【正文】 WE NEED TO SOLVE THREE CRITICAL ISSUES TO ACHIEVE OUR ASPIRATION FOR BROAD MARKET Investment Returns People development Organization Financial and . implication Prioritize market opportunities Submarket within a region Around 80 regional cities 332 regional cities (whole China) Build a solid platform XJP broad market team “ Capturing broad market” “ Turbo CME” for clinic/ barefoot doctors and township pharmacies “ Pharmacy Plus” for large pharmacy chains “ Hospital Seeding” for large county hospitals “ Distributor work to county level” XJP NEEDS TO INVEST TO CAPTURE THE GREAT POTENTIAL IN BROAD MARKET Broad market: 94% of overall demand County and below: 74% of overall demand Broad market drug sales breakdown by geography Percent, all 4 cities 203619196Village County Other channels at city level Town Class 3 hospitals High potential broad market Opportunity vs. XJP coverage gap New initiatives Nearly no coverage of barefoot doctors Barefoot doctors represent 45% of GI drug sales and 33% of Vertigo drug sales XJP has almost no coverage on them Adapt CME focus to barefoot doctors Nearly no coverage of pharmacies Pharmacy represents 37% of demand Pharmacy in county and below represents 23% of demand In developed cities, pharmacy chains are playing dominant role XJP now only covers city level pharmacies in several large cities Control large pharmacy chains at county level Insufficient coverage of county hospitals County hospitals represents 16% of demand Largest county hospitals can heavily influence consumption of Gyno Daktarin XJP only cover 23% of Tier II and 12% of Tier I hospitals Detail to county hospitals Low utilization of distributors’ push Distributors’ have influence on clinic and pharmacies XJP has not utilized distributors’ capability to push sales of XJP products Give distributors more incentive to push for XJP products Source: McKinsey analysis DURING OUR KILLER IDEA WORKSHOP, WE DEVELOPED FOUR SETS OF HYPOTHESIS TO BE TESTED IN PILOT * Summary based on Zhejiang field trip and internal interviews “ Hospital seeding” “ Pharmacy plus” ? One sales rep per region ? Sales reps are dedicated and with medical background ? For the covered region, all county No. 1 and 2 large hospitals should be covered ? Focus on GynoDaktarin but also detail Motilium, Sibelium, Daktarin, and other XJP drugs ? Three sales reps per region, covering top three pharmacy chains ? For the covered pharmacy chains, all county and some towns should be covered ? Focus on GynoDaktarin and Motilium but also push other XJP drugs ? “Sweeties” to pharmacy owners could include information system support, training, in store advertising, gifts in box, and pharmacy owner club ? “Sweeties” to pharmacy clerks could include travel for star staff, training, and gifts in box Broad market, especially county level “ Turbo CME” * ? Will be conducted by HQ OTC CME team. Local sales team will provide coordinating support ? Workshop holds once a year in each county ? Target audience is clinic/barefoot doctors ? Focused drug include Motilium, Daktarin, Pevison, and Sibelium ? Leverage local healthcare authority and associations to reach mass number of clinic/barefoot doctors “ Distributor work to county level” ? One rep per region, covering all county No. 1 distributors ? Rewrite distributor contract ? Leverage distributor work and push distributor staff to reach the villages/clinics ? “Sweeties” to distributor could include information system support, training, and distributor club ? “Sweeties” to distributor staff could include travel for star staff and training Comments on the McKinsey Proposed Initiatives Hospital Seeding Besides testing the idea to conduct professional detailing to the county hospitals, we also want to provide coverage among the smaller hospitals (Tier I II ) in the urban cities to pare the Pharmacy Plus We have seen petitors (like SiDaShu) sales growth via aggressive coverage and promotion among the drugstores in the richer countis. So, this is definitely worth testing. Comments on the McKinsey Proposed Initiatives Distributor Drive We have expanded our distribution work to include almost 1,000 subdistributors in the last 3 years. We will try to test the sales impact if we invest more program and resources among them. Turbo CME We have started CME program among county hospital doctors. It would be interested to find out the sales contribution if we conduct the program among the barefoot doctors. XJP COULD ADOPT A THREEPHASED ACTION PLAN TO ESTABLISH AND MAINTAIN DOMINANT POSITION IN BROAD MARKET Source: McKinsey analysis ROUGH ESTIMATE Phase I: Capturing the broad market Phase II: Dominating the broad market Phase III: Strengthening and maintaining the dominant position Time frame Coverage 2023~2023 2023~2023 2023 and beyond 1/4 of all regions (about 80 regions with 500 counties) Cover county level (leveraging CME to reach town and below) 1/2 of all regions (about 170 regions covering 1,100 counties) Cover county and selected town level Nearly all regions (about 330 regions covering 2,050 counties) Cover at county and selected town level REVENUE FORECAST OF NATIONAL ROLLOUT RMB millions, at NTS price 2 ,