Drug & Medical Cos

# Template State Owned Enterprises- Company Overviews OCPA - Ministry of Industry & Minerals Note: All currency figures are in 000's of Iraqi Dinars unless otherwise noted. 1. General Information Company Name: State Companies for Drugs & Medical Supplies - Ninawa & Samarra Sector Pharmaceutical Brief Description Two Companies that were one until 2002. Manufacturers of pharmaceuticals, including tablets, syrups and oral drops. Most products are generic versions of branded drugs. Also manufactured intravenous bags and kits, but this factory was 100% destroyed in war. Revenue in 2002 (Iraqi Dinars '000s) # of Employees 3550 (2,603 in Samarraw, 947 in Ninawa) Annual Employee Salaries & Bonus 1920000 (Ninawa only) Headquarters Address Samarra: Drugs Sq. House No. 11 2. Company Highlights Samarah is Manufacturer of over 300 generic medical formulations and few Animal health products. Rich in know-how and skilled labor. Samarah facilities are old, but in good condition. Some equipment is relatively new, such as blister pack machines. Ninawa is a more modern addition but lacks good managent and know-how. Both companies are operational at a limited capacity due to electricity and raw material shortage. IV solutions factory destroyed but may be restored with $2M. Also there is an uncommissioned factory for disposable syrings. Also there is uncompleted/damaged? Vials factory. 70% of product for Ministry of Health consumption. 20% private farmacies distributed through KIMADIA-MIH. Good export potential exists. Raw material is subsidized but prices are also depressed by MOH prices structure. Samarra has equity stakes in 3 other companies in Iraq, Jordan and UAE. It is recommended that both companies will merge to share resources and opportunities. Company listed quality control laboratory to upgrade quality as most pressing need. Does not bode well for current quality standards. Sammara allocated $1.5M USD for 2H 2003 operating budget and provided with 3mw off of grid. Ninewa allocated $1.2M USD for 2H 2003 operating budget and provided with 3mw off of grid. 3. Facilities Name Province City Grid Damage % Power Needs Samarra Headquarters Samarra LC9685 Ninawa Drug Factory Mosul 0.2 Ninawa IV Fluid Factory Mosul 100%? Disposable syrings factory North Baghdad 20% +commissioning Glass vials factory Musayab Unknown Value of All Plant & Equipment Before War, and Initial Purchase Dates and Prices for Major Items Current market value approc $10-20M Real value Good brand well trusted locally and regionally, Plenty of know-how to develop into sales. 4. Products - Ninawa only, Samarra not yet provided Product Name Unit Measurement Design Capacity Available Capacity 2002 Production 2002 Revenue Tablets Millions 1080 810 540 Syrup 1000 Bottles 17550 6000 6000 Oral Drops 1000 Bottles 9200 1500 1500 IV Fluid 1000 Bags 2835 3600 3600 Eye Drops 1000 Bottles 6750 2400 2400 Ointments 1000 Tubes 7200 6000 6000 Capsules Millions 405 180 180 Suppositories 1000 10620 800 800 Description of Importance of Products to Other Iraqi Industries Finished products certainly needed by Iraqi population. Not clear if imports would more efficiently satisfy this demand. 5. Customers Customer Name 2002 Revenue Subsidized (Y/N) Products Sold to Customer and Unit Pricing Ministry of Health 100% of total Unclear Prices set on a cost plus basis 6. Suppliers Supplier Name 2002 Purchases Subsidized (Y/N) Products Purchased and Unit Pricing Not imporant . All are jordanian agents new policy is to buy direct from manufacturers Current Payment Terms From Suppliers 7. Imports & Exports 2002 Import Markets for Raw Materials Italy, India, China, Germany Potential Import Markets in Free Market Same 2002 Export Markets for Finished Products None Potential Export Markets in Free Market Good Potential in Middle East and East Africa market. 8. Competition Description of Competitive Situation Company produces good quality competitive products. The company will distribute directly rather than via MIH. There will be draw back from opening the market. They may lose part of the MIH market but they should do well in the private market. Market Share Description Companies supplied 60% of Iraqi market, but actual demand not being met by supply. This share may drop because the MIH might be clinched by westren companies and free NGO supplies. 9. Summary of War Damage & Looting of Property & Equipment Description of Damage IV plant was destroyed but can be brought back to production @ $2M Current Operating Status Both Companies operating on limited basis since May 18, 2003. Lack of raw materials is biggest issue. Immediate Property & Equipment Needs To Restart Operations None Total Cost to Return to Pre-War Condition IV plant @ $2M 10. Inventory Status Raw Material Status Ninawa: Virtually out of all raw materials. Samarah: Good stock but missing critical ingredients. Months of Material Supplies & Production Rate Samarrah: 1 month with top up will be 3-4 months. Immediate Raw Material Needs Few key items missing Finished Products Supply (Units and Value) 11. Fuel & Electricity Needs Description of Fuel Needs Fuel oil for steam generating Description of Electricity Needs Samarrah currently being supplied with 4 mw from hydro-electric plant. Also have 4 x1 MW generators to supply . 12. Other Needs to Restart Working Capital Needs Samah/Ninawa combined needs $5-10M working capital for raw material purchases. Security Needs Secure location, no security issues Other Needs MOH needs to agree to production purchases. 13. Strengths, Weaknesses, Opportunities & Threats Description of Strengths Motivated staff and workforce, High level of know-how , Good brand, The combined facilities are mostly modern though there are some old facilities as well. Technology and manufacturing facilities available to develop lucrative animal health division. Description of Weaknesses Lack of marketing skill since their products used to be marketed by the MIH. Leaving Samarah and Ninawa separate is causing fragmentation in of badly needed resources. Description of Opportunities Raising prices to a realistic level will take the company to a proftable position despite the increase in the raw material cost. Export markets can also be realistic opprtunity. Capabilities exist to undertake contract manufacturing for OTC drugs for major brands who wish to produce and market their products in the middle east. Description of Threats The medicine market is highly regulated market due to its dealing with controlled substances. The lack of import control may cause a serious damage to the industry as well as potential damage to health. The free medical supplies brought by the NGO's may depress the market. 14. Long Term Strategy Description of Strategy The companies need to be united and their marketing efforts need to be coordinated with AKAI, the Iraqi company in which they hold stake. The stake will need to be made a controlling state in the near future. The company should expand its presence in the I.V. solution market as well as the disposable syring market where it has factories for both. The medical cotton products (wound dresssing) may be brought in the fold after separating it from the State Co. for Cotton industries. The company should consider setting up joint ventures for suppling upstream material such as packaging for which represent high cost imported items. Potential New Products A full range of cancer drugs. Animal health drugs. Potential Partnership Opportunities Local investors exist who are intrested in entering into partnerships for the manufacturing of upstream input. Some NGO's are intrested in contract manufacturing of a number of drugs for Iraq. Iraqi Marketing companies negotiating the marketing of OTC drugs and vitamins are intrested in contract the manufacturing to Samarah. 15. Revenue and Costs Overview Description of How Pricing Was Set On a cost-plus 30% basis, leaving the company running on a low profit margin and no proper depreciation and reinvestment programme. The products are sold to KIMADIA-MIH who supply some products to the hospital and set the final prices to the pharmacies. Prices normally at less than 30-40% of the prices of imported drugs. This allows the pharmacies to mark up the product to much higher level and earn substantial margins. Description of Production Costs Most cost come from the imported raw materials and packaging. The company should buy directly from manufacturers which will save substantial costs. Sourcing packaging through local joint ventures should also help reduce costs. Labor costs still modest. Marketing costs will increase in the forthcoming period. Potential for Profitability in Free Market Medicine is highly specialized market and commands high margins. The company has many technologies under its belt to keep supplying highly profitable products without incuring high R&D cost.