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Gx/BGx Manufacturer—Commercial Due Diligence

Task:
Assess investment risks and provide an independent opinion on Target's core business areas.
Task:
Assess investment risks and provide an independent opinion on Target's core business areas.
Client:
EBRD
Region:
Ukraine, CIS, export markets
Product portfolio:
  • provide a detailed review of Target’s current and planned products (including within its core markets), pricing, margins, and outlook;
  • original and generic products driving Target’s sales;
  • assessment of Target’s new product development process and in-house research and development (R&D) capacity to develop new original and generic products;
  • assessment of Target’s ability to continue replacing non-target's originals (following patent expiring and availability for a copy) with new generic products.
Investment program:
  • assess the Project Cost, including construction and equipment costs and Project Financing Plan;
  • assess the appropriateness of technology and equipment suggested by Target, including sources of such technology/equipment and reasonableness of indicative costs;
  • review equipment procurement process and draft contracts with key equipment suppliers;
  • review draft contract with the main contractor(s) for the construction works;
  • assess the lead time for the key components of the Investment Programme;
  • verify contingency plans to cover shortfalls;
  • provide an assessment of the proposed time-line of new manufacturing capacity becoming operational;
  • assess the GMP certification process of Target’s new production facilities;
  • review the recent project preparation/implementation status.
Organization:
  • Assess the adequacy of Target’s management resources (both extent and quality).
  • Assess the organizational structure and decision-making process within Target.
  • Assess the quality of Target’s IT, finance, and operational systems for managing Target and reporting on its operational and financial performance.
Deliverables:
  • An independent assessment of the investment project.
  • Revision of the information provided by the Target and the Client.
  • In-depth research of the core Target's pharmaceutical market.
  • A set of interviews with Target's top management with insights and recommendations.
Key areas covered in the project:
  • Assessment of Target’s strategy, investment program, and business plan.
  • Understanding the sustainability of Target’s competitiveness and profitability.
  • Study of the industry regulation.
  • Analysis of the intercompany goods and cash flows of the Target
  • Assess transfer pricing and tax arrangements of Target.
  • Study of the quality of the management team, organizational structure, and systems.
Market study:

To perform Ukrainian Target's core markets analysis:

  • evaluate Target’s marketing strategy for its core market, including product mix, pricing policy, logistic and distribution’s channels, advertising/promotion;
  • provide recommendations on marketing strategy improvement;
  • assess market volume (i.e., size in volume, value terms, and contribution’s margin), market growth rate (i.e., growth trends and assumptions for the period of up to 5 years), key players and their market shares, supply and demand, long-term trends, product substitution, the Target’s existing and potential market share.
  • review and  confirm whether existing marketing and sales structure and workforces are  appropriate
Industry regulation:
  • Review the current and prospective market regulation affecting Target’s operations, including:
  • licensing: to confirm availability and validity of Target’s timeless licenses issued by the Ministry of Health also confirming the Target’s compliance with GDP standards; procedures for the confirmation of the license validity by the Ministry of Health;
  • product certification/registration process (e.g., regulatory approvals needed, timing for bringing products to market, potential regulatory hurdles, and risks to commercialization of the newly planned products);
  • regulation of prices of medicine producers;
  • raw materials import taxes and duties;
  • supply to state hospitals: key requirements, procedures, contracts, promotion, payment terms, etc.);
  • introduction of mandatory medical insurance and reimbursement mechanism;
  • the potential of introduction of VAT on medicines and ban on medicine advertising;
  • any other regulatory risks.
Competitive position:
  • assess  existing and planned customer base (customer profile), including hospital segment;
  • assess customer contracts, their length, volume/price guarantees, termination clauses, and raw-material cost pass-through ability;
  • identify the main raw materials and operating costs of the Company, and the main suppliers of these products/services plus any available alternatives;
  • identify whether any major contracts are priced below or above market levels;
  • analyze inter-company goods and cash flows (including the Company’s existing raw materials supply chains involving off-shore companies) as well as transfer pricing practices and tax arrangements used by the Company;
  • analyze cost/price competitiveness of the Company and its ability to maintain it in the future;
  • assess distribution channels: effectiveness of proposed channels, trends, key players, and cost justification;
  • analyze indigenous and foreign competitors and their respective market shares;
  • produce a SWOT analysis;
  • comment on existing production facilities, the performance of the existing equipment, utilization rate.


Project
leads

Anastasiya MAXIMENKO
Partner, Recruitment & Organizational Development
Eugene BROVKO
Partner, Pharma & MedTech Market Access

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