1. How to be successful in the Brazilian Market Berlin 2012 / NovCarlos Grzelak Jr.

2. Agenda1. Pharmaceutical environment in Brazil, issues and opportunities in the different segments2. Promising therapeutic areas in the country3. Sales Force management and Sales Force Effectiveness as a critical success factor4. The ideal profile for the Sales/Marketing Executive to work in Brazil 3. BRAZIL OVERVIEWTotal population: 192.376.496GDP: 2,089 Trillions of USDPharmaceuticalMarket by IMS USD GDP per Capita: 11.767 USD16 BillionBRL Euro Conversion Rate (Average 2012): 2,5(Pharma real) +U$D 9 Bi =General Consumer Price Index (projection 2012): 4,50%U$ 25 Billions(Inflation)General Consumer Price Index (projection 2012) Health andPersonal Care Goods: 5,00% (Inflation of the sector)Life expectancy at birth m/f (years) : 70/77Total expenditure on health per capita (Intl US$): 943,00 USDTotal expenditure on health as % of GDP: 9,0Source: IBGE 4. Market is going through a good momentum Brazilian Market Evolution(in billion of dose unit) GrowthBrazilian Market Evolution (R$ billion of Factory Price) Growth 5. Despite the strong competitionGrowth of 5% in the last 12 month after discounts Brazilian Market EvolutionBrazilian Market Evolution(R$ billion factory price) (R$ billion with discounts applied)Generic Brand ReferenceEvolution of discounts per type of productReference BrandGeneric 6. Average discount reaches 32% Expressive variation between types of laboratories only for Branded GenericsEvolution of discounts for pharmacies (% over factory price)PxOTCDiscounts of MAT April/2012 per type of laboratory and product segment National Lab.Others Generic Brand Reference 7. Usually the Portfolio determines the discountFactory DiscounAverage Price t Price Generic discountCompany(MAT (MAT given toApril/1 April/1Brand 22 Referen thecepharmacy 8. The overall volume should still migrate togenerics and branded generics% of dose units per type of Type (%) 2017 Main Factors product Trade to Px Aging favors RxMIPFormal Jobs favors Rx 43-47 "Farmacia Popular" favors Rx Brands power Minos absolut price differantiation End of PatentsPx G 17-20 New consumers more sucetible to prices Px Generic"Farmacia Popular" Same reasons of generics and a good reputation withPx B physicians for promoted products Px Brand23-26 Prices are not always quite competitives against Generics Bioequivalence - Good or Bad? Px ReferenceEnd of PatentsPx R 11-13 New business models Innovation 9. LOE will keep impacting the market billionsPatented in LOE in LOE after 2016 20122013 10. In 2011 a strong process of consolidations in theretail has started and should keep up in the nextyears Presence of pharmacy chains per region in (%) of sales (R$) perBrasiltype of outlet Chain CW 11. The competitive environment plus the pricecontrol should keep the price increase belowinflation CMED Increases Granted Accumulated Inflation since2003 (%)Pharmaceutica l Products in the IPCAPressure from CMED to get prices downReference list for pricesw/ 9 countriesNeed for the companies to have a global pricepolicy 12. In this environment, we expect the market toreach R$87 billion in the MAT of April 2017Forecast of Brazilian Market Evolution (R$ factory price) Nominal values - retailPossiblevariation of+/- 2% peryear in the projectionInflation CAGR 12-17 ~ 9% per expected 2012year to 2017 ~ 5% Real growth (adjustedper yearby the inflation) Support scenario of the actual discount levels(32%) 13. Considering this scenario of discountselevation, the growth can fall to less than 9,9% Evolution forecast of Brazilian Market(R$ billions in factory price minus discounts) (nominal (realvalues)values)Actual levelto Actual level to Actual level toPossiblevariation of+/- 2% peryear in the projection 14. Government spent with medicationsgrow, doubling in the last 4 yearsPublic PublicPurchasesPurchases = R$ billions R$ 10,6 billions Public Purchases Excluding FarmaciaPopular 15. The next years should bring important changes Main government objectivesCommercial Balance pharmaceutical products (US$ bi) Exportati on Commercial Balance deficit reduction Importati onMore efficiency on health expenses Balance Assurance of access and quality health service to the population Reduction of external dependency for medications and supplies consider strategic Fomentation of national industry and development of research industry Generation of qualified employment 16. The 31 PDPs signed addresses 23% of the publicexpenses w/ medicinesPublic Expenses PDPs per therapeutic indication Existent Partnerships In production(7 in total) Without actual Partnerships 17. The expansion plans specifically focus onBiotechnology, niche diseases, medical equipmentsPDPs planned 9 still forecasted to 2012 20 for the next 4 years Examples: Agreement with Cuba (20 products for cancer, transplant, diabeticfeet, vaccines) consortium production. Other announcements in the media (ex.: imatinibe, nevirapina),)Possible impact on the institutional biotechnological market % Public ExpensesOther With moleculeActu Privat PDPs al ePDP 15 mainBiotec Without molecule h PDP PublicPDP s 18. More and more, be successful in Brazil meansadapt to the changing patterns of the country 19. Companies with a customized plan for Brazilshould grab future opportunitiesGovernment becomes more and moreIn general, low influence powerboth the client and the new incomingin the competitive environmentplayerand in the value chainNew players in biosimilars and highcomplexityInnovation keeps being the Government exercising the bargaingreater differential power and moving the environment Generics and biosimilars will Patients more sensitive to price capture an important portion of and with a greater dispersionthe market in the future (distribution) Services X Products Retail concentrationCompetitive differentials, highlighting the innovation, should be result of strategiesfocused on the local paradigm-Suitability of portfolio and the commercial strategy / distribution to the new consumer- Definition of positioning in front of changes in the private and public institutional market- Upgrading the institutional clients relationship model amplify scope- Commercial and marketing effectiveness a good performance is as important as a goodstrategy 20. Regulatory matters 21. Regulatory matters 22. Regulatory mattersBrazil is not a semi-regulated market (the most stricted rules in Latin America)The differences from Brasil to other countries in the regulatory environment are Derma cosmetics need to have clinical study (safety and efficacy evaluation) There is no register transference (unless in case of acquisition)Fastest way to start operations is through an acquisitionProducts are approved fast or not depending on their classificationPrice approval is another issueList of reference countries are the following (to compare prices)Local clinical studies are not required, what brings fast ROI 23. 2. Promising therapeutic areas in the countryTop 10 ATCs in Brazil (Level III) ATC DescriptionCAGR (2006- 2010) N2B - Non Narcotic Analgesic9,4% M1A - Non Steroidal Anti-rheumatic9,5% G3A Contraceptives 12,5% A2B Antiulcer18,0% N6A Antidepressants15,7% C10A - Regulators of cholesterol 19,3% and lipids* C9D - Combined Angiotensin 28,5% Antagonists II N3A - Anti epiletic14,6% J1C - Penicillin Antibiotics 11,5% C9C - Simple Angiotensin 23,6% Antagonists II 24. 2. Promising therapeutic areas in the country Dermatology market currently U$ 2 Billion Brazil became recently the 2nd one in the Beauty Market Oncology market U$ 2,5 (estimated) Brazil follows a global trend and the investment on equipmentto diagnose cancer is high SNC market currently U$ 3,5 Billion Elderly population is quickly growing in Brazil 25. 3. Be aware that Sales Force management and SalesForce Effectiveness are critical success factorsInternal factorsSales Forcesize/ structure Internal and1 Customers6 2 External panel Customers composition satisfactionResourceMonitoring5 3 Allocation(segmentation)Results4 Call EffectivenessExternal factors 26. Sales Force size/structure and customers panel composition Regions GDP 2009 (%)(%) Acum. Southeast1.792.049 55,32%55,32% South535.662 16,54%71,86% Northeast496.123 15,32%87,17% Center-West310.7649,59%96,76% North104.8043,24% 100,00% Total3.239.402100,00%- 71,86 % of GDP is in the South/Southeast 27. Number of physicians perEspecialidade Mdicos (%) Acum.General Practitioner 34.23922,65%Pediatrician 22.17037,32% specialty in BrazilObstetrics-Gynecology18.91849,84%Cardiologist 10.89557,05%Orthopaedist9.26863,18%Otolaryngologist5.61466,90%Anesthesiologist5.25370,37%Endocrinologist 4.84273,57%Dermatologist 4.18776,34%Gastroenterologist3.70178,79%Psychiatry3.07080,82%Urologist 3.04582,84%Neurologist 2.96084,80%Intensive Care Medicine 2.26786,30%Ophthalmologist 2.26287,79%Surgeon 2.07589,17%Pulmonologist 1.88990,42%Rheumatologist1.61691,49%Oncologist1.61292,55%Infectologist 1.42993,50%Allergist 1.30794,36%Geriatrician1.10695,10%Angiologist 1.03195,78%Vascular Surgery91796,38%Nephrologist77096,89%Hematologist65397,33%Plastic Surgery 56897,70%Surgery Ortopedica37697,95%Other 3.098 100,00%Total 151.138- 28. Calls by Segment - Frequency and CoverageIs there a limit for the number of calls per MD by cycle ? Ideal frequency Rx More callsAn additional call thangenerates impact necessary No impact Calls 29. Calls by Segment - Frequency and CoverageTrackingRx shareevolution2007 x 20062,01,51,00,5MDsMDs MDs MDs MDs MDs7 calls/year 10 calls/year 14 calls/year 20 calls/year 25 calls/year calls/year 30. Message recall and Message retention PM SRs/DMsMDMessage leakage Message leakageHow much (?)How much (?) 31. Message recall and Message retentionThere is a strong correlation between message and marketshare SOMRegion 4 Region 5R is an excel Region 3function thattells youstrenght ofRegion 2correlation .From 0,6-1(max) Region 1correlation isconsidered very Recall indexgood Recall is the only directly measured indicator and a good proxy for overall long-term performance 32. Monitoring Results 1.DDD by moving quarter Monthly report to DMs Must be available also for Sales Reps2.Rx share by moving quarterA tool must be delivered to DMs to build all kind of analysisRx share by quarter(last 3 quarters) available to Sales Reps athandheld 33. Does it increase sales ?Results Product Jul-Dec 07 Jan-Jul 08 A71,57%73,75% B2,92% 2,96% C6,64% 6,74%D 0,59% 0,64% E64,76%67,77% F11,07%11,13%G 4,96% 5,11%Source:DDD/IMS 34. Critical Success FactorsShow intermediate results to SF quick winsSponsorship is fundamentalStrong interaction between Sales and MarketingManagement level totally alignedProductivity workshops may help to fine tuneImplementation is key pay attention to details! 35. 4. The ideal profile for the Sales/Marketing Executive to work in BrazilThere are two important landmarks in the Brazilian pharmaceuticalenvironment that changed the profile of the ideal executive to work inthe pharma industry 19982004- Dynamics,Competitiveness,Number of players in the business+ Execution drivenStrategy driven Strategy driven and ability TechnicalGenerics Behavioralto deal w/ multipleGovernment channels competenciesentrance competenciesbusiness ConservativeAgressive Behavioral competencies expansion Non risk takers Risk takers Agressive High life cycle in theLow life cycle in the Risk takers companiescompaniesLower life cycle in the Profitability drivenFlexiblecompanies Company orientedCost reduction driven FlexibleCostumer oriented Ability to deal w/Sales Force governmentEffectiveness abilitiesSocial cost orientedrequired SFE abilities even more required 36. 4. The ideal profile for the Sales/Marketing Executive to work in BrazilDespite of this required changes, part of executives insist on keeping oldmodus operandi and set of competencies. Another point is that thepharma market is still closed soSome companies bring to pharma business professionals from other areas in order to get a different a approach (consumer market for instance)Another ones bring executives from abroadCompetition for the best professionals increased (as a consequence, salaries/benefits package)Investment in training/coaching is required 37. 4. The ideal profile for the Sales/Marketing Executive to work in BrazilExecutives must have expertise to deal in an environment where Trade activities must be performed (Drs are not the only one decision makers)Mature products became relevant again due to lack of new launchesCompanies are searching by partnerships to feed inorganic growthThe choice to work between a specific sector (specialties, niche markets) or in a diversified way must be doneSelling product is not enough. Need to sell concept, services linked to the productMarketing and Sales must work together (sinergy)Management must be more participative to get full engagement 38. 4. The ideal profile for the Sales/Marketing Executive to work in Brazil Brazil is a continental country Multicultural Mix of races Weather is different from one region to another Multiple educational levels South (European like) is completely different from North in terms of culture Speaks PortugueseNot Spanish Few people speak EnglishWe Brazilians Usually support but do not fight together for a cause Need to be stimulated to work as a team and to solve problems Have difficulties to recognize that a team problem can affect them individually Mix personal and professional lives Usually takes situations from a personal point of view We like to get in touch, personal contact 39. 4. The ideal profile for the Sales/Marketing Executive to work in BrazilOn the other hand A very peaceful people comparing to other Latin America countries Happy people, very high sense of humor Moved by passion. To get engagement, involve us emotionally We are hard workers We know how to manage difficult situationsWe never give up !SoWe love to be challenged !!!Collaboration :Heidrick StrugglesMichael PageKorn FerrySeniors Executive 40. Conclusions Brazil is an excellent market to invest but competitiveness increases yearby year Government is a business channel that must be considered Regulatory issues must be considered/adressed Acquisition of a company is the fastest way to initiate operations Companies in Brazil are very receptive to make partnerships SFE is the secret to maximize resources and speed ROI People makes the difference . Hiring an excellent team of executivesaccording to current needs in terms of profile is a CSF to be successful inthe Brazilian market Brazilians like soccer but this does not interfere in their day by day work Carnival happens only once a yearRest of time Brazilians work hard !!! 41. Thank You!!!Carlos Grzelak Jr.97486-1868 (personal mobile)/ 98515-2853(professional)grzelak@terra.com.brcarlosj@glenmarkpharma.com