decline, therewere signs of growing stability in 2006 and evenhope of a return to growth in 2007, given the

Bayer also consolidated its position as thenumber two marketer with the acquisition ofSchering AG in 2006 in a deal costing €86($113) a share. Although most of the merger’sfocus was on Rx synergies, it will enhanceBayer’s UK portfolio by adding OTC emer-gency hormonal contraceptive Levonelle to itsalready dynamic women’s healthcare range,fronted by Canesten. Hemorrhoid treatmentsUltraproct and Scheriproct will be two otherkey OTC brands inherited by Bayer.

The German company is also involved in

the first ever international merger and acquisi-tion activity in China’s OTC industry andstands to capture the OTC cough and coldbusiness of Topsun subsidiary Qidong GaitianliPharmaceutical Company Ltd. All the brandsinvolved in the deal, including White & Blackcold & flu remedy, are western-style in formu-lation. Once complete, the deal will catapultBayer into the Top 10 in China. Meanwhile, areturn to growth in the US, on the back of arevival for analgesic brand Aleve, helped makeBayer the top-performing OTC companyamong the global Top 5.

Global number three GlaxoSmithKlinefared less well in China in 2006 as its local sub-sidiary Tianjin SmithKline & French declinedby 12%, partly the result of senior personnelchanges over the past year. However, dynamicgrowth in emerging markets such as Brazil and Russia, and the continued steady upturn

movers in 2006, moving up two places to sev-enth after buying the US OTC rights to Zantacfrom Pfizer in October 2006, after the latter wasobliged to make certain divestments followingits OTC deal with Johnson & Johnson. This fol-lowed the news in August 2006 that BoehringerIngelheim would divest popular vitamins, miner-als & supplements brand Pharmaton toIdeasphere, although that deal collapsed in thefinal stages in February 2007.

DB6 2007 contains five years’ annual global OTC sales data through to full year 2006 and is subjected to a rigorousvalidation process. It is accessible online and also available in disk format. To find out more information about the range and scope of DB6 services, please contact:kelly.williams@nicholashall.com; +44 1702 220218 (tel);+44 1702 430787 (fax). Sarah Toms is Researcher/Writer,Insight Asia at Nicholas Hall & Company. She can be contacted at sarah.toms@nicholashall.com and +44 1702220216 (tel); +44 1702 430787 (fax).

Global OTC sales by major category 2006

Category 2006 sales Index

US$bn 06/05

Analgesics 12.0 106

Cough, cold & allergy 16.8 103

Gastrointestinals 10.6 106

Vitamins, minerals & suppl. 19.6 103

Dermatologicals 9.6 103

Others 6.6 106

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of key analgesic Panadol, helped stabilizeGlaxoSmithKline’s performance. In October2006, GlaxoSmithKline enhanced its OTCstanding with the $566 million acquisition ofUS company CNS, manufacturers of BreatheRight nasal strips and FiberChoice laxative.

Further down the global rankings,Boehringer Ingelheim was one of the biggest

.mp

This article shows three of the many waysdemographic forecasting can help to determinethe size of therapeutic markets and theirprospects within and across countries. It does soby illustrating the importance of:

(i) Looking at a population’s age profile not just its total size

(ii) Examining the age profile trend over time

(iii) Focusing by age, gender, geography and prevalence rates to obtain optimalresults.

Market size The two rising giants of Asia are China (1.289billion people) and India (1.1 billion people).Both have large populations, but in manyrespects this is where their similarities stop.Once the age profile is examined, for example,major differences emerge (Chart 1). China hasover 240 million more people over the age of 40than India. While China has a large, middle-aged population, India has a large, young popu-lation. Some 50% of people in India are underthe age of 25 and 75% in India are under theage of 40. Indeed, India has 140 million morechildren than China.

Why is this important? The different ageprofile determines the different types of diseaseareas that will be more prevalent in the popula-tion. With its youthful population, India will bea large volume market for childhood immuniza-tion whereas in China with 140 million lesspeople under the age of 14, this therapeutic areais going to be significantly smaller. Instead,China, with its older age profile, is going tohave a different disease burden given that theolder a person gets, the more likely they are tosuffer from degenerative diseases, such as can-cer, hypertension and diabetes.

In Chart 2, the impact of the age profile onprevalence is clearly shown. Looking at theprevalence rates alone for urban diabetes in

In 2005, China was the second, fastest-growing pharmaceutical market (at 22% –IMS) and some analysts have forecast itwill be the world’s largest by 20501. India’s

market share of close to US$7 billion is grow-ing at 10% per year compared to 7% for theworld market overall 2. These are exciting fig-ures and as the Asian pharmaceutical marketrapidly rises in global prominence, the need forgreater understanding of the multi-facetedregion’s markets and future healthcare needs istaking on fresh significance for industry deci-sion-makers.

However, fast-moving Asia can be a chal-lenge to unravel and managers at both head-quarters and country offices may find they lackdetailed, reliable, data with which to comple-ment drug sales information and build anddefend forecasts.

One key way to shed further light on theAsian landscape and improve the accuracy oftherapy forecasts (also sometimes referred to asepidemiology or patient dynamics) is to utilizethe population insights provided by demo-graphic forecasting. In doing so, executives cangain valuable assistance in formulating projec-tions, planning product launches and allocatingresources to achieve maximize return oninvestment.

LOOKING AHEADF E A T U R E S T O R Y

The first of a two-part series on the insights that demographic forecasting offers the

pharmaceutical industry, focuses on therapy forecasts in Asia

By Dr. Susan Ward ■ sward@global-dem.com

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Collecting the data

Forecasts used in this article are drawn from theGlobal Demographics Healthcare database, which is sourced primarily from the demographic, socio-economic and epidemiology data published by the government of each country and internationalmedical journals. Information is also collected fromother agencies to check the consistency of the inter-pretation of the data. Governments engage in a census and by-census at regular intervals. This datais supplemented with information from inter-yearsamples, annual labor force studies, annual house-hold income expenditure surveys, and health andnutrition surveys, among others.

To check the overall voracity of data from a gov-ernment, certain headline relationships, such aswater consumption per capita, are examined toensure the reported levels of population etc makesense. Consistency of relationships across countriesof similar affluence and education levels are lookedfor and where there are differences the possible rea-sons are investigated.

The database is harmonized as much as possibleto facilitate modeling and hence consistency of theforecasting process.Persons Mns

Age

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India shows that the rate is triple that ofChina in all age groups over 30 years.When taken together with the two coun-tries’ similar population sizes, it mightbe assumed that the number of peoplewith diabetes in India would also bethree times higher than in China.However, this is not the case.

Why? India is a youthful countrywith more people falling into youngerage groups where the prevalence rate issignificantly lower. In China, the ageprofile is much higher and many morepeople are over 40. Thus when theprevalence rate is applied to the age pro-file of both countries, it shows urbandiabetes prevalence is actually only one-third higher in India than China.

By looking only at the populationsize and not the age profile, the diabeticmarket might be overestimated in Indiaand underestimated in China. Similarly,without taking the age profile in Chinainto consideration, the market for child-hood vaccinations may be overestimated.

Therapeutic futureThe current market picture is not the only sce-nario that needs to be considered. When con-ducting business planning for an existingproduct or planning a new drug launch, forexample, managers need data that can usefullyassist in both short and long-term market pro-jections. This can be provided through examin-ing the age profile over time, tracking how itchanges, how that affects the numbers of peo-ple with a particular disease and, subsequently,how the demand for therapy will alter.

Age profiles in countries are determined bybirth and death rates. Currently the popula-tions of India and China are of similar size.

Death rates are predicted to drop inboth as more people become affluent.However, the projected birth rates upto 2025 for the two countries showmarked differences (Chart 3).

China’s one-child policy institutedin 1979 has already had a major effecton birth rates. From 1995-2005 thebirth rate dropped from 17.7 million to12.1 million. Other factors are also nowat work. The reduction in the numberof females combined with the prefer-ence for males means that after 2013the number of women of child-bearingage will start to decline. This togetherwith rising education levels and afflu-ence – which across countries have beenshown to have an important impact oncontraception – suggests that even if theone-child policy was stopped, birthrates may not rise significantly. By2025, the birth rate in China is forecastto be 6.6 million, half that of 2005.

In India, on the other hand, the totalnumber of births remains high over thenext 20 years, with a slight drop from25-26 million to around 23 million.Although the birth rate declines during

this time as a result of the affluence/educationeffect, which reduces the propensity amongwomen to have children, this is offset by theincrease in the number of women of childbear-ing age.

These different trends show that by 2025India will have become larger than China, with1.407 billion people compared to 1.316 billionpeople. China will clearly have become an oldersociety. More than 50% of its people will beover the age of 40 and in some places, such asShanghai, it will be 69%. Compared to India,China will have 330 million more people over

Births per annum (millions)0 5 10 15 20 25 30

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IndiaChina

Chart 3

One key way to shed further

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40 years, greater than the total size ofthe US population which is today’s toppharmaceutical market. India will essen-tially remain a young population. It willhave 224 million more children thanChina and 75% of the people will beunder 40 (Chart 4).

In an older society, the main healthburden becomes degenerative disease.This is especially so in an affluent popu-lation that has been exposed to toxins,smoking and changes in traditional dietand lifestyle, factors which often lead toconditions such as hypertension and dia-betes. As a population can only focus ona certain number of issues at one time, ittends to concentrate on those affectingthe most people. Thus, in China, therewill be larger focus on the population ofover 40s and the health conditions towhich they relate. In India, although thenumber of people over 40 increases, itdoes not rise in terms of proportion ofthe population. India is still a youthfulsociety and will concentrate more onhealth issues related to young people,which include infections and childbirth-

related health conditions. Such a picture assistsmanagerial decisions on which main therapeu-tic areas to pursue in particular countries.

Resource allocationWithin a country, one key issue facing man-agers is how to accurately determine where tofocus resources. In this case, it is important toapply the forecasted prevalence rate of a diseaseto the age and gender forecast by geography inorder to optimize allocation of sales and mar-keting resources. Chart 5 highlights the signif-icant difference between prevalence rates ofhypertension in northern and southern prefec-tures in China. In the 45-54 age group in the

south, 22.9% of males have high bloodpressure while in the north it is 35.7%.

This approach can also be used tocompare individual prefectures. Forexample, Harbin (3.149 million males)in the north and Guangzhou (2.793 mil-lion males) in the south, have similar-sized male populations. However, whenthe prevalence rate is applied, thisshows that in the 45-54 age group morethan double the number of males inHarbin suffer from hypertension thanin Guangzhou.

Simply applying the hypertensionprevalence rate to all cities or consider-ing all cities equal in terms of allocatingsales representatives might thereforelead to less than optimal use ofresources. In reality, it is necessary tolook at how each geographical area isaffected in relation to others to gain amore exact picture and be able to startto prioritize resources.

In looking at the insights revealedby applying the age profile, age profiletrends and focus by geographical differ-ence, the value of demographic fore-casting for therapy forecasts can readily

be seen. However, this is just one example ofhow demographic forecasting can assist phar-maceutical executives. The second article in thisseries, to appear in the next issue of The MarketPartner, examines patient access to treatment inemerging markets, with a focus on China.

Dr. Susan Ward is CEO of Global DemographicsHealthcare, which combines demographic, epidemiologyand socio-economic parameters in over 50 countries to pro-duce reports and forecasting models for the pharmaceuticalsector. She can be contacted at sward@global-dem.com

1 Cited in Unmasking China’s Pharmaceutical Future, Ernst & Young, 2005

2 Quoted in The Indian Pharmaceutical Industry: Collaboration for Growth, KPMG, 2006

Proportion of total population in 20250.0% 5.0% 10.0% 15.0%

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The ‘Science’ ofPromotional PlanningPharmaceutical brands are developed through rigorous scientific research. Can a similarapproach be applied to promotional strategies?

By David Gascoigne, IMS Health ■ dgascoigne@us.imshealth.com

planning. These techniques incorporate rigor-ous scientific methods to assess promotionalstrategies and their impact on return on invest-ment (ROI) at the brand, portfolio and marketlevels.

In each scenario, marketing managers areable to capitalize on rich information, includ-ing benchmarks, analogs, and an array of detailregarding physician preferences, sales volumeand performance drivers, to support moreeffective promotional planning throughout theproduct lifecycle. Whether marketers arefocused on a single brand, an overall portfolio,or multiple countries across a region or aroundthe world, there is evidence that highly scien-tific methodologies can be applied to producehigher returns. Real-world case studies illus-

trate this concept and show how taking a moreanalytical, evidence-based approach can opti-mize promotional investments and generatemore effective – and at times economical –sales and marketing strategies.

Optimizing a channel within a portfolio

Managing a brand’s promotional mix is funda-mental to pharmaceutical marketing. Whileachieving the right balance between personaland non-personal promotion may seem like asimple objective, the myriad promotional tacticsthat can be deployed across each of theseoptions bring great complexity to the task athand. Marketers often build plans based onprior-year activities, with little insight as to howchanges to the mix can yield significant increas-es in brand performance. Building greater ana-lytics into the planning process can uncovernew growth opportunities and eliminate therisks and uncertainties inherent in change.

Background: A top pharmaceutical compa-ny wanted to understand the impact of key promotional activities on brand performanceand to optimize the impact of the promotionalbudget. The marketing team also wanted todetermine whether their revenue target wasachievable given their planned spend and pro-posed allocation. The brand in question was ina relatively new drug category, yet a late entrantin the US market – lagging the market leaderby nearly four years. All drugs in the categoryhad used branded and disease awareness direct-to-consumer (DTC) marketing over the pastseveral years. The company sought to applyevidence-based analytics to determine the opti-mal DTC budget within the context of the totalpromotion mix for the brand.

Approach: The analytical approach inte-grated a comprehensive research design thatutilized diverse yet rich data sources, prescriber

market watch | S T R A T E G I C T H I N K I N G

From the very first testing of a novel com-pound, pharmaceutical companies use informa-tion derived during the meticulous clinicalresearch process to make pivotal decisions.The value of this information is unquestion-able, as it will determine the success or failureof the compound. Similarly, for pharmaceuticalmarketers, launching a new drug or managinga mature brand can exceed or fall short ofexpectations based on a single key element –accurate, comprehensive information.

For the pharmaceutical marketer, it isessential to obtain, prioritize and act on thebest available information. Fortunately, today’sprofessionals have advanced techniques avail-able to them for analyzing information aboutthe marketing environment for promotional

$712mm$747mm

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preferences and attitudes, and analog brandbehavior. Both branded and unbranded programs were examined, with a focus on ROI and impact on product performance. A rigorous process was employed. This includ-ed evaluating measures for modeling based onbusiness objectives, examining trends andanalogs in the market category, developingmodels to assess the impact of promotions,using these to analyze ROI, developing keyconclusions, and identifying implications forfuture professional and DTC promotions.

Outcome: The analysis pinpointed theimpact of promotional practices and broughtimportant strategic insights: given the currentresponse to promotional activities and marketdynamics, brand performance would fall con-siderably short of its target. However, modestincreases in the promotional budget would inturn drive significant increases in revenue – asmuch as US$58 million with only a US$10million budget increase. This increase could beused to expand the current DTC program toinclude prime-time television. In addition, thecompany learned that it should focus more onprint advertising, which, contrary to what mar-keters and promotion management expertsoften think, typically generates a higher ROIthan television spots. This strategic realloca-tion projected a 25%-plus increase in overallROI for the brand. (Chart 1)

Optimizing the mix across the portfolio

More rigorous analyses can also refine theoverall promotional mix, which includes detail-ing, e-marketing, sampling, meetings andevents, public relations, and journal-relatedactivities. This “mix” serves to enhance theoverall performance for a pharmaceutical com-pany’s portfolio from new products to moremature ones. By developing scenarios that canpredict incremental revenue growth, compa-nies can establish appropriate budgets – andmore effectively allocate funds across variouspromotional channels. Modeling the ways inwhich different funding scenarios affect rev-enues and portfolio performance over timeyields critical information that ultimatelyimproves ROI and strengthens a company’scompetitive edge.

Background: A major pharmaceutical com-pany wanted to look at its promotional invest-ments across a nine-brand portfolio to identifymajor spending inefficiencies and to use thefindings to maximize the impact of the compa-ny’s promotional investment across the ninebrands. Traditionally, the company established

promotional strategies and budgets for eachbrand individually. However, it couldn’t makepromotional effectiveness comparisons acrossbrands, nor was it able to pre-determine whatbrand – and overall portfolio – performancewould be given various promotional budgetlevels and allocations.

Approach: The analysis incorporated mod-els built according to physician specialties andproduct form/strength and demonstrating thepercentage of annual prescriptions written byphysicians that were contributed by each majorpromotional channel. These models were sup-plemented with additional promotional data.Response curves and marginal ROI curveswere subsequently developed to support multiple optimization scenarios, which demon-strated the ways in which shifts in funding andchannels impacted brand performance. In addi-tion, numerous benchmarks were utilized to

compare and analyze the impact of detailing,samples and DTC given that the brands werein different phases of the product lifecycle.

Outcome: Findings demonstrated there wasopportunity for substantial reallocation of thetotal promotional budget across the portfolio.Scenarios suggested that incremental revenuegrowth of up to $300 million could be achievedwith the current budget – depending on thedegree of reallocations of funds across brandsand the optimization of the promotional chan-nel mix within brands. This substantial gaindemonstrates the power of evidence-based analytical approaches and has significant implications for franchise leaders, who oftenmake difficult trade-off decisions without beingable to predict the short and long-term impactthese choices will have on their portfolios.

Optimizing the mix across countries

Cross-geography planning presents similaropportunities for enhancing promotional effi-ciencies and effectiveness. Optimizing the promotional spend for pharmaceutical productsis a process that entails examining the level ofpromotion required to achieve brand sales goalsin a specific region; determining the optimalallocation of investment across a market thatencompasses many countries; and leveragingthe most efficient mix of promotion channels ineach country’s market. Disparate data sources,geographic differences, and pricing and payerinfluences make cross-country/cross-regioncomparisons particularly challenging, butadvanced analytic techniques illuminate areas of marketing and promotional opportunity.

Background: A vice-president of marketingfor a major pharmaceutical company wanted tomeet an expected level of promotional ROI fora new drug launch. The drug was in a highlycompetitive class that included varying levels of promotion across the region. Uptake of thedrug class was known to be generally slow dueto payer-imposed restrictions. Additionally, itwas acknowledged that breaking through to amore standardized use of the drug class wouldrequire concentrating promotion against theprimary prescribers of the class. Comprehen-sive analysis of 22 markets was used to createanalogs that would help establish – and opti-mize – promotional budgets in the first threeyears. Such comparisons to historical referencesprovided an invaluable business context tomake optimal allocation decisions.

Approach: Analyzing 22 diverse marketspresented numerous obstacles, so local factorssuch as retail vs non-retail, GP vs specialist

Modest budget increases yield revenuegains of US$58 million

Mix analysis determined that, given the currentresponse to promotional activities and marketdynamics, brand performance would fall consider-ably short of its target. By increasing the budgetby only US$10 million as much as US$58 million inincremental revenue can be gained. This budgetincrease could be used to expand the current DTCprogram to include prime-time television andgreater emphasis on print advertising, which typi-cally generates a higher ROI than television spots.

Chart 1

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Country-level analyses uncover US$68 million in incremental revenues

To execute effective promotional planning acrossmultiple countries, local market dynamics wereexamined and factored into subsequent channeland brand analyses. After extensive analog model-ing the optimal weight and mix for both personaland non-personal promotion was established.Through this iterative approach, an additional $68million in incremental revenue opportunity wasidentified versus what was projected under theoriginal budget.

Performance pointers

■ Many pharmaceutical companies assume thatbigger brands require arbitrarily larger budgetsthan smaller brands. IMS analysis across multiplebrands and therapy areas suggests that, in manyinstances, promotional programs for larger brandsdeliver diminishing returns and are over-funded.Smaller brands often deliver higher returns on promotional investment, a key consideration whenestablishing budgets and promotional plans for afranchise or portfolio. Companies can achievegreater gains for the same level of overall invest-ment, potentially breathing new life into languish-ing brands or capitalizing on competitive dynamics.

■ Promotional plans and budgets are often estab-lished based on historical activities and spending.IMS analysis suggests that significant revenuegains are achievable within 12 months if theseplans are re-examined and optimized. The gainsrepresent untapped growth opportunities and areparticularly significant in crowded markets wheremultiple brands compete for market share andshare of voice.

■ IMS analysis of nearly 100 brand-specific studieson direct-to-consumer (DTC) advertising, includingthe impact of both branded and unbranded cam-paigns across print and television shows that,under the right circumstances, and using appropriate planning and measurement models,DTC delivers a positive return on investment (ROI)that is, on average, 2:1. Further analysis acrossIMS’ normative database of DTC campaigns andrelated ROI suggests that there are three often-related brand and market characteristics that influence the ROI for DTC advertising:

- Size of the brand and marketplace- Level of persistency (refill rates)- Price of the brand

■ Too often, pharmaceutical companies overempha-size new patient starts as the primary means ofachieving performance targets. IMS consultantshave found that patient compliance and persistency represent an area of significant – and underutilized – opportunity when it comes tosetting brand strategy and meeting or exceedingbrand goals.

prescribing mix, market size and potential, andpricing and market access factors were exam-ined and clustered based on their similarities.Primary research and secondary data providedfurther inputs to the creation of predictive pro-motion response models, which drew heavilyon promotional benchmarks to test the reason-ableness of spending in each country. In thismanner, the ideal promotional budget by majorchannel for selected markets was identified,along with additional insights on the merits ofpersonal and non-personal promotion.

Outcome: For the launch brand, the shareof the expanded drug class was estimated byusing extensive analog analysis. Market sharewas projected which related Year 3 exit volumeshare to three-year average promotional shareof voice. This methodology generated recom-mendations for the optimal promotional bud-get and provided specific guidance formanagerial consideration. Interestingly, themajor competitors in the class appeared tohave underspent on personal promotion forcollective market launches. Further analysisindicated that greater emphasis on personalpromotion across the EU compared to whatwas originally planned for the brand wouldgenerate additional revenues. By optimizingboth the mix of promotion as well as the

weight, US$68 million in incremental revenuecould be realized set against that projectedunder the original planned budget. (Chart 2)

Analytical rigor drives better results

Multi-dimensional approaches to building andapplying analogs illuminate important strategicinsights for promotion optimization, and are a clear input to achieving a truly optimizedpromotional mix. Advanced techniques areavailable today, but remain largely unexploitedby pharmaceutical companies, which may lackthe expertise, resources or access to analogsand benchmarks required to fully apply them.Increased competition, regulatory challengesand a rapidly globalizing market make infusinggreater analytical rigor into promotional plan-ning a strategic imperative. By taking a moreevidence-based, analytical approach, pharma-ceutical companies of all sizes and specialtiescan gain a significant competitive advantageand enjoy greater commercial success.

David Gascoigne is Vice-President, Global PromotionManagement at IMS, where he oversees new offeringsdevelopment, ensures global consistency and alignment ofofferings and spearheads thought leadership initiatives forthe company’s promotion management information, analyt-ic and consulting services on a worldwide basis. He can becontacted at dgascoigne@us.imshealth.com.

Chart 2

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initiatives include: new packagingrequirements mandating a moreprominent display of chemicalcompound name; requiring hospi-tal prescriptions to be in com-pound rather than brand name;and the proposed hospital stockinglimit of only two brands for a givenpharmaceutical compound. Theseinitiatives are now being rolled outso the impact of these changesremains to be seen.

The less severe than expected2006-07 influenza flu season isover. Vaccine manufacturers arenow busy managing the vaccinereturns process, with returns aver-aging about 15%. The lack of harshweather, no acknowledged credibleavian flu threat, and lack of gov-ernment-sponsored vaccinationprograms all contributed to theweak uptake.Eric von Zwisler

ezwisler@zuelligpharma.com.cn

✱ Fast FactNew pharmaceutical cost-contain-

ment initiatives are creating fresh

challenges.

Hong KongChief Executive

unveils government

restructuring plan

The outcome of the election forHong Kong’s Chief Executive inMarch was never in doubt. It hadlong been known that the currentChief Executive, Donald Tsang, withthe support of the Chinese govern-ment behind him, would win a second term by a comfortable margin. The hope now is muchmore will be accomplished in Mr. Tsang’s second term than in hisfirst. This time he will have the fullfive years. However, there are manychallenges to be faced and action is

needed on a wide range of fronts. In his election pledges, Mr. Tsangincluded bringing about democraticreform, maintaining Hong Kong’scompetitiveness, dealing with pollu-tion, combating poverty, strengthen-ing education, and reforming thehealth service.

Mr. Tsang’s next term of officestarts in July and, in May, he unveiledhis restructuring plan for the newgovernment. The current system ofpolicy bureaus, created in 2002 whenthe first Chief Executive, Tung Chee-hwa, launched the ministerial sys-tem, took policy-making out of thehands of top civil servants and gaveit to political appointees. Somebureaus had too wide a brief, such asthe Health, Welfare and Food Bureau.The new set-up will see a re-distribu-tion of portfolios among policy-making bureaus and the creation of aDevelopment Bureau. The intention is to enhance policy implementationand rationalize the distribution of responsibilities, while keepingchanges to a minimum. The realign-ment will also free Mr. Tsang from the structure he inherited from hispredecessor.

Under the reorganization, welfarewill be separated from health andfood. Instead it will form part of aLabour and Welfare Bureau leavingthe new Food and Health Bureau toconcentrate on food safety andhealth policy. The revamp of policybureaus illustrates the policy priori-ties and political imperatives of thenext administration. During Mr.Tsang’s election campaign, he alsopledged to increase healthcarespending from 15% of governmentexpenditure in 2007 to 17% by 2012.Annual spending will rise from HK$30billion (US$3.8 billion) to an estimat-ed HK$40 billion (US$5.1 billion).This could be a sign of the determi-nation of the next administration toundertake the badly needed radicalreform of Hong Kong’s health service.Frederick Tsang

ftsang@zuelligpharma.com.hk

✱ Fast FactAnnual healthcare spending is due

to increase from US$3.8 billion to

US$5.1 billion.

TaiwanElections likely to hold

up legislative reforms

National elections will ensure that parti-san politics continue to dominate thepolitical scene in 2007-08. Official cam-paigning will start mid-year ahead of theparliamentary election (Legislative Yuan)scheduled for December 2007. The presi-dential election will follow in early 2008.Due to partisan polarization and thefocus on corruption scandals affectingboth the ruling DPP party and the opposition KMT, there is not much hope of progress on much-needed legislative reforms.

Latest estimates for 2007 GDP growthrange from 4.1%-4.5%. This is almost inline with the 2006 growth rate of 4.6%,thanks to a recovery in domestic demand(although not as strong as expected asthe sector is still plagued by the con-sumer credit storm, according to theTaiwan Institute of Economic Research)and a better-than-expected export per-formance which is still the major sourceof growth. Taiwan dropped one place to18th in the latest IMD global competitive-ness report while China moved up to15th from 18th last year.

On the healthcare front, the investiga-tion launched by the Tainan ProsecutorsOffice in November 2006 and the subse-quent complete re-submission to theBureau of National Health Insurance(BNHI) of all drug purchase transactiondata have not yet resulted in an outcomeas BNHI said it needed more time to ana-lyze the data. This has left all stakehold-ers wondering about future implicationsfor the healthcare system.

BNHI announced on April 4 that it hadapplied for a NT$160 billion loan (US$4.8billion) to cover the growing deficit of thehealthcare system. The premium hike,one of the key measures proposed byBNHI to help to improve its financialposition, continues to be opposed in theLegislative Yuan. This resulted in HealthMinister Hou Sheng-mou eventuallyannouncing there will be no premiumhike until the drug price black-hole issueis solved.

BNHI also said that the first stage ofthe Diagnosis-Related Group (DRG)

views from the region

ChinaFast-paced GDP

growth continues

Gross domestic product expanded by10.8% in Q1 2007 with predictions formuch the same for the full year. Whileinflation was on target at 3.3% inApril, this was still the highest con-sumer inflation rate for the past 25months. However, it will probably not trigger the central government totake significant measures to cool theeconomy. China’s trade surplusexpanded 60% in April year-on-yearwith export volume increasing 25.7%,outpacing import growth of 19% forthe first four months of the year. TheEuropean Union remains China’slargest trading partner, followedclosely by the US and Japan.

Fundamental changes in China’seconomic policy, including exchangeand interest rates, are unlikely in the lead-up to the National PartyCongress later this year. However, asthe United States enters its presiden-tial election cycle, US demands forbasic changes in China’s trade policyare sure to create increasing frictionbetween the two countries.

Preliminary pharmaceutical industryresults for Q1 2007 indicate a strongsales rebound with many multination-als growing in excess of 20% year-on-year, marking the return to growthrates last seen in the first half of2005. Tendering activity around thecountry in Q1 2007 was also signifi-cantly below 2006 levels. NationalReform and Development Commissioncentrally mandated price reductionsappear to be slowing as well. This iswelcome news for an industry rackedover recent years by constant andserious price pressures.

However, several new pharmaceuti-cal cost-containment initiatives arecreating additional challenges. These

A round-up of reports from our offices around theregion outlining the news and events that are shapingtheir businesses and redefining the healthcare industry

views from the region

would be introduced starting from 2008with full implementation by 2011. This is a payment system establishing a uni-versal reimbursement price for treatingthe same medical condition, regardlessof treatment methods, drugs and lengthof hospitalization. The new system willeventually replace the current “fee-for-service” payment system.Yves Hermes

yhermes@zuelligpharma.com.tw

✱ Fast FactThe first stage of the Diagnosis-

Related Group payment system will

start in 2008.

SingaporeHealthy economic

growth on track

The construction boom has providedsufficient impetus in Q1 to helpSingapore’s economy continue toexpand at an impressively strong 6%.Weaker manufacturing growth wastipped as the Achilles heel, but buoyantactivity in construction offset that fragili-ty and continued strength in the ser-vices sector made the overall picturerosier than the market had expected.

Singapore’s economy is likely to growat the top end of the official 4.5%-6.5%growth estimate this year, according toMinister Mentor Lee Kuan Yew, as longas the United States’ economy holds up.Mr Lee’s optimism was mirrored by theMonetary Authority of Singapore (MAS),which said that the local economy is ontrack for a fourth consecutive year ofrobust growth. However, the centralbank is sticking to the official growthestimate as it notes that the US econo-my is slowing and the global electronicssector is sputtering.

Growth of around 6% this year is wellabove Singapore’s medium-term growthpotential of 3%-5%. But is still a signifi-cant slowdown from last year’s 7.9%,which was the third straight year ofhealthy growth for the local economy,which increased by 6.6% and 8.8%respectively in 2005 and 2004. However, economists at NanyangTechnological University (NTU) are farmore upbeat about the economy than

the government, tipping growth thisyear to be a sparkling 7%.

Continued growth has also generatedstrong employment gains in Q1 with preliminary estimates showing that total employment grew by 48,000. This is higher than the gains of 45,000in the same period a year ago, but seasonally adjusted is lower than51,500 in Q4 2006.

Eli Lilly has joined GlaxoSmithKlineand Novartis by committing a sizeableinvestment to Singapore for researchactivities over the next five years. Lillywill invest US$150 million to triple thesize of its research center and bring thetotal number of researchers to 150.

The new S$400 million Yishun hospi-tal, due to open in December 2009, hasexperienced delays as have many otherconstruction projects. The Indonesianban on sand exports and the disruptionto granite supplies has created concernand is not only delaying projects butalso pushing prices higher.

Finally, Singapore has been chosen by the Association of Southeast AsianNations (ASEAN) as the region’s centerfor stockpiling antiviral drug oseltamivirin case of a bird flu pandemic.Singapore was considered the mostappropriate location because of the lackof H5N1 cases and its ability to react toan outbreak within the region.Giuseppe Leo

gleo@zuelligpharma.com.sg

✱ Fast FactASEAN has made Singapore the

region’s center for stockpiling

oseltamivir.

Malaysia & BruneiProjects under 9th

Malaysia Plan gain

momentum

The Malaysian economy will continue toexpand moderately given the increasingmomentum in implementation of 9thMalaysia Plan (9MP) projects, fasterinvestment approvals, policy initiativesto relax foreign exchange trading rulesand scrapping of the Real Property GainsTax (RPGT). Recent monthly indicatorsreveal inflationary pressures decliningfrom a high of 4.8% in March 2006 to

3.1% in February 2007, while DBSResearch expects inflation to remainaround 2.8% as the impact of the previous oil price hike dissipates.

As the US is Malaysia’s largest exportmarket, slower growth in the US econo-my will have a negative impact on localproduction and domestic and externalorders. On balance, the GDP forecast for2007 moved up slightly to 5.6% from theprevious forecast of 5.2%, although thisis still below the government’s 6% targetand 2006’s growth.

On the pharmaceutical market front,the Pharmaceutical Association ofMalaysia (PhAMA) reported total partici-pating pharmaceutical company sales ofRM535 million in the first four months of2007, posting overall growth of 7.6%.Zuellig Pharma Malaysia recorded over-all growth of 13.3%. In terms of ethicalgrowth, PhAMA posted growth of 10.5%in the first four months, whilst ZuelligPharma’s principals recorded growth of 10.1%.

Negotiations on the US-Malaysia Free Trade Agreement (FTA) continue.However, industry observers are doubt-ful that negotiations will be concludedbefore July, putting the entire FTA indoubt.

The Malaysian government is stillmaking the country’s healthcare industryone of its top priorities and is striving toimplement new schemes to help boostthe country’s medical sector. AboutUS$9.7 million (RM37 million) has beenallocated to the newly launched HealthPromotion Board to provide funding tohealth-related NGOs and professionalhealth associations to act as catalysts topromote the culture of healthy livingamong Malaysians. Organizing health-promotion activities is one of the strate-gies of the Ministry of Health inmanaging health-related diseases suchas strokes, which are on the rise eachyear. A total of 350 health clinics will bebuilt in rural areas nationwide under the9MP to cater for the healthcare needs ofthe poor. Mobile clinics are also in thenational health plan, with such facilitiesprovided for areas that lack land for con-struction.

In March 2007, a whopping US$3.7million (RM14 million) worth of counter-feit sex stimulant pills closely resemblingViagra were seized in Penang in thenorthern part of Malaysia. It was the

biggest seizure of a single drug inMalaysian history. It is believed that thepills were for the Malaysian market whilesome could have been for Thailand.

In Brunei, with global energy demandslowing down, GDP is forecast to ease to3% in 2007, according to the AsianDevelopment Bank. Although petroleumproducts still account for more than half of the economy, banking, insurance, trans-portation and the food-retailing sectorhave increased their contribution to GDPgrowth in recent years and will likelyassume a larger share of economic outputin the years ahead. Inflation remains low atabout 0.5%.

As part of its e-health program initiative,Brunei’s Ministry of Health signed a leasingagreement for personal computers andperipherals with Komputer Wisman SdnBhd, which will lease 1,380 units of ITequipment for distribution to all govern-ment hospitals, health centers, clinics,treatment centers and health-relatedoffices. The project hopes to improve thedistribution and provision of quality health-care through utilizing the latest develop-ments in information and communicationstechnology.Jessie Tang

jtang@zuelligpharma.com.my

✱ Fast FactThe Malaysian government is still seek-

ing to boost the country’s medical sector.

ThailandEconomy slows as

political uncertainties

remain

The interim government announced that itwould only be managing the country up tothe end of the year. It plans to hold anational election this year but has yet toannounce a date. The government is alsodrafting a new constitution although cer-tain issues are still pending.

Thailand’s economy during Q1 2007slowed due to persistent weakness indomestic demand and political uncertain-ties. The country was also included on theUS 301 Watch List for trademark infringe-ments, dampening market sentiments fur-ther. Consumers were more cautious inspending and credit card default pay-ments increased. This is expected to have

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an effect on public hospitals’ ability tomeet short-term payment obligations.

Compulsory licensing announced afew months ago by the Ministry ofPublic Health has affected three phar-maceutical companies in Thailand, twoHIV treatment drugs and one heart dis-ease drug. The issue is still being widelydebated and no satisfactory solution iswithin close reach. Though the Thai government believes it has acted in thebest interests of Thai patients, it is diffi-cult to follow many aspects of the issue.Thailand is the 21st richest country inthe world. In 2004, it spent US$93 mil-lion on AIDS/HIV (as per the last pub-lished figures in the UN AIDS report)while the new government increasedmilitary budget spending in 2006 byUS$1.1 billion.

In addition to compulsory licensing,the current administration is also set to revamp the financing and benefitschedule for healthcare spending, tak-ing away most of the benefits for civilservants and their families. How thegovernment will communicate thesechanges to the public without wide-spread unhappiness remains to be seen.

Due to problems in Thailand’s south-ern region, the government will spendover US$11 million on nursing scholar-ships to address a shortage of medicalcare. Scholarships will be given to 3,000 high-school students living in Yala, Narathiwat and Pattani provinces,together with students of districts in Songkhla province affected by the violence. Patrik Bruhlmann

patrikb@zuelligpharma.co.th

✱ Fast FactThe government’s compulsory

licensing of drugs is still causing

debate.

IndonesiaParliament approves

investment law

Due to numerous natural catastrophesearlier this year, the government hasestimated a 0.1%-0.2% drop in GDP.Nevertheless, despite all the disasters,the rupiah exchange rate has been in

the stable 8,900-9,200 range in recentmonths. Indonesian shares have also reached record highs, with theJakarta Stock Exchange CompositeIndex breaking through 2,000 follow-ing feverish growth in other Asian markets.

Meanwhile, Bank Indonesia (BI) haslowered the BI rate from 9% to 8.75%.This decision was based on an evalua-tion of progress toward the inflationtarget, set at 6%+1% and 5%+1% for2007 and 2008, identification of vari-ous risks, and assessment of currenteconomic conditions.

Economic growth projection for2007-08 is still on track to meet earlierforecasts of 6% for 2007 and 5.7%-6.7% for 2008. The slow rate at whichprivate consumption has been gather-ing momentum in 2007 is expected tobe compensated by the substantialincrease in government spending.Government efforts to improve the investment climate and the accel-erated infrastructure development program are expected to push invest-ment growth to higher levels.

A new investment law has beenapproved by parliament one year afterthe draft was submitted. Key elementsof the law include equal legal status,investors’ protection, dispute resolu-tion, negative list, property rights,immigration procedures, tax incentivesand reporting requirements.

Bird flu has largely flown off theradar of the western world but peopleare still dying from it nearly everyweek in Indonesia. Since the first casewas reported two years ago, govern-ment officials have reported 79 deathsfrom the H5N1 strain in Indonesia,more than a third of the world’s total.The country is also struggling toensure that poor nations get their fairshare of any new vaccine developed tostem the spread of a possible globalflu epidemic. Indonesia has refused toshare its samples of bird flu virus withthe World Health Organization (WHO)since January. Jakarta fears a vaccineproduced from its specimens would beout of reach for its own citizens – tooexpensive and controlled by wealthynations. WHO has not counted anyIndonesian bird flu cases since thecountry stopped sending samples,keeping its official count at 63. By

early June, Indonesian officials hadrecorded 16 further deaths.

Minister of Health Siti Fadilah Suparihas launched cheap, unbranded genericmedicines as part of the Ministry ofHealth program called Obat Serba

Seribu (All One Thousand Medicines).The program consists of 20 kinds ofmedicines worth 1,000 rupiah each(around US$0.11). These medicines areproduced by PT Indofarma, a state-owned pharmaceutical manufacturingcompany, and will be distributed gradually all over the country. Elevenwere distributed in May and the rest are due to be made available next year.Medicines will be labeled to ensuretheir authenticity.Christian Stoeckling

christian.stoeckling@aplcare.com

✱ Fast FactThe Health Minister has launched a

program distributing cheap, unbranded

generic medicines.

PhilippinesNational mid-term

polls held

The Philippines held national mid-termelections on May 14 for positions in theSenate, Congress, and local government(governors and mayors). Election resultsshould be available by the end of June.

The government missed its budgetdeficit target of P46 billion for the firstquarter, posting instead a deficit of P52billion. Government revenues were P19billion short of target. Finance officialsadmitted the revenue goal is unattain-able and have reduced it by 13%.Minimal improvement in collection effi-ciency and the absence of new tax mea-sures have further limited revenuegrowth. Nonetheless, the government isprojecting a full year budget deficit ofP63 billion or 0.9% of GDP. Governmentspending, particularly on much-neededinfrastructure, may need to be curtailedin order to achieve this goal.

Strong net inflows, including remit-tances of overseas Filipino workers andportfolio investment, have helped sus-tain a stronger peso against the US dol-lar. The exchange rate fell below P48

per US$, despite market jitters andmassive spending in the run-up to theMay elections. In response, the cen-tral bank liberalized selected forextransaction rules in an attempt totemper the peso appreciation. Theinflation rate through April remainedmoderate (less than 3%).

The Supreme Court recently sustained a prior injunction on theDepartment of Health, restraining the government from enforcing proposed restrictions on advertising,marketing and the promotion ofinfant milk formula and other breastmilk substitutes.

The Philippine International TradingCorporation (PITC) continued to promote its parallel drug importationplans and announced it will increaseits annual imports from P115 millionto P400 million. PITC also announcedplans to increase the number of low-cost brands imported from 30 to 70brands.

The pharmaceutical industry grewover 10% in the first quarter to anindustry size of almost P100 billion(US$2 billion or €1.56 billion). Ethicalproducts grew 13% and proprietaryproducts grew 6%. The drugstorechannel grew 11% and the hospitalchannel grew 5%.

Zuellig Pharma Philippines

In March, Zuellig Pharma welcomedtwo new principals: Novartis andMead Johnson. Separately, the CebuDistribution Center upgraded storagecapacity for “cool” and “cold” productstorage.Mike Becker

mbecker@zuelligpharma.com.ph

Metro Drug Inc

In early June, MDI completed its ware-house extension project. We have rented an additional 1,500-square-meter warehouse directly adjacent toour current facility to handle returngoods and samples. In the main facili-ty, we upgraded the air-conditioning,improved the flooring and added addi-tional racking thus increasing capacityand improving the workflow. In thisnew setup we have a capacity utiliza-tion of around 80%. Should the needarise there is an option of an addition-al 4,500 square meters for further

expansion within the same compound.Welcome on board and thank you foryour trust, Alcon Laboratories Inc,Lundbeck and Roche DiagnosticsPhilippines!Chris Eberle

ceberle@metrodrug.com.ph

✱ Fast FactThe Philippine International Trading

Corporation (PITC) continued to

promote its parallel drug importation

plans.

VietnamGrowth puts pressure

on staff and office

resources

The first four months of 2007 resulted inthe continued growth of Vietnam’s econ-omy and exports. Exports grew by 22%to US$14.5 billion over the same periodlast year, an increase attributed in part tonew export opportunities created byVietnam’s World Trade Organizationentry. Total imports into Vietnam greweven faster at 32.8%, which marks achange from 2006 when imports andexports were nearly at the same level.Foreign direct investments (FDI) grew bya staggering 55% in the same periodwhich means that the annual FDI goal ofUS$12 billion looks well within reach.Economic growth also appears to be ontrack to reach the government target of8.5% GDP growth for 2007. On the down-side of such rapid growth is an increasingshortage of A and B class office space,especially in Ho Chi Minh City, with corre-sponding increases in rental prices. Moreand more companies also face difficultiesin recruiting qualified employees.

April saw a large number of articles in the Vietnamese media about pharma-ceutical product price changes.Pharmaceutical pricing is regulatedunder the Pharmacy Law, which requires both the importer and productregistration owner to notify the DrugAdministration of Vietnam (DAV) aboutprices changes on the import priceand/or price to trade. However, marketprices – especially those in wholesalemarkets – fluctuate independently fromprices registered with DAV. The

views from the region

moved from 30 takas (US$0.4) in June2006 to 65 takas (US$0.9). The riseaimed at addressing the growing debtposition of the Bangladesh PetroleumCorporation. The flow-on effect to com-modity prices, together with a shortageof some food commodity items, has seen the increase contribute directly tothe rise in inflation to 7.43% in Marchfrom just below 5.98% in January. Aslowdown in the growth rate of GDP isalso anticipated.

Avian influenza was first detected in the country on March 22 in six farms to the north of Dhaka. The virus has sincespread to nine districts and resulted inthe culling of 107,000 chickens. Thepoultry industry represents an invest-ment of nearly US$1.5 billion forBangladesh, directly or indirectlyemploying almost five million people. The government’s response hasbeen limited so far to culling, a publicawareness campaign, and recently con-sidering enforcing the use of masks andgloves for poultry workers. No cases ofhuman infection have been reported.

The local pharmaceutical market con-tinued a growth rate averaging 15%through Q1 2007, despite early concernsover the large number of outlets dam-aged or removed as local governmentsmoved against illegal structures or con-struction beyond legally designatedproperty boundaries. April looked lesspromising for the industry as companiesreported a reduced rate of growth andsales below that for April 2006 on theback of a reduction in inventories by thetrade. The concern is that this mayreflect reduced spending power resultingfrom commodity price increases.However, the underlying reasons haveyet to be identified.

Zuellig Pharma Bangladesh Limitedhas officially opened its new corporateoffice in the Gulshan area of Dhaka andis nearing the end of recruiting itsvibrant corporate team. The Dhaka officewill support the operation of 11 branchesnationwide and deliveries to over 10,000customers for its first client,GlaxoSmithKline Bangladesh Ltd.Brett Marshall

bmarshall@zuelligpharma.com

✱ Fast FactThe country has experienced its first

outbreak of avian influenza.

Government Statistics Office publisheddata in May showing that the overallConsumer Price Index increased by 7.2%in the January-April period compared tothe first four months of 2006. Increasesfor medical products and healthcarestood at only 4.1%, while food, for example, rose by 14.3%.

The Ministry of Health launched an investigation into the pricing of phar-maceutical products and as a result anumber of companies that had increasedprices were asked to reduce them back toprevious levels. The Ministry of Health isexpected to issue new guidelines onpharmaceutical pricing in Q2. Stefan Heitmann

sheitmann@zuelligpharma.com.vn

✱ Fast FactPricing of pharmaceutical products is

in the spotlight.

Bangladesh Electricity shortage

is causing concern

The caretaker government completed itsfirst 90 days in office and continues togovern under the Emergency PowersRules with heavy restrictions on all formsof political activity. An election is expectedbefore the end of 2008 with work under-way to secure the landscape for crediblepolls. Reforms include transparent ballotboxes and voter identity cards.

Peak electricity generation capacity of3,812 megawatts in financial year 2006compared with peak demand of 4,693megawatts resulted in load-shedding of1,312 megawatts on 347 days. Growth ofboth the manufacturing sector and con-sumer demand has seen this gapincrease in 2007. Prices for urban usersrose 5% in March, and a further increaseis likely, to help redress significant lossesto government finances in this area. Theper unit tariff remains below prices inboth the West Bengal area of India, andNepal, from where Bangladesh is lookingat electricity import options to meet itsgeneration shortfall.

An increase in the price of fuels in Aprilrepresented the tenth price rise sinceJune 2006, and saw prices jumping over15% per liter. For petrol alone, the price

KoreaFree Trade Agreement

with US concluded

The biggest news in the first half of2007 has been the successful negoti-ation of the US-Korea Free TradeAgreement. Although there are stillsubstantial hurdles to overcome inthe months ahead, this developmentpaves the way for major change with-in the healthcare industry. The mostaggressive estimates indicate thattwo-way trade will increase by aboutUS$20 billion per annum.

During this time, the Association ofSoutheast Asian Nations Free TradeAgreement, which was ratified onApril 2, also took effect. WhileThailand held out due to rice beingexcluded from the agreement, it isexpected that Thailand and Korea willsign an agreement at a later date.

The Ministry of Health and theHealth Insurance Review Agency(HIRA) have announced the formationof a new information center to raisethe transparency of pharmaceutical-related transactions in Korea. The center, to be run by LG CNS, is scheduled to begin a trial period inOctober. It is anticipated that thedatabase will contain such informa-tion as production and other impor-tant statistics, the state of supply, as well as consumption data. Theinformation will be submitted regularly by industry partners includ-ing manufacturers, distributors, andwholesalers.

HIRA has notified some multina-tional pharmaceutical companies ofreductions in their reimbursementprices although these products areunder patent. It remains to be seenwhat action these firms will take: litigation against the government orpatent suits against the registrants of the generic substitutes.David Ames

dames@zuelligpharma.co.kr

✱ Fast FactA new information center seeks to

increase transparency in pharma

transactions.

Corporate officeHong KongZuellig Pharma Asia Pacific1303, Shui On CentreNo. 6-8 Harbour RoadWanchai, Hong KongTel: +852 2845 2677Fax: +852 2877 5647

ContactsMr. Fritz HorlacherChief Executive Officerfhorlacher@zuelligpharma.com

Mr. Rolf SteffenRegional Director, South East AsiaRegion, Zuellig Pharmarsteffen@zuelligpharma.com

Mr. Roland BruhinRegional Director, North Asia Region,Zuellig Pharmarbruhin@zuelligpharma.com

Mr. Eric von ZwislerRegional Director, China Region, Zuellig Pharmaezwisler@zuelligpharma.com.cn

Mr. Mike HamptonBusiness Development Manager South Asia mhampton@zuelligpharma.com

Mr. John DicksonChief Information Officerjdickson@zuelligpharma.com

Ms. Elaine J. CheungChief Financial Officerecheung@zuelligpharma.com

Mr. Douglas Stanton Regional Human Resources Director dstanton@zuelligpharma.com

Mr. Joshua LeungEditor, The Market PartnerZuellig Pharma Asia Pacificjleung@zuelligpharma.com

For information about Zuellig Pharma

Asia Pacific or any of its business entities,

please contact the Corporate Office:

Zuellig Pharma Asia Pacific1303 Shui On CentreNo. 6-8 Harbour RoadWanchai, Hong KongTel: +852 2845 2677 Fax: +852 2877 5647Email: help@zuelligpharma.com

Country officesZuellig PharmaBangladeshMr. Brett MarshallGeneral ManagerZuellig Pharma Bangladesh Ltd.Tel: +880 (2) 988 4454bmarshall@zuelligpharma.com

ChinaMr. Eric von ZwislerChief ExecutiveZuellig Pharma ChinaTel: +86 (21) 5306 0001 ezwisler@zuelligpharma.com.cn

Mr. John WooGeneral ManagerLocal Wholesaling Division Zuellig Pharma ChinaTel: +86 (21) 5306 0001 jwoo@zuelligpharma.com.cn

Hong Kong & MacauMr. Frederick TsangChief ExecutiveZuellig Pharma Ltd.Tel: +852 2856 3632ftsang@zuelligpharma.com.hk

IndonesiaMr. Christian Stoeckling President DirectorP.T. Anugerah Pharmindo LestariTel: +62(21) 345 6008christian.stoeckling@aplcare.com

KoreaMr. David AmesPresidentZuellig Pharma Korea Ltd.Tel: +82 (2) 2006 0600dames@zuelligpharma.co.kr

Malaysia & Brunei Ms. Jessie TangChief ExecutiveZuellig Pharma Sdn.Bhd.Tel: +60 (3) 7985 6688jtang@zuelligpharma.com.my

PhilippinesMr. Michael BeckerPresident & Chief ExecutiveZuellig Pharma CorporationTel: +63 (2) 845 7252 mbecker@zuelligpharma.com.ph

Mr. Chris Eberle General ManagerMetro Drug Inc.Tel: +63 (2) 837 8661 ceberle@metrodrug.com.ph

SingaporeMr. Giuseppe LeoGeneral ManagerZuellig Pharma Pte.Ltd.Tel: +65 6546 8188gleo@zuelligpharma.com.sg

TaiwanMr. Yves HermesGeneral ManagerZuellig Pharma, Inc. Tel: +886 (2) 2570 0064yhermes@zuelligpharma.com.tw

ThailandMr. Patrik BruhlmannChief ExecutiveZuellig Pharma Ltd.Tel: +66 (2) 656 9800patrikb@zuelligpharma.co.th

Vietnam & CambodiaMr. Stefan HeitmannGeneral ManagerZuellig Pharma Vietnam Ltd.Tel: +84 (8) 910 2650sheitmann@zuelligpharma.com.vn

RegionalMr. Joe DaviesRegional Logistics ManagerZuellig PharmaTel: +63 (2) 752 6458jdavies@zuelligpharma.com

Zuellig Pharma Asia PacificWith a history of more than60 years in Asia, ZuelligPharma has forged a reputa-tion as the leading providerof distribution solutions forthe pharmaceutical industryin the region. Our cutting-edge services cover end-to-end supply chainmanagement, includinginventory management,warehousing, distributionand customer order man-agement, among others.Taking advantage of our extensive expertise, pioneering technologicalinnovations and state-of-the-art facilities allows manufacturers to focus ontheir own core expertise. Ascalable infrastructure sup-ports the marketing drivesof our principals and ourcollection services reducecountry risks for individualprincipals.

We provide the largestdirect account coverage inall healthcare channels inAsia Pacific, employing over1,000 sales representativesto support the activities ofour principals in the tradechannel. Advanced informa-tion technology tools, suchas zip-online, an innovativesales and inventory tool,give principals full trans-parency for all transactions.

zip-online® is our regionalprincipal information platform offering timelysales and inventory information, best practicesin analysis and reporting,and diverse forms of benchmarking.

AsiaRx® is our exclusiveregional Internet-basedpharmaceutical marketplacethat connects customersand principals in innovativeways. For principals, it is anew connection to cus-tomer behavior, integratedwith other channels andoffering complete supplychain information. For cus-tomers, it saves them timeand money, and gives themthe control necessary to runtheir businesses better.

PharmaLink is a leadingpharmaceutical and health-care marketing specialist inthe Asia Pacific region. Thecompany is a wholly ownedsubsidiary of Asia PacificPharmaceutical Holdings, a joint venture betweenInterpharma InvestmentsLtd, Quintiles TransnationalCorp and TemasekHoldings (Private) Limited.

The Market Partner: company background

Affiliated Company

Pharma Industries has along-established history inproviding contract manu-facturing services to theAsian pharmaceuticalhealthcare industry throughits operations in Thailandand the Philippines. With a client base of over 50multinational companies,and over 1,200 formula-tions currently in produc-tion, the Philippines plantof Pharma Industries isthe largest, most advancedcontract manufacturingfacility in Asia. The group’sThai operations are certi-fied to the same top GMPstandards, providing manu-facturing services to over 30research-based companiesfrom around the globe.

Our world-class facilitiesoperate in strict accordancewith rigorous quality man-agement standards, settingindustry benchmarks ofexcellence. We continuouslyrefine and implement thelatest technological advancesin our on-going drive tooffer the best services to ourprincipals and clients.

For more information aboutZuellig Pharma Asia Pacific,please contact:jleung@zuelligpharma.com

Associated Company