Our strategy for sustainable growth.
Our strategy for sustainable growth
In 2008, the Group defined its strategy in three elements:
1. Organic revenue growth from:
- New developments in core respiratory business
- Diversification into adjacent markets and territories
- Increasing revenue by capturing more of the value chain
2. Investment in activities in adjacent/complementary technologies/markets.
3. Operating leverage from growth, and on-going cost efficiency.
1. Organic Revenue:
- Launch of integrated dose counter on Teva's QNASL, and the Chiesi NEXThaler®
- Development of two auto-injector development programmes, including the launch of INJ300 in February 2014 — for Dr. Reddy's sumatriptan — and significant new auto-injector IP development from the Bespak Innovation team.
- Securing two nasal development programmes
- Securing commercial drug handling on the Nicoventures projects — including the MHRA licence award in August 2013 — and one of the nasal programmes
2. Investment in the Medical House, and Atlas Genetics:
Following the divestment of King Systems, this core strategy is unchanged, though now more tightly focused on the drug delivery and Life Sciences services market. Our strategy is primarily organic growth, to be supplemented with relevant and value enhancing inorganic opportunities as they become available.
3. Operating leverage and cost efficiency:
Margins have grown following the revenue growth, and realignment of corporate costs following the King Systems disposal.
We continue to operate a mixed model producing both our own proprietary products, and the contract manufacture of customers' products, based on our know-how and regulatory expertise.
We aim to continue to diversify our revenue portfolio by growing our product offering in respiratory and non-respiratory markets.
We aim to also grow by moving up the value chain: from our core expertise of design for manufacture, moulding and assembly through to commercial drug handling and finished product delivery following QP (Qualified Person) release.
In terms of customers, we will plan to sell new products into current and new divisions of existing customers building on our strong relationships, whilst also cultivating relationships with new customers in order to deliver diversified growth.
Our core competencies in the high volume, high quality regulated respiratory market are readily transferrable to our chosen adjacent sectors: auto-injectors, nasal, nicotine delivery and point-of-care (POC) diagnostics. Our strategic intent is to build on these strong foundations whilst adding new skills to meet new challenges, including commercial drug handling, final device assembly, pharmaceutical packaging and QP release of finished product.
Group strategy model
Our Strategy by Market
The respiratory sector is estimated at US$24bn drug sales and £272m of device sales in 2013 with the device revenues predicted to deliver a compound annual growth rate (CAGR) of 3% to 2016. Bespak estimates its current share of this market to be 22%. The respiratory sector is one of the most highly regulated, resulting in high barriers to entry. A number of key drugs are shortly 'coming off patent', resulting in a number of new generic entrants and associated opportunities for Bespak to supply both metered dose inhaler (MDI) and dry powder inhaler (DPI) devices. Although sales remain relatively flat in the traditional western economies, significant volume growth is being seen in emerging markets with the Brazilian, Russian, Indian and Chinese (BRIC) markets becoming more important to Bespak.
We will continue to increase our share both through the development of new products and through selling into new and developing geographical markets. We will maintain our competitive position by continuing to leverage Continuous Improvement (CI) activities as products move into the mature stage of their product life cycle.
The auto-injector sector is a relatively high growth market, the end drug market of which is estimated at US$175bn in 2013 with a CAGR of 5% to 2016. Growth is being driven by a large number of new drugs coming to the market for the first time that require delivery by injection. Whilst Bespak currently has a negligible share of this market, it is estimated that circa 40% of all new drugs in development will be delivered parenterally and may therefore require some form of auto-injector. Many of these new 'large molecule' biologic drugs are highly viscous and require specialist devices to enable them to be effectively administered, often by patients themselves in a non-clinical environment. The continued drive to greater self-administration with the associated improvements to patient compliance, patient outcomes and healthcare economics will create significant opportunities for Bespak to develop and manufacture auto-injectors to meet these needs. Bespak's recently launched Syrina® range of auto-injectors positions it well to participate in this growing market.
Our strategy for the auto-injector sector is focused on the commercialisation of the existing pipeline in conjunction with the development of further IP and the exploitation of "innovation on demand" opportunities through our growing Innovation team based in Cambridge. We will continue to move up the value chain by offering assembly and drug handling and will continue to look for additional, selective acquisitions.
The nasal drug market is estimated to be worth circa £8.9bn in 2013 with the associated device sales being £310m. The CAGR is estimated at 2.4% through to 2016 with growth being delivered from two main areas. Firstly, a number of existing branded drugs are coming off patent leading to generic entrants all requiring their own delivery system as the original device associated with the branded drug is normally unavailable to them. Secondly, the nasal drug delivery route is extremely effective and a number of existing and new drugs are being reformulated to enable delivery in this way, increasing demand for this type of drug delivery product. This is now a strategic market for Bespak and it currently has two firm development pipeline opportunities.
Our strategy for the nasal market is focused on the delivery of our existing development programmes plus further exploitation of our growing IP portfolio via a number of "innovation on demand" opportunities.
Although the non-tobacco nicotine delivery market is in its infancy — with 2012 UK, France and Germany revenues estimated at £310m — it is forecast to deliver significant growth over the short-term, estimated CAGR of 116% to 2016. The key drivers for this growth centre on both the consumer and regulatory appetite for safer alternatives to tobacco smoking coupled with the associated public health and healthcare economic benefits. Bespak will participate in this market through the Nicoventures contract awarded in December 2012.
Our approach to the nicotine delivery sector is to successfully industrialise and commercialise the Nicoventures device, and then to increase the value-added content, and exploit wider geographic opportunities as the business and market develops.
The POC diagnostics sector is a relatively high growth market with an estimated CAGR of 6.6% to 2016. This diagnostic model enables the patient to be tested, diagnosed and treated in one appointment, whereas the traditional model requires samples to be sent away to a laboratory for testing, with patient recall required for treatment. Market growth is being driven by the combined benefits of: increased patient compliance, improved patient outcomes and lower cost of provision. Pharmaceutical companies are looking to exploit POC systems as part of a companion diagnostics strategy where drugs and tests are sold as combined 'test and treat' packages. Bespak has an equity investment in Atlas Genetics, as well as a manufacturing contract to produce disposable test cartridges for Atlas.
The POC diagnostic strategy is focused on the commercialisation of the Atlas device as a first stage penetration of the market. Following a successful outcome to this programme we will leverage our development, manufacturing and regulatory know-how in order to grow our market share, possibly in conjunction with selective acquisitions.
In summary, our strategy is to continue to grow by exploiting its current and emerging competencies, in both existing and adjacent market sectors, in a mixed model of proprietary IP-protected products and contract manufacturing, whilst harnessing more of the value chain to include commercial drug handling and final QP release to the market.