The Market Opportunity
Growing, unsaturated markets
According to industry sources, the pharmaceutical market in Moldova is estimated at around US$ 120 million. The market grew by more than 20% in the last two years and continues to grow at a remarkably high rate, despite the unfavorable economic situation worldwide. At present, annual pharma consumption per capita remains at around EUR 35-40 (US$ 21-24), which is still quite low as compared to other countries in the Eastern European region.
According to Espicom Business Intelligence, pharmaceutical market in Romania is estimated at US$ 2,124 million. The Romanian pharmaceutical market ranks as the sixth largest in the Central and East European region. Yet, the annual pharma consumption per capita in Romania is estimated at around EUR 70 (US$ 42) . This is still far from the rate of more than EUR 100 (US$ 60) registered for the 2004 wave of EU accession countries. On the other hand, Romanian pharma market continues to grow between 13 and 20 per cent per year and the per capita consumption is expected to increase quite fast.
Outstanding growth rates of the target markets
Pharmaceutical markets of the Commonwealth of Independent States (CIS) and Russia are the most capacious in Eastern Europe and certainly hold out huge promises. In 2006, the Russian pharmaceutical market was estimated at 12.3 billion dollars. As compared to 2005, the market grew at a remarkable growth rate of 36%. Russia has been recently included in the TOP-10 list of countries with the highest capacity in the drugs retail market. Drugs import value in 2006 amounted to 6.5 billion dollars, which was 63% higher than that in 2005.
According to RMBC research company, the pharmaceutical market in Ukraine has been growing at a remarkable rate of 22% for the past 4 years. In 2007, the market volume reached US$ 2.2 billion. It is remarkable that in the same period the market volume in unit terms has decreased by 12%. This tendency shows that the household income grows and people prefer to buy more expensive products. This market trend is even more prominent in Russia, where consumption of pharmaceuticals per capita is estimated at US$ 65-70. Current per capita annual consumption of pharmaceuticals in Ukraine is estimated at US$ 47-50.
The dominance of the generics on the market
Generic drugs dominate Central, East European and Central Asia markets. In Russia, Moldova and Ukraine, for instance, generics account for 90% of the total market by unit volume. The demand for affordable drugs is the principal factor in the dominance of the generics in these markets. This reflects the poor economic situation, low levels of household disposable income and insufficient public healthcare funding. However, as economies develop, the market share of higher value branded products is constantly increasing.
Ethical Drugs: Market Potential
Barkan-Farma's initial portfolio products target more than US$ 400 million market opportunity. This assessment is based on the potential markets of the following six countries: Moldova, Romania, Ukraine, Russia, Kazakhstan and Uzbekistan. Based on the countries' population income data, it is assumed that only 26% of the population in Moldova can afford paying for the highly priced branded products offered by Barkan-Farma, 27% in Romania, 39% in Russia, 26% in Kazakhstan and 22% in Uzbekistan.
Raviten® sales assumptions:
• Estimated distribution price per vial is US$ 5, or US$ 25 per a pack of 5.
• It is assumed that 2 vials of Raviten® may be used during each surgery, emergency care for trauma and poisoning cases, epidural procedure for labor and delivery. Estimated numbers of surgeries, trauma, poisoning care and epidural procedures are based on known and projected numbers of surgeries in governmental and private hospitals, same-day surgeries in outpatient clinics and private establishments. It is further assumed that each ambulance, paramedic and physician will have 1 pack of 5 vials of Raviten in stock for potential use.
• It is assumed that only 50% of the potential target market can be reached.
Ravimig® sales assumptions:
• Ravimig will be sold in a pack of 2 tablets. Projected distribution price per a tablet is US$ 6, and per a pack of two - US$ 12.
• Figures from the World Health Organization (WHO) show that in Western countries 6–8% of men and 15–18% of women experience at least one migraine attack each year (the difference is believed to be hormonally driven). In Asian countries the prevalence is lower, but still significant: approximately 3% of men and 10% of women suffer an attack in any given year. Population of 18-64 years old was considered. It was further considered, that on the average a migraine affected person experiences one attack in a month (yet, some experience as much as five). It is assumed that annual consumption is at least 12 tabs per person. In fact, consumption can be much higher.
• It is assumed that only 30% of all the migraine affected who can afford paying for the treatment will be prescribed Ravimig® .
Ravirin® sales assumptions:
• Ravirin® distribution price is estimated at US$ 3.
• According to data presented in the 2006 country study by Espicom Business Intelligence, around 27 million people in Russia are affected by rhinorrhea and allergic rhinitis annually. Based on this population data, the Company estimates that more than 800,000 people are affected by this condition in Moldova, more than 4 million in Romania, close to 9 million in Ukraine, around 3 million in Kazakhstan and more than 5 million in Uzbekistan. It is assumed that each affected person will require at least 2 nasal dosing spray annually.
• It is assumed that only 30% of all the target patients who can afford paying for the treatment will use Ravirin® .
Raviset® sales assumptions:
• Raviset® will be sold in a pack of 6 suppositories. Annual consumption is estimated at 72 suppositories (12 packs) per person on the average. Estimated distribution price per a pack of 6 suppositories is US$ 4.8.
• It is assumed that 15% of women aged 18-65 are affected by menorrhagia (19% according to some sources).
• It is further assumed that that only 50% of all the target patients who can afford paying for the treatment will use Raviset®
Total market potential for Barkan-Farma's ethical drugs portfolio is estimated at more than US$ 450 million.
Potential market sales projections
As mentioned previously, Barkan-Farma targets the most capacious in Eastern Europe and Central Asia pharmaceutical markets, characterized by remarkable growth rates and untapped potential for branded and ethical drugs. Initially, the Company plans to introduce unique, high quality ethical drugs for very common and inadequately treated disorders and acute conditions. Following is the list of the Company's ethical drugs; their comparative advantages; market penetration and acceptance projections, and prospective pricing.
RAVITEN®
Raviten, the Company's unique vassopressing drug falls into the category of the cardiovascular drug market, one of the largest and fastest growing market segments of the target markets. Currently, the ruling concept of treating emergency medicine cases and intra operative hypovolemic shock conditions is by fluid replacement therapy and by vasopressor sympathomimetic generic agents, such as Dopamine, Dobutamine and Epinephrine. These drugs are available at the following prices:
Dobutamine: available in 250ml bottles, priced at around US$ 10. Manufacturers: Hexal (Germany), Solvay Pharma (US), Pliva Lachema (Czech Republic).
Dopamine: available in 200mg/10ml, 50mg/10ml, 40mg/5ml, 10mg/5ml and 4%, 0.5% 5ml ampoules. Prices range between US$ 1.8-0.8 per ampoule. Leading manufactures: Solvay Pharma (US), Polfa (Warsaw Pharmaceutical Works, Poland), and Russian manufacturers, such as Darnitza and Brynzalov A. Russian manufacturers offer unbeatably low prices – around 20 cents per ampoule or lower. Yet, the drugs quality is often referred as doubtful.
Epinephrine: available in 0.1%/ 1ml ampoules priced at 40 cents per ampoule. Produced by Moscow Endocrine Plant.
Generic vasopressor sympathomimetic drugs suffer from many treatment limitations and drawbacks. They do not suffice in achieving safe, stable and balanced blood pressure, and do not create better cardiac perfusion. Raviten is a 10% sterile solution used to overcome episodes of hypotension causing vasoconstriction followed by normalization of blood pressure. Raviten is highly differentiated from these agents by its fast-acting ability to normalize and stabilize blood pressure and by its lasting effect. The Company believes, that Raviten will gain 20% share of the potential market in Moldova in 4-5 years and 20% of the potential market in Romania in four years. In fact, this number can possibly be higher, since Raviten offers outstanding clinical abilities that no other drug can offer. Raviten is expected to gain great popularity in the local medical communities quite rapidly, just as it became famous in almost no time during its clinical trials.
The Company estimates that the acceptable selling price of Raviten is around US$ 25 per a pack of 5 vials. Raviten will be sold directly to hospitals through tenders. Other medical facilities and pharmacies will be able to purchase it directly from the Company. Since the per capita expense on the pharmaceuticals is significantly higher in Russia and Romania than in Moldova, Ukraine and Central Asia, it is assumed that the drugs' sale prices on the Russian and Romanian markets can be 15-20% higher.
RAVIMIG®
Ravimig a 50mg., novel anti-migraine drug offers many sufferers safe, rapid and lasting treatment. As opposed to other therapies available on the market, Ravimig features outstanding abilities in treating migraine attacks with not known adverse effects. OTC non-specific therapies (aspirin, ibuprofen, and other analgesics sometimes combined with caffeine) are widely available on the local markets at very low prices (20-50 cents per tablet). These agents, suited for low-severity migraine, do not help patients with more disabling attacks. These patients are prescribed migraine-specific therapies. Local markets offer a relatively wide choice of triptans including: Eletriptan by Pfizer; Sumatriptan by Glaxo-Wellcome, Veropharm, and Indian manufacturers, Naratriptan by Glaxo-Wellcome, Zolmitriptan by Astra Zeneca. Prices for these agents range between US$ 3.5-4 per tablet of Sumatriptan manufactured in India, US$ 6-8 for a single tablet of Sumatriptan 50mg/Elitriptan 40mg/Zolmitriptan 2.5 mg produced by Western manufactures. Most expensive are: Sumatriptan 100mg by GSK (Glaxo-Smith-Klein) priced at US$ 14-15 per unit or US$ 28-30 per a pack of two tablets (US$ 11 and US$ 22 respectively in Moldova). Sumatriptan 20mg Nasal Spray by GSK priced at US$ 17-18 per unit.
Many patients treated with triptans report adverse side effects. As compared to these agents, Ravimig has shown to have a better safety profile. The Company believes that Ravimig 50mg will be best adopted by the Moldavian, Ukrainian and Central Asia region markets at prices that are lower than those of the branded triptans. The estimated selling price of a pack of Ravimig (50mg #2 oral tablets) is US$ 17-18. Distributor price is estimated at US$ 12-12.5 per a single pack. In Russia and Romania these prices are expected to be 15-20% higher.
Ravimig market penetration will be challenged by intense market competition and well-budgeted advertisement campaigns run by the Western manufacturers of triptans. For these reasons, the Company assumes that Ravimig market penetration rate will be relatively moderate. However, in Moldova, Ravimig is expected to reach 33% of the potential target patients (primarily triptan non-responders) in five years from its introduction in 2009.
RAVIRIN®
Ravirin Nasal Spray, Barkan-Farma's proprietary nasal dosing spray will face intense competition from many local and foreign manufacturers who offer wide range of various nasal sprays from bottom cheap to branded, premium priced therapies. The Company assumes that Ravirin has most chances for faster market acceptance at a selling price of US$ 4.2 per single unit. Distributor price is estimated at US$ 3 (US$ 3.5-4 in Russia and Romania).
RAVISET®
Raviset vaginal suppositories represent a true breakthrough in the treatment of menorrhagia and excessive postpartum bleeding. This innovative agent has therapeutic properties that no other drug can offer. Raviset shortens the bleeding period while reducing the associated pain. The Company strongly believes that this product will be rapidly accepted by the local markets. To insure fast market acceptance, the Company will conduct advertisement campaigns and develop market education programs targeted at gynecologist and Delivery Hospitals physicians. The Company assumes that this unique product will be well adopted by the markets and reach 10% of the potential target patients in Moldova in 5 years from its introduction in 2009.
Assumed selling price for a pack of 6 units of Raviset suppositories is US$ 6-7. Distribution price is estimated at US$ 4.7 per pack (estimated US$ 5.5 in Russia and Romania).
The following tables represent Barkan-Farma's potential market sales projections through 2013:
Market for Dietary Supplements and natural cosmeceuticals products
Great potential and untapped market opportunity for the Natural Products lines
Dietary supplements (DS) and natural cosmetics products market in the Eastern European and Central Asia countries are characterized by relatively low market entry barriers, rapid growth (30% annual growth rate in some countries), inexpensive registration costs and huge market potential.
There is a strong tradition of herbal remedies and natural cosmetics in the targeted region. For this reason, this sort of OTC (over the counter products) has developed very fast. But there is still huge room for growth.
The total DS market in Moldova, Romania, Russia, Ukraine and Central Asia countries is estimated between US $ 2.5-3 billion dollars. Russian market, the largest and the most rapidly growing, is estimated at around US$ 2 billion in annual sales. Pharmacies, the primary licensed distributors of DS products, sell around US $ 700-800 million annually. The Ukrainian DS market is estimated at US $ 40 million based on pharmacies' sales only. The Company estimates that the overall Ukrainian market stands at US$ 240 million. This gap in numbers is explained by the fact that many DS products are sold in the "black market" through MLM (multi-level or network marketing).
According to PharmExpert, the leading Russian market research center, only 8% of the population in Russia and former Soviet republics consumes dietary supplements (DS) products at present. Yet, this situation is changing rapidly. Advertising campaigns and excellent exposure in pharmacies and drugstores supported the creation of a larger consumer base and promotes the use of vitamins and dietary supplements on a more regular basis. In 2006, the overall DS market growth rate was as high as 30% in Russia and 40% in Ukraine.
Herbal formulas and DS products that address gastro-intestinal problems represented 24% of all products in the market. In 2006 this group of products experienced 38% increase in sales as compared to the previous year. Second market leader are products that address endocrine system problems. This group experienced 25% growth rate. Remarkably, urinary tract and prostate related products experienced 76% growth in the past year.
The natural cosmeceuticals market segment has also been growing rapidly in the last years. In some countries the segments' annual growth rate reached 40%.
