Business Plan- TLG Resources International LLC

Preface

This Business Plan is intended to assist T.L.G. Resources International, LLC plan,
implement its strategies and grow its venture. This Business Plan has been created and
developed by Bhumika Gandhi, Madoka Noto and Nroop Bhavsar who are MBA candidates
at Fairleigh Dickinson University. Every reasonable attempt has been made to present
reliable and accurate information. Much of the analysis is, of necessity, subjective in nature
and based largely on team research and analyses, customer surveys, interviews with industry
experts, and team observations. As such, the authors and/or the faculty and staff of Fairleigh
Dickinson University (FDU) make no warranties or representations as to the accuracy of this
Plan. Additionally, the authors, faculty and staff of FDU shall not be responsible or liable for
any indirect, incidental, or consequential damages including but not limited to loss of profits
or the venture‟s performance.

This Business Plan may contain proprietary and confidential information and is not to
be reproduced or distributed in any format without the express written consent of its authors,
of the venture‟s CEO or founding entrepreneur, and also of FDU Professors Steven M. Fulda
or George J. Maddaloni.

1

Table of Contents

EXECUTIVE SUMMARY……………………………………………3
I.

COMPANY DESCRIPTION, VISION & GOALS…………………..4
II.
TLG International Inc. specializes in facilitating the procurement process of
internationally sourced Active Pharmaceutical Ingredients (APIs)

III. SERVICES & PRODUCTS DESCRIPTION………………………...5
The services provided include the sourcing of prospective purchaser of API and
facilitating the import of the same.

IV. INDUSTORY OUTLOOK, MARKET TRENDS & ANALYSIS…..6
Growth of APIs demand and supply chains continue to rise because of high
pharmaceutical market potential, market size and some positive demographic and
industry trends in the United States.

o Market Growth
o Market/Industry Size or Analysis of Market Niche
o Market Segmentation
o Industry Trends / Outlook

COMPETITIVE ASSESSMENT……………………………………10
V.
TLG has a competitive advantage as compared to its competitors because of
prompt services and competitive rates.

o SWOT Analysis

VI. CUSTOMER ANALYSIS……………………………………………12
TLG’s target market is pharmaceutical companies demanding different kinds of
API’s.

o Insights from customer survey

2

BUSINESS STERATEGY…………………………………………..14
VII.
A carefully planned strategy provides optimal opportunities for growth and will
help TLG to penetrate in to the market.

o Intensive Growth
o Integrative Growth

VIII. MARKETING PLAN………………………………………………..16
Competitive pricing strategy and an aggressive marketing plan will help TLG to
expand networking in the industry.

FIANACIAL PLAN SUMMARY……………………………………18
IX.

APPENDICES………………………………………………………….22
X.

o Market research analysis
o APIs demand growth derivation
o Industry Expert Interviews
1. Dr. Gerard Cleaves
2. Barry Turner.
3. Hemant A. Alur
o Customer Survey
1. Sample survey
2. Analysis of Survey
o Regulations
o NJ- strategic location

3

I. Executive Summary

T.L.G. Resources International, a service business, founded in July 2008, is a Limited
Liability Company located in Paramus, NJ. One of the company‟s founders, Thomas
Wiedemann, has years of experience in pharmaceutical industry and is currently working with
Par Pharmaceutical, Inc. in supply chain management.

T.L.G.‟s target market is the healthcare companies including branded and generic
pharmaceutical companies; and bio-tech companies who rely on various suppliers of Active
Pharmaceutical Ingredients (APIs) and who are looking to adapt the cost-effective approach
in term of cost of APIs incurred.

T.L.G. has the vision of becoming a leading supply chain enabler who facilitates the
procurement process of internationally sourced APIs for the US pharmaceutical companies.

Currently, most of the US pharmaceutical companies rely on foreign suppliers of APIs as
manufacturing in US is expensive. The foreign manufacturer of APIs has to get approval of
the USFDA for its manufacturing facility. Then it has to register US agent for their import
processes. Each pharmaceutical company in the US has to register the API bought from the
foreign supplier through US agent, with the FDA. Agents like T.L.G. manage the all customs
and import procedures and facilitates the procurement of imported APIs and logistics between
foreign supplier and the US Company.

Statistics show that the pharmaceutical industry in US has been growing at CAGR of 7.4%
over the last 5 years. API supply chain is closely associated with the growth of
pharmaceutical industry. Thereby, future growth rates of API supply chains are expected to be
higher with expectations of higher CAGR in the future for pharmaceutical industry because of
Medicare modifications by US Government in favor of pharmaceutical companies, positive
demographic trends like aging of population in the largest markets & higher life expectancy
of US people at birth; and rising incidence of chronic diseases.

The US pharmaceutical market is fragmented with drug types- generic or branded and
therapeutic categories. With more focus on APIs of the drugs with higher market share

4

therapeutic categories of central nervous system, oncology and cardiovascular system; T.L.G.
wants to untie the complex competitive landscape.

Projected Financial Highlights

$200,000

$150,000

Revenues
$100,000
Gross profits
Net profits
$50,000

$0
1st year 2nd year 3rd year
($50,000) 1

II. The Company

T.L.G. Resources International, LLC, a member-managed Limited Liability Company, has
entered into the venture from July 1, 2008, by and among: Eileen Wiedemann and Thomas
Wiedemann as the members. It is a service business that facilitates API (Active
Pharmaceutical Ingredient) procurement for the pharmaceutical industry. T.L.G.‟s vision is
“To become a leading supply chain enabler who facilitates internationally sourced APIs
and provide order assistance 24/7.” The company will maintain its principal business
office at Paramus, New Jersey. T.L.G. has established and entered into agreement with a large
international API manufacturer and supplier, named Jiangsu Kaxi Pharmaceutical Co., LTD.,
based in China. Under this agreement, T.L.G. has got exclusive rights to sell this company‟s
APIs to the US companies. Thereby, no other company like T.L.G. can sell the same API
manufactured by this Chinese manufacturer.

The focus is to act as a supply chain enabler for US based pharmaceutical companies who
manufacture and distribute pharmaceuticals. This company will facilitate procurement of
APIs from international suppliers while being cost sensitive to the current market price.

1
Refer table- 8
5

The USFDA makes manufacturing of APIs expensive, because it involves number of
regulations to be followed. This not only involves time, but also money. Therefore, the
service provided by T.L.G. will solve a major critical problem to bridge a gap between the
supplier and purchaser. T.L.G. is seeking the FDA approval (registration) for the major APIs,
it wants to involve in.

Moreover, T.L.G. is seeking for the contract with the US pharmaceutical companies to be a
leading APIs provider. This contract span is usually of 5-10 years which binds US company
to depend only on T.L.G. for that particular API. This is how, for that specific time period of
contract, T.L.G. is the only source of a particular API.

III. Products and Services Description

T.L.G. is service designed business and it has following major services:

Filing for entry documents like entry manifest, invoices, packing lists, entry summary,
evidence of bond and valuation. we will have a fully certified customs agent on staff
which will assume the responsibility of performing all required procedures
from beginning to end. We will act as the import agent and provide all services
required.

T.L.G will assume full responsibility for the delivery and quality of the product.
We will ensure that all required documentation is provided in a timely manner.
We will provide a root cause analysis to determine all product failure and develop and
corrective action to prevent future reoccurrence.
An order tracking service with daily/weekly/monthly status updates
Online ordering and request of price quotes for the batches of APIs
If there are any issues related to quality or delivery, the customer would not have to
get phone numbers from 3rd party vendors and begin the investigation process. T.L.G
would handle all inquires.
Active Pharmaceutical Ingredients (APIs) are one of the major products. Besides this, T.L.G.
is going to facilitate the procurement of excipients, intermediates, biologics and
nutraceuticals.

6

Table 1

Category APIs
Central Nervous System- CNS Carbamazepine, Dimenhydrinate, Donepezil
HCL, Doxepine HCL
Cardio Vascular System- CVS Nicorandil, Acetazolamide, Phentolamine
Mesylate
Anti- Cancer Temozolomide, Oxaliplatin
Other Allopurinol, Amiodarone HCL, Aspirin,
Dipyridamol, Indomethacin

T.L.G. has divided its APIs in two areas: one is high demand growth APIs which can be used
by companies in bulk and stored in excess. Generally, these APIs may be the part of the
blockbuster drugs and other major drugs in the market. Second is APIs for specific use; that
can be used for specific treatment and its demand is comparatively lower than that of former.
These APIs might be formulated in specific way.

IV. Industry/Market Characteristics and Outlook

The pharmaceutical industry consists of ethical drugs only and does not include
consumer healthcare or animal healthcare. This industry comprises establishments
primarily engaged in wholesaling biological and medical products; botanical drugs and
herbs; and pharmaceutical products and raw materials (APIs) used for manufacturing
of pharmaceutical products for internal and external consumption.

Market Growth

This industry is considered as “recession resistant/immuned2” by analysts. Despite near-term
uncertainties, pharmaceuticals still rank among the nation‟s more vibrant & dynamic
industries, with average margins well exceeding most industries.

Table 2

CAGR over the last five years
US Pharmaceutical Industry 7.4%
2.5%3
Prescription drug wholesaling

2
Standard & Poor’s- industry Surveys- Healthcare: Pharmaceuticals, April 24, 2008
7

Some factors that are likely to accelerate market growth:

Demographic growth in the senior population
Promise of new therapeutic products derived from discoveries in genomics and
biotechnology
Improvement in new drug pipelines after several years of weakness
Cost cutting initiatives and synergies from mergers4

Market/Industry Size or Analysis of Market Niche

The US pharmaceutical market is world‟s largest and wealthiest pharma market5,
generated total revenues of $260.8 billions in 2006. It generates 48% of the global
pharmaceutical market‟s value. It created per capita expenditure of drugs in $1,154 in
2007, nearly double the level found in rest of the world.

Leading global markets for pharmaceutical sales ( BIL. $) as of year
2007
205.8
Sales ( BIL. $)

59.3
32.2 29.6 17.4 16.1 15.8 13.9 10.6 8.5 7.2 2.7

Source: IMS Health Inc.6

3
IBIS World Industry Report, July 17, 2008- Prescription Drug Wholesaling in the US: 42221
4
In the past three years, large pharmaceutical companies have responded by merging, forming alliances, buying
biotech companies, litigating against generic competitors and cutting costs. Recent acquisition activity has been
focused on smaller biotech firms with promising R&D profiles. S&P believes that these responses could help to
mitigate some of the effects of generic competition and improve new product pipelines in the next three to five
years.
5
Refer Appendix- 1
6
This chart shows the massive sales of pharmaceuticals in the US as compared to that of the other countries.
It shows the market potential for T.L.G.
8

Strategic Location

T.L.G has considered New Jersey State as our strategic location for our operations in
USA. New Jersey has been known as “medical chest of the nation” and “the global
epicenter of pharmaceuticals” because of leading hospitals and universities, research
institutions and a proactive business climate.7

o Best connected region in the country for speeding product to market
domestically and overseas
o Over 100 million consumers with a collective purchasing power of $2 trillion
are within 24 hours drive
o Two international airports- Newark (one of the busiest of the nation) and
Atlantic City
o Major ports on Hudson & Delaware rivers
o Port of NY & NJ is the largest port complex on the eastern seaboard and
responsible for more than $100 billion trade

Market Segmentation

Prescription drugs and Generic drugs (OTC)8

The US market for prescription drugs
U.S. Pharmaceutical market
segments by drugs (%) as of year has always been of higher potential
2007
Generic
and can be a market niche segment for
Drugs
13% T.L.G. But now trend has been
changing and with the fear of patent
expiration and declining economy,
generic drug companies‟ growth is
Prescripti
on Drugs
found to be booming.
87%

to be booming.

7
Http://www.state.nj.us/njbusiness/njadvantage/strategic/
8
Source: IBIS World Industry Report- NAICS code : 42221, July 17, 2008

9

Pharmaceutical Companies

Global pharmaceutical companies like Pfizer, GlaxoSmithKline, Merck and Johnson &
Johnson are the major players.9

Therapeutic categories

Central nervous system drug sales proved the most lucrative for the US pharmaceutical
market in 2007, generating total revenues of $64 billion, equivalent to 23.2% of market‟s
overall value. In comparison, sales of cardiovascular drugs generated revenues of $54.5
billion in 2007, equating to 19.7% of market‟s aggregate revenues.10

Industry Trends/Outlook11

API supply chain is closely associated with the growth of pharmaceutical industry. Thereby,
future growth rates of API supply chains are expected to be higher with expectations of higher
CAGR in the future for pharmaceutical industry because of the following trends:

Big Pharma expands in biotechnology- As conventional pharmaceutical R&D
productivity has waned, major global drug companies are turning to
biotechnology for new products to fuel growth. Biologics is still one of the
bright spots in the pharmaceutical industry.
Oncology grows in importance- It is now the fastest growing therapeutic
category was $37.5 billion, and sales growth topped 17.0%. Mainstream
pharmaceutical manufacturers see oncology as one of the most effective growth
rates.
Medicare Part D remains a key driver- It has created a new business driver
for drug manufacturers. As of the end of 2007, the federal program accounted
for roughly 19% of all retail prescriptions, and covered some 65% of all US
citizens over age 65. Medicare part D has made the government the largest
purchaser of drugs in the US. Companies most exposed to Medicare Part D-

9
Appendix-1
10
Appendix-1
11
Standard & Poor’s- industry Surveys- Healthcare: Pharmaceuticals, April 24, 2008
10

that is, those with a high proportion of drugs used by seniors- include Merck
with 20% and Pfizer with 18%.
Vaccines remain a bright spot- Vaccines are attracting greater interest amid increased
global concern about the spread of the infectious diseases. S&P‟s estimate the global
vaccine market was about $15 billion in 2007, and will reach over $27 billion by 2012.
Demographic trends remain positive- Three worldwide demographic trends bode
well for future pharmaceutical consumption:
o Aging of the population in the largest markets and expectations of life at
birth of US people12; together will create greater demand for the drugs and
thus huge demand for the APIs.13
o Rising incidence of chronic diseases
Cost Cutting and Reorganizing- Pharmaceutical companies have found cost cutting
and reorganizing to reinvigorate growth and grapple with assorted threats; and this has
been successfully implemented by major players of the industry in last 2 years.
R&D gets an overhaul- R&D is the source of future growth for pharmaceutical
companies.

V. Competitive Assessment

As the overall competitive environment in the drug industry has grown more intense
in recent years, with the landscape littered by patent expirations and pipeline
disappointments; pharmaceutical companies are under heavy pressure to seek new cost-
effective ways to develop, manufacture, and commercialize new therapeutics.

The development of new therapeutic agents often requires the sourcing of novel
APIs, for which chemical manufacturers can charge pharmaceutical companies a premium. If
the novel drug successfully reaches the market, the supplier of a novel
API can reap significant benefits, and the fortunes of several API manufacturers have
been made on the back of the sale of blockbuster drugs. Also, pharmaceutical

12
See appendix-1
13
In US, for example, people aged 60 or older represented 17% of the total population in 2006, but they
accounted for more than one-third of the nation’s total consumption of total prescription drugs. This group’s
share of the population is projected to rise to 25% by 2050.
11

companies need employees with high levels of skill in disciplines such as synthetic
Chemistry, biochemistry, and so on. Overall, supplier power with respect to the
pharmaceuticals market is strong.

Table 3

Leading Location Estimated Description of main line of
Competitors Annual business/ competitive advantage/
Sales in $ Attributes
Millions
o Global supplier of APIs,
Attix Pharmachem Canada --
other fine chemicals, raw
materials, intermediates and
nutraceuticals
o Contract biopharmaceutical
KBI Biopharma NC, USA 1.3
manufacturer
o API manufacturing for the
partner company
o API development and
Hovione NJ, USA 4.3
manufacturing
o Consulting services between
Ceres Chemical NY, USA --
suppliers of API and
pharmaceutical and biotech
companies
o API manufacturer and
TAPI ( Teva) NJ, USA --
supplier
o Leading supplier of API
Aesica UK 22 m GBP
o Manufacturer and supplier of
BASF NJ, USA --
raw chemicals and biologics
o Manufacturer and suppliers
Flavine Holdings Inc. NJ, USA 56
of API
o Supply chain enabler of APIs
US PharmaLabs NJ, USA 25

SWOT Analysis
Table 4

o Venture to be started in New Jersey, the medical chest
Strengths
of the nation.
o Entrepreneur‟s strong understanding of pharmaceutical
industry and network with companies
o Product and services innovation capability.

12

o Lack of Capital and small size of business
Weaknesses
o Dependence on all types of APIs without much clarity.
o Lack of entrepreneurial experience
o Difference in quality control measures for different
countries, which effects business
o The Chinese APIs are cheaper.
Opportunities
o Expansion of business with Indian and Chinese
companies, leading to more sources of APIs and other
chemicals
o Growing healthcare industry in the United States
o Competition from larger players and private labels.
Threats
o Newer and tougher regulations
o Foreign exchange changes: weak dollar against yuan
effects the business

VI. Customer Analysis

T.L.G has wide array of customers that includes many large brand name drug
companies, generic drug companies, bio-tech companies, companies engaged in
manufacturing of nutraceuticals and cosmetics.

Brand name drug companies,

o Often use European suppliers for intermediates and finished APIs
o Sometimes produce finished APIs themselves
o Now begin to authorize European suppliers to partner with Indian and
Chinese companies for the starting materials, intermediates and APIs

Generic drug companies,

o Heavily use Indian and Chinese API suppliersThe American companies
have headed towards Chinese and Indian APIs for the following reasons:
o Highly skilled in extraction and purification of herbs and botanicals
13

o Highly skilled in fermentation of microorganisms
o Very competitive in synthesis of intermediates and the finished APIs

Biologics is still one of the bright spots in the pharmaceutical industry, continuing to
spawn lucrative new therapies and enjoy above-average sales and earnings growth.

Analysis of the financial statements of the few of the T.L.G‟s prospective customers can
derive APIs demand growth for generic, branded and biotech pharmaceuticals.14

We have assumed APIs cost proportion from the overall COGS as up to 6% for
branded pharmaceutical companies, up to 10% for the generic drug companies and up
to 25% for the biotech companies.15
Table 5

CAGR of APIs Demand
Prescription Drug Companies 13.625%
Generic Drug Companies 32.7%

T.L.G.’s prospective customers’ list include:

Table 6

Prescription drug companies Pfizer Inc., Wyeth Pharmaceuticals, Novartis
SG, Johnson & Johnson etc.
Generic drug companies Par Pharmaceutical Companies, Inc., TEVA
pharmaceuticals, Barr Pharmaceuticals, Inc.,
Watson Pharmaceuticals, Mylen, Inc. etc.
Bio-tech companies Amgen Inc., Genzyme Corporation, ImClone
Systems Inc., Genentech Inc. etc.

Insights from customer survey16

Generally, pharmaceutical companies do not prefer to manufacture APIs in-house to support
their cost-cutting strategies. But, when they prefer to do that, it would be limited to APIs for
specific drugs with specific formulation requirements.

14
See appendix 2
15
Based on Industry expert- Dr. Hemant Alur’s interview
16
Refer appendix- 6
14

Companies rely on outsourcing in foreign countries that include mainly India and China; for
their APIs sources. They expect their sources of APIs readily available when required with
standard quality and affordable prices. This is the reason why they require a facilitator or
agent or broker who facilitates the price negotiations of APIs and logistics between
manufacturer and end users.

Because of tighter USFDA regulations, companies tend to believe in higher quality of raw
materials like APIs with the approach of minimum price sensitivity. This is how the “price” of
APIs, they buy is not crucial, but still important for them.

On the service side, they expect,

On-time & expedited delivery
Convenient & quicker order processing
Full certified compliance in handling & storage

Most of the companies expect a supplier to store some extra inventory of their order due to
unexpected demand in a way that they can get their supply in the most efficient manner as
soon as possible. This leads T.L.G. to acquire fully equipped warehouse on rent or lease.

VII. Business Strategy

T.L.G. Resources International LLC is a service business that procures API (Active
Pharmaceutical Ingredient) for the pharmaceutical industry. T.L.G.’s vision is “To become a
leading supply chain enabler who facilitates the procurement of internationally sourced
APIs & provide order assistance 24X7 and provide a low cost value-added service to
pharmaceutical companies.”

Intensive Growth

Market Penetration- New Jersey based pharmaceuticals is the market niche where
T.L.G. is going to focus in early stages of its venture. The few ways, T.L.G. plans to
penetrate into API suppliers‟ market are to,
o Offer higher quality & competitive prices to client companies as compared to
the other API suppliers.

15

o Lure more pharmaceutical companies which rely on expensive foreign API
suppliers and get them switch to do the business with us.

Market Development- After company penetrates into market, it follows its strategies
to sustain its position.
o Company will completely take care of import regulations and procedures by
US Government Regulatory Authority- the Food & Drug Administration
(FDA) to make procurement easier and faster; and provide flexible pricing
options/quotes to the clients.
o Company will intensify its focus on quality of products it supplies through
contracts with various API manufacturers and this is how it plans to make FDA
import regulations frictionless.

Products & Services Development-
o Company will adapt user friendly online customer services including instant
price quotes for the required quantities of various APIs & 24X7 assistance.
o Company will provide price comparison chart of different API suppliers as
guiding tool to the prospective buyers.

Integrative Growth

Being an entrepreneurial company, horizontal integration is important for integrative growth
strategies.

Company will adapt efficient supply chain management techniques like cross-docking
for warehousing services, to make logistics easier and help themselves improve bonds
with supply networks and distribution channels.

Strategic alliance with various API manufacturers, because on average contract span between
manufacturer and supplier of APIs is 18-24 months and supplier has to register each product
with the FDA. Therefore, contracts and alliances with multiple manufacturers will help
company to broaden its prospects.

16

VIII. Marketing Plan

T.L.G. is a start up venture and we plan to establish service loyalty. We are going to
implement aggressive marketing strategies for the first couple of years to penetrate into the
market.

Marketing strategies for services

API companies that do business in the USA act as the middle man only. If there is a
failure with the product, they defer all responsibility to the manufacturer. The agent is
never involved with the solution. At T.L.G. - we will assume full responsibility for the
delivery and quality of the product.
We will ensure that all required documentation is provided in a timely manner.
We will provide a root cause analysis to determine all product failure and develop and
corrective action to prevent future reoccurrence.
API distributors do not privately handle Customs activities and do not act as the
Export agent. These are 3rd party activities which are done by private companies. At
T.L.G - we will have a fully certified customs agent on staff which will assume the
responsibility of performing all required procedures from beginning to end. We will
act as the import agent and provide all services required. (The normal process is
between 3 and 9 days. Having these functions handled at T.L.G will reduce the lag to
about 2 - 4 days)
An order tracking service with daily/weekly/monthly status updates

Online ordering and request of price quotes
Nearly all API distributors in the USA have limited responsibility pertaining to quality
assurance and deliveries. At T.L.G. - we would assume full responsibility from the
time the order is placed until it is received and QC accepted. If there are any issues
related to quality or delivery, the customer would not have to get phone numbers from
3rd party vendors and begin the investigation process. T.L.G. would handle all
inquires.

17

Promotional activities for services

The best promotional activity for the services of T.L.G. is to build relationships with
pharmaceutical companies. This is the vital reason why company is willing to enter into a
contract with T.L.G. There are many marketing tools through which T.L.G. can promote their
supply chain enabling services.
Banner ads (Web banner) - It is an important tool to attract pharmaceutical
companies or purchasing department of particular companies to T.L.G.‟s services
through World Wide Web or internet.
Pharmaceutical companies’ direct mailing lists- The most effective form of selling
is through direct contact with managers, product control managers, and purchasing
managers.
T.L.G.’s own web-site- Even though T.L.G.‟s web-site is under construction now,
T.L.G. wants to develop its site as the most important tool for the customers.
Attending pharmaceutical conferences, bio-tech/pharmaceutical career fairs &
trade fairs- This will help T.L.G. to get as much exposure as it can. This is how
T.L.G. will come in contact with the professionals of this industry and such network
will lead T.L.G. to reach its goal of building long-lasting relationships with
pharmaceutical companies.
Magazines & newspapers- T.L.G. will promote their services and publish articles
related to their services in magazines and newspapers like- Pharmaceutical
Representative, U.S. Pharmacist, Medical Product Manufacturing, Pharmaceutical
Manufacturing and many more.

Expense breakdown of promotional activities in
marketing budget of T.L.G.
Web banner

18% 18% T.L.G.'s own web-site

15%
24% Attending conferences, trade
fairs and career fairs
25%
Magazines & newspapers

Source: Based on Thomas Wiedemann„s assumptions
18

IX. Financial Plan Summary

T.L.G. is projected to lose money until the end of second quarter of the first year of the
business. The company‟s gross margin is quite high because of the lower cost of goods sold as
it is a service oriented business. High operating expenses shrink projections of net income and
profit margins.

Key Financial Assumptions

T.L.G. financial plan is based on the following key assumptions:

T.L.G. is seeking FDA approval for its APIs registration for the client companies. So,
we have not taken any specific year to start a venture.
Revenues are based on commission of APIs being supplied, which we have assumed
roughly 4.5%, 5% and 5.25%17 for the first, second and third year respectively.
Volume plan is based on single or very few customers & it is demand driven.
During the first year of business, T.L.G. will operate business from home. Then, it
plans to rent some space for storing the inventories or lease the warehouse. We have
assumed rent expense as $8000, $9000 & $10000 per month for the first, second and
third year respectively.
No consideration of opportunity costs of storing extra inventories for customers is
taken. If it is taken, it is included in revenues for the company as customers has to pay
for the storage and insurance for the period of storage.
In volume plan, with assumptions & some research, we have observed high jump in
volume in second year from first year because of warehouse or storing facility and
growing number of prospect customers.
Prices per kg of APIs vary from $25-$85
We have assumed 27% as taxes.

17
Based on assumptions of Thomas Wiedemann
19

Volume Plan 18

Table 7

% increase from the % increase from
Year Batches Sold Revenue in $
Previous Year the Previous Year
1 209 29,106
2 1059 406.7% 165,266 467.81%
3 1165 10.01% 197,222 19.34%

Pricing Plan

According to the industry interviews and customer surveys, we can analyze that quality of the
APIs plays a vital role for the business. TLG will focus not only on quality but also on
reasonable and attractive price for the purchaser. This will be the major benefit for the
purchaser as its indeed challenging to get the blend of price and quality in pharmaceutical
industry. If the quality analysis is made, TLG International Inc is at par with its competitors.
The major parameter different from competitors is price.

TLG will earn its profit as a commission charged from the seller on the batches sold. The
price of each batch of API will be decided in comparison to the market price existent in the
market. Ideally to make it more competitive it will be kept lower then the market price. TLG
will calculate final parentage on sales i.e. around 4-7% of commission which will be charged
to the seller of API from overseas. For better understanding following is the example.

Assuming, Company A is the seller company of API in China. Company B is the purchaser in
United States who wants to buy 100 batches of a particular type of API. TLG facilitates the
deal of both the companies and therefore company B agrees to purchase 100 batches of API
from Company A. The market price of API in United States is 30 $ per batch. But, Company
A sells to Company B at $28 per batch. Therefore the total sale is of $ 2800. Now, TLG will
negotiate with Company A and charges 5% of commission on total sales i.e. $ 140. The
company B will be ready to pay this commission to TLG because even after the commission
the Selling price per batch to A is $ 26.60 whereas, the cost is $ 23 per batch which earns the
revenue of $3.60 per batch.
18
Appendix- 3 that contains income statements, volume plan, pricing plan and sales plan for the 3 years
20

Consolidated income statements
Table 8

Particulars Year 1 Year 2 Year 3
Revenues $29,106 $165,266 $197,222
Cost of Services 17,260 38,280 43,910
Gross Profit 11,846 126,986 153,312
Gross Margin (%) 41% 77% 78%
Selling Expenses $22,540 $135,644 $145,388
G&A Expenses 5,580 3,000 2,650
Total SG&A Expenses 28,120 138,644 148,038
EBIT -16,274 -11,658 5,275
Net Profit After Taxes -16,274 -11,658 3,850
Profit Margin % -56% -7.05% 1.95%

Consolidated income statement review clearly shows that T.L.G.‟s operating expense would
be high. Most of the sizable operating expenses fall into fixed cost category, which, by
definition, implies that they have to be paid no matter what the revenue is. The only way to
fight fixed costs is to spread them over more units sold, meaning T.L.G. plans to increase
sales volume.

Key Financial Ratios
Table 9

Ratios / Year Year 1 Year 2 Year 3
Gross Margin 41% 77% 78%
Operating Expenses 97% 84% 75%
Cost of Services 59% 23% 22%
Profit Margin -56.00% -7.05% 1.95%

Key Financial Ratios
150%

100%
Gross Margin
50%
Operating Expenses
%
0%
Cost of Services
1 2 3
Profit Margin
-50%

-100%
Year

21

Key financial ratios (projected) clearly indicate that company will have positive cash flows
from the first quarter of third year of business. Low % of cost of services and operating
expenses after the first year will boost company‟s profit margin.

Expenses breakdown

Cost of Services
Expenses Breakdown - Total
Utilities and
Telecommunications
3%
Marketing & Advertisement
25%
Office supplies

Insurance

5% Legal & Accounting
50%
Licenses & fees
9%

Lease/Rent Expense
1%
Miscellaneous G&A expenses
1% 3% 3%

22

Appendix-1

Market research analysis

Top 14 Pharma Markets by 2015
sales (BIL. $)
444

82
46 38 38 32 25 25 25 20 20 19 15 15

Source: IMS World Review, analyst projections, McKinsey India Pharma Demand Model 19

19
This shows US’s dominance in the global pharmaceutical market. As APIs supply chain growth is entirely
associated with the growth of pharmaceutical industry, this chart will help us understand how the massive
future growth in US pharmaceutical market will make APIs supply chains grow all over.
23

U.S. Pharmaceutical Market Segmentation by companies in % as
of year 2007
Pfizer GlaxoSmithKline Merck Johnson & Johnson Other

9%
8%

6%

6%

71%

Source: Datamonitor

Market share of therapeutic categories in % in US as of year 2007

CNS
23%
Others including
Anti-cancer
27%

Anti-Infective CVS
7% 20%

Respiratory
Alimentary/Metabo
9%
lism
14%

Source: Datamonitor20

20
This chart shows the potential therapeutic categories in US pharmaceutical market. Demand of APIs of
these leading categories will rise in future. And TLG has many APIs in its products line, which fall into these
categories.
24

US seniors(65 & above) population and estimates as of year 2007

35

30

25

20
%

Proportion of population of
15 65 and above %
Growth rate of population of
10
65 & above %
5

0

Years

Source: US Census Bureau > www.census.gov

Expectation of Life at birth of US people
80
78
76
74
72
70
68
66

Life Expectancy

*Based on middle mortality assumptions; Source: US Census Bureau, Population Division Working Paper No. 38

Source: US National Center for Health Statistics, National vital statistics Reports, Vol 55, No. 19, August 21,2007

25

Appendix- 2

APIs demand growth derivation

Generic Drug Companies

Source: LexisNexis® Academic-
Business

Prospective
Column2
Customers Ticker Column1 COGS in $ millions
2005
2007 2006

PAR Pharmaceuticals
258
Companies, Inc. PRX 501 507
2,770
TEVA Pharmaceuticals TEVA 4,531 4,149
Barr Pharmaceuticals,
Not
Inc. BRL Not Not
Watson
853
Pharmaceuticals, Inc WPI 1,505 1,234
630
Mylan Inc. MYL 1,304 768
4,511
Total 7,841 6,658
As per industry expert‟s assumption,
APIs‟ cost proportion in total COGS is 10%21

API
costs in
451
COGS 784 666

API cost
annual
growth
rate 17.72% 47.67%

This is how we get CAGR of API demand, which is
32.70%

21
As per Dr. Hemant Alur’s assumptions, we derived APIs’ approx. proportion of cost of goods sold expenses
of pharmaceutical industries. That proportion will help us to derive demand growth of APIs supply chains in the
future. And this is how CAGR of APIs demand will be important figure for TLG’s business growth.
26

Source: LexisNexis® Academic-
Business

Branded Drug Companies

Prospective Customers Ticker Column1 COGS in $ millions Column2
2007 2006 2005

Pfizer Inc. PFE 11,239 7,640 8,525

Wyeth Pharmaceuticals,
Inc. WYT 6,314 5,588 5,431
Johnson & Johnson JNJ 17,751 15,057 13,954
Novartis NVS 11,032 9,411 8,259
Total 46,336 37,696 36,169

As per industry expert‟s assumption,
APIs‟ cost proportion in total COGS is 6%

API
costs in
COGS 2780 2262 2170

Annual
growth
rate of
API
costs 23% 4.25%

CAGR
of API
demand 13.63%

27

Appendix- 3

Financial Statements

Volume Plan

Volume = Batch : 1 Batch= 50 Kilos
First year of the Business

QT-
1 QT-2 QT-3 QT-4 Total

High Demand Growth APIs 30 40 42 42 154
APIs of specific use 10 14 14 17 55

Total 209

Second year of the business


Total 1059
CAGR 406.7%

Third year of the business


Total 1165

CAGR 10.0%

28

Pricing Plan

We need to find Avg. Price per batch of APIs.
Assume inflation rate as 4%
High Demand Growth APIs $ price/ Batch of 50 kilos
1st year 2bd year 3rd year
Allopurinol $1,300 $1352 $1406.08
Amiodarone HCL 1,350 1404 1460.16
Aspirin 1,250 1300 1352
Acetazolamide 1,350 1404 1460.16
Carbamazepine 2,500 2600 2704
Phentolamine Mesylate 2,650 2756 2866.24
Indomethacin 2,300 2392 2487.68
Dimenhydrinate 2,450 2548 2649.92
Dipyridamol 3,450 3588 3731.52

Donepezil HCL 4,200 4368 4542.72

Nicorandil 3,950 4108 4272.32
Temozolomide 4,250 4420 4596.8
Oxaliplatin 4,000 4160 4326.4 1st year 2nd year 3rd year
Doxepine HCL 3,800 3952 4110.08 Average commission per batch
$2,771.43 $2,997.58
Average price $2,882.29 $124.71 $144.11 $157.37
$4,000.00 $4,160.00 $4,326.40
APIs of specific use $180.00 $208.00 $227.14

29

Sales Plan

First year of the business
(Based on 4.5% commission on revenues)

QT-1 QT-2 Qt-3 QT-4
High Demand Growth APIs $3,741 4,989 5,238 5,238
APIs of specific use 1,800 2,520 2,520 3,060

Second year of the business
Based on 5% commission on revenues)

$
Third year of the business
(Based on 5.25% commission on revenues)



30

T.L.G. Resources International, LLC- Financial Plan

Quarterly Pro Formas (Projected)
First Year of Business

Qt-1 Qt-2 Qt-3 Qt-4 Total
Revenues
Commissions on High Demand Growth
$3,741 $4,989 $5,238 $5,238 $19,206
APIs

Commissions on APIs of Specific Use 1,800 2,520 2,520 3,060 9,900

Total Revenues $5,541 $7,509 $7,758 $8,298 $29,106

Costs of Services
Customer Servicing Expense $2,500 $2,700 $2,800 $2,780 $10,780

Other Costs of Services 1,350 1,600 1,740 1,790 6,480
Total Costs of Services $3,850 $4,300 $4,540 $4,570 $17,260

Gross margin $1,691 $3,209 $3,218 $3,728 $11,846
Gross margin % 31% 43% 41% 45% 41%

Operating Expenses
Management Salaries 0 0 0 0 0
Utilities and Telecommunications $1,200 $1,500 $1,530 $1,580 $5,810

Marketing & Advertisement 2,500 2,700 2,840 3,060 11,100

Office Supplies 300 420 440 470 1,630
Insurance 0 0 0 0 0
Legal & Accounting 500 610 640 650 2,400
Licenses & Fees 400 400 400 400 1,600
Lease/Rent Expense 0 0 0 0 0

Miscellaneous G&A Expenses 1,300 1,400 1,400 1,480 5,580

Total Operating Expenses $6,200 $7,030 $7,250 $7,640 $28,120

EBIT -4,509 -3,821 -4,032 -3,912 -16,274
Interest expense 0 0 0 0 0
EBT -4,509 -3,821 -4,032 -3,912 -16,274

Taxes -1,217 -1,032 -1,089 -1,056 -4,394

Net Profit ( Loss ) -$4,509 -$3,821 -$4,032 -$3,912 -$16,274

Profit Margin % -81% -51% -52% -47% -56%

31

Second Year of Business

Revenues
Commissions on High Demand
Growth APIs $28,823 $31,705 $30,840 $32,714 $124,082
Growth APIs 9,984 10,816 11,648 8,736 41,184
Total Revenues $38,807 $42,521 $42,488 $41,450 $165,266

COGS

Other Costs of Services 0 0 0 0 0
Other COGS 2,200 2,400 2,450 2,470 9,520
Total COGS $9,200 $9,700 $9,710 $9,670 $38,280

Gross margin $29,607 $32,821 $32,778 $31,780 $126,986
Gross margin % 76.29% 77.19% 77.15% 76.67% 76.84%

Operating expenses
Management salaries 0 0 0 0 0

Office supplies 400 380 360 410 1,550
Insurance 1,500 1,500 1,500 1,500 6,000
Legal & Accounting 1,000 1,200 1,280 1,320 4,800
Licenses & fees 300 300 300 300 1,200
Lease/Rent Expense 24,000 24,000 24,000 24,000 96,000

Operating losses as tax carry
forward 1,217 1,032 1,089 1,056 4,394

Miscellaneous G&A expenses 600 700 800 900 3,000
EBIT -4,710 -1,521 -2,150 -3,276 -11,658
EBT -4,710 -1,521 -2,150 -3,276 -11,658

Taxes -1,272 -411 -581 -885 -3,148

Net Profit ( Loss ) -$4,710 -$1,521 -$2,150 -$3,276 -$11,658

Profit Margin % -12.14% -3.58% -5.06% -7.90% -7.05%

32

Third year of business

Revenues
Growth APIs $36,196 $38,556 $39,501 $37,769 $152,022
Commissions on APIs of Specific
Use 11,357 11,811 10,675 11,357 45,200
Total Revenues $47,553 $50,367 $50,176 $49,126 $197,222

COGS
Other COGS 3,000 3400 3,450 3260 13,110
Total COGS $10,500 $11,200 $11,250 $10,960 $43,910

Gross margin $37,053 $39,167 $38,926 $38,166 $153,312
Gross margin % 77.92% 77.76% 77.58% 77.69% 77.74%

Operating expenses

Office supplies 500 620 630 600 2,350
Insurance 1,500 1,500 1,500 1,500 6,000
Licenses & fees 300 300 300 300 1,200
Lease/Rental Expense 27,000 27,000 27,000 27,000 108,000

forward 1,272 411 581 885 3,148

EBIT 221 2,307 1,705 1,042 5,275
EBT 221 2,307 1,705 1,042 5,275

Taxes 60 623 460 281 1424

Net Profit ( Loss ) $161 $1,684 $1,245 $760 $3,850

Profit Margin % 0.34% 3.34% 2.48% 1.55% 1.95%

33

Third year of business

Revenues
Growth APIs $36,196 $38,556 $39,501 $37,769 $152,022
Commissions on APIs of Specific
Use 11,357 11,811 10,675 11,357 45,200
Total Revenues $47,553 $50,367 $50,176 $49,126 $197,222

COGS
Other COGS 3,000 3400 3,450 3260 13,110
Total COGS $10,500 $11,200 $11,250 $10,960 $43,910

Gross margin $37,053 $39,167 $38,926 $38,166 $153,312
Gross margin % 77.92% 77.76% 77.58% 77.69% 77.74%

Operating expenses

Office supplies 500 620 630 600 2,350
Insurance 1,500 1,500 1,500 1,500 6,000
Licenses & fees 300 300 300 300 1,200
Lease/Rental Expense 27,000 27,000 27,000 27,000 108,000

forward 1,272 411 581 885 3,148

EBIT 221 2,307 1,705 1,042 5,275
EBT 221 2,307 1,705 1,042 5,275

Taxes 60 623 460 281 1424

Net Profit ( Loss ) $161 $1,684 $1,245 $760 $3,850

Profit Margin % 0.34% 3.34% 2.48% 1.55% 1.95%

34

Appendix- 4

Industry expert interviews

1. Barry Turner: Procurement Director at Novartis

Barry Turner is a Fairleigh Dickinson University alumni and a successful professional having
more then twenty five years of experience with pharmaceutical industry. He has also served as
President and Board of Director at APEX. He is highly knowledgeable and provided with
important inputs which are very useful for TLG.

Cost is the major issue for the services added upfront.
Two issues with API‟s:
1. It‟s costly to reach out in Asia. E.g. India.
2. Risks: As the FDA standards differ among various countries.
API business is not just that easy by going out in the market and purchasing the same.
There are various technical aspects involved which play a vital role for the business.
To be a supplier of API, one needs the quality of each API to be approved and
qualified by FDA team
From the second year of the business one can provide warehousing services as
business volume will be increased.
Major barrier by FDA is bio testing of the API which is transition from stage two to
stage three among four stages of approval cycle. Third stage is the most time
consuming stage.
China has the most competitive price for API‟s. They reduce the price to 40% - 50%
on average.
Only FDA approved API‟s can be imported from India and China.
It‟s important to know the US customs check and FDA customs check. If the API is
put on hold from the port, it‟s stopped and takes long time in the procedure to get it
released.

35

2. Professor Gerard W. Cleaves:

Prof.Cleaves is the chairman of Pharmaceutical Management department, FDU in 2003 with
more than 20 years experience in business and organizational development. This experience
comes primarily in the global supply chain management software and consulting industries
serving multinational chemical and pharmaceutical companies. He serves on the Board of
Directors of the Market Street Mission in Morristown, NJ - an organization that has served the
needs of the homeless, helpless and hopeless of northern NJ for over 100 years. He has
worked for Exxon Chemicals, Chesapeake Decision Sciences (now Aspen Technology), and
i2 Technologies and consulted for industry through AtlanTec, a company he founded in 1995.
He has degrees in chemical engineering from Lehigh University and Princeton University and
an MBA from Harvard Business School.

It costs around a billion dollars to bring in a new drug.
There are four stages of FDA approval for the new drug.
It takes almost twelve to fifteen years to get to fourth stage of FDA approval stages.
Companies earn even by filing for the patent of the drug.
Even after the approval of the drug, Facility approval by FDA is also challenging.
Each process has to be certified by FDA.
TLG should deal with companies who already have approval.
Lot of distrust of API manufactured from China..
Beware of Scams.

3. Hemant A. Alur, PhD: Vice President, Trilogic Pharma LLC

Trilogic Pharma LLC is a startup pharmaceutical venture, started before 3 years.

Hemant guided us to derive APIs demand growth from the income statements of
pharmaceutical companies.
From his vast amount of experience of 15 years in the pharmaceutical industry, he
gave us assumptions of % proportions of APIs cost in total COGS of the company.

36

They were assumed to be 5-7%, 8-12% and 20-25% in prescription drug companies,
generic drug companies and bio-tech companies respectively.
After we found the cost proportion of APIs over the last 3 years, we derived growth
rate of that particular cost.
Averaging that cost, we found CAGR of demand of APIs.
CAGR of demand of APIs was found to be 13.63% and 32.70% for prescription drug
companies and generic drug companies respectively.

37

Appendix- 5

Regulations and associations

FDA- The U.S. Food & Drug Administration- An agency of the United States
Department of Health and Human Services and is responsible for the safety
regulation of most types of foods, dietary supplements, drugs, vaccines,
biological medical products, blood products, medical devices, radiation-emitting
devices, veterinary products, and cosmetics. The FDA requires research or
marketing approval for the drug that uses the API. Some of the important
regulations and guidelines of the FDA for venture like T.L.G. are as following:
Foreign firms that manufacture, prepare, propagate, compound, or
process a drug imported or offered for import into the U.S. are
required to register name and place of business
List all drugs imported or offered for import into the U.S.
Shall designate only one U.S. agent, who must be physically
located in the U.S. and be point of contact between FDA and
foreign firm on all drug registration, listing matters and
requirements22
Submit DMF (Drug Master File) which contains confidential API
information23, to the FDA. This submission is required to sell the
drug that contains the API

Trade Associations related to TLG:

It‟s very necessary to understand for TLG the importance that each trade association has to its
new venture. The following are the ones that we suggest are important as far as the business
of TLG is concerned.

Consumer Healthcare Products Association (CHPA)- CHPA works with members of
Congress on legislation to address concerns about the safety of drug ingredients

22
Importation of active pharmaceutical ingredients requirements 7-16-08 FDA NYK-DO API seminar
presentation notes
23
Confidential information means- API information submitted in the IND, ANDA, or NDA
38

manufactured outside the United States. TLG will be acting as a medium between the
producer (who may be overseas) and customer companies based in United States. To
be a member company with CHPA will help TLG to overcome risks factors involved
with manufactured products outside United States.
The U.S. Drug Enforcement Administration (DEA)- DEA has responsibility for
combating drug trafficking and make efforts to prevent the diversion of legal drugs
and precursor chemicals to manufacture illegal drugs. The benefit of TLG with DEA
is because Controlled Substances Act (CSA) is one of DEA‟s key authorizing statutes.
Generic Pharmaceutical Association - The Generic Pharmaceutical Association
(GPhA) represents the manufacturers and distributors of finished generic
pharmaceutical products, manufacturers and distributors of bulk active pharmaceutical
chemicals, and suppliers of other goods and services to the generic pharmaceutical
industry. GPhA advances the interests of its members through initiatives in
the scientific, regulatory, federal and state forums and in the public affairs arena which
will help TLG too.
The Pharmaceutical Research and Manufacturers of America (PhRMA)- (PhRMA)
represents the country‟s leading pharmaceutical research and biotechnology
companies in United States, which are devoted to inventing medicines that allow
patients. Being a part of this association will help TLG to forecast the need for new
API used during research and which may be demanded in future when the finished
product is out for sale in the market. Therefore, TLG will get details of companies
carrying research and therefore those can be future potential customers of TLG.
Sales Association of the Chemical Industry (SACI)- Members of SACI involves
Sales agents, distributors, and individuals engaged in sales or sales promotion for
American chemical manufacturers, exporting companies for American manufacturers,
personnel of publications and advertising agencies in chemical and allied industries,
and purchasing agents of American chemical manufacturers. Works to increase selling
efficiency, foster high sales ethics, and promote fellowship among members. Sponsors
golf outings; conducts sales clinics and research programs; provides speakers on
selling. TLG as member of SACI will do some marketing of its product and services.
Also, it will help to build network and customer base which results in business.
39

BIO - Biotechnology Industry Association- BIO is the world's largest biotechnology
organization, providing advocacy, business development and communications services
for more than 1,200 members‟ worldwide. TLG should be the member for BIO
because this will benefit ventures business development. It will have opportunity to
get many potential customers for business from biotech filed.

PDE: A Pharmaceutical Trade Association- The PDE is an organization dedicated to
the advancement of its membership by providing a forum for interaction,
communication, and education. Its membership, predominantly from Pennsylvania,
Delaware, New Jersey, but open nationally, includes pharmaceutical manufacturers,
the allied trade industries, and schools of pharmacy. We suggest TLG to be a part of
PDE as it‟s locally based in NJ and this will help TLG to analyze the competitors
locally.
Parenteral Drug Association (PDA)- Parenteral Drug Association (PDA) is the
leading global provider of science, technology and regulatory information and
education for the pharmaceutical and biopharmaceutical community. PDA, a non-
profit organization is committed to developing scientifically sound, practical technical
information and resources to advance science and regulation through the expertise of
its more than 10,000 members worldwide. It holds various conferences on Supply
chain management which is a useful resource for TLG as a start up venture.

Chamber of Commerce of State of New Jersey:- The New Jersey Chamber of
Commerce is a business advocacy organization based in Trenton. The State Chamber
staff represents its members on a wide range of business and education issues at the
State House and in Washington. The organization also links the state‟s local and
regional chambers on issues of importance through its grassroots legislative network.

40

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