麥肯錫給醫(yī)藥行業(yè)的報告課件

McKinseyBroadMarketStudyProcessProjectdesign(Q1,2003)ProjectreviewwithlocalandregionalJ-Cteam(Apr.03)Surveymarketselection(Apr.03)Fieldworkin2citiesinShandong(May03)1stinterimreport(mid-June03)Fieldworkin2citiesinSichuan(mid-June–mid-July03)2ndinterimreportandKillerIdeaworkshop(endJuly03)Finalreport(Aug.03)Presentationtocorporatemanagement(Sept.03)1-McKinseyBroadMarketStudyPrBROADMARKETCANBEDEFINEDASCLASS2HOSPITALSANDBELOWATREGIONALCITYLEVELANDALLHEALTHCAREINSITITUTIONSATCOUNTYLEVELANDBELOWRegionalcityCountyTownVillageClass3hospitalClass2&belowhospitalPharmacyClinicBroadmarket

Source:McKinseyanalysis2-BROADMARKETCANBEDEFINEDASBROADMARKETDRUGSINCLUDEOTCAND“OUTPATIENT”RxDRUGS

Source:McKinseyanalysisTargetingeasilydiagnosed,non-lifethreateningdiseasesEasytouseRelativelycheapRelativelysafewithfewsideeffectExamplesOTCMatureNewMotiliumGyno-DaktarinRxOutpatientIn-hospitalSporanox/SibeliumCipramilBroadmarketdrugs3-BROADMARKETDRUGSINCLUDEOTCMcKinseyKeyFindings

OverallMarketSituation4-McKinseyKeyFindings

OverallBROADMARKETREPRESENTS94%OFOVERALLDEMANDFORBROADMARKETDRUGSClass3hospitalBroadmarketdrugsalesbreakdownbygeographyPercent * Foronly2accordingcities ** DataforonlySichuanprovince Source: Interviewwithdistributors,hospitals,pharmacies&clinics;McKinseyanalysisAll4citiesBroadmarketrepresents94%ofdemand100%=BnRMBShandong*Sichuan*City100%=2162MnRMBCountyTownVillageMotiliumGyno-DaktarinSibelium**BroadmarketSalesbreakdownofXJPproductPercentOtherchannelatcitylevelGDPpercapita:#ofcounty9,1993211,300185,80114Countyiscriticalforbroadmarket5-BROADMARKETREPRESENTS94%OFDUETOLOWINSURANCECOVERAGEANDRECENTREIMBURSEMENTPOLICIYCHANGES,MOSTPATIENTSPAYBROADMARKETDRUGSBYTHEMSELVESInsurancecoverageinYantai&JiningForthosewithinsurance,theycanusetheirpersonalaccounts(~RMB100~300peryear)tocovertheirbroadmarketdrugexpenseInlooselycontrolledregion(likeYantai),patientscantreatthepersonalaccountsassavingsaccountPatientspayontheirownaftertheaccountbalanceiszeroAmajorityofpopulationdoesnothaveinsuranceTheypaybroadmarketdrugsbythemselvesInsuredSelf-payTotalCityCountyTownVillage3-595-9720-3070-8010-1585-901990100Source: Interview;focusgroup;McKinseyanalysis6-DUETOLOWINSURANCECOVERAGEPATIENTSGOTOPHARMACY/CLINICSFORMINORSYMPTOMSSource: Interview;McKinseyanalysisDriversIncreasedpricesensitivityChangedmedicalinsurancepolicyImprovedhighwayinfrastructureRichinformationaccessTVNewspaperIncreasedlifepaceNotimetovisithospitalPharmaceuticalmarketderegulationpolicyMoreandmorepharmacies&clinicsConvenientlylocatedMiddle-smallhospitalsfindithardtosurviveduetolackofpatientsSeveresymptomsTownhospitalMinorsymptomsLargesthospitalsincityandcountyMiddle-smallhospitalsincityandcountyPharmacy/clinicsRuralpatientsCitypatients7-PATIENTSGOTOPHARMACY/CLINICALARGEPROPORTIONOFDRUGSALESCOMESFROMRETAILPHARMACIES;PHARMACYCLERKSBECOMEINFLUENTIAL*40%ofthepatientschangedtheirmindinpharmacySource:Interview;Focusgroup;McKinseyanalysis“Whatmakesyouchangeyourperceiveddrugs?”*–PharmacypatientsurveyPercent,ShandongcitylevelPerceiveddrugnotavailable;persuadedbypharmacyclerkPerceiveddrugavailablebutpersuadedbypharmacyclerkChangedmindbymyself“WhenIgotothepharmacywithoutadruginmind,Ijustaskthepharmacyclerktorecommend.ThenIwillcheckthedrug’sintroductionsheet,ifthisdrugcoversmydisease,Iwillhaveatry”–YibincitylevelfocusgroupTotaldrugsalesbreakdownPercentPharmacyHospitalClinicsOverallMotiliumGynoDaktarinSibeliumXJPshoulddesignspecialinitiativestotargetpharmacychannels8-ALARGEPROPORTIONOFDRUGSALCLINICSAREPLAYINGIMPORTANTROLEESPECIALLYATCOUNTYANDTOWNANDBELOW

Source: Interview;McKinseyanalysis Clinics’shareintotaldrugsalesPercentOverallCountyTownVillage36%2634100SichuanShandongCity827%8271003XJPshouldthinkaboutcost-effectivewaytolockinindividualclinic/barefootdoctors9-CLINICSAREPLAYINGIMPORTANTG.I.CategoryReview10-G.I.CategoryReview10-*Morethanhalfofpatientsgoingtolargehospitalswillpurchasedrugatretailpharmacies **Brandedgenericdrugsreferringtogenericdrugsthatrunadvertising,creatingbrandawarenessinconsumersSource:Physicianandpharmacyinterviews;McKinseyanalysisFORGIDISFUNCTIONDRUGSASAWHOLETHEREISSIGNIFICANTLATENTDEMAND;PEOPLEGENERALLYSEEKTREATMENTINCLINICSANDPHARMACIESLatentmarketdemand60%oftotalpatientsdonotseekanytreatmentAsmarketleader,increasingawarenessforMotiliumtofurtherboosttreatmentrateisoneofthekeydemandleversSmallclinicsandpharmaciesareimportantchannels75%ofpatientsseekingtreatmentgotoclinicsandpharmaciesTotalincidenceDonotseektreatmentGotolargehospital*GotosmallclinicSelfmedicateatpharmacySeektreatmentNotawarePercentMotilium’smarketshareMotiliumhasavastroomforgrowbecauseofsignificantleakagealongthepatientflow60%ofGIpatientsthatdoseektreatmentCurrentmarketshareof4%whichcouldbegrownfurtherAmongthe40%peoplewhoseekGItreatment,about30%wouldbuybandedgenericdrugs**,whiletherestwouldbuynon-brandgenericdrugs1.6%11-*MorethanhalfofFORGIDRUGS,POLARIZATIONISBECOMINGMOREOBVIOUSAnecdotesQuantitativeexamplesSub-TAsalesbychannelPercentSource: Hospitalpharmacyinterviews;retailpharmacyinterviews;McKinseyanalysis199719992002Retail

PharmacyHospitalClinic“Unlikethingsinthepast,patientsnowadaysgenerallytrytoavoidcomingtohospitalsbecauseofhospitals’expensivecharges.ForGIdisease,mostpeoplecanjudgebythemselves.Sotheyusuallyprefertogotopharmaciesorclinicstobuydrugs.”——QixiaGIphysicianinterview“MostGIpatientsarerepeatingpatients.Theyknowwhichdrugstobuy,andwherethedrugsarecheap.Sousuallytheywillchoosepharmacies&clinics.”——JiningretailpharmacistinterviewYantai199719992002Retail

PharmacyHospitalClinicJiningImportanceofGIdrugsalesinhospitalisdiminishingRetailpharmacywouldbethemajorbattlefieldforGIdrugsROUGHESTIMATION12-FORGIDRUGS,POLARIZATIONISSALESOFGIDRUGSAREMORECONCENTRATEDTOWARDSVILLAGEANDCOUNTY,WHILETHEMARKETISFRAGMENTEDWITHMANYDIFFERENTDRUGSPercentMotiliumWei’ershu(謂爾舒)Mosapride(莫沙比利)Tidines**(替丁類藥)Others*Sidashu(斯達(dá)舒) * Othersincludingmorethan200differentGIdrugssuchasKuiweipian(快胃片)、Weifuan(w胃復(fù)安)、Jinweixiaoshipian(健胃消食片)、999(三九胃泰)、丹桂香、胃舒平、健胃酵母片、果膠鉍、邦消安、調(diào)胃片、胃氣痛片、濕胃舒、養(yǎng)胃舒,andmanyothercheapnon-brandedgenericdrugs ** IncludingCimetadine,Ramitidine&FamotidineSource: Distributorinterviews;physicianinterviews;patientinterviews;McKinseyanalysisTotal=RMB243.05millionVillageCountyTownCity13-SALESOFGIDRUGSAREMORECONINBROADMARKET,MOTILIUMISLOSINGOUTBIGTIMEINRETAILPHARMACYCHANNEL…RetailpharmacyHospitalClinicSource: Distributorinterviews;hospitalpharmacyinterviews;retailpharmacyinterviews;McKinseyanalysisSalesbychannelMnRMB,%MotiliumSidashu(斯達(dá)舒)Wei’ershu(謂爾舒)Mosapride(莫沙比利)Tidines(替丁類藥)GIdrugs123553243.051434529.83666296.62576207.304038217.934227344.64YANTAI&JINING14-INBROADMARKET,MOTILIUMISL…ANDINCOUNTYGEOGRAPHYCityCountyTownVillageSource: Distributorinterviews;hospitalpharmacyinterviews;retailpharmacyinterviews;McKinseyanalysisSalesbystrataMnRMB,%MotiliumSidashu(斯達(dá)舒)Wei’ershu(謂爾舒)Mosapride(莫沙比利)Tidines(替丁類藥)GIdrugs152619243.05411522209.83432237266.62152644217.3091850237.93101171744.6466YANTAI&JINING15-…ANDINCOUNTYGEOGRAPHYCityCVaginalInfectionCategoryReview16-VaginalInfectionCategoryRevFORVAGINALINFECTIONS,PATIENTSAREMOREAWAREOFTHEDISEASEANDGOTOHOSPITALFORTREATMENTPercentLesslatentdemandAlmostallpatientsawareofthediseaseduetoobvioussymptomsandregularcheckup80%ofpatientsseektreatmentLargehospitalisimportantinfluencingchannelMostpatientsseekingtreatmentwillgotolargehospitalsThoughhalformorewillpurchaseprescribeddrugsinpharmaciesMarketplayershouldfocusonsharegainTotalincidenceDonotseektreatmentGotolargehospitalGotosmallclinicSelfmedicateatpharmacySeektreatmentNotaware

Source: Physician,pharmacyandclinicinterviews Hospitalisstillnumber1channeltopushGynoDaktarinsalesPharmacyisbecomingincreasinglyimportant30%wouldusebrandeddrugs,while70%wouldusenon-brandeddrugs17-FORVAGINALINFECTIONS,PATIENFORGYNODAKTARIN,HOSPITALISCRITICALFORPRESCRIPTIONBUTPURCHASINGHASBEENGRADUALLYSHIFTINGTORETAILPHARMACYAnecdotesQuantitativeexamplesSub-TAsalesbychannelPercentSource: Hospitalinterviews;Retailpharmacyinterviews;McKinseyanalysis199719992002Retail

PharmacyHospitalClinic“Gynopatientswillusuallycometohospitalforbodycheckandgotopharmaciestorefilldrugs.Forsuchkindofdisease,peoplestilltrustlargehospitals.However,moreandmorepeoplepurchasedrugsinpharmacies”——LiangshanNo.2hospital,Gynophysicianinterview“Idon’thavemanygynopatients.Thisisbecauseof3reasons.First,Iamaman;second,Idon’thavefacilitiestocheckthebodyintheclinic;third,patientsareusuallyfamiliarwithmeandtheywillfeelawkword.”——ZhangyongxintownlevelclinicinterviewYantai199719992002Retail

PharmacyHospitalClinicJiningESTIMATE18-FORGYNODAKTARIN,HOSPITALISINADDITION,GYNODAKTARINNEEDSTOGROWTHEMARKETSHAREESPECIALLYTHOSEOFCOUNTYANDTOWNSource: Distributorinterviews;hospitalpharmacyinterviews;retailpharmacyinterviews;McKinseyanalysisSalesbystrataMnRMB,%GynoDaktarinXiaomishuan(消糜栓)Mycostatin(制霉菌素)Shuangzuotaishuan(雙唑泰栓)Jie’eryin(潔爾陰)VaginalinfectiondrugsYANTAI&JININGCityCountyTownVillage26502071.384247122.472443324.544146134.46359385.46943275.83400002219-INADDITION,GYNODAKTARINNEENailFungalInfectionCategoryReview20-NailFungalInfectionCategoryFORTINEAUNQUIUMDRUGS,DEMANDLATENCYISEVENHIGHERPercentExtremelylatentdemandwithincreasingawareness90%ofpatientsdonotseektreatmentAwarenessandtreatmentrateisincreasingslightlyduetocompetitor'sheavyadvertisingOnlyaround10%ofthoseseekingtreatmentpurchasedrugsOnly1%wouldfollowprescriptionTotalincidence*DonotseektreatmentSeektreatmentNotaware*Theincidencerateisaround5%inShandongSource:Physicianandpharmacyinterviews;McKinseyanalysisOnly1%actuallybuydrugsLowtreatmentrateismainlyduetoaffordabilityissueofthepatientsSporanox’spotentialmarketasaTineaUnquiumdrugissmall,andisunlikelytobeabroadmarkethitGotolargehospitalGotoclinicGotopharmacydirectly21-FORTINEAUNQUIUMDRUGS,DEMANHOSPITALCHANNELISSTILLDOMINATINGTINEAUNQUIUMDRUGMARKETWHILEPHARMACYCHANNELISPICKINGUPAnecdotesQuantitativeexamplesSub-TAsalesbychannelPercentSource: Hospitalpharmacyinterviews;Retailpharmacyinterviews;McKinseyanalysis199719992002Retail

PharmacyHospitalClinic“WegraduallycarrysomeTineaUnquiumdrugsintheseyears.Becausemoreandmorepatients,althoughstillquitesmallinamount,comeheretoaskforLiangjiaafterseeingitsadvertisement.Ithinkmostpatientsstillgotohospitalfortreatment.”——JiningKangfupharmacy“IseldomseeTineaUnquiumpatients.Andalso,becausethedrugsareveryexpensive,Ididn’tcarrythem.Ifthereisreallysomeonecometomyclinic,Iwillsuggestthemtopharmacy.”——YantaiclinicinterviewYantai199719992002Retail

PharmacyHospitalClinicJining22-HOSPITALCHANNELISSTILLDOMI * Othersincludingaroundfivedrugs,suchasHuihuangmeisu（灰黃霉素）,Lisulao（里素勞）,Lianghuija（亮灰甲）etc.Source: Distributorinterviews;physicianinterviews;patientinterviews;McKinseyanalysisTHEREAREONLYAFEWCOMPETITORSATCITYANDCOUNTYLEVELFORSPORANOX;LIANGJIAISDOINGBETTERTHANSPORANOXATRETAILPHARMACIESDUETOHEAVYADVERTISINGPercentOthers*Total=RMB9.22millionCountyTownCitySporanoxLanmeishu(蘭美抒)Liangjia(亮甲)Village023- * OthersincludingaroundfivSource: Distributorinterviews;physicianinterviews;patientinterviews;McKinseyanalysisTHEREAREONLYAFEWCOMPETITORSATCITYANDCOUNTYLEVELFORSPORANOX;LIANGJIAISDOINGBETTERTHANSPORANOXATRETAILPHARMACIESDUETOHEAVYADVERTISINGCityTotalRetailpharmacyHospitalClinicCountyShareofleadingdrugswithinTineaUnquium–Yantai&JiningMnRMB,%TotalRetailpharmacyHospitalClinic4.05.0100%=SporanoxLanmeishu*(蘭美抒)Liangjia(亮甲)OthersLiangjiahasrelativelyhighmarketshareinretailpharmaciesAtcitylevel,Lanmeishuhas31%ofhospitalchannel,betterthanSporanoxHospitalatcountylevelandaboveshouldbethemainfocus24-Source: DistributorinterviewPRICEISAHUGEISSUEFORSPORANOXSporanoxistooexpensiveformostfarmerswhoseannualincomeisonlyaroundRMB2,000Evenatcountylevel,costofusingsporanoxforeffectivetreatmentishigherthantotaldrugexpenseperyearforanaveragepersonCountylevelpricethreasholdCitylevelpricethreasholdCountylevelannualdrugexpenseperpersonAverageinsuranceallowanceperyearCostofsporanoxasadermadrugSource: Interviews;McKinseyanalysisCostofsporanoxasaSTDdrugRMB25-PRICEISAHUGEISSUEFORSPORFORSPORANOX,XJPSHOULDCONTINUETOFOCUSONHOSPITALS…RetailpharmacyHospitalClinicSource: Distributorinterviews;hospitalpharmacyinterviews;retailpharmacyinterviews;McKinseyanalysisSalesbychannelMnRMB,%SporanoxLanmeishu*(蘭美抒)Liangjia(亮甲)TineaUnquium65339.22693012.21841501.5012871.2622YANTAI&JINING26-FORSPORANOX,XJPSHOULDCONTI…ANDATCITYANDRICHCOUNTIESCountyTownVillageSource: Distributorinterviews;hospitalpharmacyinterviews;retailpharmacyinterviews;McKinseyanalysisSalesbystrataMnRMB,%SporanoxLanmeishu*(蘭美抒)Liangjia(亮甲)CityTineaUnquiumdrugs44549.22485022.21534711.5067291.26240110YANTAI&JINING27-…ANDATCITYANDRICHCOUNTIEVertigoDrugCategoryReview28-VertigoDrugCategoryReview28THEREISUNTAPPEDDEMANDINTWOOFTHETHREEPRODUCT-RELATEDTAsGIdisfunctionpatientflowinbroadmarketpercent

Source: Hospital&pharmacyinterview;McKinseyanalysisVIpatientflowinbroadmarketpercentVertigopatientflowinbroadmarketPercentTotalincidence100~3030~4020~40NotawareDonotseektreatmentSeektreatmentTotalincidence100~120~4060~80NotawareDonotseektreatmentSeektreatmentTotalincidenceNotawareDonotseektreatmentSeektreatment1001990Vertigoincidencerateisonly1%-3%SibeliumcantargetmoreindicationswithmuchlargerpatientpopulationHugelatentdemandAwarenesscanbeincreasedbypatienteducationAffordabilitycanbeimproveduetoeconomicdevelopment29-THEREISUNTAPPEDDEMANDINTWBYGEOGRAPHY,COUNTYLEVELANDABOVECONSUMEADOMINANTSHAREOFSIBELIUMCityCountyTownVillageSource:Interviews;McKinseyanalysisPercentTotal=RMB2.0millionforsalesofSibeliuminDeyangandYibinSalesofSibeliumismoredominantincityandcountylevelMarketshareofSibeliumintotaldrugsfordizzinessisalsohigherincountylevelandaboveSibelium’smarketshareindizzinessdrugsalesinDeyangandYibinCityCountyTownVillage100%=(RmbMm)1.652.641.881.79SibeliumOthers30-BYGEOGRAPHY,COUNTYLEVELANDMcKinseyBroadMarketProposal31-McKinseyBroadMarketProposalWENEEDTOSOLVETHREECRITICALISSUESTOACHIEVEOURASPIRATIONFORBROADMARKETInvestmentReturnsPeopledevelopmentOrganizationFinancialandorg.implicationPrioritizemarketopportunitiesSub-marketwithinaregionAround80regionalcities332regionalcities(wholeChina)BuildasolidplatformXJPbroadmarketteam“Capturingbroadmarket”“TurboCME”forclinic/barefootdoctorsandtownshippharmacies“PharmacyPlus”forlargepharmacychains“HospitalSeeding”forlargecountyhospitals“Distributornetworktocountylevel”32-WENEEDTOSOLVETHREECRITICAXJPNEEDSTOINVESTTOCAPTURETHEGREATPOTENTIALINBROADMARKETBroadmarket:94%ofoveralldemandCountyandbelow:74%ofoveralldemandBroadmarketdrugsalesbreakdownbygeographyPercent,all4citiesVillageCountyOtherchannelsatcitylevelTownClass3hospitalsHighpotentialbroadmarketOpportunityvs.XJPcoveragegapNewinitiativesNearlynocoverageofbarefootdoctorsBarefootdoctorsrepresent45%ofGIdrugsalesand33%ofVertigodrugsalesXJPhasalmostnocoverageonthemAdaptCMEfocustobarefootdoctorsNearlynocoverageofpharmaciesPharmacyrepresents37%ofdemandPharmacyincountyandbelowrepresents23%ofdemandIndevelopedcities,pharmacychainsareplayingdominantroleXJPnowonlycoverscitylevelpharmaciesinseverallargecitiesControllargepharmacychainsatcountylevelInsufficientcoverageofcountyhospitals

Countyhospitalsrepresents16%ofdemandLargestcountyhospitalscanheavilyinfluenceconsumptionofGynoDaktarinXJPonlycover23%ofTierIIand12%ofTierIhospitalsDetailtocountyhospitalsLowutilizationofdistributors’pushDistributors’haveinfluenceonclinicandpharmaciesXJPhasnotutilizeddistributors’capabilitytopushsalesofXJPproductsGivedistributorsmoreincentivetopushforXJPproductsSource:McKinseyanalysis33-XJPNEEDSTOINVESTTOCAPTUREDURINGOURKILLERIDEAWORKSHOP,WEDEVELOPEDFOURSETSOFHYPOTHESISTOBETESTEDINPILOT * SummarybasedonZhejiangfieldtripandinternalinterviews“Hospitalseeding”“Pharmacyplus”O(jiān)nesalesrepperregionSalesrepsarededicatedandwithmedicalbackgroundForthecoveredregion,allcountyNo.1and2largehospitalsshouldbecoveredFocusonGyno-DaktarinbutalsodetailMotilium,Sibelium,Daktarin,andotherXJPdrugsThreesalesrepsperregion,coveringtopthreepharmacychainsForthecoveredpharmacychains,allcountyandsometownsshouldbecoveredFocusonGyno-DaktarinandMotiliumbutalsopushotherXJPdrugs“Sweeties”topharmacyownerscouldincludeinformationsystemsupport,training,instoreadvertising,giftsinbox,andpharmacyownerclub“Sweeties”topharmacyclerkscouldincludetravelforstarstaff,training,andgiftsinboxBroadmarket,especiallycountylevel“TurboCME”*WillbeconductedbyHQOTCCMEteam.LocalsalesteamwillprovidecoordinatingsupportWorkshopholdsonceayearineachcountyTargetaudienceisclinic/barefootdoctorsFocuseddrugincludeMotilium,Daktarin,Pevison,andSibeliumLeveragelocalhealthcareauthorityandassociationstoreachmassnumberofclinic/barefootdoctors“Distributornetworktocountylevel”O(jiān)nerepperregion,coveringallcountyNo.1distributorsRewritedistributorcontractLeveragedistributornetworkandpushdistributorstafftoreachthevillages/clinics“Sweeties”todistributorcouldincludeinformationsystemsupport,training,anddistributorclub“Sweeties”todistributorstaffcouldincludetravelforstarstaffandtraining34-DURINGOURKILLERIDEAWORKSHOCommentsontheMcKinseyProposedInitiativesHospitalSeedingBesidestestingtheideatoconductprofessionaldetailingtothecountyhospitals,wealsowanttoprovidecoverageamongthesmallerhospitals(TierI&II)intheurbancitiestocomparetheR.O.I.sPharmacyPlus

Wehaveseencompetitors(likeSiDaShu)salesgrowthviaaggressivecoverageandpromotionamongthedrugstoresintherichercountis.So,thisisdefinitelyworthtesting.35-CommentsontheMcKinseyPropoCommentsontheMcKinseyProposedInitiativesDistributorDriveWehaveexpandedourdistributionnetworktoincludealmost1,000sub-distributorsinthelast3years.Wewilltrytotestthesalesimpactifweinvestmoreprogramandresourcesamongthem.TurboCMEWehavestartedCMEprogramamongcountyhospitaldoctors.Itwouldbeinterestedtofindoutthesalescontributionifweconducttheprogramamongthebarefootdoctors.36-CommentsontheMcKinseyPropoXJPCOULDADOPTATHREE-PHASEDACTIONPLANTOESTABLISHANDMAINTAINDOMINANTPOSITIONINBROADMARKETSource:McKinseyanalysisROUGHESTIMATEPhaseI:CapturingthebroadmarketPhaseII:DominatingthebroadmarketPhaseIII:StrengtheningandmaintainingthedominantpositionTimeframeCoverage

2005~2007

2008~2010

2011andbeyond1/4ofallregions(about80regionswith500counties)Covercountylevel(leveragingCMEtoreachtownandbelow)1/2ofallregions(about170regionscovering1,100counties)CovercountyandselectedtownlevelNearlyallregions(about330regionscovering2,050counties)Coveratcountyandselectedtownlevel37-XJPCOULDADOPTATHREE-PHASEDREVENUEFORECASTOFNATIONALROLL-OUTRMBmillions,atNTSprice20032004200520062007200820092010201120122013201420152,5602,8523,4924,4405,3406,2317,4258,6269,89611,50113,17114,75116,522AdditionalsalesfrombroadmarketinitiativesatNTSpriceXJPBPsalesatNTSpriceTotalsalesatNTSpriceMcKinseyEstimateAssumingRoll-Outin200438-REVENUEFORECASTOFNATIONALEyeOpeningKeyLearningsDevelopmentofG.P.clinicsLackofsensitivityofreimbursementinthebroadmarketduetonewM.I.SystemSpeedofretaildrugstoredevelopmentandinfluenceinpatientproductchoicePrescriptionspillovertotheretailoutlets39-EyeOpeningKeyLearningsDevelOurConclusionsThepotentialofthebroadmarketisonceagainconfirmedbytheMcKinseystudyThefastdevelopmentofdrugstoresandthepolarizationofhospitalssalesarealignedwithourunderstandingAgreewithMcKinsey’sfindingregardingoursharelossinthebroadmarket(especiallyamongcountyleveldrugstores)tolocalcompetitorsandgenericproductsTestingthedifferentproposalinitiativeswithdedicatedresourcesandmonitoringeffortwillenableustofocusonthekeybusinessdriversforfuturebroadmarketexpansion40-OurConclusionsThepotentialoOurProposedActionStepsSeekmanagementapprovalforthebroadmarketpilottestin2004AssumeapprovalisobtainedbeforeNov.1,SelectinternalcandidatetobeprojectleaderFormtheprojecttaskforcewithmarketing,salesandmarketresearchmembersRecruitandtrainthebroadmarketteamKickofftheplanbyFeb.1afterCNY41-OurProposedActionStepsSeekOurProposedPilotTest42-OurProposedPilotTest42-OurProposedPilotTestScheduleManagementApproval Nov.1,03Recruitment Nov.–Dec.,03Training Jan.,04Pre-testsurvey Jan.,04PilotTestbegins Feb.,041stAssessment(with3monthsdata) June,042ndAssessment(with6monthsdata) Sept.,04NationalRoll-outProposal Mid-Sept.,04ManagementApproval Nov.1,0443-OurProposedPilotTestScheduRequiredFTEs44-RequiredFTEs44-RequiredFunding45-RequiredFunding45-McKinseyBroadMarketStudyProcessProjectdesign(Q1,2003)ProjectreviewwithlocalandregionalJ-Cteam(Apr.03)Surveymarketselection(Apr.03)Fieldworkin2citiesinShandong(May03)1stinterimreport(mid-June03)Fieldworkin2citiesinSichuan(mid-June–mid-July03)2ndinterimreportandKillerIdeaworkshop(endJuly03)Finalreport(Aug.03)Presentationtocorporatemanagement(Sept.03)46-McKinseyBroadMarketStudyPrBROADMARKETCANBEDEFINEDASCLASS2HOSPITALSANDBELOWATREGIONALCITYLEVELANDALLHEALTHCAREINSITITUTIONSATCOUNTYLEVELANDBELOWRegionalcityCountyTownVillageClass3hospitalClass2&belowhospitalPharmacyClinicBroadmarket

Source:McKinseyanalysis47-BROADMARKETCANBEDEFINEDASBROADMARKETDRUGSINCLUDEOTCAND“OUTPATIENT”RxDRUGS

Source:McKinseyanalysisTargetingeasilydiagnosed,non-lifethreateningdiseasesEasytouseRelativelycheapRelativelysafewithfewsideeffectExamplesOTCMatureNewMotiliumGyno-DaktarinRxOutpatientIn-hospitalSporanox/SibeliumCipramilBroadmarketdrugs48-BROADMARKETDRUGSINCLUDEOTCMcKinseyKeyFindings

OverallMarketSituation49-McKinseyKeyFindings

OverallBROADMARKETREPRESENTS94%OFOVERALLDEMANDFORBROADMARKETDRUGSClass3hospitalBroadmarketdrugsalesbreakdownbygeographyPercent * Foronly2accordingcities ** DataforonlySichuanprovince Source: Interviewwithdistributors,hospitals,pharmacies&clinics;McKinseyanalysisAll4citiesBroadmarketrepresents94%ofdemand100%=BnRMBShandong*Sichuan*City100%=2162MnRMBCountyTownVillageMotiliumGyno-DaktarinSibelium**BroadmarketSalesbreakdownofXJPproductPercentOtherchannelatcitylevelGDPpercapita:#ofcounty9,1993211,300185,80114Countyiscriticalforbroadmarket50-BROADMARKETREPRESENTS94%OFDUETOLOWINSURANCECOVERAGEANDRECENTREIMBURSEMENTPOLICIYCHANGES,MOSTPATIENTSPAYBROADMARKETDRUGSBYTHEMSELVESInsurancecoverageinYantai&JiningForthosewithinsurance,theycanusetheirpersonalaccounts(~RMB100~300peryear)tocovertheirbroadmarketdrugexpenseInlooselycontrolledregion(likeYantai),patientscantreatthepersonalaccountsassavingsaccountPatientspayontheirownaftertheaccountbalanceiszeroAmajorityofpopulationdoesnothaveinsuranceTheypaybroadmarketdrugsbythemselvesInsuredSelf-payTotalCityCountyTownVillage3-595-9720-3070-8010-1585-901990100Source: Interview;focusgroup;McKinseyanalysis51-DUETOLOWINSURANCECOVERAGEPATIENTSGOTOPHARMACY/CLINICSFORMINORSYMPTOMSSource: Interview;McKinseyanalysisDriversIncreasedpricesensitivityChangedmedicalinsurancepolicyImprovedhighwayinfrastructureRichinformationaccessTVNewspaperIncreasedlifepaceNotimetovisithospitalPharmaceuticalma