Building Bridges With the Government to Grow in the MarketBy Miriam Bello | Mon, 10/05/2020 - 14:20
Q: How are you changing your approach following regulatory changes regarding the acquisition and distribution of medications?
A: We register, import and distribute medicines, keeping a registry of our operations and maintaining quality throughout our process. To us, this was a very stable and predictable business, in which it was easy to invest by having a very clear vision of how a product was going to behave, when the return on investment was going to arrive and how much cash flow was needed. However, in 2019, we made the difficult but wise decision not to participate in many public tenders because of the risk involved. No doubt this represented a major blow to the company's annual revenue but it also helped us avoid many problems. We had to go through a complete restructuring to get rid of the warehouses we rented and keep one of our own, while strengthening our delivery capacity. Our regulatory staff struggled as they had to go through a great deal of training while registrations and imports stopped, leading to a decrease in overall workload. Seventy percent of the planned training was never implemented, however, because it was uncertain what would happen. At the same time, our communication with COFEPRIS stagnated.
The regulatory changes were radical for everyone in the industry. Historically, 2019 was the hardest year for the company because of falling revenues. Our drug distribution clients were disappearing and that generated a gap in revenue flows as many of them finished paying us this year or even owe us to this date. Faced with uncertainty, we decided not to invest in risk and began to monitor the market. Our company is very strong in regulatory issues and that is why we decided to stop working with authorized third parties to manage these procedures. Fortunately, we are a small, flexible and self-sufficient company, with our own licenses, our own staff and our own records and we were able to adapt very quickly. By the end of 2019, we were already growing our revenue and 2020 was our best year ever in terms of sales. Although we had some very difficult times, we were able to perform successfully in the market. Currently, the company sells only flagship products and we have focused on products aimed at the public sector.
Changes in government have been troublesome for everyone because of the inherent unpredictability but today, we manage to communicate in the same language and understand each other. Now that registrations are continuing, we import and are distributing to the government. It is pointless for companies to fight the government because this leads to no good. During the crisis, our first objective was to engage in talks with the government to reach a mutual understanding, minimize risks and maximize the potential we already had. This meant making alliances with companies that we had not considered before. Eseotr3s Pharma decided not to go for the big tenders but for the niche projects of good volume and price that we could supply with our production capacity abroad.
Q: How has the pandemic impacted the company and its product lines?
A: We did a market analysis to see which products were forecast to face shortages and which products were needed to care for patients with COVID-19. Some of these medicines are already available in our portfolio and others are in the pipeline. When the pandemic arrived in the country, the health industry was emerging from a collapse and cash flows were restricted.
One of the company's advantages is that it has always been characterized by its resilience and innovative business models. Risk is not an obstacle for start-up projects. For us, dealing with the government was a training exercise for the real test: the pandemic. The government broke the structures we used to know, our habits and previous conceptions. COVID-19 was one more thing we had to go through.
Q: In what areas is the company’s investment focused?
A: When dealing with the previous administration, our challenge was to invest in European manufacturing plants that had the capacity to manufacture products to meet tender requirements. However, the business has now transformed toward high capacity production plants, as the business in Mexico is now divided among fewer players. That is another reason why we do not invest in the development of molecules, but in production plants with more capacity and faster response times. Among the countries we migrated to were South Korea, Ukraine, Russia and India.
Although we will be participating in research and meetings, our plan is to be only spectators at the United Nations Office for Project Services (UNOPS) tenders. We believe that the mega-purchase of inputs will create a small shortage in 1Q21. We are already preparing for that situation.
Eseotr3s Pharma is a distributor for foreign medical supplies with its own line of specialized formulations for generic medicine.