Plastic Syringes in Kuwait February 15, 2014 Page 1 © 2014 Umnitech, Inc. - Prepared by David Talbot

Business Plan

Plastic Syringes in Kuwait

Introduction

Syringes are the familiar glass or plastic items nurses use to inject vaccinations or

medicines. Plastic disposable syringes represent a huge and growing market, projected as $12

billion worldwide in 2015 (GIA). The growth is partly due to regular home use by the increasing

numbers of people with diabetes and other chronic diseases that need frequent injections to maintain

their health.

Because of infection concerns and other reasons, the reusable glass syringes are being

phased out in favor of one-time, (single-use) plastic disposable syringes.

Plastic syringes are made of polyethylene or polypropylene plastic. These plastics are

already made in large volume in Kuwait as a by-product of the oil industry. A key business driver

for this enterprise is the abundant availability of low cost plastic material, compared to potential

competitors in China (Dow).

The proposal is to use the local polyethylene and polypropylene supply to produce plastic

syringe components in Kuwait. The production would be a heavily automated process with

expensive equipment but low labor costs.

Syringe components are relatively high value and low weight, and so are easy to ship to

major markets in Europe or North America. Converting commodity plastic to precision

components would be a significant value added item for Kuwait, and would continue Kuwait’s path

to a diverse economy, not just centered on unrefined petroleum extraction.

The Market

Overview

First used in 1853, syringes might be considered a mundane, mature product. However, the

syringe market is undergoing a disruptive change, which gives opportunities for new market

entrants (Wood). A disruptive change is a technology or behavior change that totally upends the

traditional market. For example, digital photography virtually eliminated the old film photographs.

Great film companies like Kodak failed (Disalvo). New electronics companies like Panasonic grew

rapidly.

Because of infection concerns, especially with HIV/AIDS, the old reusable glass syringe is

rapidly being phased out worldwide, in favor of one-time plastic disposable syringes. Within the

disposable syringe market, there are new trends. First, there is the “safety syringe”, which prevents

nurses accidently sticking themselves with the needle. Second, the personal home injection market

is rapidly growing for people with chronic diseases like diabetes. Third, there is a movement to

one-time pre-filled syringes, where the drug is already in the syringe (Wood).

The increasing wealth and aging of populations, even in developing countries, has produced

an increase in both chronic diseases and the ability of patients to pay for ongoing medical treatment

(WHO). For the syringe market, chronic disease is the growth area as people may need multiple

syringes every week for many years.

Plastic Syringes in Kuwait February 15, 2014 Page 2 © 2014 Umnitech, Inc. - Prepared by David Talbot

Market Size and Distribution

The global market for disposable medical devices is estimated at over $100 billion

(Baoying) of which $12 billion is for syringes (GIA). 40% of the market is in the United States and

29% in Europe. Together China, India, Japan and emerging Asian countries account for 18% of the

market, but are also the fastest growing sector (Baoying).

Product Description

Production of Components

The intent initially is to only produce the plastic syringe components. These components

would then be supplied to medical device manufacturers who would insert the metal needle, or

cannula, and perform final assembly, branding, and distribution. There is also an established

market, wholesale and retail, for syringes without cannulas (Zoro).

Disposable Polyethylene Syringes

These syringes are quite easily made from the relatively soft polyethylene plastic. To use a

syringe, the individual fills the syringe with medicine from a vial, injects the medicine into the skin,

and then throws away the syringe. The key aspect is that the medicine is in contact with the plastic

for less than one minute, so there is minimal chemical interaction between the medicine and the

syringe plastic. This absence of technical complications suggests polyethylene syringes as the best

starting point for the company.

Within the basic product, there will be a variety of sizes and styles, and so the machines will

need to be changed periodically for the slightly different mold configurations.

Exact Initial Product Decisions

This will be a difficult decision to make, as the company will initially have little detailed

market knowledge. Syringes come in all shapes and sizes, so the company should order a variety of

molds covering the common sizes. Only after marketing and production are under way will it

become more obvious which sizes and styles will be most attractive. The company will

acknowledge in advance that there will be some initial wastage.

Disposable Prefilled Polypropylene Syringes

Especially with home use, the 8-step process of filling a syringe and performing the

injection is inconvenient, especially as many of the patients are older (Kiang). Failure to properly

follow a medication plan is an increasingly serious public health issue. Also there are problems

with measuring the correct dosage and wastage. The medicine is usually supplied with a 20%

overage to take care of spillage.

An innovation is the prefilled syringe, which comes with the correct medicine and dosage

already in the syringe. A prefilled one-time syringe avoids all these problems. The elimination of

wastage is particularly important with very high cost medicines. There were 2.5 billion prefilled

syringes used in 2011, with a 10% annual growth rate, and containing over 50 varieties of medicine

(Wood).

With prefilled syringes, the technical problem is that the medicine may be in contact with

the syringe plastic for a matter of months, and there could be chemical interaction and leaching

between the plastic and the medicine. There is also a potential of the plunger becoming stuck in the

cylinder, and so the need for some lubrication.

Plastic Syringes in Kuwait February 15, 2014 Page 3 © 2014 Umnitech, Inc. - Prepared by David Talbot

The rapid growth in the prefilled syringe market should be noted for the medium term, and

discussions started with the plastics suppliers to find suitable plastic materials for this market. The

best candidate is polypropylene, with is produced locally, but it is a rigid material and more difficult

to form into shapes. There are many varieties of polypropylene. The local plastic suppliers are huge

companies with large world class technical departments (Dow).

As prefilled syringes are the growth market, it is important to start discussions with the

plastics suppliers to identify the details of the materials required for these components and the

potential difficulties in the production process. The profit margins are higher for the more exacting

requirements of the prefilled syringe components. However, because of the extra complications, it

is suggested that the prefilled syringe market be tackled at a later date.

Similar Products

Though the intent is to first consider plastic syringes, there are several other single-use

disposable medical products that use the same materials, the same production processes, and are

sold through the same distribution channels. To name a few, these products include catheters,

laryngoscope blades, speculas, ear curettes, and incontinence devices.

From a production and marketing angle, it would be relatively easy to add these products

gradually. Apart from increased revenues, product variety would likely smooth the production

flow. Orders from the single syringe product line may well be of a large size, but with idle time in

between.

Selling Commodity Products

A commodity product is a product that satisfies some minimal technical and performance

standards, but otherwise is indistinguishable from its competitors. Examples are West Texas

Intermediate Oil, USA Midwestern Corn, and generic kitchen paper towels. As long as it meets the

standard, the customer does not care which oil well, farm, or paper goods factory produced the item.

Buying decisions are made largely on cost, including transport and tax costs. The advantage

is that a new competitor can get in quickly with a lower price. The huge disadvantage is that there

is no preference or loyalty for a particular oil well, farm, paper factory, or syringe manufacturer.

Early entrants into a market often start with components and commodity products. Western

Countries buy huge amounts of products from China, but Westerners have no knowledge of Chinese

Brands. Westerners buy either boring “no name” jeans from China or else Nike shoes and Apple

iPhones with American Brand Names, but Chinese manufacture.

The venture into commodity syringe component manufacturing is made with complete

awareness of the situation. The initial first step is contemplated as the initial rung on the ladder in

building a high technology medical supplies company.

Medical Device Standards

Even with commodity products it is important to meet the minimal standard. Medical

devises are especially heavily regulated for safety and efficacy. The company must research,

comply with, and be certified with standards published by regulatory agencies, such as the

European Union (EU).

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Selling Private Label Products

Walking into a Walmart Superstore in the USA or Carrefour in France, and alongside the

famous Brands like Nestle you will see almost identical items carrying the Store Brand. These

Store Brand or Private Label products are of high quality, but slightly less expensive than the

famous Brand products.

A good first opportunity for the company to break out of pure commodity competition, is to

arrange a Private Label supply contract. This could be a special size syringe, perhaps for

veterinarian use. In that way the company could gradually build repeat orders with some customer

loyalty.

Moving up the Value Chain

This paper describes the production of simple plastic syringes using inexpensive local

feedstock and highly automated equipment. Though this basic commodity product represents a

viable approach, it underestimates the capability of Kuwait.

Kuwait is a highly educated country with good capital resources (CIA). Kuwait also is a

high income country with high labor costs (CIA). Initially the company will be successful by

balancing low raw material costs with higher labor costs, but that is a fragile balance. A worldwide

drop in the price of raw plastic would make the company less competitive compared with low wage

countries such as China and Vietnam (CIA).

As the company begins to understand the markets, it should move up the value chain to

more complex and high margin products. Several possibilities exist.

First, the company could produce completed syringes, with cannulas, in sterile packaging.

This would involve assembling the components and purchasing a sterilization system. The labor

content would be higher, but the profit margin would be much higher. The sales message would

concentrate on the high quality image enjoyed by Kuwait (Q8). This expansion could be managed

in the existing building space, and could use expatriate labor.

Second, the company could move into the prefilled syringe market. Initially this would be

with just the plastic components, but then the company could actually introduce the drug dose into

the syringe as a completely finished ready-to-use product. This is a more complex expansion,

requiring a new factory space with a clean room. The finished syringes may also need to be kept

below a certain temperature during shipping. Again this is a more complex project, but one well

within the intellectual and financial capital resources of Kuwait.

Third, building on the widespread quality perception of Kuwait (Q8), the company should

start branding its products. Branded products command higher margins, and engender customer

loyalty and repeat orders. Commodity products generally sell based on the lowest price. Branding

can be expensive. The ideal approach would be for the Government of Kuwait to launch an

awareness campaign explaining the general advantages of doing business in Kuwait, and then

smaller companies could work under this umbrella. Such branding is routinely produced. For

example, The Economist regularly has country-specific special sections, paid for by the countries

involved (Economist).

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Market Forces

Kuwait’s Market Advantages

Syringes are relatively high-value, low-weight items. Though Kuwait has a small home

market, high-value low-weight items may be effectively shipped worldwide (FedEx). Plastic

syringes may be made with expensive automated machines (Ningbo). Kuwait has considerable

capital, but expensive labor and other costs. Therefore, heavily automated processes are attractive

for a Kuwaiti company.

Plastic syringes are made from polyethylene and increasingly polypropylene. The raw

materials to make polyethylene and polypropylene are a by-product of petroleum extraction –

Kuwait’s major industry. Kuwait now has a large polyethylene and polypropylene production

capacity (Dow, 2014). However, polyethylene and polypropylene are a heavy, low-value,

commodity products, and therefore expensive to ship. Hence the polyethylene and polypropylene

raw material is available at very low cost to local Kuwaiti companies.

The low material cost is a major competitive advantage for a Kuwaiti company. It would be

very attractive for Kuwaiti companies to convert raw polyethylene and polypropylene into higher

value complex finished products.

Kuwait has a good reputation for being a well-organized industrial country capable of high

quality. This reputation is anchored by the clean, attractive chain of Q8 roadside service stations in

Europe and the North America (Q8). Thus, apart from well capitalized operations and low cost raw

materials, Kuwait has a quality perception advantage over competitors like China.

The intent is to start with basic components, using only plastic-processing. The components

would be shipped to medical device distributors for insertion of the cannula (needle), finishing,

branding, and distribution. In the future, Kuwait has excellent opportunities to move up the value

chain. First, Kuwait could make finished products, including the cannula. Second, Kuwait could

start making “safety syringes” and pre-filled syringe components and complete syringes. Third,

Kuwait should establish a branding and marketing strategy. The potential market for pre-filled

syringes is very strong as healthcare providers have found that these syringes reduce expensive drug

wastage and improve patient dosing and compliance.

Overall, plastic syringe manufacturing ideally fits Kuwait. Syringes are a reasonably high-

value product, with low shipping weight. The market is increasing as there are more and more

people worldwide with chronic disease. Technology changes are opening the market to new

entrants. Kuwait has low cost raw materials and capital to buy expensive automated manufacturing

equipment. With a reputation for quality, syringes give Kuwait a potential to move up the value

chain, to more complex, higher margin products. The manufacturing of plastic syringes offers

Kuwait one path for transitioning to a more diversified economy, with less dependence on unrefined

petroleum exports.

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Competition

The big competitor is China (MediaSource). In 2010, China was selling plastic syringes for

0.22 Chinese Yuan Renminbi CNY, which is about 4.5 US Cents (OANDA). This was considered

below cost, and China was hit with Anti-Dumping Tariffs.

China does not have its own petroleum production like Kuwait, and so has to import its raw

materials. Therefore, Kuwait can be competitive with its target price of 5 US Cents per syringe.

It is important to restate that a very large factor in the viability of the company is the

abundant local supply of inexpensive raw material, backed by the large local presence of a huge

petrochemical company with world class technical support.

This intense price competition does emphasize the need to start with simple products to gain

understanding of the market and technology, and then use Kuwait’s intellectual capacity, capital,

petrochemical industry, and world reputation to move into higher value, more complex products.

Barriers to Entry

There are few Barriers to Entry. The manufacturing equipment is widely advertised and

available on the internet (Ningbo). The technology is mature. It would be easy to have a consultant

fly to a company to explain the process and machine operation.

It is always more risky to be in an industry with minimal Barriers to Entry, because success

immediately brings more competitors. Realizing this fact, the company must plan to gain initial

advantage through low material prices, and then gradually move into higher complexity and high

value products.

Tariffs and Trade Barriers

Any international company must have current knowledge of Trade Restrictions and Tariffs.

Part of the ongoing plan is to use this first step to gain institutional knowledge about all market and

technical conditions.

As an example, in general there have been no restrictions on medical device components (as

opposed to finished products) imported into the European Union, but that may be changing

(Vollebregt). The proposed Tariff is not finalized, but would be about 6.5%.

As mentioned there have been Anti-Dumping Tariffs against China. European and

American companies are quick to request government protection if they detect unusually low prices.

Trade regulations are complex, but Kuwait is already very internationally connected, so there will

be existing expertise within Kuwait to help in this area.

Logistics

Given the small local market, the company will require an efficient method to ship products

to customers. Fortunately, Kuwait is the central location of Agility Logistics, one of the major

worldwide integrated logistics organizations (Agility). So the company should have no problems

efficiently shipping its products worldwide.

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The Customers

Initially, the customers will be wholesale distributors and independent Sales Reps. With

commodity products it is difficult to reach directly to the end user customer. The end user

customers are hospitals and retail pharmacies. With prefilled syringes, the end user is the

pharmaceutical company that produces the medicine.

Market Segmentation

In a commodity product it is difficult to identify and target traditional market segments, as

the supplier is disengaged from the end user customer.

Segments may be imagined as follows:

First, there are medical supply packaging companies that sell completed products. These

companies assemble the syringes and package them in a sterile container.

Second, there are distributors, who accumulate large inventories from a variety of sources

and sell to packaging companies and pharmaceutical companies.

Third, there are independent Sales Reps or brokers, who do not take physical ownership of

the products, but act as facilitators, organizing the sale and delivery of the transaction.

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Marketing Plan

Overview

This is a new company, being launched into a fiercely competitive commodity market, in

which the company has little knowledge or experience.

There will be an initial marketing budget of $50,000, which will be spent on web marketing,

trade contacts, identifying distributors and independent Sales Reps, and making phone calls to likely

prospects.

Much of the initial work will be “Trial and Error” while the company starts to understand

the market, and what is effective and ineffective. There will be some wasted effort and directions

that do not work.

The Marketing Plan will not be an elegant process. The Marketing Plan will be hard work,

finding contacts and calling them on the phone.

Website

The company must have a multilingual website, primarily in English, but also switchable to

the main market languages of German, Spanish, French, and Italian. The website will describe the

company, and have individual product descriptions. Ecommerce, with a Shopping Cart will come

later. Initial sales will be personal by telephone and email.

The website should emphasize the high quality image of Kuwait (Q8).

Website production can be outsourced to freelancers in India, for example (oDesk).

Search Engine Optimization

This may be the most important item. The great advantage of Search Engines is that if you

do not know exactly who will be your customers, the Search Engines allow your customers to find

you.

Google, Bing, and other Search Engines use a variety of techniques to rank-order Search

Results. The company wants to be at the top of the list when someone searches for a phrase which

fits the company Marketing Plan.

Search Engine Optimization is a process of adapting a website so that it shows up well in

Search Results.

Search Engine Optimization is an area where the company should engage a freelancer to

perform this task (oDesk).

Pay-per-Click Advertising

The concept is that the company buys a keyword on Google or Bing, for example “plastic

syringe”. It is possible to also set a geographic area, and a price to be paid for each “click”. Then

within Google the keyword is linked to the company website.

If a person searches for “plastic syringe” on Google, then the company is listed to the right.

If the person clicks on the link, then the company pays Google some small amount of money.

There is considerable opportunity for fine tuning keywords, price per click, and daily budget

(Google). Again it is worthwhile to contract with a freelancer (oDesk).

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Social Networks

Social Network profiles, especially LinkedIn, are inexpensive to set up and may be very

productive (LinkedIn).

Trade organizations

Trade organizations provide lists of members, and can be a good source of contacts and

information. An example is the Medical Device and Diagnostic Industry Association which lists

many trade groups (MDDI). This would be a good investigative project for a freelancer. Talented

web researchers can be found for US $5 per hour (oDesk).

Kuwaiti Contacts

Kuwait, especially through its Sovereign Wealth Fund (SWF) is a major investor in

companies worldwide. Agility Logistics (Agility) is also very well connected with all major

companies in the world. The company should be forthright with its Kuwaiti colleagues and ask for

referrals and introductions.

Distributors and Sales Reps

Some of these contacts will find the company from Search Engines and “Pay per Click”

advertising. These individuals are always looking for faster, cheaper supply sources. LinkedIn has

a specialized Professional Medical Marketers and Distributors special interest group (LinkedIn).

Freelancer research would again be useful in this area.

For distributors and independent Sales Reps, quality, speed of delivery and payment terms

are competitive inducements. The company could pre-position product at a distributor, and only

bill when the distributor sells the products. The company will need to adopt imaginative and

perhaps risky tactics to build momentum.

Phone Calls

Having gathered lists of potential Distributors and independent Sales Reps, the need is to

call them. The company intends to make hundreds of “cold calls” by phone. Again, freelancers

will be used and given a script (oDesk). It will be important to use individuals with perfect British

or American English. English from India is often difficult to understand and is resented by some

Americans frustrated by Indian Call Centers.

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Operational Plan

Company Organization

The company organization and legal form will be the responsibility of the investors. A lead

investor will also act as a part time, unpaid, mentor and Chief Executive Officer. The legal format

will depend on the tax and personal profiles of the investors.

The Kuwait Investment Authority – essentially a Sovereign Wealth Fund – is also a likely

source for initial and expansion capital (SWF).

HR Plan

The key employees will be 2 Managers, hired on the first day. The individuals will need to

be educated, enthusiastic, speak very good English, and preferably have travelled overseas

previously. One individual should have a business or accounting degree.

The 2 Managers must initially act as “jacks of all trades”. Their tasks will be:

1. to coordinate and gain approval from the investors on major decisions

2. to organize the physical space, including engineering items, City Permits, electrical supply,

and build-out

3. to learn and analyze the production machinery options, and make a final recommendation on

the machine type and features to be purchased

4. to learn to operate the machinery, and understand the chemistry and production process

5. to learn how to drive a fork lift truck

6. to negotiate the polyethylene and polypropylene supply contract with heavy emphasis on

price negotiation – the investors can probably help with final negotiations

7. to draw up lists of potential distributors and independent Sales Reps

8. to make hundreds of phone calls to potential distributors and independent Sales Reps

9. to contract for a company website

10. to contract with Agility Logistics for logistical support

11. to hire the Production Workers

Production Workers should be hired gradually the workload demands. Expatriate workers, of

which there are many in Kuwait (CIA), could be likely candidates. It is probably possible to find

expatriates with plastic injection molding production experience.

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Production Machinery

The Ningbo Machine is proposed as the starting point (Ningbo). Prior to purchase much

more information would be required to know the exact capabilities of the machine and the

availability of Maintenance Service in Kuwait.

There is also some uncertainty with the Ningbo price as to what is included, so the Financial

Plan has purposely inflated the Monthly Machine Cost to account for this uncertainty.

It may be that a different machine set will be purchased, but Ningbo provides a good model

for initial analysis.

Allowing for 1 meter clearance all around the Ningbo footprint (L×W×H = 4.16×1.19×1.79

m.), each machine will occupy 74 sq. m. Each Ningbo machine weighs 3.2 Tonnes (3,200 KG), and

so will require a reinforced floor. The power consumption is 20 KW, 3-phase power.

The company will also need a fork lift truck for loading supplies.

Physical Space

The physical space should be ground floor factory space. Ideally there should be a loading

dock. The floor will need to be reinforced to support the machines. Air conditioning should be

sufficient to take care of both the Kuwaiti summers and also the heat generated by the machinery.

At least 100 KW of 3-phase electrical power must be provided, calculated using starting surges and

power factors typical of high torque electrical motors.

Because of the special machine requirements, an architect and electrical engineering

consultant will be needed to finalize the factory improvement plans.

The space will also need 2 small offices, soundproofed against the machine noise, and a

restroom, lunch room, and storage space.

The size should be large enough for 3 machines at 75 sq. m. each plus 60 sq. m. for office

and lunchroom space, plus 100 sq. m. for product storage, making a total of 385 sq. m.

A 500 sq. m. space will be rented on a 3-year lease. This will allow for expansion with

additional machinery and future activities.

Material Supply

The plastic raw materials will probably initially be supplied by the Equate Petrochemical

Company (DOW). Price negotiation is important, but also the company needs access to technical

support for the selection of clinically appropriate plastics. So negotiations should be firm, but

cordial.

Logistics

The managers will have to learn and absorb a huge amount of information in the first year.

To remove a whole area of complexity, the company will contract locally with Agility Logistics

(Agility) for all shipping, Customs Clearance, shipping insurance, and other logistical items.

Ability to deliver quickly would be a competitive advantage compared to a factory in

Central China.

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Financial Plan

Economics of Syringe Production

Syringes sell at retail in the range or US $0.50 to US $0.90 (Zoro). A US wholesale price is

US $0.12 (East Coast). The target price for the components leaving the Kuwait factory in very

large quantities will be US $0.05 (5 cents US).

Figure 1 Typical Retail Advertisement for a package of 10 syringes without cannula - US$ 0.50 each syringe (Zoro)

High Density Polyethylene has a world price of US $0.16 per pound (453 grams) (Espozito).

An empty syringe without cannula weighs about 4 grams (Medeco). Calculating from the price per

pound and converting to metric, the price for the polyethylene is estimated at about US 1 cent per

syringe. Assuming that syringes may need higher quality polyethylene and accounting for wastage,

the target material cost per syringe is set at $ US 0.02 (2 cents US).

Abundant low cost, locally produced, polyethylene and polypropylene is a major advantage

for the company. Though the estimated material cost is set at 2 Cents US per syringe, the company

should negotiate hard with the local petrochemical companies. The potential of a steady local

customer would be very attractive to a petrochemical company, and some price negotiation off the

“world price” is almost certainly possible.

Therefore, the target Gross Margin for each syringe is set at US $0.03 (3 cents US). As the

manufacturing process is heavily automated, the Gross Margin only includes the polyethylene

plastic cost and not the Direct Labor cost.

The volumes are very large. Medeco (previously mentioned) sells syringes in packages of

1,300 syringes.

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Production Plan

Syringe components are manufactured using a process called Injection Molding. The plastic

is forced into a metal mold, which shapes the final component. The machine costs approximately

US $15,000 and has a target production rate of 1 syringe per second (Ningbo). This production rate

is estimated from the plastic feed rate of the machine. A more accurate machine production rate

should be requested from the machine manufacturer before investing.

The intent is to gradually purchase 3 machines, and operate 12 hours per day, 5 days per

week. This will be 2 shifts, allowing time for machine maintenance, switching to different size

syringes, and material supply.

The weekly production will be targeted as follows:

3 machines x 3,600 syringes per hour x 12 hours x 5 days = 648,000 syringes per week.

At US $0.03 Gross Margin per syringe, this gives a total Gross Margin of US $19,440 per week

Figure 2 Typical Automated Syringe Extrusion Machine (Ningbo)

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Estimated Financial Statements

It is intended that a regular factory space be rented. The extra electrical supply connection,

building improvements, fork lift truck, and a security deposit are estimated at a one-time US

$50,000. In addition, the Working Capital required will be US $50,000 for material inventory, US

$50,000 for Accounts Receivable financing until cash is collected, a marketing budget of US

$50,000, and a US $50,000 Contingency Fund.

Thus the initial Capital Investment will be US $250,000.

The 3 production machines will be leased, with a maintenance contract. Each machine will

be in heavy production use. Each machine will cost US $15,000 (Ningbo) and with shipping from

China, import duties, and installation it is considered that each machine will have an installed price

of US $30,000. Hence each machine has a projected monthly cost, including maintenance of

$4,000.

The finished syringe components will be sold through independent Sales Reps who will take

a planned 15% Commission. Other monthly costs are estimated.

The company will gradually move to full capacity, as explained on the next page in Figure 4.

The eventual projected Income Statement at full capacity is shown here in Figure 3. It is expected

that full capacity will be reached in the Fifth Quarter. Quarterly financial estimates are shown

overleaf.

Figure 3 Estimated Monthly Income Statement – steady state after startup period (round numbers)

Line Item US $

650,000 syringes sold per week x 4 weeks x US $0.05 $130,000

Less 15% Sales Commission -19,500

Less Material Cost at US $0.02 per syringe -52,000

Gross Margin $58,500

Production Salaries 4 people @ $800 per week -16,000

Management Salaries: 2 people average $1,500 per week -12,000

3 Machines Equipment Lease and Maintenance Contracts -12,000

Building and Utilities -5,000

Monthly Profit Before Taxes $13,500

Reviewing the first 5 Quarters until full capacity level is reached, the progression will be as follows:

The 2 Managers will be hired from the first day, as there will be a lot of startup coordination

Initially the managers will contact wholesalers and distributors and contact independent

Sales Reps.

The building will be rented and finished from the first day

The machines will be staged, 1 per Quarter, as shown in Figure 4. Workers will be hired as

production increases

The managers will operate the machines for the first Quarter, both to save money, and also it

is essential that the managers understand the technology and can help out in an urgent

situation

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Figure 4 Estimated Quarterly Income Statements – Money in $ US

Figure 5 Assumptions in Quarterly Income Statements – Money in $ US

In summary, the Financial Plan calls for a Capital Investment of US $250,000 (70,225 KD).

The company is expected to earn a Profit Before Tax of US $13,500 (3,792 KD) per month

on Revenues per month of US $130,000 (36,515 KD) (currency conversion by OANDA).

As shown in Figure 4, the company will need to slightly need to dip into the Contingency

Fund in the Third Quarter, but then will be Cash Flow positive.

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Conclusion

The underlying objective is to take advantage of the considerable local output of plastic raw

material from Kuwait’s large petrochemical industry, and for which output there is not a similar

sized local matching market.

Coupled with the large technical departments within the petrochemical companies, this gives

the company supply advantage in availability, prices, and technical support compared with

competitors in China.

The overall market for single-use (disposable) medical products is growing in three ways.

The first growth is in absolute market size. The second growth is in expansion of the customer base

as usage transitions from a clinical setting to home use. The third growth is in the variety and

complexity of products such as prefilled syringes.

Offsetting these advantages is the fact that the company is entering a highly competitive,

price sensitive, single product, commodity marketplace with little product differentiation. Apart

from the material supply advantage, Kuwait is an unlikely place to start a simple commodity

manufacturing company. Typically, such projects are started in low-wage countries.

Though this enterprise will be profitable, its real value in the medium term will be to

establish a foothold in the single use medical device market. From there, Kuwait’s intellectual and

financial capital advantages could be used to build a much larger scale multi-product company,

eventually selling a variety of increasingly complex high-quality brand-name single-use medical

products, still anchored on the petrochemical industry.

Kuwait is a small country that has spawned some major enterprises that have helped

diversify its economy away from raw oil extraction, and provide jobs and security to its citizens.

This enterprise could grow in the same fashion as the other enterprises mentioned in the paper,

notably Q8, EQUATE, and Agility.

Such an eventual outcome would be the real dividend from this startup.

Plastic Syringes in Kuwait February 15, 2014 Page 17 © 2014 Umnitech, Inc. - Prepared by David Talbot

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