Sunday, April 4, 2010

Market realities


Above image from here!

The raison d'etre of a pharma enterprise is the market. The market comprising of the set of prospects and customers (prescribers, patients, patient attenders and payers) - are the market elements that support product performance. Analysing the market of a product is a continuous process. Analyzing the market requires gathering qualititative and quantitative data. Trends need to be discerned. Many a times marketing myopia results due to lack of analysis and true understanding of the nature of the product(s)'s market. It is very necessary to go by facts, figures, and trends in the marketplace rather than by past knowledge (which may have become outdated), past experience (which may not be relevant), assumptions and hunches. For a pharma enterprise to be relevant and purposeful, understanding the market's composition, basics, behavior, trends, changes, moods, regulations, communication flow patterns, opinion builders, distribution patterns & changes, price points, product technologies, competitor activities, research activity trends, demographics etc are very essential.

Piramal Healthcare buys i-pill from Cipla

The recent market development of the purchase of brand property i-pill from Cipla by Piramal Healthcare in an all cash deal for Rs. 95 crores, speaks volumes of corporate vision and market analysis by these two market entities. The justifications are solid for both seller and buyer. As per Cipla's vision, brand i-pill is not a strategic fit as Cipla sees itself as a pure Rx market operator. Piramal Healthcare on the other hand, it is obvious from its market moves, wants to straddle the total Indian pharma and healthcare market. Piramal Healthcare is interested in both the Rx market segment and in OTC play, as it has brands like Saridon, Lacto Calamine ... . Mankind is the other paradigm competitor of Piramal Healthcare as this company is also in to Rx segment and OTC segments. Cipla is narrowing as a niche Rx market operator. Both Mankind and Piramal appear to be market savvy and are going as per the market trends of an increase in potential for OTC (over-the-counter) and OTX (prescription plus over-the-counter) products. However, Cipla believes its core competence is in Rx play and intends to concentrate on it.

So what is right? Is it OK to be judgmental? Should not Cipla with it's vast distribution reach, cash resources, and other market strengths worked to address the pharma and healthcare OTC opportunity? Is it Cipla's market myopia to overlook the pharma and market OTC opportunity (mind you for Ranbaxy, Revital (an OTX brand) is one of its most valuable brands?) What would have happened if Cipla had looked to building an OTC and OTX brand portfolio? Furthermore, Cipla does not have any great drug discovery research program. Would it have improved Cipla's shareholder value in the medium to long run if Cipla had ventured in to building a robust pharma and healthcare OTC and OTX brand portfolio? Was Cipla hasty in selling off its i-pill? These are valid and interesting questions.

I-pill is picked up at the right time from Piramal's angle. i-pill is operating in a part of the target market (ie., penetrated market as per above graphic). There is still the available market portion and the potential market that is bigger and to tap this, Piramal Healthcare's experience as an OTC operator will help.

However, Cipla had i-pill on a platter to woo the OTC 'market lady', and make inroads in to this market too. However, Cipla chose to be coy, and has pulled out. Cipla has given away i-pill to a more virile, aggressive suitor of the OTC pharma market - Piramal Healthcare.

There is no doubt companies like Piramal Healthcare and Mankind have understood the potential of OTC and OTX markets. Whether Ranbaxy has the same verve to go ahead with its OTX and OTC pharma market operations after its purchase by Daiichi Sankyo is to be seen. Mind you, Ranbaxy has a great operational record in the OTC and OTX market operations. It was Ranbaxy in the past that has understood the realities of Indian pharma market and unveiled its Rainbow Coalition Business Model. This model or business plan has time and again proved its robustness, Revital is a vital product in Ranbaxy's business portfolio. If Ranbaxy does a volte face and decides to concentrate only on its pure Rx play biz, it stands to lose a lot.

Philosophy is fine, but the market realities are more vital! Market has to be analyzed in terms of PENETRATED MARKET, TARGET MARKET, QUALIFIED AVAILABLE MARKET, AVAILABLE MARKET, AND POTENTIAL MARKET, as per above graphic. Having analyzed market realities, decisions are always welcome. Business prudence is following the market structure of a product and adapting to this market reality rather than being philosophical.

Charles Darwin had once said: IT IS NOT THE STRONGEST OF THE SPECIES THAT SURVIVES, NOR THE MOST INTELLIGENT OF THE SPECIES THAT SURVIVES. IT IS THE ONE THAT IS THE MOST ADAPTABLE TO CHANGE (THAT SURVIVES).

This is an important lesson for market operators, enterprises should learn to adapt to market realities. Has Cipla denied itself an opportunity to adapt itself to market reality? Or is it the old fashioned "stick to your knitting" kind of a thing, OK for Cipla?

So the first market reality is that MARKET CONTOURS ARE ACHANGING, enterprises need to understand this, and adapt.

Pharma market (comprising of Rx, OTC and OTX) is a push market

Let us say, I have a lot of money, and I set up a cement manufacturing plant. There is not much market push to be done in in the domestic cement market as compared to say, launching a new drug or a new brand. Cement is a well known building material commodity, there is constantly increasing market demand, there is a current shortage of cement production capacity in India compared to cement demand, and further, I do not have to educate anyone about the virtues of cement or the side effects (and limitations) of cement as a building material. Everything is known about cement. I need to indulge in brand marketing and distribution to make the cement manufacturing business profitable.

This is not the case with the pharma market! It is tougher to operate in the pharma market. We need to push hard to make the brand or new generic a success. There is the aspect of producing convincing clinical documentation, and indulging doctors. That is market reality no. 2!

Technology is very vital to differentiate

The market reality no. 3 is that the pharma Rx market operates at two levels. One is the PRODUCT level and the other is the PROMOTION level. If you have a high tech product like a unique biological (say a rDNA tech product), or an aseptic technology electrolyte energy drink product, or any other tech product that cannot be duplicated easily, then technology helps you gain a juicy market piece.

If one has a me-too product without much of technology differentiation like the regular capsule, liquid oral or other such easily available technologies, then the emphasis will be on PRODUCT PROMOTION, and it is a rat race!

Hence, product technology differentiation makes a great difference to marketability of a product (promotion is very vital here too, for sustained adoption of the product by the market), however, the market piece is juicier! So market reality no. 3 is that product technology makes a difference!

Hope you enjoyed, reading the above three market realities (this list is certainly not complete), please scroll down, do read other blogposts, click on older posts as and when required, pass the word around about this blog url! Thnks!!!

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