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DDB and Market Outlook

Market Intelligence Brief

DDB outlook

COUNTRY OUTLOOK 2

PHARMACEUTICAL OUTLOOK 4PRODUCTS PORTFOLIO 4

COMPETITION 5

DISTRIBUTION 5

BENEFITS 6

FINANCES 6

CONCLUSIONS 6

DDB OUTLOOK

Our Mission (DDB)

We will become the most valued pharmaceutical distributor company forhospitals in Colombia

Our Purpose (DDB)

We dedicate ourselves to consumer needs through fast service and a hugesupply of pharmaceutical products making human lives our utmost concern.

Company Profile

DDB markets leading medicines for humans of the worlds best knownconsumer brands on the Colombian market. We help people through ourdiligence, our quality service and our initiative in providing health products tothe hospitals all around Colombia. The company as a recognizedpharmaceutical distributor supplies the core city of Colombia, Bogot, andmany other main cities such as Medellin, Cali, Barranquilla and Pasto which

imply an important channel distribution for marketing pharmaceuticalproducts.

Business Strategy

In the last 30 years DDB has been providing the Colombian market withpharmaceutical products in all medical areas, DDB has prestigious clientsranging from the small private business companies to big public hospitals.DDBs philosophy has always been to permit the access to pharmaceuticalproducts to all type of social classes. That is why low prices and genericdistribution of local and international pharmaceutical laboratories have been at

the core of our business strategy.

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Services

DDB has been working on the Colombian market creating a huge channeldistribution network and a long-term relationship with most of thepharmaceutical multinationals present in Colombia. The main service of DDB

is the marketing of the pharmaceutical multinationals products through the socalled institutional channel which include Hospitals and Private Cliniques.

Marketing your Products

The identification of business partners in the Colombian market and thedevelopment of pharmaceutical intelligence projects have allowed us toencourage our business activity and to consolidate us as an important actor inthe pharmaceutical sector. In this process we are expanding our foreignsuppliers in order to market and introduce new pharmaceutical products with

a high demand on the Colombian market. Our channel distribution networkand our price analysis data base make us a powerful business unit to reachthe Colombian market.

Country Outlook

In general, the Colombian economy looks healthy and poised for morepositive growth.

Colombia is expected to remain the third most populous country in Latin

America and the fifth-largest economy in the region in 2007-11. Its populationwill reach 49.6m and GDP, measured at purchasing power parity (PPP), willreach US$531bn in 2011. Faster economic growth, combined with adecelerating birth rate and moderate currency depreciation, will result in anincrease in average income (measured by GDP per head), which theEconomist Intelligence Unit estimates will reach US$3,513 (at marketexchange rates) by the end of the forecast period, making it one of the poorermarkets in South America. Private consumption per head is estimated toreach US$2,162 by 2011. Not only are income levels low in absolute terms,but Colombia's income per head figures will continue to disguise wideinequalities.

Analysts throughout the world are forecasting relatively strong growth in 2008-2012. Real GDP is expected to keep pace with 2006 gains, increasing roughly5% per annum in 2008-2012.

As real GDP is expected to increase, economists are forecasting a slightreduction in the annual inflation rate, settling around 4 -6% each year in 2008-2012. The stable forecasted inflation rates suggest that the economy is not indanger of overheating. Subsequently, unemployment rates are expected tofall to around 9-10% in 2008 and 2009.

Consumer expenditure on health goods and medical services is expected toincrease at a compound annual growth rate (CAGR) of 6.2% in 2007-2012.

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Not surprisingly, OTC healthcare is expected to benefit from this increase inconsumer expenditure; the industry is expected to see its retail sales value toincrease at a compound annual growth rate of 1.7% in constant value terms in2007-2012.

Pharmaceutical Outlook

The Colombian OTC pharmaceuticals market consistently posted relativelystrong rates of growth throughout the 2003-2007 period. This trend isexpected to continue over the forthcoming five years, although at a decliningrate.

The Colombian OTC pharmaceuticals market generated total revenues ofCol$1,292 billion in 2007, representing a compound annual growth rate(CAGR) of 8.62% for the period spanning 2002-2007. Vitamins and Dietary

Supplements proved the most lucrative for the Colombian OTCpharmaceuticals market in 2007, generating total revenues of Col$437.39billion, equivalent to 33.8% of the market's overall value. In comparison, salesof analgesics generated revenues of $283.3 million in 2007, equating to21.8% of the market's aggregate revenues.

The performance of the market is forecast to decelerate, with an anticipatedCAGR of 10.2% for the five-year period 2007-2012, which is expected to drivethe market to a value of Col$1.406 billion by the end of 2012.

The Colombian OTC pharmaceuticals market generated total revenues ofCol$1,292 billion in 2007, representing a compound annual growth rate(CAGR) of 8.62% for the period spanning 2002-2007. Vitamins and DietarySupplements proved the most lucrative for the Colombian OTCpharmaceuticals market in 2007, generating total revenues of Col$437.39billion, equivalent to 33.8% of the market's overall value. In comparison, salesof analgesics generated revenues of $283.3 million in 2007, equating to21.8% of the market's aggregate revenues.

The performance of the market is forecast to decelerate, with an anticipatedCAGR of 10.2% for the five-year period 2007-2012, which is expected to drivethe market to a value of Col$1.406 billion by the end of 2012.

Products Portfolio

In order to proceed with the import business, DDB has chosen amanufactured product by Leo-Pharma, Heparin and Protamine. In theProtamines case, we acquire this product from a multinational supplier at8.73 USD cost price. The average expected annual demand of this product atDDB (turnover) is around 12.350 (units) for the years 2011 and 2013.

With a 20% margin, the DDB selling price is 10.92 USD as you might see onthe following figure.

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Figure: Turnover Expected DDB Annual Demands and Pricing Structure

We have estimated this figures considering the consumer market price from aimporting company, Grupo Farma that supplies DDB, and according to IMS isthe leader on this product.

The current prices trend is to go up. Following our product example, DDB hasestimated the Protamine cost price to increase at an annual rate of 5.6%,expected for the next three years.

Competition

Colombias OTC healthcare remains highly fragmented with a large number ofcompanies defending their shares, particularly through brand and imagerevitalisation. Competition was particularly tough in generic products withinanalgesics, cough, cold and allergy (hay fever) remedies, digestive remedies,medicated skin care and vitamins and dietary supplements. Productdifferentiation is often not stressed in OTC healthcare and players continue tofocus on building brand loyalty and reputation. Furthermore, brand loyalty canoften be extended to generic products, as generic brands such asTecnoqumicas MK, Biochem Farmaceticas Noxpirin Pax and PfizersGenerics gained share by offering affordable prices, making them moreattainable to the bulk of the population. In terms of multinational brand share,Wyeth Inc, Laboratorios is the leading company in the Colombian market, with

an 12.8% share of the market by value. In comparison, GlaxoSmithKline Plcgenerates 11.4% of the market's revenues.

Distribution

Grocery outlets and chemists/pharmacies lead the distribution of OTChealthcare, together accounting for more than half of total value sales in 2008.The strong position of grocery outlets was supported by cultural purchasingtraditions, as most buy OTC healthcare alongside their biweekly or weeklygrocery purchases. The strength of chemists/pharmacies is meanwhile due toconsumers preferring to consult pharmacists regarding product use anddosage. Chains in chemists/pharmacies and drugstores/parapharmacies are

remodelling and expanding their outlets in order to gain share. These largeroutlets expanded their product portfolios, to provide not only Rx and OTC

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healthcare but also cosmetics and toiletries, soft drinks, stationery and healthfood.

BenefitsDDB would like to become authorized distributor of Leo-Pharma in theColombian Market. This will create synergies for both parties in terms ofmarket share. It will contribute to Leo-Pharma internationalization strategy,

Marketing Plan

DDB has its own distribution channel.

Finances

In order to enter the Colombian market, we would need to have a GMP from arecognized organization around the world (FDA, EMEA, WHO).

An individual payment by product must be made in order to register eachmolecule (around 1500 USD per product). You can also find this informationon the following link:

http://web.invima.gov.co/Invima//tramites/docs_tarifas/tarifas_medicamentos.htm

Conclusions

1.. We at DDB would like to have a foreign allied understanding the changingpharmaceutical Colombian market and providing us good and affordableprices.