1、McKinsey was commissioned in Q1, 2003 to:provide dedicated effort in conducting in-depth market survey and collect detailed information from 4 cities within 2 provinces to identify the key growth drivers in Chinas broad market;4 product categories were included: G.I. (Motilium), OBGY (Gyno.), Nail I
2、nfection (Sporanox) provide business model / proposal for XJP to capture the broad market,McKinsey Broad Market Study Process,Project design (Q1, 2003)Project review with local and regional J-C team (Apr. 03)Survey market selection (Apr. 03)Field work in 2 cities in Shandong (May 03)1st interim repo
3、rt (mid-June 03)Field work in 2 cities in Sichuan (mid-June mid-July 03)2nd interim report and Killer Idea workshop (end July 03)Final report (Aug. 03)Presentation to corporate management (Sept. 03),BROAD MARKET CAN BE DEFINED AS CLASS 2 HOSPITALS AND BELOW AT REGIONAL CITY LEVEL AND ALL HEALTH CARE
4、 INSITITUTIONS AT COUNTY LEVEL AND BELOW,Regional city,County,Town,Village,Class 3 hospital,Class 2 & below hospital,Pharmacy,Clinic,Broad market,Source: McKinsey analysis,BROAD MARKET DRUGS INCLUDE OTC AND “OUT PATIENT” Rx DRUGS,Source: McKinsey analysis,Targeting easily diagnosed, non-life threate
5、ning diseases,Easy to use,Relatively cheap,Relatively safe with few side effect,Examples,OTC,Mature,New,Motilium,Gyno-Daktarin,Rx,Outpatient,In-hospital,Sporanox / Sibelium,Cipramil,Broad market drugs,McKinsey Key FindingsOverall Market Situation,BROAD MARKET REPRESENTS 94% OF OVERALL DEMAND FOR BRO
6、AD MARKET DRUGS,Class 3 hospital,Broad market drug sales breakdown by geographyPercent,*For only 2 according cities*Data for only Sichuan provinceSource:Interview with distributors, hospitals, pharmacies McKinsey analysis,All 4 cities,Broad market represents 94% of demand,100%=,3.6,2.3,1.3,Bn RMB,Sh
7、andong*,Sichuan*,City,100%=,21,6,2,Mn RMB,County,Town,Village,Motilium,Gyno- Daktarin,Sibelium*,Broad market,Sales breakdown of XJP productPercent,Other channel at city level,GDP per capita:# of county,9,19932,11,30018,5,80114,County is critical for broad market,DUE TO LOW INSURANCE COVERAGE AND REC
8、ENT REIMBURSEMENT POLICIY CHANGES, MOST PATIENTS PAY BROAD MARKET DRUGS BY THEMSELVES,Insurance coverage in Yantai & Jining,For those with insurance, they can use their personal accounts (RMB 100300 per year) to cover their broad market drug expenseIn loosely controlled region (like Yantai), patient
9、s can treat the personal accounts as savings accountPatients pay on their own after the account balance is zeroA majority of population does not have insuranceThey pay broad market drugs by themselves,Insured,Self-pay,Total,City,County,Town,Village,3-5,95-97,20-30,70-80,10-15,85-90,1,99,0,100,Source
10、: Interview; focus group; McKinsey analysis,PATIENTS GO TO PHARMACY/CLINICS FOR MINOR SYMPTOMS,Source:Interview; McKinsey analysis,Drivers,Increased price sensitivityChanged medical insurance policyImproved highway infrastructureRich information accessTVNewspaperIncreased life paceNo time to visit h
11、ospitalPharmaceutical market deregulation policyMore and more pharmacies & clinicsConveniently located,Severe symptoms,Town hospital,Minor symptoms,Largest hospitals in city and county,Middle-small hospitals in city and county,Pharmacy/clinics,Rural patients,City patients,A LARGE PROPORTION OF DRUG
12、SALES COMES FROM RETAIL PHARMACIES; PHARMACY CLERKS BECOME INFLUENTIAL,* 40% of the patients changed their mind in pharmacySource: Interview; Focus group; McKinsey analysis,“What makes you change your perceived drugs?”* Pharmacy patient surveyPercent, Shandong city level,Perceived drug not available
13、; persuaded by pharmacy clerk,Perceived drug available but persuaded by pharmacy clerk,Changed mind by myself,“When I go to the pharmacy without a drug in mind, I just ask the pharmacy clerk to recommend. Then I will check the drugs introduction sheet, if this drug covers my disease, I will have a t
14、ry” Yibin city level focus group,Total drug sales breakdownPercent,Pharmacy,Hospital,Clinics,Overall,Motilium,Gyno Daktarin,Sibelium,CLINICS ARE PLAYING IMPORTANT ROLE ESPECIALLY AT COUNTY AND TOWN AND BELOW,Source:Interview; McKinsey analysis,Clinics share in total drug salesPercent,Overall,County,
15、Town,Village,36%,26,34,100,Sichuan,Shandong,City,8,27%,8,27,100,3,G.I. Category Review,* More than half of patients going to large hospitals will purchase drug at retail pharmacies * Branded generic drugs referring to generic drugs that run advertising, creating brand awareness in consumersSource: P
16、hysician and pharmacy interviews; McKinsey analysis,FOR GI DISFUNCTION DRUGS AS A WHOLE THERE IS SIGNIFICANT LATENT DEMAND; PEOPLE GENERALLY SEEK TREATMENT IN CLINICS AND PHARMACIES,Latent market demand 60% of total patients do not seek any treatmentAs market leader, increasing awareness for Motiliu
17、m to further boost treatment rate is one of the key demand levers Small clinics and pharmacies are important channels75% of patients seeking treatment go to clinics and pharmacies,Total incidence,Do not seek treatment,Go to large hospital*,Go tosmall clinic,Self medicate at pharmacy,Seek treatment,N
18、ot aware,Percent,Motiliums market share,Motilium has a vast room for grow because of significant leakage along the patient flow60% of GI patients that do seek treatmentCurrent market share of 4% which could be grown furtherAmong the 40% people who seek GI treatment, about 30% would buy banded generi
19、c drugs*, while the rest would buy non-brand generic drugs,1.6%,FOR GI DRUGS, POLARIZATION IS BECOMING MORE OBVIOUS,Anecdotes,Quantitative examples,Sub-TA sales by channelPercent,Source: Hospital pharmacy interviews; retail pharmacy interviews; McKinsey analysis,1997,1999,2002,Retail Pharmacy,Hospit
20、al,Clinic,“Unlike things in the past, patients nowadays generally try to avoid coming to hospitals because of hospitals expensive charges. For GI disease, most people can judge by themselves. So they usually prefer to go to pharmacies or clinics to buy drugs.” Qixia GI physician interview,“Most GI p
21、atients are repeating patients. They know which drugs to buy, and where the drugs are cheap. So usually they will choose pharmacies & clinics.” Jining retail pharmacist interview,Yantai,1997,1999,2002,Retail Pharmacy,Hospital,Clinic,Jining,Importance of GI drug sales in hospital is diminishingRetail
22、 pharmacy would be the major battle field for GI drugs,ROUGH ESTIMATION,SALES OF GI DRUGS ARE MORE CONCENTRATED TOWARDS VILLAGE AND COUNTY, WHILE THE MARKET IS FRAGMENTED WITH MANY DIFFERENT DRUGS,Percent,Motilium,Weiershu (谓尔舒),Mosapride (莫沙比利),Tidines* (替丁类药),Others*,Sidashu (斯达舒),*Others includin
23、g more than 200 different GI drugs such as Kuiweipian(快胃片)、 Weifuan(w胃复安)、 Jinweixiaoshipian (健胃消食片)、999(三九胃泰)、丹桂香、胃舒平、健胃酵母片、果胶铋、邦消安、调胃片、胃气痛片、湿胃舒、养胃舒, and many other cheap non-branded generic drugs*Including Cimetadine, Ramitidine McKinsey analysis,Total = RMB 243.05 million,Village,County,Town,City
24、,IN BROAD MARKET, MOTILIUM IS LOSING OUT BIG TIME IN RETAIL PHARMACY CHANNEL ,Retail pharmacy,Hospital,Clinic,Source: Distributor interviews; hospital pharmacy interviews; retail pharmacy interviews; McKinsey analysis,Sales by channelMn RMB, %,Motilium,Sidashu (斯达舒),Weiershu (谓尔舒),Mosapride (莫沙比利),T
25、idines (替丁类药),GI drugs,12,35,53,243.05,14,34,52,9.83,6,66,29,6.62,5,76,20,7.30,40,38,21,7.93,4,22,73,44.64,YANTAI & JINING, AND IN COUNTY GEOGRAPHY,City,County,Town,Village,Source: Distributor interviews; hospital pharmacy interviews; retail pharmacy interviews; McKinsey analysis,Sales by strataMn R
26、MB, %,Motilium,Sidashu(斯达舒),Weiershu(谓尔舒),Mosapride(莫沙比利),Tidines(替丁类药),GI drugs,15,26,19,243.05,41,15,22,20,9.83,43,22,37,26,6.62,15,26,44,21,7.30,9,18,50,23,7.93,10,1,17,17,44.64,66,YANTAI & JINING,Vaginal Infection Category Review,FOR VAGINAL INFECTIONS, PATIENTS ARE MORE AWARE OF THE DISEASE AND
27、 GO TO HOSPITAL FOR TREATMENT,Percent,Less latent demand Almost all patients aware of the disease due to obvious symptoms and regular check up80% of patients seek treatmentLarge hospital is important influencing channel Most patients seeking treatment will go to large hospitalsThough half or more wi
28、ll purchase prescribed drugs in pharmaciesMarket player should focus on share gain,Total incidence,Do not seek treatment,Go to large hospital,Go tosmall clinic,Self medicate at pharmacy,Seek treatment,Not aware,Source:Physician, pharmacy and clinic interviews,Hospital is still number 1 channel to pu
29、sh Gyno Daktarin salesPharmacy is becoming increasingly important,30% would use branded drugs, while 70% would use non-branded drugs,FOR GYNO DAKTARIN, HOSPITAL IS CRITICAL FOR PRESCRIPTION BUT PURCHASING HAS BEEN GRADUALLY SHIFTING TO RETAIL PHARMACY,Anecdotes,Quantitative examples,Sub-TA sales by
30、channelPercent,Source: Hospital interviews; Retail pharmacy interviews; McKinsey analysis,1997,1999,2002,Retail Pharmacy,Hospital,Clinic,“Gyno patients will usually come to hospital for body check and go to pharmacies to refill drugs. For such kind of disease, people still trust large hospitals. How
31、ever, more and more people purchase drugs in pharmacies” Liangshan No.2 hospital, Gyno physician interview,“I dont have many gyno patients. This is because of 3 reasons. First, I am a man; second, I dont have facilities to check the body in the clinic; third, patients are usually familiar with me an
32、d they will feel awkword.” Zhangyongxin town level clinic interview,Yantai,1997,1999,2002,Retail Pharmacy,Hospital,Clinic,Jining,ESTIMATE,IN ADDITION, GYNO DAKTARIN NEEDS TO GROW THE MARKET SHARE ESPECIALLY THOSE OF COUNTY AND TOWN,Source: Distributor interviews; hospital pharmacy interviews; retail
33、 pharmacy interviews; McKinsey analysis,Sales by strataMn RMB, %,Gyno Daktarin,Xiaomishuan(消糜栓),Mycostatin(制霉菌素),Shuangzuotaishuan(双唑泰栓),Jieeryin(洁尔阴),Vaginal infection drugs,YANTAI & JINING,City,County,Town,Village,26,50,20,71.38,42,47,12,2.47,24,43,32,4.54,41,46,13,4.46,3,59,38,5.46,9,43,27,5.83,4
34、,0,0,0,0,22,Nail Fungal Infection Category Review,FOR TINEA UNQUIUM DRUGS, DEMAND LATENCY IS EVEN HIGHER,Percent,Extremely latent demand with increasing awareness 90% of patients do not seek treatmentAwareness and treatment rate is increasing slightly due to competitors heavy advertisingOnly around
35、10 % of those seeking treatment purchase drugsOnly 1% would follow prescription,Total incidence*,Do not seek treatment,Seek treatment,Not aware,* The incidence rate is around 5% in ShandongSource: Physician and pharmacy interviews; McKinsey analysis,Only 1% actually buy drugs,Low treatment rate is m
36、ainly due to affordability issue of the patientsSporanoxs potential market as a Tinea Unquium drug is small, and is unlikely to be a broadmarket hit,Go to large hospital,Go toclinic,Go to pharmacy directly,HOSPITAL CHANNEL IS STILL DOMINATING TINEA UNQUIUM DRUG MARKET WHILE PHARMACY CHANNEL IS PICKI
37、NG UP,Anecdotes,Quantitative examples,Sub-TA sales by channelPercent,Source: Hospital pharmacy interviews; Retail pharmacy interviews; McKinsey analysis,1997,1999,2002,Retail Pharmacy,Hospital,Clinic,“We gradually carry some Tinea Unquium drugs in these years. Because more and more patients, althoug
38、h still quite small in amount, come here to ask for Liangjia after seeing its advertisement. I think most patients still go to hospital for treatment.” Jining Kangfu pharmacy,“I seldom see Tinea Unquium patients. And also, because the drugs are very expensive, I didnt carry them. If there is really
39、someone come to my clinic, I will suggest them to pharmacy.” Yantai clinic interview,Yantai,1997,1999,2002,Retail Pharmacy,Hospital,Clinic,Jining,*Others including around five drugs, such as Huihuangmeisu（灰黄霉素）, Lisulao（里素劳）,Lianghuija（亮灰甲）etc.Source: Distributor interviews; physician interviews; pa
40、tient interviews; McKinsey analysis,THERE ARE ONLY A FEW COMPETITORS AT CITY AND COUNTY LEVEL FOR SPORANOX; LIANGJIA IS DOING BETTER THAN SPORANOX AT RETAIL PHARMACIES DUE TO HEAVY ADVERTISING,Percent,Others*,Total = RMB 9.22 million,County,Town,City,Sporanox,Lanmeishu (兰美抒),Liangjia (亮甲),Village,0,
41、Source: Distributor interviews; physician interviews; patient interviews; McKinsey analysis,THERE ARE ONLY A FEW COMPETITORS AT CITY AND COUNTY LEVEL FOR SPORANOX; LIANGJIA IS DOING BETTER THAN SPORANOX AT RETAIL PHARMACIES DUE TO HEAVY ADVERTISING,City,Total,Retail pharmacy,Hospital,Clinic,County,S
42、hare of leading drugs within Tinea Unquium Yantai & JiningMn RMB, %,Total,Retail pharmacy,Hospital,Clinic,4.0,2.2,1.8,0.1,5.0,0.8,4.1,0.2,100%=,Sporanox,Lanmeishu* (兰美抒),Liangjia (亮甲),Others,Liangjia has relatively high market share in retail pharmaciesAt city level, Lanmeishu has 31% of hospital ch
43、annel, better than SporanoxHospital at county level and above should be the main focus,PRICE IS A HUGE ISSUE FOR SPORANOX,Sporanox is too expensive for most farmers whose annual income is only around RMB 2,000Even at county level, cost of using sporanox for effective treatment is higher than total d
44、rug expense per year for an average person,County level price threashold,City level price threashold,County level annual drug expense per person,Average insurance allowance per year,Cost of sporanox as a derma drug,Source:Interviews; McKinsey analysis,Cost of sporanox as a STD drug,RMB,FOR SPORANOX,
45、 XJP SHOULD CONTINUE TO FOCUS ON HOSPITALS ,Retail pharmacy,Hospital,Clinic,Source: Distributor interviews; hospital pharmacy interviews; retail pharmacy interviews; McKinsey analysis,Sales by channelMn RMB, %,Sporanox,Lanmeishu* (兰美抒),Liangjia (亮甲),Tinea Unquium,65,33,9.22,69,30,1,2.21,84,15,0,1.50
46、,12,87,1.26,2,2,YANTAI & JINING, AND AT CITY AND RICH COUNTIES,County,Town,Village,Source: Distributor interviews; hospital pharmacy interviews; retail pharmacy interviews; McKinsey analysis,Sales by strataMn RMB, %,Sporanox,Lanmeishu*(兰美抒),Liangjia(亮甲),City,Tinea Unquium drugs,44,54,9.22,48,50,2,2.
47、21,53,47,1,1.50,67,29,1.26,2,4,0,1,1,0,YANTAI & JINING,Vertigo Drug Category Review,THERE IS UNTAPPED DEMAND IN TWO OF THE THREE PRODUCT-RELATED TAs,GI disfunction patient flow in broad market percent,Source: Hospital McKinsey analysis,VI patient flow in broad marketpercent,Vertigo patient flow in b
48、road marketPercent,Total incidence,100,30,3040,2040,Not aware,Do not seek treatment,Seek treatment,Total incidence,100,1,2040,6080,Not aware,Do not seek treatment,Seek treatment,Total incidence,Not aware,Do not seek treatment,Seek treatment,100,1,99,0,Vertigo incidence rate is only 1%-3%Sibelium can target more indications with much larger patient population,Huge latent demandAwareness can be increased by patient educationAffordability can be improve due to economic development,BY GEOGRAPHY, COUNTY LEVEL AND ABOVE CONSUME A DOMINANT SHARE OF SIBELIUM,
