Bayer Hong Kong: Fighting

Against the Odds

 Executive Summary

Target : 18% annual growth rate

 Overview of Bayer Hong Kong Business

• Revenue growing steadily; prior year +20% and +18% targeted over next three years
• How to maintain and expand?
– Cardiology segment will experience slowing growth into 2020 due to patent expiry (Xarelto)
– Focus in Primary Care, Women’s Health Categories
– Opportunity in Distributor Channels & Supply Chain Improvements
Growth Anchors – Product/Channel, Supply Chain/Distribution, and
Marketing Mix Orientation

1 2
Product Segment
Diversification &
Channel Strategy Re-
alignment
• Xarelto constitutes ~76% of
cardiology sales and is expiring in
2020
• Distribution channels show promise
as growth engines but need
additional investment
• Untapped potential in Primary Care
and Women Healthcare market
Mitigate or Solve
Supply Assurance
Risks & Improve
Distribution
• FDA issued warning letter for
good manufacturing practices
(GMP) violation in 2018 Feb
• Result in a global shortage of
affected drugs and loss in
sales via tender
3
Develop Marketing
Strategy Alignment
with Opportunities in
Product & Channel
• Marketing Budget constraints
through 2019 at 15M HKD
• Strategic shift of budget from
industry events and
conventions to distribution
• Product-specific promotions
to encourage adoption of
drugs in strategic growth
areas
Current and Ideal Revenue Share
 Impact of Xarelto on Sales Revenue
• Xarelto (Rivaroxaban) is top selling product of Bayer Hong Kong. The drug was sold by
the cardiology franchise and garnered revenues of HK$124M in 2017 (47% of total sales
revenue in 2017).
• Xarelto was first approved for use in 2011 and would lose its patent coverage in 2020.
• Total revenue will increase, but growth rate will be slow down to 30% in 2018, 20% in
2019 and 10% in 2020
• We decrease the price 10% every year to make show soft landing after patent expires
• Price will decrease, the sales volume will increase in the same time
• The price of Xarelto will decrease to 58% after patent expiration. Decreasing price
a few years earlier can help gain loyalty of customers after the patent expires
Price ratio between off-patent and generic drugs in China Worldwide revenue of Pfizer's Lipitor from 2003 to 2017
Patent expire in 2011
 To increase penetration rate in Women Healthcare

Invest in building
relationship with
gynaecologists
WHY
WHY 1. No restrictions on spreading awareness
•1. They believe in the benefits Spread awareness about a health practice
of oral contraceptives about uses of oral 2. Leverage 80% market share in oral
2. Hong Kong is physician contraceptives contraceptive to gain more customers for YAZ
dispense market

HOW
HOW •1. Through advertisements, university
1. Sponsor them to regional programs, conferences and campaigns,
and global medical educate people about benefits of oral
conferences contraceptive, if not the product itself
2. Strengthen relations using •2. Use non-contraceptive benefits such as
the sales team/external cure against heavy menstrual bleeding and
distributors polycystic ovary syndrome (PCOS) to
advantage

Sales Growth
CONTRACEPTIVES MARKET IN HK
250

Sales (Millions)
200

150
Others
Bayer 20%
Other contraceptives Oral Contraceptives
80%
87% 13% 100

50

0
13% 18% 23% 28% 33% 38% 43% 48%
Penetration Rate
 Surveys and Facts
What's your view on oral contraceptives?
Does it not lead to weight gain,
headaches, pimples?
I believe it will affect my
menstruation cycle Amanda Leung
Coordinator, Women in Tech
Eh, putting a foreign
Jenny Lau
Part time student, CUHK
substance in my body. Not
sure.
Anastasia Turchenkova
Quant analyst, Quantifeed
I am not aware of any
famous oral
contraceptives.
Nan Pang
Analyst, Element.ai
 Increasing Market Share in Primary Care
Primary Care Revenue
17
17
Sales (Millions)

16
16 • No major investment in the segment
15
15
leading to a 13.5% decrease in revenues
over last two years

Why
14
14
13
• The Global Erectile Dysfunction market is
2015 2016 2017
expected to reach USD 2.95 billion by
2023 at a CAGR of 6.5%

How • Incentivising sales team to target primary

care products

• Patent for a major competitor product

‘Viagra’ has expired in December 2017,
creating opportunity for Levitra to have
competitive advantage
 Supply Chain Disruptions as a Result of FDA Intervention

Impact Resolution

Potential loss in Assuming only 30% of tender sales are lost due to the
sales of up to supply issue, which is expected to impact half of 2018
6.5% of revenue revenue.

The total lost sales would amount to approximately 5.4M

Reputation and HKD.
customer
satisfaction at risk It is imperative to re-establish supply.

Inventory Redistribution: Explore Bayer units available globally to meet the current tender demands in HK
Drugs Buy-back: Actively buy back additional affected drugs from private and distributor market to restart distribution
Proactively inform Stakeholders: Mitigate shortage effect on reputation and on key strategy products (Hospital
Authority & Chief Pharmacist Office)
 Marketing Mix Changes to Support Continued Growth

Marketing mix is a key driver for sales performance across channels and product lines
• Shift marketing dollars (+4.8M HKD) from low-performing channels to high-performing channels
• Distributor channels achieved 23% growth in 2017
• 57% of revenue came from distributor channels, so this mix is better aligned to take
advantage of key growth areas

Reduction in conference spending of -3M HKD and a focus on promotional materials (+1.7M
HKD) for drugs Xarelto, Levitra, Adalat, and Yaz will help drive adoption of key strategic products.
"Bottoms-up" Financial Projections by Key Product Line

18 19 20
21% 18% 16%
Thank You!
Any questions?
Appendix
 Oral contraceptives survey

• Link: https://www.ncbi.nlm.nih.gov/pubmed/27063439