Complete go-to-market strategy for launching an endoscopic diabetes treatment in China. Presentation includes landscape assessment and strategic analysis of the diabetes treatment market in China.

1. Launching a Type 2
Diabetes Treatment
in China
Go-to-Market Strategy

2. Today’s Presentation
Current Trends
Healthcare
System
Diabetes in China
Diabetes
Treatments
Strategic Analysis
Potential Markets
Entry Strategy
Marketing Mix

3. Current Trends
Current Trends
Healthcare
System
Diabetes in China • Aging Population
• Emerging Middle Class
Diabetes • Urbanization
Treatments • Growing Economy
• Safety & Reliability Issues
Strategic Analysis • Concern for Public Health
Potential Markets
Entry Strategy
Marketing Mix

4. Current Trends
Aging Population:
• Population growth rate in Population by Age
China – 0.493% (World Fact Book)
• One-child policy
• Increased life expectancy 0-15 13% 19%
15-20
20-39 8%
28%
40-59
60+ 32%
Children will be caring for multiple dependent parents and age-
related illness will be on the rise.

5. Current Trends
Emerging Middle Class:
• Growing consumer spending on food, housing & healthcare
• Top 10% of population possess more than 40% of the wealth
• Increased Earnings
• Increased disposable
income

6. Current Trends
Emerging Middle Class:
There is a growing consumer segment in China that
expects, and is willing to pay, for the best products on the
market.

7. Current Trends
Urbanization:
• People in China are migrating to urban
China's Rural and Urban
areas for jobs
Population, 1950-2030 (UN
• Wealth & resources are concentrated in Estimates, 2003)
urban areas
• Much of rural China is still comprised of
subsistence farmers
There is a massive disparity between the availability of
wealth, resources and labor in urban vs. rural China.

8. Current Trends
Growing economy open to foreign trade:
• Economy grew on average
+10.14% from 2001 to
2010
• Rigorous tax system with
lucrative incentives
designed to attract foreign
investment and boost
exports
• No debt, significant
reserves
• 20% CAGR in
pharmaceutical market
China has a stable and rapidly growing economy, making it an
important player in the global market.

9. Current Trends
Safety & Reliability Issues:
• Contaminated baby milk powder
recalled after four Chinese infants
died and at least 6,000 more fell ill
• Chinese-made batches of the
blood-thinning drug heparin
recalled after 81 patients died
• Mattel orders the third Chinese toy
recall, saying it would take back
more than 800,000 units globally
that contain “impermissible” levels
of lead
Chinese consumers tend to have a preference for Western
goods due to a history of safety issues and affluent Chinese are
willing to go outside of the system to access goods.

10. Current Trends
Growing Concern with Public Health:
• Negative health effects brought on
by aging of the
population, urbanization, industrializ
ation, and globalization
• Old Chinese public health models
cannot meet present requirements.
• Main issues: poor capacity to
respond to public health
emergencies, severe inequality of
health care services, and lagging
development of public health
information systems.
Public health issues, like diabetes education, diagnosis and
treatment are at the top of the government’s priorities.

11. Healthcare in China
Current Trends
Healthcare
System
Diabetes in China
• Reform
• Current System
Diabetes
Treatments • Availability
• Consumers
• Western vs. TCM
Strategic Analysis
Potential Markets
Entry Strategy
Marketing Mix

12. Healthcare in China
Healthcare Reform:
• Medical costs are growing faster than
income
• 2009 goal to develop a national health
insurance system by the end of 2020
which includes:
 Universal coverage for basic
services
 Targeted improvements to public
health infrastructure, safety, the
pharmaceutical system, and
hospitals
 Essential Drug List that fixes
prices for essential
pharmaceuticals
The Chinese government is focused on making quality medical
care affordable and accessible for all citizens as the cost of
treatment rises faster than wages.

13. Healthcare in China
Current Healthcare System:
 Currently in China, covered
consumers pay:
 50% for medically necessary or
emergency medical services
 50-100% for all other medical
care
 50-100% for pharmaceuticals or
medications
 100% for “elective” procedures
 40% of urban and 57% of rural
resident are not covered by
healthcare
Even with insurance, few costs are covered and the majority of
Chinese consumers are very worried about their ability to afford
medical care.

14. Healthcare in China
Availability of Health Services in China:
Availability of health-related service varies greatly depending on
your physical location.

15. Healthcare in China
Chinese Health Care Consumers:
•Consumers with progressive DM spend
22% of their current household income for
healthcare vs. 9% for average consumer
•Actively research and pursue treatment
options
•Collectivist: Family & friends heavily
influence all medical decisions
Chinese consumers do not passively listen to their doctors; the
family will actively research and evaluate various treatment
options.
page 15 confidential / for EES internal use

16. Healthcare in China
Chinese vs. Western Medicine:
Traditional Chinese Medicine (TCM) Western Medicine
Used for thousands of years, TCM is a holistic Western medicine is the type of medical treatment
system of health and healing, based on the that is most popular in North America and Western
notion of harmony and balance, and employing European countries, based on the use of drugs and
the ideas of moderation and prevention. surgery to treat symptoms.
Both exist side-by-side in the Chinese market, are covered by
insurance, and are considered valid treatment options for
different purposes and conditions.
page 16 confidential / for EES internal use

17. Healthcare in China
Chinese vs. Western Medicine:
Traditional Chinese Medicine (TCM) Western Medicine
Used for thousands of years, TCM is a holistic Western medicine is the type of medical treatment
system of health and healing, based on the that is most popular in North America and Western
notion of harmony and balance, and employing European countries, based on the use of drugs and
the ideas of moderation and prevention. surgery to treat symptoms.
• Slower acting, milder side effects • Quickly alleviates symptoms
page 17 confidential / for EES internal use

18. Healthcare in China
Chinese vs. Western Medicine:
Traditional Chinese Medicine (TCM) Western Medicine
Used for thousands of years, TCM is a holistic Western medicine is the type of medical treatment
system of health and healing, based on the that is most popular in North America and Western
notion of harmony and balance, and employing European countries, based on the use of drugs and
the ideas of moderation and prevention. surgery to treat symptoms.
• Slower acting, milder side effects • Quickly alleviates symptoms
• Consumers prefer TCM to cure the underlying • Consumers prefer WM when the time-frame
illness when the time-frame is longer or when shorter and a medical diagnosis has been made
the cause of symptoms is uncertain
•Consumers increasingly prefer WM when there is a
sense of urgency in treatment
page 18 confidential / for EES internal use

19. Healthcare in China
Chinese vs. Western Medicine:
Traditional Chinese Medicine (TCM) Western Medicine
Used for thousands of years, TCM is a holistic Western medicine is the type of medical treatment
system of health and healing, based on the that is most popular in North America and Western
notion of harmony and balance, and employing European countries, based on the use of drugs and
the ideas of moderation and prevention. surgery to treat symptoms.
• Slower acting, milder side effects • Quickly alleviates symptoms
• Consumers prefer TCM to cure the underlying • Consumers prefer WM when the time-frame shorter
illness when the time-frame is longer or when the and a medical diagnosis has been made
cause of symptoms is uncertain
•Consumers increasingly prefer WM when there is a
sense of urgency in treatment
• TCM to treats a problem • WM fixes a problem
page 19 confidential / for EES internal use

20. Healthcare in China
Chinese vs. Western Medicine:
Traditional Chinese Medicine (TCM) Western Medicine
Used for thousands of years, TCM is a holistic Western medicine is the type of medical treatment
system of health and healing, based on the that is most popular in North America and Western
notion of harmony and balance, and employing European countries, based on the use of drugs and
the ideas of moderation and prevention. surgery to treat symptoms.
• Slower acting, milder side effects • Quickly alleviates symptoms
• Consumers prefer TCM to cure the underlying • Consumers prefer WM when the time-frame shorter
illness when the time-frame is longer or when the and a medical diagnosis has been made
cause of symptoms is uncertain
•Consumers increasingly prefer WM when there is a
sense of urgency in treatment
• TCM to treats a problem • WM fixes a problem
•Consumers who prefer TCM tend to be more •Consumers who prefer TCM see it as a way to by-
focused on a living a healthy lifestyle pass healthy lifestyle changes
page 20 confidential / for EES internal use

21. Healthcare in China
Chinese vs. Western Medicine:
Traditional Chinese Medicine (TCM) Western Medicine
Used for thousands of years, TCM is a holistic Western medicine is the type of medical treatment
system of health and healing, based on the that is most popular in North America and Western
notion of harmony and balance, and employing European countries, based on the use of drugs and
the ideas of moderation and prevention. surgery to treat symptoms.
• Slower acting, milder side effects • Quickly alleviates symptoms
• Consumers prefer TCM to cure the underlying • Consumers prefer WM when the time-frame shorter
illness when the time-frame is longer or when the and a medical diagnosis has been made
cause of symptoms is uncertain
•Consumers increasingly prefer WM when there is a
sense of urgency in treatment
• TCM to treats a problem • WM fixes a problem
•Consumers who prefer TCM tend to be more •Consumers who prefer TCM see it as a way to by-
focused on a living a healthy lifestyle pass healthy lifestyle changes
To have an invasive procedure would require more than a
doctor’s recommendation, a sense of urgency and a belief that
the procedure could fix a serious condition would be needed.
page 21 confidential / for EES internal use

22. Diabetes in China
Current Trends
Healthcare
System
Diabetes in China • Global Rank
• Global Prevalence
Diabetes • Market Growth
Treatments • Drivers of Growth
• Demographics
Strategic Analysis • Education & Awareness
Potential Markets
Entry Strategy
Marketing Mix

23. Diabetes in China
Top 10 Countries with the
Highest Cases of Diabetes
China has more cases of diabetes than any other
country in the world.

24. Diabetes in China
Prevalence of Diabetes (%)
Top 10 most populated countries
China’s rate of diabetes is high relative to other countries and
continues to climb.

25. Diabetes in China
Market Growth:
2025-2030:
180MM Total Cases of Diabetes
CURRENT 14.7% Prevalence Rate
SITUATION:
7.2MM New Cases Per Year
90 MM
9.2% 4.2MM Diabetes-related Deaths
2 MM
1.5MM
Market growth is projected to be significant. Total
cases, prevalence, new cases and mortality are all on the rise.

26. Diabetes in China
Drivers of Diabetes Growth
200
180
160
140
120
100
80
60
40
20
Population growth, urbanization, risk factors, and age are all
factors driving the growth of the diabetic population in China.

27. Diabetes in China
Demographics: Gender
Diabetes Cases by Gender
45.70%
54.30%
Men Women
There are a significant number of cases in both men and
women.

28. Diabetes in China
Demographics: Age
Population and Diabetes Cases
millions
by Age Group
500
435
400 380
300
200 172
100
43.7 35
13.92
0
20-39 40-59 60+
Age
Population Cases of Diabetes
The highest percentage of diabetes cases is in the 40-59 age
range, but the greatest number of cases is in the 20-39 age
range. This is much younger than other countries.

29. Diabetes in China
Demographics: Weight
Status Diabetes Pre-
Diabetes
Underweight 4.5% 11.2%
(BMI<18.5)
Healthy 7.6% 13.1%
Weight
(BMI 18.5-24.9)
Overweight 12.8% 19.9%
(BMI 25.0-29.9)
Obese 18.5% 26.7%
(BMI>30.0)
Their overall obesity rate is growing and the Chinese population
has a higher diabetes prevalence rates at lower BMI’s than in the
U.S.

30. Diabetes in China
Demographics: Income & Geography
Prevalence (%) estimates
of diabetes (20-79 years)
by income group
Urban vs. Rural Prevalence
0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00%
Rural Urban
Diabetes is much more prevalent in urban areas and upper-
income groups. Studies show up to 5 times as many cases in
urban than rural areas.

31. Diabetes in China
Education & Awareness:
Known Cases
•13% of total medical expenditures in China are
directly caused by diabetes: RMB 173.4 billion or
US$25 billion
•Early diagnosis can lower the risk of complications by
more than 50% 39.3%
•Diabetes education significantly improves A1C levels 60.7%
in diagnosed patients
•Organizations currently working to educate Chinese
citizens include: Chinese Diabetes
Society, International Diabetes Foundation, Chinese
Ministry of Health, WHO, Doctors Without
Undiagnosed Diagnosed
Borders, United Nations, Project HOPE
•Corporate partners like Bayer & Elli Lilly are also
significantly involved in the effort
The education and awareness diabetes is very limited in China.
More than half of people who have diabetes don’t know they
have it which is costly in terms of dollars and their health.

32. Diabetes Treatments
Current Trends
Healthcare
System
Diabetes in China
• Options
Diabetes • Costs
Treatments
• Diabetic Stages
Strategic Analysis
Potential Markets
Entry Strategy
Marketing Mix

33. Diabetes Treatments
Breakdown of Treatment Utilization in China:
Pharma Insulin TCM
Lifestyle
80% 12% 24%
61% Pharma 4% Insulin 5% 9% Lifestyle
Only Only TCM Only Only
• Glucobay • Lantus • Acupuncture • 50-60% Diet
• Januvia • Humulin • Herbal Medicine Modification
• Actos • Humalog • Diet Therapy • 90% Exercise 3+
• Avandia • Novolin • Meditation times/week
• Metformin • Byetta • Massage
• Glibenclamide • Biocon
• Glipizide • Glufast
• Galvus
Primary diabetic treatments in China include
pharmaceuticals, injectables, Traditional Chinese Medicine and
lifestyle changes. The proportion of patients using each method
is shown above.

34. Diabetes Treatments
Approximate Out-of-Pocket Cost (USD) of Diabetes Treatments in
China (per year):
Pharma Insulin TCM
Lifestyle
80% 12% 24%
$125-250 $120 $100-180 $0
Yearly diabetic medication for urban residents is about 5-10% of
their disposable income and for rural residents it is about 15-
20%.
page 34 confidential / for EES internal use

35. Diabetes Treatments
Classification of Diabetic Stages:
Early Moderate Severe
Characteristics •Newly diagnosed • Regularly see their •Regularly see their
•Periodically see clinician clinician clinician
•Focus on lifestyle • Worried about disease •Intrusion on their daily
changes and prevention progression life
• Try to stay compliant with •Experiencing serious
their diets complications
•Trouble controlling
blood sugar
page 35 confidential / for EES internal use

36. Diabetes Treatments
Classification of Diabetic Stages:
Early Moderate Severe
Characteristics •Newly diagnosed • Regularly see their clinician •Regularly see their
•Periodically see clinician • Worried about disease clinician
•Focus on lifestyle changes progression •Intrusion on their daily life
and prevention • Try to stay compliant with •Experiencing serious
their diets complications
•Trouble controlling blood
sugar
Treatments Controlled with diet On a combination of Insulin dependant
and exercise and pharmaceutical drug
maybe oral medication therapies
or TCM
page 36 confidential / for EES internal use

37. Diabetes Treatments
Classification of Diabetic Stages:
Early Moderate Severe
Characteristics •Newly diagnosed • Regularly see their clinician •Regularly see their
•Periodically see clinician • Worried about disease clinician
•Focus on lifestyle changes progression •Intrusion on their daily life
and prevention • Try to stay compliant with •Experiencing serious
their diets complications
•Trouble controlling blood
sugar
Treatments Controlled with diet and On a combination of Insulin dependant
exercise and maybe oral pharmaceutical drug
medication or TCM therapies
A1C < 7.5 7.5-8.5 >8.5
page 37 confidential / for EES internal use

38. Diabetes Treatments
Classification of Diabetic Stages:
Early Moderate Severe
Characteristics •Newly diagnosed • Regularly see their clinician •Regularly see their
•Periodically see clinician • Worried about disease clinician
•Focus on lifestyle changes progression •Intrusion on their daily life
and prevention • Try to stay compliant with •Experiencing serious
their diets complications
•Trouble controlling blood
sugar
Treatments Controlled with diet and On a combination of Insulin dependant
exercise and maybe oral pharmaceutical drug
medication or TCM therapies
A1C < 7.5 7.5-8.5 >8.5
Associated None Single Multiple
Conditions
page 38 confidential / for EES internal use

39. Diabetes Treatments
Classification of Diabetic Stages:
Early Moderate Severe
Characteristics •Newly diagnosed • Regularly see their clinician •Regularly see their
•Periodically see clinician • Worried about disease clinician
•Focus on lifestyle changes progression •Intrusion on their daily life
and prevention • Try to stay compliant with •Experiencing serious
their diets complications
•Trouble controlling blood
sugar
Treatments Controlled with diet and On a combination of Insulin dependant
exercise and maybe oral pharmaceutical drug
medication or TCM therapies
A1C < 7.5 7.5-8.5 >8.5
Associated None Single Multiple
Conditions
% of Diabetic 48% 39% 12-13%
Population
page 39 confidential / for EES internal use

40. Diabetes Treatments
Classification of Diabetic Stages:
Early Moderate Severe
Characteristics •Newly diagnosed • Regularly see their clinician •Regularly see their
•Periodically see clinician • Worried about disease clinician
•Focus on lifestyle changes progression •Intrusion on their daily life
and prevention • Try to stay compliant with •Experiencing serious
their diets complications
•Trouble controlling blood
sugar
Treatments Controlled with diet and On a combination of Insulin dependant
exercise and maybe oral pharmaceutical drug
medication or TCM therapies
A1C < 7.5 7.5-8.5 >8.5
Associated None Single Multiple
Conditions
% of Diabetic 48% 39% 12-13%
Population
It is important to use disease progression as a way to further
segment the diabetic population, because treatment options
and patient characteristics are different at each stage.
page 40 confidential / for EES internal use

41. Strategic Analysis
Current Trends
Healthcare
System
Diabetes in China
• SWOT
• Porter’s Five Forces
Diabetes
Treatments •Key Takeaways
Strategic Analysis
Potential Markets
Entry Strategy
Marketing Mix

42. TOWS Strategic Alternatives Matrix
Strategic Analysis
SWOT:
Internal Strengths Internal Weaknesses
1. J&J Brand awareness 1. New entry to market
2. J&J Existing Sales Force 2. Elective procedure (not paid via ins)
3. J&J Training Facilities for doctors 3. 1 year limited use
4. Fewer side effects than alt 4. Muted effects after 1st use
5. Scalability of product 5. Low priced alternatives
6. Yearly (vs. daily) maintenance 6. Unappealing procedure
External Opportunities External Threats
1. Large and growing market 1. Pharmaceutical strengths
2. No direct substitute (currently) 2. Possible entrants of substitutes
3. Pockets of high income in China 3. Limited skilled doctors in China
4. Urbanization movement 4. Limited awareness of diabetes
5. Insulin dependancy intolerance 5. Government power
6. Prevalance in 20-30 age bracket
page 42 confidential / for EES internal use

43. Strategic Analysis
Porter’s Five Forces:
Threat of New Entrants – Low
Barriers to entry:
• Finances needed to get
approved in clinical studies
• Patents
Rivalry – Low
Bargaining Power of Bargaining Power of
Suppliers – Low • No direct Buyers - High
competition
• Supplies to make the sleeve for same • Chinese consumers
are inexpensive and easily product in have numerous options
sourced China to treat their diabetes
Threat of substitutes – Medium
• Insulin is inexpensive,
subsidized by
government

44. Strategic Analysis
Key Takeaways:
Opportunities Challenges
• Large and growing diabetic population • Weak purchasing power of Chinese
consumers
• Rapid growth in emerging diabetes care
market which could translate into first- • Low-cost and easily accessible
mover advantage treatment alternatives
• No direct substitutes • Cultural resistance to surgical
procedures
• Growing affluent population
• Lack of knowledge about the
• Growing concern regarding the safety of seriousness of diabetes
medicine available in China
• Government proactively encouraging
economic investment and health care
initiatives
page 44 confidential / for EES internal use

45. Potential Markets
Current Trends
Healthcare
System
Diabetes in China
• Market Segments
• Analysis
Diabetes
Treatments • Selection
Strategic Analysis
Potential Markets
Entry Strategy
Marketing Mix

46. Potential Markets
Mission Critical Work Hard, Play Hard Caregivers
Moderate and severe Wealthy, urban, severe Wealthy, urban families
diabetics living diabetics who’s busy who are taking care of
in rural China who are Westernized lifestyles aging parents with
in desperate need of make daily insulin severe diabetes and
effective, long-term therapy inconvenient desire a safer more
treatment. and difficult to manage. convenient treatment
than insulin.

47. Mission Critical
Moderate and severe diabetics living in rural China who are
in desperate need of effective, long-term treatment.
Market Size 28.3M Severe to Moderate Diabetics
Skilled Physicians Physicians: 1.3-.06 doctors per 1,000 people
Hospitals: 1 hospital every 257-1047 km2
Ability to Pay Rural net income =$812/year
9-22% expected healthcare cost=$85-$179/year
Benefits: Limitations:
- Large underserved market - If government or NGO won’t cover
- Minimal competition from pharma or costs of device and
insulin procedure, consumers will not have
- Partnering with government or NGO to ability to pay.
bring resources to this population - If there are complications, patients may
would be good PR for J&J and fulfill not have immediate access to medical
their philanthropic mission care.
- There is a serious need for a low - Launching a new product in a high-
maintenance treatment option due to need population leaves J&J open to
lack of availability of continuing accusations of “experimenting” on the
medical care. poor
- J&J is a low-risk company and this is a
high risk option

48. Work Hard, Play Hard
Wealthy, urban, severe diabetics who’s busy Westernized lifestyles
make daily insulin therapy inconvenient and difficult to manage.
Market Size 239,086 (urban, diabetes, 40-60, severe, affluent)
Skilled Physicians Physicians: 5.8 doctors per 1,000 people
Hospitals: 1 hospital every 1.4 km2
Ability to Pay Urban Net Income= Global & Mass Affluent: >$15,900
22% expected healthcare cost = >$3498
Benefits: Limitations:
- J&J currently has strong presence in - It may be hard to convince even severe
urban hospitals and connections with diabetics to have this type of
skilled physicians procedure, due to:
- Targeting severe diabetics is an • Comparatively low cost for
advantage due to: alternative treatments
• Culturally, only very serious • Cultural resistance to surgical
conditions are treated surgically procedures
• Clear right to win against • Collectvism, which may make it
insulin, more difficult against difficult to find early adopters of a
pharma. radically different idea.
- Takes price out of the equation and
allows J&J to compete on convenience
and effectiveness.
- Younger generation more open to

49. Caregivers
Wealthy, urban families who are taking care of aging parents
with severe diabetes and desire a safer more convenient
treatment than insulin.
Market Size 248,933 (urban, diabetes, 60+, severe, affluent)
Skilled Physicians Physicians: 5.8 doctors per 1,000 people
Hospitals: 1 hospital every 1.4 km2
Ability to Pay Urban Net Income= Global & Mass Affluent: >$15,900
22% expected healthcare cost = >$3498
Benefits: Limitations:
- Highest growth rate for severe - It may be hard to convince even severe
diabetes is among 60+ population diabetics to have this type of procedure,
- Researching and accessing best care due to:
for aging parents is very important to • Comparatively low cost for alternative
Chinese families treatments
- Low-maintenance therapy would help • Cultural resistance to surgical
to ease the burden for children taking procedures
care of one or more ageing parents. • Older generations being more risk-
adverse and closed to western ideals
• The possible perception that children
are “experimenting”
on parents

50. Target Market Selection

51. Target Market Selection
Work Hard, Play Hard
Wealthy, urban, severe
diabetics who’s busy
Westernized lifestyles make
daily insulin therapy
inconvenient
and difficult to manage.
We chose this segment, because:
• Younger segments are less risk-adverse and more accepting of Western practices
• Busy, working professionals are willing to pay a premium for convenience
• Young, affluent consumers are attracted to high-end (high-priced) Western goods
• Urgency of treatment and control is greatest among younger people with severe
complications

52. Entering China
Current Trends
Healthcare
System
Diabetes in China
Diabetes
Treatments • Competitive Set
• Positioning
• Growth Potential
Strategic Analysis
Potential Markets
Entry Strategy
Marketing Mix

53. Entering China
Competitive Set: Insulin
• In 2010, Novo Nordisk, Eli Lilly and
Sanofi-Aventis accounted for 90.6%
of China’s insulin market, while
Tonghua Dongbao, the largest
domestic company, only accounted for
3.7%
• In 2009, China’s insulin market size
reached up to RMB5.3 billion, but still
accounted for less than 6% of the
global market.
• CAGR for growth in Chinese Insulin
Market=26.8%

54. Entering China
Positioning:
1. CONVENIENT– Right to Win
• No more need for insulin
• No need to check your sugar levels and inject insulin
multiple times night and day
• Yearly, rather than daily maintenance
2. EFFECTIVE – Right to Win Positioning Statement
• Make claims on more improvement in A1C than
insulin DiaGuard is the one
• Induce weight loss where insulin causes weight gain
diabetes treatment that
provides severe
• While its implanted, you will get better results than if
on insulin diabetics with a safe,
effective, convenient
therapy which has been
3. SAFE – Right to Play
clinically proven to reduce
• Skilled specialists trained and supported by J&J
A1c more significantly and
• Very few side effects when compared to other
have fewer side effects than
treatments
insulin.
• As safe to use as insulin
.

55. Entering China
Growth Potential
• The first year target for the foothold Projected Revenue Growth
12000000
market is $30M or 15,000 patients,
$98.3M
which is 6% of the target market 10000000
segment
80000000
• Capturing a 6% share of the target
USD
60000000
market would equate to a 0.14% share
in the overall Chinese insulin market 40000000
20000000
• Based on the 26.8% CAGR for growth
in the Chinese Insulin Market, we 0
project revenue in 5 years to reach 2012 2013 2014 2015 2016 2017
$98.3M
Starting with a base of 15,000 patients or $30M in revenue in
year one, would grow to $98.3M in revenues in year five.

56. Marketing Mix
Current Trends
Healthcare
System
Diabetes in China
Diabetes • Product & Branding
Treatments • Pricing
• Placement
Strategic Analysis • Promotions:
o Benchmarking
o Advertising Regulations
Potential Markets
o Consumer Attitudes
o Purchase Funnel
Entry Strategy
Marketing Mix

57. Marketing Mix
Product & Branding
• Brand Name: DiaGuard
• Cultural significance of the “Guardian” concept
• Descriptive name helps relay information about the product
• Global affluent in China prefer Western brands
• English brand helps with global portability

58. Marketing Mix
Pricing
•We are not competing on price, because of low cost of alternatives and
affluent target market. We are competing on convenience and effectiveness.
•Due to the Chinese consumers’ limited ability to pay, we recommend $2000
per procedure as the max price when entering this market
• Assuming a 22% healthcare expenditure vs 9% average, $2000 is still more than
50% of total yearly healthcare expenditures for affluent Chinese consumers
• Minimum price set by J&J is $1500-$2000
•Addressing the Gray Market:
• Due to the developing medical care market in China, people are not currently
traveling to China for medical procedures
• Our buyers are not price sensitive, so they would not be “shopping” for lower
prices
Although we are not competing on price, even affluent Chinese
consumers have a limited ability and willingness to pay. We
recommend entering the market at a price of $2000.

59. Marketing Mix
Placement • 57-75% of middle-class
• 2 types of hospitals: consumers would seek specialty
1. Public (81%) medical care at a private
hospital
• State owned, operated and
subsidized by the
government • 58-83% of middle-class
• Dominate healthcare market consumers believe private
2. Private (19%) hospitals have greater
• Primarily foreign-owned or
technical expertise
joint-venture
• Affordable only to affluent • Willingness-to-Pay at Private
consumers Hospital: .4% would pay 8
• Small, focus on out-patient times more, 12% would pay 3
procedures to 4 times more, 43% would
pay 2 to 3 times more than at
public facility
We recommend placement in private hospitals. Affluent
consumers are more likely to seek specialty care, have greater
confidence in, and are willing to pay more at private hospitals.

60. Marketing Mix
Promotions: Benchmarking
-Promote diabetes awareness
- Create partnerships with World Diabetes Foundation, the
Ministry of Health, and selected key opinion leaders
- Physician training
- Facilitate physician trainings in both small and large cities
- Patient education - facilitate education programs to support
patients in using their medicine and facilitate lifestyle changes
and prevention
- NovoCare telephone hotline – diabetics directly communicate
with trained diabetes management specialists
- NovoCare Education – run by the Novo Care Club with more
than 300 members
- Changing Diabetes Bus: promote diabetes awareness, provide
feedback to already diagnosed diabetics, facilitate local
education initiatives
Currently, market leaders are taking a holistic approach to their
promotions. Their focus is on awareness, training and education.
We recommend J&J take a similar approach with DiaGuard.
page 60 confidential / for EES internal use

61. Marketing Mix
Promotions: Advertising Regulations
-2009: Medical ads must be accurate in and SHALL NOT EXAMPLE:
INCLUDE:
– Assertion or guarantee of effectiveness
NO: “Diaguard is more
– Description of the efficacy rate or recovery rate
– Comparison to other devices, drugs or therapies in
effective than insulin at
effectiveness or safety treating diabetes.”
– Non-scientific descriptions of the characteristics or
mechanisms
– Research findings that cannot be confirmed
YES: “In a clinical
– Implications that the device is a cure-all study, DiaGuard was
– Promising words such as safe, no side effects, refund if shown to reduce HA1c
ineffective, or exclusive words like only, exact, newest levels by __%, compared
technology, most advanced
– Words that imply the device is necessary for daily life or
to ___% with insulin.”
curing disease
– Words that indicate the device may help the user deal with
common life pressures, improve performance, make the user
more energetic, taller or more talented.
Significant regulations on medical advertisements exist, prompting
ads in this industry to be more informational or educational in
nature.
page 61 confidential / for EES internal use

62. Marketing Mix
Promotions: Consumer Attitudes Toward Medical Advertising
• > 16% of all advertising expenditures are spent on Medical advertising. It is one of the
most heavily advertised product categories in China.
• 19% of Chinese consumers report using advertising as a source of information
about medical treatments (compared to only 2% in US)
• Chinese consumers hold positive attitudes toward advertising in general and
specifically medical-related advertising
• Consumers distrust over-stated claims but appreciate information on new products
• 45% report they looked online for information about health care treatment options
in the past year
• 44% report searching online for information provided by a specific doctor; notably,
more than half of those with a chronic condition (55%) say they searched for such
information.
Consumers have positive feelings toward informational medical
advertising and they actively seek out information about treatment
options.
page 62 confidential / for EES internal use

63. Marketing Mix
Promotions: Consumer Sources of Information
• As trusted sources of information on effective and safe treatments,
consumers rely on:
• 53%: Doctors at academic medical centers
• 41%: Reports from medical associations/societies
• 38%: Internet (such as Baidu, Google or Baidu Wenku)
• 37%: Doctors at community hospitals
• 28%: Pharmacies
• 27%: Health insurance companies/health plans
• 24%: Employers (e.g., health benefits office)
• 23%: Pharmaceutical or Medical Device Manufacturers
Chinese consumers use a variety of resources, beyond medical
professionals, to gain information about treatment options. We
sought to incorporate these sources into our purchase funnel.
page 63 confidential / for EES internal use

64. Marketing Mix
Promotions: Purchase Funnel
Awareness
Interest
Consideration
Trial
Re-Trial
page 64 confidential / for EES internal use

65. Marketing Mix
Purchase Funnel: Awareness>Interest>Consideration>Trial>Re-trial
Awareness
Consumer Awareness Process influenced by:
1) Physician Recommendation
2) Patient/Family-Initiated Research for Better
Treatment
3) Diabetic Education and Communications
J&J Marketing Methods:
- Partnership with Government and NGOs
- Sponsorship of major social and cultural
Events
- Participate in diabetes awareness functions
and medical conventions
- Ads in business magazines or newspapers
page 65 confidential / for EES internal use

66. Marketing Mix
Purchase Funnel: Awareness>Interest>Consideration>Trial>Re-trial
Partnerships Social Media & Internet Print & Other
Chinese Medical Doctor Weibo - A cross between Facebook
Association: and Twitter that has +250MM users in Advertise in print publications
An established network of China and is growing an additional commonly read by our target
+2MM doctors in China +10M users per month group, upscale food magazines, travel
& leisure
Chinese Ministry of Health and Baidu – Baidu is the largest internet
World Health Organization: search engine in China
Leaders in promoting diabetes Seek out potential spokes person to
awareness and education Utilize Weibo to promote diabetes awareness
comment, educate, diabetes Example – Jeremy Lin (Athlete –
awareness and drive traffic to our own NBA)
Participate in Diabetes related website, pay Baidu for diabetes
conferences and events with a search results drive traffic to our
focus around driving website
awareness on all treatment
options “in a 2010 survey, 56 percent of Chinese
consumers said they regarded online
advertising as credible, up from 29 percent
in 2009”
page 66 confidential / for EES internal use

67. Marketing Mix
Purchase Funnel: Awareness>Interest>Consideration>Trial>Re-trial
Interest
Consumer Interest Process influenced by:
1) Convincing information about how the
product will solve their specific problem
2) Easy of access to additional information
J&J Marketing Methods:
- Use medical sales force to educate
endocrinologists
- Make informational brochures available
for MD’s to give to patients and to display in
waiting room
- E-newsletter from physician
page 67 confidential / for EES internal use

68. Marketing Mix
Purchase Funnel: Awareness>Interest>Consideration>Trial>Re-trial
Sample Brochure:

69. Marketing Mix
Purchase Funnel: Awareness>Interest>Consideration>Trial>Re-trial
Consideration
Consumer Consideration Process:
Patient & Family need information that:
1) Gives detailed information about the
procedure, benefits, cost and availability
2) Gives testimonials/success stories from
current patients
J&J Marketing Methods:
- Website for additional research
(benchmark: endobarrier.com)
- Include information specific to patients and
family members, because this is a family
decision
- Testimonials from past patients
page 69 confidential / for EES internal use

70. Marketing Mix
Purchase Funnel: Awareness>Interest>Consideration>Trial>Re-trial
diaGUARD
Contact Us
Helping you fight the diabetes
 Sign up for our
challenge
Newsletter
What is diaGUARD? How it works? Is it for you? Support Contact Us
How do I get my
diabetes under
control?
In a 60 minute procedure performed in an outpatient center, a protective sleeve is placed just beyond
the stomach within the first portion of your intestine. As a result of getting this procedure and
changing the way your body processes food, you can expect better control of your diabetes, as
compared to other available treatments.

71. Marketing Mix
Purchase Funnel: Awareness>Interest>Consideration>Trial>Re-trial
diaGUARD
Contact Us
Helping you fight the diabetes
challenge  Sign up for our
Newsletter
What is diaGUARD? How it works? Is it for you? Support Contact Us
Videos:
- How it is put in
- How it works
- How it is removed
- Living with diaGUARD

72. Marketing Mix
Purchase Funnel: Awareness>Interest>Consideration>Trial>Re-trial
diaGUARD
Contact Us
Helping you fight the diabetes
challenge  Sign up for our
Newsletter
What is diaGUARD? How it works? Is it for you? Support Contact Us
Is the diaGUARD right for you?
Are you a patient who:
• Has been unable to manage their type 2 diabetes with
medication or lifestyle modifications?
• Are you tired of daily monitoring and injections?
• Are diabetes and constant insulin injections stopping you
from living the life you deserve?
• Looking for a safer and more convenient solution?

73. Marketing Mix
Purchase Funnel: Awareness>Interest>Consideration>Trial>Re-trial
Drive traffic to www.diaguard.com by :
• Search Engine Optimization through
Baidu.com, China’s number one
search engine (both natural and
paid search).
• Sending our newsletters (email blasts)
page 73 confidential / for EES internal use

74. Marketing Mix
Purchase Funnel: Awareness>Interest>Consideration>Trial>Re-trial
Trial
Consumer Trial Process:
Patient & Family need information that:
1) Validates efficacy & safety of procedure
2) Makes procedure seem “socially acceptable”
J&J Marketing Methods:
- Published studies in academic journals
- Testimonials from doctors
- Online “Community”: It’s important to
feel accepted and part of a group
page 74 confidential / for EES internal use

75. Marketing Mix
Purchase Funnel: Awareness>Interest>Consideration>Trial>Re-trial
Academic Studies: MD Testimonials: Online Community: SNS
Chinese Medical Web sites of private RenRen: “For Everybody”
Association: Publishes the hospitals performing most popular SNS in China
most heavily cited and procedure
circulated journals. Kaixin001.com: Another very
Web MD-type service in popular social network.
The Chinese Academy of China - Users are mostly "white
Medical Sciences: Second collar middle class" and
to CMA in citation and Diaguard.com typically come from a "first
circulation. tier cities.“
- Extremely popular among
people who work for
multinational companies and
other white collar companies.
- Wealthy user base.

76. Marketing Mix
Purchase Funnel: Awareness>Interest>Consideration>Trial>Re-trial
Re-Trial
Consumer Re-trial Process:
Patient & Family need information that:
1) Demonstrates and monitors their success
2) Provides value-added services
3) Creates personal relationship
J&J Marketing Methods:
- Smart Phone App to: provide ongoing
support, track success and countdown to
next procedure
- Health-coaching- 24/7 support
page 76 confidential / for EES internal use

77. Marketing Mix
Purchase Funnel: Awareness>Interest>Consideration>Trial>Re-trial
Diabetes Apps: Benefits of Health Coaching:
dLife: U.S. Benchmark -Increases compliance & helps
with disease management
Allows user to:
- log glucose levels -Lowers overall health costs for
- find recipes and nutrition information consumers
- Watch dLife videos
- Connect with the dLife community -Creates long-term relationship
- Connect with experts to get answers and decreases switching
to diabetes-related questions behavior
- graph daily, weekly, or monthly
glucose levels and track trends - Having medical professionals
- E-mail information from app to available to offer 24/7 health
yourself or your health care provider. support gives value-added
service

78. Marketing Mix
Promotions: Purchase Funnel Summary
Awareness Interest Consideration Trial Re-Trial
• Partnership with • Use medical sales • Website for • Published studies • Smart Phone App
Government and force to educate additional research in academic to: provide
NGOs endocrinologists (benchmark: journals ongoing
endobarrier.com) support, track
• Sponsorship of • Make informational • Testimonials from success, and
major social and materials available • Include information countdown to next
cultural events in MD waiting room specific to patients
doctors
procedure
and family
• Participate in • Supply doctors with members, because • Accepting
diabetes awareness materials for this is a family “Community”: It’s • Health-coaching-
functions and patients that makes decision important to know 24/7 support
medical conventions it easy to access that others support
additional • Testimonials from the decision • E-newsletter & on-
• Ads in business information past patients line community
magazines or
newspapers
• Cross-promote with
insulin at the
pharmacy
page 78 confidential / for EES internal use

79. Next Steps
Once a foothold has been
established, we suggest:
1. Move into Caregiver
segment
• Procedure will now be
seen as more socially
acceptable and less
risky
• Can use the power of
“Word-of-Mouth”
Mission Critical Advertising Caregivers
Moderate and severe Wealthy, urban families
2. Build the support to make
diabetics living Mission Critical a who are taking care of
in rural China who are success aging parents with
in desperate need of • Entering in a high-end severe diabetes and
effective, long-term market establishes desire a safer more
treatment. this as truly convenient treatment
philanthropic vs. than insulin.
experimental
• Proven safety &
efficacy will help to
gain financial support