PHARMA - THE RIGHT PRESCRIPTION 6 sector focus What's NïwS Issue 8 August 1996 Coordination is a keyword when breaking into new international markets. And there are few markets that are more international in scope than pharmaceuticals. Rabobank has been eying this industrial sector with interest for some years, trying to decide whether and how it could make profitable inroads. Occasional successes did occur, but there was always the feeling that the approach could be fine tuned.This summer, a group of pharmaceutical industry account managers met in Utrecht to see how the European pharmaceuticals market can be mapped and subsequently approached. The new approach is called 'Join Hands'. Under this approach, account managers in the European network who are already involved in the pharmaceuticals industry have agreed to pool their knowledge and to coordinate their efforts. Once the companies have been selected, a common strategy will be agreed for each segment and its implementation will begin. SECTOR STUDY The approach is based on the results of a study that was commissioned from students at France's INSEAD business school. Two researchers interviewed ten financial managers at the larger pharmaceuticals companies in Europe to determine these companies' banking needs. Although one of the outcomes was that the industry enjoys a lot more interest from commercial and investment banks than it has business to offer, another was that banks without sophisticated industry knowledge were not rewarded with the higher value added banking business. STIFF COMPETITION The overall context is that worldwide healthcare expenditures will continue to rise substantially as a result of aging FARMA - EUROPESE AANPAK De farmaceutische indu strie wordt gestructureerd benaderd. Een team van farma account managers kwam bijeen om te bespreken of er voldoende kansen zijn voor onze bank. Kennis van de branche is belangrijk om goed zaken te kunnen doen. De grootste farmaceutische bedrijven zijn al rijkelijk voorzien van banken. Het team zal zich daarom richten op de sub-top van deze snelgroeiende, veelbelovende sector. populations, changing medicinal demands, increasing costs of R&D, and more exacting regulatory standards. Meanwhile, in western countries, government interest in cost cutting and the increasing cost of R&D will continue to fuel the current phase of industry consolidation. As a result, the already stiff competition among banks to serve the emerging giants of global pharmaceuticals - companies like Bayer, Hoechst and Ciba/Sandoz - will intensify further. Although, front a risk Erik-Jan Verhulst - pooling resources. perspective, little remains to be desired when doing business with large pharmaceutical companies, the banking environment seems to have become so competitive that few banks seem able to reach their profitability targets. NICHE POTENTIAL Nevertheless, the pharmaceuticals sector is likely to remain a high growth industry both in terms of turnover and profit. The Rabobank pharmaceutical account managers have therefore decided to look beyond the 20-30 largest players in the market and concentrate instead on building up expertise in several potentially profitable niches. The initial focus will be on the smaller and medium sized companies as well as on ancillary (or related) businesses. Target clients include nationally-based wholesalers and manufacturers of generic drugs. A promising number of smaller manufacturers include a few located in particularly interesting areas such as Hungary. Lastly, there are the manufacturers of medical equipment. WORKING KNOW HOW After having identified the companies, the pharma team will determine their specific banking needs and try to design appropriate products. These will be drawn from Rabobank's corporate finance, financial markets and trade finance expertise, provided the bank is prepared to enter into these risks on a larger scale. Pharma team members have specific expertise which can be applied in a cross border context. For example, London's Dr Hal Gerber has for years worked in the medical field both as a doctor and as an entrepreneur. Luuk Hans from healthcare Utrecht can add specific expertise on suppliers of care. Other members include Pascal Wijnen in Brussels, Björn Gross in Frankfurt, Nathalie Huet in Paris, and Erik-Jan Verhulst in Utrecht. SECTOR SUPPORT Industry sectors have been divided between them for the initial period. The team will meet regularly and exchange information. Where necessary, support from appropriate team members can be called in when visiting a cliënt. At a later stage, it is envisioned that the team will be open to pharmaceutical account managers from other branches of the bank. Equity analysts from IRIS might also be smoothly integrated as well. Verhulst, for now, has taken the initiative in a non-hierarchical f team. 'For the moment, we are cultivating team flexibility, smooth coordination, and expertise,' he says. 'The trick will be to start working together, even in this phase where much desk research will have to be done first. So far it has been easy - now action has to be taken. What I want is that we have a project here with a longer life than just its start-up phase.' MEASURED APPROACH There are clearly a lot of opportunities out there but the team will have to approach them in a measured way. 'We also have to be willing to redirect our resources if some areas prove less interesting than we initially might have hoped,' Verhulst says. 'All of this will require excellent lines of communication. We will never become a g real player unless we are as international as our customers are. We need to coordinate the resources we already have in place and not be scared to take tough decisions, if necessary.

Rabobank Bronnenarchief

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