Landscape assessment of the pharmaceutical distribution companies in Saudi Arabia and identify the potential acquisition target

Background and scope

Our client, a diversified business with deep roots in the Middle East, North Africa, and Turkey (MENAT region). The client has vast experience in the automotive sector, and has diversified into new sectors. Their Health and wellness vertical engaged us to support decision making around acquiring a healthcare distributor in Saudi Arabia. Acquisition of a mid-size pharmaceutical distribution company in one of the largest pharmaceutical markets in the MENAT region was to become the foundation of their overall health and wellness distribution business.

The client engaged Healthark Insights to assess the healthcare distribution landscape in Saudi Arabia and identify potential acquisition targets

Our approach

Objective was to create a list of pharmaceutical and healthcare distributors operating in Saudi Arabia and then filter the list aligned with the client’s vision and future portfolio of products. Finally, profile the potential acquisition targets and rate them on different parameters to aid the decision making process.

Scan the country for distribution companies

Healthark collected the list of the distribution companies through detailed secondary research from a variety of sources: companies active in the tender market, companies which are exclusive distributors for big pharma, research and news reports, press releases, etc. A lot of the companies were small to medium sized players as top 4-5 distributors control over 50% of the market share in Saudi Arabia.

Profile and filter the list to identify the companies for outreach

We did an initial profiling exercise for all the 93 companies found to be distributing pharmaceuticals in the Saudi market. Categorised the distributors under 4 categories: Size of the company, type of services offered, assets and partner strength, type of product it distributed. The four categories were further divided into 29 parameters. To judge the size of the company information like number of employees, turnover, years of operation, strength in the tender market (number of tenders won, tender value in USD, volume of products distributed under tender) was used. Under the services offered section we identified if the company apart from distribution offered other value added services like regulatory filings, dossier creation, handled pre and post launch marketing and promotional activities, managed importation, warehousing and pharmacovigilance. To analyse the assets and partner strength we  utilise parameters such as number of suppliers and quality of suppliers, number of offices and warehouses in Saudi Arabia and the geographical reach in terms of the number of countries the company operated. To assess the distribution capabilities of the company we identified the type of drugs / device distribution – specialty pharma, vaccines, large ticket value medical devices, biologics, generics, OTC drugs, etc.. The candidates were scored and benchmarked against each other based on the above metrics.

Create a rating matrix to rank the screened companies

Healthark prepared a rating framework to rank and strategically prioritise the companies which would generate maximum synergy based on the client’s existing vision and operational footprint. Before we rank the 93 companies a filtering criteria was suggested to the client to further reduce the number of opportunities. Three filters were created: i. Filter very large companies, listed entities and the companies who were a part of a large conglomerate ii. Companies whose primary business was manufacturing and not distribution of pharmaceuticals and devices iii. Ignore the company with no tender market presence (70% of the Saudi and other GCC markets procure ~70% through the tender market) and companies playing in distribution of nutraceuticals, generics, OTCs and similar low margin business segments. Only 23 companies remained out of the initial list of 93 companies.

Rating framework was finalised and 6 criterias were shortlisted for the framework: –

    1. Size of the company – Revenue or number of employees are not too big neither too small were given the highest rating
    2. Tender market access – Volume and value of products distributed through tender market (higher the better)
    3. Type of products – Company distributing pharmaceuticals, devices and drugs in priority therapy areas would get the highest rating
    4. Services or capabilities – In terms of marketing, regulatory, PV, import
    5. Quality & number of relationships with marquee pharma/ device companies
    6. Geographical reach is limited to KSA or covers other countries in MEA

Rated all the remaining 23 companies and top 20 out of them were comprehensively profiled

Detailed profiling exercise to help the client make an informed decision

In-depth research of the top 20 companies was presented to the client. Key suppliers, clientele, products, key executives, capabilities were detailed out for each company. Also a short SWOT analysis was performed to show the strategic fit / alignment and what the possible acquisition  of a particular distributor would mean for the client.

Project output

Based on our comprehensive findings and analysis, we advised the client to actively pursue the top 5 companies for the acquisition. Recommendations for potential acquisition were designed around the rating framework and strategic fitment with the client’s overall health and wellness strategy and the investment strategy of the overall business.

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