Pharma business expansion into new markets
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Should you use distributors or start with own Legal entity when going international? What are the benefits and what can be mayor pitfalls in each of these scenarios?
Pharma business expansion into new markets
- 1. Time for Business Expansion?
- 2. Decision is made, your pharma business is going international. But should you use Distributors or start your own Legal entity? What are the benefits and what can bee pitfalls of each of these two models?
- 3. Retail price Gross WS price NET WS price Investments ExW/CIP Price Distributor's Profit COGS After investments in Marketing &Sales, operations and other expenses Gross Margin Manufacturers basic profitability Distributor model Retail Margin Pharmacy margin WS Margin Mandatory and non-mandatory WS margins Distributor fee - difference between ExW/CIP and NET WS Price and/or marketing expense share PRO Significantly lower OPCO Experienced local teams, Distributors market knowledge and contacts Established relations with TA KOLs and KA CONTRA Less control over SF activities, portfolio cherry picking Product focus/seasonality on distributor Lower Gross margin and profitability Distributors model is interesting: Related to companies: a) Companies interested in international sales, no capabilities for expansion b) Medium to large companies focused on other markets; c) Companies that look for market/ sales creation before entrance with own entity; Related to market type: a) Small markets does not justify investment in time, people and money; b) Emerging markets out of current focus; c) Regional markets; distributor cover several markets with centralized communication to principal (Logistics, marketing, regulatory);
- 4. When is the time for Own Legal Entity: Related to companies: a) Company expanding territories, increasing recognition, brand value and M&A value; b) Expansion after acquisition; c) Market/ sales developed by distributors; Related to products: a) Products with established sales via distributors, transfer to own entity and portfolio enlargement; b) Acquisition entrance, distributors agreement termination; c) Specific products: Short time to market/ Satisfying target market value/ Added value products; Retail price Gross WS price Net CIP Price COGS Additional profitability after investments in Marketing &Sales, operations and other expenses Manufacturers basic profitability Gross Margin Own Legal Entity Retail Margin Pharmacy margin WS Margin Mandatory and non-mandatory WS margins PRO: Full control on portfolio and activities, Building company Identity, brand equity, recognition Logistic activities centralized (in compare with scenario of several distirbutors) Direct communications with authorities Higher Gross margin and profitability CONTRA: Significantly increased OPCO HR issues