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36
STRATEGY

Finding the Right Partner

A pharmaceutical company formed international partnerships to reach foreign markets.
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Bill Bologna had a problem. The chairman of Columbia Laboratories, a $10-million pharmaceuticals company in Miami, wanted to export Columbia's chief product, a vaginal moisturizer called Replens, to Greece as part of an international-sales-growth strategy.

But there were problems. If sold as a cosmetic, Replens would have been subject to an exorbitant 109% duty tax. If sold as a medicine for menopause, Replens would have been duty free but priced at a ridiculously low level by the Greek government, which regulates drug prices and considers menopause medication a low-ticket item.

"Fortunately, we had set up a sales-and-marketing partnership with Roussel [a French pharmaceuticals company], which knew the Greek market so well that it suggested we license Replens as a 'medical device.' That way we could import it on a duty-free basis and set whatever price we wanted," says Bologna. The strategy has worked so well that Greece brings in half a million dollars in annual sales of Replens.

Bologna's growth strategy depends on his finding financially savvy corporate partners in every country he targets for diversification. One measure of his success: the company currently earns the equivalent of a 12% to 15% royalty on its sales overseas -- quite impressive for the pharmaceuticals industry. Here's what Bologna looks for in an overseas partner:

Local expertise. "Don't delude yourself into thinking that a European company knows the intricacies of every European country equally well. It can't," says Bologna. He examines the partner's sales records, tax expertise, and other matters on a country-by-country basis.

Country-specific strategies. "Every country in which you do business has a potentially different set of tax rules, banking networks, and currency-repatriation guidelines," warns Bologna. He notes that "the way you plan to handle them can have significant effects on the profitability of each venture."

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Last updated: Feb 1, 1994




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