Q: What role does Mexico play in Aspen Labs’ vast global presence?
A: Aspen Labs has operated for 160 years, enjoying great success in many countries. Throughout that time, Latin America has been an instrumental region for our growth. We incorporated in Mexico in 2004, and we view the country as one of the top five most important emerging markets for our business. In 2016, we estimate that Mexico will represent 36% of Aspen Labs’ total value in Latin America and 6% of its global value.
Q: What has been your main strategy for growth in the local market?
A: In Mexico, our business is divided between nutrition and pharmaceuticals. We recently acquired Nestlé’s infant formula division (previously Wyeth), which now represents 60% of our total sales in Mexico. We have a slightly different approach to the commercialization of these products to Nestlé, since we have our own R&D division dedicated to improved nutritional alternatives. This formula is a nutritional product, not a medication, so our promotion strategy revolves around its benefits and its alignment with the nutritional needs of infants. We are invested in promoting lactation, but remain aware that, for several different reasons, such as work or medical disability, mothers are sometimes unable to breastfeed. More Mexican women are now engaged in full-time work, and so they do not have the time to breastfeed. In these cases, it is extremely important to use formula to provide proper nutrition to babies under a year old. We also have products aimed at providing the proper amount of vitamins and minerals to children from one to five years old. The formula is the closest alternative to breast milk available and the best option to prevent obesity.
Our other division is pharmaceutical, in turn subdivided into three areas. The first is women’s health, an area on which we are focusing our expansion efforts. We have acquired several branded products for this division from Merck Sharp & Dohme, including contraceptives and hormone replacement therapies. The second subdivision is critical care, for which we have two of the most important products for thromboembolic diseases. Finally, our prescription subdivision includes cardiology, steroids, corticoids, and drugs for controlling uric acid.
Q: Aspen Labs is investing US$20 million in a manufacturing plant in Vallejo, near Mexico City. What is the goal of this investment? What function will the plant serve?
A: This plant used to belong to Wyeth Pharmaceuticals and was divided into pharmaceuticals and nutrition. Pfizer acquired that plant but decided to move its pharmaceutical branch to another location. Therefore, we acquired it solely for our nutritional line. However, we have now reversed that decision and will be investing to reactivate the pharmaceutical line. Half of the money was used to update the plant and obtain COFEPRIS authorization to begin manufacturing pharmaceuticals there once more. We are beginning to produce corticoids and analgesics and the plant will also manufacture our OTC line, with nine brands for Mexico and two to export to Central and South America. The other half of the investment was used to improve our capacity for nutritional products. At this moment, the Vallejo plant is producing our main nutritional product for Mexico and Latin America, which is infant formula for stages one, two, and three. This investment will also allow us to produce special formulas for reflux and other conditions. Manufacturing in Mexico gives us several advantages. We can keep costs low and be more competitive, react faster to the country’s market needs, and generate more jobs for the Mexican population.
Q: How important is Aspen’s OTC line to its growth strategy?
A: At this point we have one OTC product called Nytol which is used to combat insomnia. In the next twelve months, we will introduce three different brands in this area to strengthen our OTC presence. The OTC market is growing extremely fast. However, this popularity has made the sector very competitive, so we often have to compete with cheap products that are well marketed but do not deliver on their claims. Our strategy is to differentiate ourselves with clear results and through the demonstration of the efficacy of our products through science. Branding is one of the most important factors for the success of our OTC products. This has become evident as more companies have started to invest heavily in branding in the last couple of years. We intend to increase our investments in this area and reduce our investments in other promotion techniques, such as exhibitions and point of sale activities.
Q: Have you perceived any change in your usual distribution channels?
A: Distribution channels have changed in recent years both in our nutrition and pharmaceutical lines. Our nutrition clients, especially those in retail, are increasingly requesting to deal directly with us instead of using wholesalers. This can be either good or bad for us depending on the capacity of the retailer and the demand for our products in their specific geographic zone. Many times, retailers are interested in dealing directly with us but risk facing large losses if they do not have the right market volume. Pharmacy chains are becoming unwilling to keep relying on distributors but are still facing this risk, due to not having distribution capacity. Distribution may be easy in Guadalajara, Monterrey, and Mexico City but not in rural areas. This is why we balance our sales based on the needs of each region. On the pharmaceutical side, the distribution channels have undergone considerable changes especially after the fall of Casa Saba. Many manufacturers are starting to abandon distributors and instead deal directly with the point of sale. Other distributors are allying with each other to remain strong in the market.
Q: How important is the generics portfolio for Aspen Labs?
A: We have two different areas for generics. One is branded generics, which are our core business and where we work with medical representatives. The second area covers pure generics, which are manufactured for tenders to the Mexican government. We do not have a sales force for these products as they are sold in tenders. This was our initial core business in 2004 but we are now reducing its scope. We are no longer focusing so heavily on tenders: instead, we are shifting our attentions to branded generics and nutritionals. The majority of our generics are already part of national bids on which our competitive edge is distribution and price point. However, most of our branded generics are not part of such bids. Part of the reason we are moving away from public tenders is that they bring a lot of pressure to lower prices. While we are able to be competitive in bids, we can only do so with certain products that are not expensive to produce. This is not sustainable for our more expensive products so we channel them through the private market.
Q: Why does the Mexican market have such a preference for generics?
A: Mexicans still have a lot of respect for prescriptions. If physicians prescribe a specific brand, patients are more likely to respect the brand than to look for a generic, even though the name of the active pharmaceutical ingredient (API) is available to them in the same prescription. Doctors are also prescribing branded generics, which they trust. This may be because they are reluctant to risk their patients’ health by switching to unknown generics. There is a recent law that states that pharmacies must respect the name of the brand being prescribed, which stops them from substituting the product for a generic alternative. This is still not always the case but we have observed that about 50% of prescriptions are respected without being switched. However, physicians at the point of sale is a new trend and sometimes they are far more likely to prescribe medicines that favor the specific pharmacy they work at. Every manufacturer could be negatively affected by this practice, as this risky behavior increases every year. Our strategy to compete with such problems is to increase our brand equity by promoting the real benefits of our products and generating confidence among doctors and patients as to the quality of our products. We also have strong pharmacovigilance to guarantee our products’ safety and quality.
Q: What are your main growth plans for increasing Aspen Lab’s position in the market?
A: In Mexico, we are trying to increase our sales to be among the top ten pharmaceutical manufacturers by 2020. We are currently in 27th place so we need to secure double-digit growth for the next three years to achieve this goal. To help with this goal, we are also planning to acquire new brands for specialized products and to launch new ones in our prescription and nutritional area. These new launches will be a particularly important pillar of our growth. Over the next three to five years, we will research, develop, and launch nutritional products for adults and for certain conditions, such as diabetes, cancer, and metabolic diseases. At this moment, we have completed our integration so we hope to increase our nutrition market share at least by eight points in 2016. We are also improving our brand equity as Aspen Labs. While we are highly recognized in South Africa, Australia, and other parts of the world, this is not the case for Mexico. As such, we are investing a lot of time and money in branding to be recognized as an international company.