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Valeant Pharmaceuticals to India Brian Braley, Justin Lam and Omar Elkhatib.

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Presentation on theme: "Valeant Pharmaceuticals to India Brian Braley, Justin Lam and Omar Elkhatib."— Presentation transcript:

1 Valeant Pharmaceuticals to India Brian Braley, Justin Lam and Omar Elkhatib

2 Valeant Pharmaceuticals Focuses on neurology, dermatology and infectious diseases Manufactures pharmaceuticals as well as medical devices Canada’s largest pharmaceutical company with $8 billion revenue Since 2008 Valeant has been executing many acquisitions to grow internationally

3 Dermatop Topical steroid cream, used to decrease inflammation in skin Prescription required Valeant currently manufactures Dermatop in Barbados Prednicarbate also being made in India under different manufacturers

4 The Main Issue Labour in Barbados is comparably expensive to rivals and is unreliable Still recovering from recession in 1980’s Opportunity for Valeant to save on production costs by looking elsewhere

5 Identified Driver Efficiency Driver: Outsourcing for cheap costs in India Generic product Easily accessible materials Low import tariffs Method of Entry: Brownfield Lease existing manufacturing plant to produce Dermatop

6 Key Success Factors Cheap Costs Legitimacy, safety and credibility Medical Advancements

7 Patna, India Capital of Bihar province Ranked 2 nd easiest Indian city to start a business by the world bank (2009) 5 th fastest growing city in India

8 Political India is ranked 85/175 on the corruption index Canada has a 6.5% tariff on imported pharmaceuticals Foreigners are not allowed to own immovable property in India Leases not exceeding 5 years are allowed

9 Economic Indian Rupee is not fully convertible Exchange rate has been relatively stable Any fluctuation will not have a major impact on value of Canadian dollar Cheap labour costs BDS $6.25 = CAN $3.90/hour INR 192 = CAN $3.81/day = $3.81/9 hours = $0.42/hour

10 Social/Cultural Corporate Social Responsibility Fair wage and good working conditions Environmental Impact Acceptance of imperfection could be problematic High power distance gives authority

11 Comparative Advantage Factor Endowments -Low cost workforce -Growing Infrastructure -English is common, easy communication Related and Supporting Industries -Resources, infrastructure and suppliers exist -Large work force eager to work Demand Conditions -Investment driven economy -Growing middle class/higher education making better management Strategy, Structure and Rivalry -Pharmaceutical industry is seen positively in India -Competition has led to better innovation

12 India’s Relative Advantage Cheap, plentiful labour of varying skill levels Strong indicators of future growth and improvements to support our needs

13 The Market Dermatop is sold to the general public for their use Quality: no one will buy a low quality medication Monopolistic Competition Many firms with a homogenous product only differentiated by brand name Many different brands are often owned by a single company

14 The Pharmaceutical Industry in India Relatively stable, however advances can cause turbulence Highly regulated in terms of price, quality and patents Estimated to have over 10,000 manufacturing units Manufacturing facilities are increasingly complying with International Regulatory Agencies like USFDA & MCC

15 Industry Competition CompanyRevenue in Billions (2013) Johnson & Johnson71.3 Pfizer51.6 Roche52.1 Valeant8

16 Strengths and Weaknesses in India Pharmaceuticals Strengths Well developed Strong manufacturing base Cost competitive Labour quality varying from unskilled to extremely skilled Weaknesses Subpar products affects image of all companies Growing concern over working conditions and wage

17 Threats and Opportunities in Indian Pharmaceuticals Threats Mostly domestic, not related to manufacturing and exporting China is a threat in terms of exporting and labour Opportunities Significant export potential Significant potential to supply generic drugs to developed markets

18 Method of Entry Brownfield Entry Will lease a manufacturing plant for 2 years to begin manufacturing Dermatop Acquiring a manufacturing plant in Patna will not be difficult as they are readily available for lease Will be able to begin manufacturing right away

19 Supply Chain Raw Materials purchased locally Dermatop manufactured Dermatop flown from Patna, India to Canada

20 Potential Issues Drug contamination Backlash against typical Indian labour conditions USFDA and India are working closely to improve working conditions Valeant and Dermatop image being tarnished due to image of low quality drugs being manufactured in India

21 Corporate Social Responsibility Legitimacy Public Responsibility Labour Issues

22 Short Term Lease an appropriate factory for 2 years to manufacture Dermatop Hire local, experienced semi-skilled labour

23 Long Term Plans If 2 year lease is successful, will lease for another 5 years and begin moving other products to production facilities in India and start to expand operations

24 The Big Picture Valeant is a company who has a vast interest in internationalization They already have a presence in South Asia Indian Pharmaceutical Industry vastly growing and has a very bright future A presence in India would be great in the long-term for Valeant and will be key to future success Starting out with Dermatop is safe and will pave the way for new products

25 Q & A

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