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

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.
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.
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.
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.
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.
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
Project
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