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Merck into Emerging India
 

Merck into Emerging India

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  • Widen our product portfolioDouble our revenueEstablish a stronger presence
  • http://www.biotaiwan.org.tw/download/structure4/%E5%8A%89%E7%BF%A0%E7%8E%B2/%E6%96%B0%E8%97%A5%E7%A0%94%E7%99%BC%E6%88%90%E6%9C%AC%E6%AF%94%E8%BC%83%E5%88%86%E6%9E%90(200803).pdf

Merck into Emerging India Merck into Emerging India Presentation Transcript

  • Be WellIndia – Key to Emerging MarketWork on biotechEnhance cost structureLeverage our expertise in diabetes & hepatitis CLead in the pharmaceutical industry
  • Merck is facing significant revenue pressure due to patent expiration in5 yearsPharmaceutical, 89%ConsumerCare, 4%AnimalCare, 7%Revenue streams of MerckPatents of the 3 best-selling products(Singulair, Vytorin, Zetia) will expire in5 yearsThreatsExpected revenue loss of US$10bnSource: Merck 2011 Annual Report, Pharmaceutical IndustryStructureOverview R&D in China Manufacturing in India Offerings in India Financials Implementation2
  • Merck is further alarmed by limited growth in developed market andlagging behind major competitors in emerging market5%16%0%2%4%6%8%10%12%14%16%18%DevelopedMarketEmergingMarketMarket growth rate in2011-20150%2%4%6%8%10%12%14%16%18%2009 2010 2011Percentage of sales from emerging marketMerckAverage of top 3 playersOverview R&D in China Manufacturing in India Offerings in India Financials ImplementationSource: Global Pharmaceutical Industry Report, Annual Reports of Johnson & Johnson, Pflizer, Novartis and Merck 3
  • Merck should invest in R&D of biologics, establish a manufacturinghub in India, and sell specialized biological offerings in IndiaPatent expirationIntensifyingcompetition ingenericsCurrent high R&DandmanufacturingcostOptimization ofcore businessRefinement ofcost structureInvestment forfuture growthChallengeGlobal StrategyBiologicsR&D in BeijingSpecializedbiologicsofferings inIndiaManufacturinghub in IndiaRecommendationto Merck IndiaOverview R&D in China Manufacturing in India Offerings in India Financials ImplementationSource: Team analysis 4
  • 5Biologics would be the key growth driver in pharmaceuticalBiologics ChemicalGrowth rate15-16%5-6%ProfitabilityHigher marginLower marginProtection ofintellectual propertyrightHigher technologycomplexityLower technologycomplexityDevelopment riskSuccess rate 30.1%Success rate 25.6%Source: Case pack, DiMasi & GrabowkiOverview R&D in China Manufacturing in India Offerings in India Financials Implementation
  • Beijing would be R&D center for biologics012345Biology talentsupplyMaturity ofskillsSynergy withoutside R &DPresence ofkey pharmasGovernmentsupportChinaIndiaFast expandingbiology talent poolLimited due to focuson genetics>100 supportingcompaniesLess supportingcompaniesEstablished skills5 companieswith provenskills> 128BetterinfrastructureEducationsupportSource: Case pack, The Korn Ferry InstituteOverview R&D in China Manufacturing in India Offerings in India Financials Implementation6
  • India would be the biologics manufacturing hub for lower cost and risk29.9 34.327.5293133.6010203040506070China IndiaAttractiveness index for FDI(Higher score = Lower cost, lower risk)CostRiskSource: PwCOverview R&D in China Manufacturing in India Offerings in India Financials Implementation7
  • Manufacturing in India would facilitate cost-effective distribution forIndian marketDistribution is 50% of total supplycost in IndiaStreamlining and reducingmiddlemenIntroduction ofGoods andService TaxEnsuring quality of biologicsPartnership with local distributorsLower distribution costOverview R&D in China Manufacturing in India Offerings in India Financials ImplementationSource: Team analysis 8
  • Merck should build its own production facilities in India in order toprotect our technologies and ensure product qualityLicensing Joint-venture AcquisitionInternalexpansionIntellectualpropertiesprotectionQualityassuranceCostSet-up timerequirement1 year 1 to 2 years 1 to 2 years 2 to 3 years= the bestOverview R&D in China Manufacturing in India Offerings in India Financials ImplementationSource: Team analysis 9
  • The production facilities will manufacture biologics, primarily to satisfydomestic demandsMajor considerations Site economics Proximity to skilled workers Proximity to end market Proximity to raw materialsKey facts• Located in Maharashtra, the richestand 2nd most populated state• 60% of Merck’s global biologicsproduction• Initial employment of about 100peopleOverview R&D in China Manufacturing in India Offerings in India Financials ImplementationSource: Team analysis 10
  • Merck should leverage its leading position in diabetes and hepatitis Cpharmacies to capture the huge market potential in India21138028-102030405060708090Diabetes Hepatitis CSize of Indian market (US$bn)2010 20252 existing products2 in R&D pipeline3 existing products2 in R&D pipelineSource: PwC, WHOOverview R&D in China Manufacturing in India Offerings in India Financials Implementation11
  • Merck should utilize its differential pricing strategy to educate the Indianmarket about our brand and foster good relationship with stakeholders• Keep our own brand to increase awareness• Sell at low price to reduce incentives for copycat• Obtain large volume to achieve profitability• Include Merck’sproducts on theessential drug listGovernment• Familiarize withMerckDoctor• Understand Merckas affordablemedicine withsuperior qualityPatientsOverview R&D in China Manufacturing in India Offerings in India Financials ImplementationSource: Team analysis 12
  • We will be able to finance investment through shifting manufacturingand growing sales to emerging market0.2 0.5 0.5 0.5 0.2 0.2 0.20 0 01.01.0 1.02.02.0 2.0 2.0 2.0 2.0 2.000 000 0.3 0.3 0.3 0 0-1.02.03.04.05.06.07.02012 2013 2014 2015 2016 2017 2018 2019 2020 2021Capital investment and available fund (US$bn)Biologic plant in India R&D for biologics in ChinaNew capacity in EM Fund availableSource: Team analysisOverview R&D in China Manufacturing in India Offerings in India Financials Implementation13
  • Merck’s new biologics will grow exponentially after launch6001,4002,6003,9006681,3971,9232,3862007001,000 1,350216738639 56605001,0001,5002,0002,5003,0003,5004,0004,5001st Year 2nd Year 3rd Year 4th YearSince the product launchSales projection for new biologics(Benchmark with existing products in US$m)Bio Diabetes I JanuviaBio Hep C PegintronSource: Case pack, Team analysisOverview R&D in China Manufacturing in India Offerings in India Financials Implementation14
  • Merck’s biologics will become crucial profit driver in the future0.3 0.9 1.6 2.315.3 15.415.515.6-2.04.06.08.010.012.014.016.018.020.02022 2023 2024 2025Profit projection for Merck (US$bn)Others Bio Diabetes I + Bio Hep CSource: Team analysis12.6% of totalprofitOverview R&D in China Manufacturing in India Offerings in India Financials Implementation15
  • Merck can mitigate the risks by continuous technologyimprovement, building good relationships with India government andregulatory bodies16High LikelihoodLow LikelihoodHighImpactLikelihood and impact of potential risks1. Governmentrestrictions onmode of entryand researchactivities3. R &Dfailure2. UncertainFDA biologicsapprovalregulations1. Build relationshipwith government by• Lobby group• CSR• Localemploymentand training2. Maintain closeconnection withFDA, actively consult FDAand reflect concernsLowImpact 3. Enhance quality ofexpertise and technologySource: Team analysisOverview R&D in China Manufacturing in India Offerings in India Financials Implementation
  • While biologics is Merck’s key growth driver, chemical products remainas the cash cowShort-term2012 - 2016Medium-term2017 - 2021Long-term2022 - futureBiologicsChemical• Continue R&Dwith biosimilaracquired fromSchering-Plough• Start biologicsR&D in China• Expand R&Dactivities inemerging markets• Buildmanufacturingcapacity in India• Manufacturebiologics in India• Sell biologics inIndia and otheremerging marketcountries• Sell low-pricebranded productsto India• Shift capacity toemerging markets• Continue tolaunch newproducts in Indiawith differentialpricing• Review pricingstrategy andmodify Merck’soverall strategy inemerging marketsOverview R&D in China Manufacturing in India Offerings in India Financials ImplementationSource: Team analysis 17
  • Merck should immediately enhance R&D in China and boost local salesin India while planning for plant construction in 5 years’ time‘12 ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 ‘19 ‘20 ‘21 ‘22 ‘23 ‘24RESEARCH AND DEVELOPMENTBiologics R&D in ChinaMANUFACTURINGProduction increase in existingEM plantsConstruction of India plantsIndia plants in operationMARKETING AND SALESEnhance sales network in IndiaSales of certain brandedproducts at low marginSales of diabetes and hepatitis CproductsSales to other emerging marketsSource: Team analysisOverview R&D in China Manufacturing in India Offerings in India Financials Implementation18
  • Be well - a promise we’ve made to the world since 1917Be NovelBe FirstBe the BestThat promise of Be Well is kept in the heart of this strategy
  • Appendix - Competitive analysis of Merck and Indian local playersMerck Indian Local PlayersCost Advantage inGenericsDisadvantagedDominant(Reverse-engineeringexpertise)Financial Resources Favorable LimitedKnow-how ofAdvanced GenomicsLeadership Significantly behindAcademicCollaborationMature Lacked20