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) & Vertigo (Sibelium)provide objective assessment about the broad market opportunity (not including any urban centres);provide business model / proposal for XJP to capture the broad marketMcKinsey Broad Market Study Process Project design (Q1, 2003) Project review with local and r
3、egional J-C team (Apr. 03) Survey market selection (Apr. 03) Field work in 2 cities in Shandong (May 03) 1st interim report (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 corporat
4、e management (Sept. 03)BROAD MARKET CAN BE DEFINED AS CLASS 2 HOSPITALS AND BELOW AT REGIONAL CITY LEVEL AND ALL HEALTH CARE INSITITUTIONS AT COUNTY LEVEL AND BELOWRegional cityCountyTown VillageClass 3 hospitalClass 2 & below hospitalPharmacy Clinic Broad marketSource: McKinsey analysisBROAD MARKET
5、 DRUGS INCLUDE OTC AND “OUT PATIENT” Rx DRUGSSource: McKinsey analysisTargeting easily diagnosed, non-life threatening diseasesEasy to useRelatively cheapRelatively safe with few side effectExamplesOTCMatureNewMotiliumGyno-DaktarinRxOutpatientIn-hospitalSporanox / SibeliumCipramilBroad market drugsM
6、cKinsey Key FindingsOverall Market SituationBROAD MARKET REPRESENTS 94% OF OVERALL DEMAND FOR BROAD MARKET DRUGSClass 3 hospitalBroad market drug sales breakdown by geographyPercent *For only 2 according cities*Data for only Sichuan provinceSource:Interview with distributors, hospitals, pharmacies &
7、 clinics; McKinsey analysisAll 4 citiesBroad market represents 94% of demand100%=3.62.31.3Bn RMBShandong* Sichuan*City 100%=2162Mn RMB County Town Village Motilium Gyno- DaktarinSibelium*Broad marketSales breakdown of XJP productPercent Other channel at city levelGDP per capita:# of county9,1993211,
8、300185,80114County is critical for broad marketDUE TO LOW INSURANCE COVERAGE AND RECENT REIMBURSEMENT POLICIY CHANGES, MOST PATIENTS PAY BROAD MARKET DRUGS BY THEMSELVESInsurance coverage in Yantai & JiningFor those with insurance, they can use their personal accounts (RMB 100300 per year) to cover
9、their broad market drug expenseIn loosely controlled region (like Yantai), patients 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 themselvesInsuredSelf-payTot
10、al City County Town Village 3-595-9720-3070-8010-1585-901990100Source: Interview; focus group; McKinsey analysisPATIENTS GO TO PHARMACY/CLINICS FOR MINOR SYMPTOMSSource:Interview; McKinsey analysisDriversIncreased price sensitivityChanged medical insurance policyImproved highway infrastructureRich i
11、nformation accessTVNewspaperIncreased life paceNo time to visit hospitalPharmaceutical market deregulation policyMore and more pharmacies & clinicsConveniently locatedMiddle-small hospitals find it hard to survive due to lack of patientsSevere symptomsTown hospitalMinor symptomsLargest hospitals in
12、city and countyMiddle-small hospitals in city and countyPharmacy/clinicsRural patientsCity patientsA LARGE PROPORTION OF DRUG SALES COMES FROM RETAIL PHARMACIES; PHARMACY CLERKS BECOME INFLUENTIAL * 40% of the patients changed their mind in pharmacySource: Interview; Focus group; McKinsey analysis“W
13、hat makes you change your perceived drugs?”* Pharmacy patient surveyPercent, Shandong city levelPerceived drug not available; persuaded by pharmacy clerkPerceived drug available but persuaded by pharmacy clerkChanged mind by myself“When I go to the pharmacy without a drug in mind, I just ask the pha
14、rmacy clerk to recommend. Then I will check the drugs introduction sheet, if this drug covers my disease, I will have a try” Yibin city level focus groupTotal drug sales breakdownPercent Pharmacy Hospital ClinicsOverall Motilium Gyno DaktarinSibelium XJP should design special initiatives to target p
15、harmacy channelsCLINICS ARE PLAYING IMPORTANT ROLE ESPECIALLY AT COUNTY AND TOWN AND BELOWSource:Interview; McKinsey analysisClinics share in total drug salesPercent Overall CountyTown Village 36%2634100SichuanShandongCity 827%8271003XJP should think about cost-effective way to lock in individual cl
16、inic/barefoot doctorsG.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: Physician and pharmacy interviews; McKinsey an
17、alysisFOR GI DISFUNCTION DRUGS AS A WHOLE THERE IS SIGNIFICANT LATENT DEMAND; PEOPLE GENERALLY SEEK TREATMENT IN CLINICS AND PHARMACIESLatent market demand 60% of total patients do not seek any treatmentAs market leader, increasing awareness for Motilium to further boost treatment rate is one of the
18、 key demand levers Small clinics and pharmacies are important channels75% of patients seeking treatment go to clinics and pharmaciesTotal incidence Do not seek treatment Go to large hospital*Go tosmall clinicSelf medicate at pharmacySeek treatment Not awarePercentMotiliums market shareMotilium has a
19、 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 generic drugs*, while the rest would buy non-brand generic d
20、rugs1.6%FOR GI DRUGS, POLARIZATION IS BECOMING MORE OBVIOUSAnecdotesQuantitative examplesSub-TA sales by channelPercentSource: Hospital pharmacy interviews; retail pharmacy interviews; McKinsey analysis199719992002Retail PharmacyHospitalClinic“Unlike things in the past, patients nowadays generally t
21、ry 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 patients are repeating patients. They know which drugs to buy, and wh
22、ere the drugs are cheap. So usually they will choose pharmacies & clinics.” Jining retail pharmacist interviewYantai199719992002Retail PharmacyHospitalClinicJiningImportance of GI drug sales in hospital is diminishingRetail pharmacy would be the major battle field for GI drugsROUGH ESTIMATIONSALES O
23、F GI DRUGS ARE MORE CONCENTRATED TOWARDS VILLAGE AND COUNTY, WHILE THE MARKET IS FRAGMENTED WITH MANY DIFFERENT DRUGSPercentMotiliumWeiershu (谓尔舒)Mosapride (莫沙比利)Tidines* (替丁类药)Others*Sidashu (斯达舒)*Others including more than 200 different GI drugs such as Kuiweipian(快胃片)、 Weifuan(w胃复安)、 Jinweixiaosh
24、ipian (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 & FamotidineSource: Distributor interviews; physician interviews; patient interviews; McKinsey analysisTotal = RMB 243.05 millionVillage CountyTown City IN
25、BROAD MARKET, MOTILIUM IS LOSING OUT BIG TIME IN RETAIL PHARMACY CHANNEL Retail pharmacyHospitalClinicSource: Distributor interviews; hospital pharmacy interviews; retail pharmacy interviews; McKinsey analysisSales by channelMn RMB, %Motilium Sidashu (斯达舒)Weiershu (谓尔舒)Mosapride (莫沙比利)Tidines (替丁类药)
26、GI drugs 123553243.051434529.83666296.62576207.304038217.934227344.64YANTAI & JINING AND IN COUNTY GEOGRAPHYCity County TownVillageSource: Distributor interviews; hospital pharmacy interviews; retail pharmacy interviews; McKinsey analysisSales by strataMn RMB, %Motilium Sidashu(斯达舒)Weiershu(谓尔舒)Mosa
27、pride(莫沙比利)Tidines(替丁类药)GI drugs 152619243.05411522209.83432237266.62152644217.3091850237.93101171744.6466YANTAI & JININGVaginal Infection Category ReviewFOR VAGINAL INFECTIONS, PATIENTS ARE MORE AWARE OF THE DISEASE AND GO TO HOSPITAL FOR TREATMENT PercentLess latent demand Almost all patients awar
28、e 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 will purchase prescribed drugs in pharmaciesMarket player should focus on share gai
29、nTotal incidence Do not seek treatment Go to large hospitalGo tosmall clinicSelf medicate at pharmacySeek treatment Not awareSource:Physician, pharmacy and clinic interviewsHospital is still number 1 channel to push Gyno Daktarin salesPharmacy is becoming increasingly important30% would use branded
30、drugs, while 70% would use non-branded drugs FOR GYNO DAKTARIN, HOSPITAL IS CRITICAL FOR PRESCRIPTION BUT PURCHASING HAS BEEN GRADUALLY SHIFTING TO RETAIL PHARMACYAnecdotesQuantitative examplesSub-TA sales by channelPercentSource: Hospital interviews; Retail pharmacy interviews; McKinsey analysis199
31、719992002Retail PharmacyHospitalClinic“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. However, more and more people purchase drugs in pharmacies” Liangshan No.2 hospital, Gyno physician in
32、terview“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 and they will feel awkword.” Zhangyongxin town level clinic interviewYantai199719992002Retail Pharmacy
33、HospitalClinicJiningESTIMATEIN ADDITION, GYNO DAKTARIN NEEDS TO GROW THE MARKET SHARE ESPECIALLY THOSE OF COUNTY AND TOWNSource: Distributor interviews; hospital pharmacy interviews; retail pharmacy interviews; McKinsey analysisSales by strataMn RMB, %Gyno DaktarinXiaomishuan(消糜栓)Mycostatin(制霉菌素)Shu
34、angzuotaishuan(双唑泰栓)Jieeryin(洁尔阴)Vaginal infection drugsYANTAI & JININGCityCountyTownVillage26502071.384247 122.472443324.544146134.46359385.46943275.834000022Nail Fungal Infection Category ReviewFOR TINEA UNQUIUM DRUGS, DEMAND LATENCY IS EVEN HIGHERPercentExtremely latent demand with increasing awa
35、reness 90% of patients do not seek treatmentAwareness and treatment rate is increasing slightly due to competitors heavy advertisingOnly around 10 % of those seeking treatment purchase drugsOnly 1% would follow prescriptionTotal incidence* Do not seek treatment Seek treatment Not aware * The inciden
36、ce rate is around 5% in ShandongSource: Physician and pharmacy interviews; McKinsey analysisOnly 1% actually buy drugsLow treatment rate is mainly due to affordability issue of the patientsSporanoxs potential market as a Tinea Unquium drug is small, and is unlikely to be a broadmarket hitGo to large
37、 hospitalGo toclinicGo to pharmacy directlyHOSPITAL CHANNEL IS STILL DOMINATING TINEA UNQUIUM DRUG MARKET WHILE PHARMACY CHANNEL IS PICKING UPAnecdotesQuantitative examplesSub-TA sales by channelPercentSource: Hospital pharmacy interviews; Retail pharmacy interviews; McKinsey analysis199719992002Ret
38、ail PharmacyHospitalClinic“We gradually carry some Tinea Unquium drugs in these years. Because more and more patients, although 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
39、“I seldom see Tinea Unquium patients. And also, because the drugs are very expensive, I didnt carry them. If there is really someone come to my clinic, I will suggest them to pharmacy.” Yantai clinic interviewYantai199719992002Retail PharmacyHospitalClinicJining*Others including around five drugs, s
40、uch as Huihuangmeisu（灰黄霉素）, Lisulao（里素劳）,Lianghuija（亮灰甲）etc.Source: Distributor interviews; physician interviews; patient interviews; McKinsey analysisTHERE ARE ONLY A FEW COMPETITORS AT CITY AND COUNTY LEVEL FOR SPORANOX; LIANGJIA IS DOING BETTER THAN SPORANOX AT RETAIL PHARMACIES DUE TO HEAVY ADVE
41、RTISINGPercentOthers*Total = RMB 9.22 millionCountyTown City SporanoxLanmeishu (兰美抒)Liangjia (亮甲)Village 0Source: Distributor interviews; physician interviews; patient interviews; McKinsey analysisTHERE ARE ONLY A FEW COMPETITORS AT CITY AND COUNTY LEVEL FOR SPORANOX; LIANGJIA IS DOING BETTER THAN S
42、PORANOX AT RETAIL PHARMACIES DUE TO HEAVY ADVERTISINGCity TotalRetail pharmacyHospitalClinicCounty Share of leading drugs within Tinea Unquium Yantai & JiningMn RMB, %TotalRetail pharmacyHospitalClinic4.02.21.80.15.00.84.10.2100%=SporanoxLanmeishu* (兰美抒)Liangjia (亮甲)OthersLiangjia has relatively hig
43、h market share in retail pharmaciesAt city level, Lanmeishu has 31% of hospital channel, better than SporanoxHospital at county level and above should be the main focusPRICE IS A HUGE ISSUE FOR SPORANOXSporanox is too expensive for most farmers whose annual income is only around RMB 2,000Even at cou
44、nty level, cost of using sporanox for effective treatment is higher than total drug expense per year for an average personCounty level price threasholdCity level price threasholdCounty level annual drug expense per personAverage insurance allowance per yearCost of sporanox as a derma drugSource:Inte
45、rviews; McKinsey analysisCost of sporanox as a STD drugRMBFOR SPORANOX, XJP SHOULD CONTINUE TO FOCUS ON HOSPITALS Retail pharmacyHospitalClinicSource: Distributor interviews; hospital pharmacy interviews; retail pharmacy interviews; McKinsey analysisSales by channelMn RMB, %SporanoxLanmeishu* (兰美抒)L
46、iangjia (亮甲)Tinea Unquium65339.2269301 2.218415 01.5012871.2622YANTAI & JINING AND AT CITY AND RICH COUNTIESCounty Town VillageSource: Distributor interviews; hospital pharmacy interviews; retail pharmacy interviews; McKinsey analysisSales by strataMn RMB, %SporanoxLanmeishu*(兰美抒)Liangjia(亮甲)CityTin
47、ea Unquium drugs44549.22485022.21534711.5067291.26240110YANTAI & JININGVertigo Drug Category ReviewTHERE IS UNTAPPED DEMAND IN TWO OF THE THREE PRODUCT-RELATED TAsGI disfunction patient flow in broad market percentSource: Hospital & pharmacy interview; McKinsey analysisVI patient flow in broad marke
48、tpercentVertigo patient flow in broad marketPercent Total incidence1003030402040Not awareDo not seek treatmentSeek treatmentTotal incidence100120406080Not awareDo not seek treatmentSeek treatmentTotal incidenceNot awareDo not seek treatmentSeek treatment1001990 Vertigo incidence rate is only 1%-3% S
49、ibelium can target more indications with much larger patient population Huge latent demand Awareness can be increased by patient education Affordability can be improve due to economic developmentBY GEOGRAPHY, COUNTY LEVEL AND ABOVE CONSUME A DOMINANT SHARE OF SIBELIUMCity CountyTown Village Source:
50、Interviews; McKinsey analysisPercentTotal = RMB 2.0 million for sales of Sibelium in Deyang and YibinSales of Sibelium is more dominant in city and county level Market share of Sibelium in total drugs for dizziness is also higher in county level and aboveSibeliums market share in dizziness drug sale
