Dechra Pharmaceuticals PLC

Dechra Pharmaceuticals PLC

Annual Report and Accounts for the year ended 30 June 2012

Risks and Uncertainties

As we have stated in previous reports, the Group, like every business, faces risks and uncertainties in both its day-to-day operations and through events relating to the achievement of its long term strategic objectives. The Board has ultimate responsibility for risk management within the Group and there is an ongoing and embedded process of assessing, monitoring, managing and reporting on significant risks faced by the separate business units and by the Group as a whole. More detail in relation to this process can be found within the Corporate Governance section.

The table below highlights the main potential risks to the Group strategy, as identified by the Board, and the controls put in place in order to mitigate the risks:

StrategyRiskHow we mitigate the risk
To develop a high growth, cash generative specialist veterinary products businessCompetitor product launched against one of our leading brands
  • Product improvement plans and marketing strategies are reviewed on a regular basis
  • Where competitor products are launched a response strategy is established and followed by our marketing team to highlight any unique selling points or competitive advantages or to position our products defensively to minimise competitor impact
  • Market research is conducted in order to allow the marketing team to better understand customer needs and ensure that our products fulfil the identified requirements
  • Any product patents are monitored and consideration given to the formulation of a defensive strategy towards the end of the life of the patent
Revenue from recently launched new products failing to meet expectations
  • In respect of all new product launches a detailed marketing plan is established. Progress against the plan is constantly monitored
  • The Group ensures that it has detailed market knowledge and retains close contact with customers through its sales team
  • Alongside the marketing plan the sales team receives training on the product, its benefits and all available technical information
Failure of clinical trials
  • Before major costly efficacy studies are initiated, smaller proof of concept studies are conducted to study the effects of the drug on target species and for the target indication
Prescribing pressure on veterinarians to reduce antibiotic use
  • Regular contact is made with all relevant veterinary authorities to ensure that we have a comprehensive understanding of anticipated regulatory changes
  • Programme of development of new products that minimise antimicrobial resistance concerns
Failure to meet regulatory requirements under which we operate
  • The Group always strives to exceed regulatory requirements and ensures that its employees have detailed experience and knowledge of the regulations
  • All businesses have clearly established quality systems and procedures in place
  • Regular contact is maintained with all relevant regulatory bodies in order to build/strengthen relationships and ensure good communication lines
  • The regulatory and legal teams remain constantly updated in respect of proposed/actual changes in order to ensure that the business is equipped to deal with and adhere to such changes
  • Where any changes are identified which could affect our ability to continue to market and sell any of our products a response team is created in order to mitigate such risk and to retain effective communication with the relevant regulators
  • External consultants are utilised to audit our manufacturing systems prior to any major inspection
To sustain growth and innovate in our Services businessLoss of key personnel*
  • Succession planning is given consideration by the Board and, where deemed necessary, Key Man Insurance is in place
  • In 2009 the Group HR Director developed and implemented a leadership development programme for the senior management team in order to further strengthen the retention of the individuals. This programme is ongoing and includes the involvement of personal coaches
  • As stated in earlier in this report a Performance and Development Review process is in the early stages of implementation
The failure of a major customer or supplier*
  • The business units monitor the financial status of both key customers and suppliers and maintain regular contact with them (including face to face meetings)
  • All contacts with customers are reviewed from both a commercial and legal perspective to ensure that assignment of the contract is allowed should there be a change of control of either of the contracting parties
Fuel shortage/logistics failure
  • Standard operating procedures have been drafted in respect of fuel emergences to provide a daily service. Such standard operating procedures are regularly reviewed in order to ensure they remain effective
  • Delivery routes are constantly monitored by the operations department in order to ensure that they remain effective, economic and efficient
  • Routine ongoing maintenance of the automated picking circuit at NVS and ensuring that all critical components are held on site

* These risks apply across all trading segments.

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