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.