COMPETITIVE ASSESSMENT AND MARKET ENTRY STUDY OF DEVIL’S CLAW

IN THE U.S. NUTRACEUTICAL / HERBAL SUPPLEMENT MARKET

Agribusiness, Food, and Consumer Economics Research Center (AFCERC) report. Final report on Cooperative Agreement No. 58-3148-2-014 with the U.S. Department of Agriculture, Foreign Agricultural Service, July 2012. Submitted by Dr. Victoria Salin, Dr. Desmond Ng, Dr. Gary W. Williams, Dr. Eluned Jones, and Dr. Ariun Ishdorj.

ABSTRACT Devil’s Claw is a plant indigenous to a number of countries in southern Africa that is used as an herbal remedy for pain and inflammation of the joints. Stakeholders in the Namibian supply regions are considering whether to develop capacity to market dietary supplements in the United States. As a preliminary step in the development of commercial ventures using this indigenous traditional product, a market assessment has been undertaken and is reported in this study. The competitive environment in the U.S. market for nutraceutical and herbal supplements is assessed with Porter’s Five Forces framework. In both human and animal markets, a set of natural and non-natural substitutes to Devil’s Claw are marketed, around half of them sold via the Internet. Natural substitutes present a significant threat to the market potential of Devil’s Claw in the United States. The threat of rivalry is high because barriers to entry to the markets are limited. Value chain analysis indicates that the Namibian stakeholders have a presence in the harvest and primary production stages. In order to extend the business along the market channel, it is possible to work with brokers and the ingredient buyers at the major processing companies. This includes the potential to leverage the distributional and logistical efficiencies of companies situated in China and India as a means of entry into the United States. Those companies market a variety of botanicals (not significant quantities of Devil’s Claw) but they might expand product lines using existing operations and logistics / trade flows. Alternatively, a U.S. market entry plan would be to ship Devil’s Claw root in raw form to serve a niche market of consumers interested in ecologically oriented or traditional remedies. Finally, to facilitate entry into markets for animal health products or pet foods that contain health supplements, research on the toxicity of Devil’s Claw to animals should be considered.

ACKNOWLEDGEMENTS Funding for this research was provided under Cooperative Agreement No. 58-3148-2-014 from the U.S. Department of Agriculture, Foreign Agricultural Service.

The Agribusiness, Food, and Consumer Economics Research Center (AFCERC) provides analyses, strategic planning, and forecasts of the market conditions impacting domestic and global agricultural, agribusiness, and food industries. Our high-quality, objective, and timely research supports strategic decision-making at all levels of the supply chain from producers to processors, wholesalers, retailers, and consumers. Through research efforts, outreach programs, and industry collaboration, AFCERC has become a leading source of knowledge on how food reaches consumers efficiently and contributes to safe and healthy lives. AFCERC is a research and outreach service of Texas AgriLife Research and Extension and resides within the Department of Agricultural Economics at Texas A&M University. Online at http://afcerc.tamu.edu/ Contact the authors at 979.845.8013 or v-salin@tamu.edu

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COMPETITIVE ASSESSMENT AND MARKET ENTRY STUDY OF DEVIL’S CLAW IN THE U.S. NUTRACEUTICAL / HERBAL SUPPLEMENT MARKET

EXECUTIVE SUMMARY

This summary provides the findings of an analysis of the competitive environment for a producer of Devil's Claw products intended for distribution in the United States (U.S.). We provide industry level perspectives that result in an assessment of the competitiveness of the target market. Following, there is a value chain analysis that identifies the specific business partners, product lines, and/or geographic markets that are most promising avenues for market entry. This summary is organized as follows:

1. Briefing on the analytical approach, 2. Market size summary, 3. Substitutes for Devil’s Claw products, 4. Threats from rival companies and potential entrants, 5. Market access considerations, and 6. Preliminary recommendations to mitigate the threats identified.

The full report contains the following chapters:

1. Introduction and Background 2. Competitive Landscape Analysis with Porter’s Five Forces 3. Conclusions on Competitive Landscape 4. Value Chain Analysis and Market Entry Study

Analytical Approach Porter’s Five Forces framework was used to assess the competitive landscape and form the preliminary value chain analysis of Devil's Claw for the human and animal nutraceutical / herbal supplement markets. Porter’s approach underscores that the attractiveness or profitability of an industry is determined by five sets of unique factors that might independently reduce industry profitability. The Porter’s Five Forces framework is thus suited to not only assessing the competitive landscape and value chain of Devil's Claw, but it is also useful in determining the attractiveness of eventual entry into the U.S. human and animal nutraceutical / herbal supplement markets. Of course, the prediction of success of any entry event faces significant uncertainties. The identification of these key threats / factors in the five forces analysis serves to identify the nature of such uncertainties. As a result, the stakeholders of Namibian Devil's Claw will be better able to mitigate uncertainties of entry and thus improve on the potential to profit from the introduction of Devil's Claw products in the U.S. human and animal nutraceutical / herbal supplement markets.

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Market Size and Boundaries The U.S. herbal supplement market in 2009 was estimated to be $5.03 billion (sales value) and has risen by 4.8% over the previous year, according to industry sources. Retail sales for pet supplements is estimated at just below $1 billion for 2007. Within the supplement category, growth rates for joint health remedies are expected to exceed the rate of overall industry growth. Basic improvement in the quality of life and advances in health care have resulted in more active lifestyles and improvements in life expectancy, which are likely to further advance the future demand and growth for joint health products in the human market in the U.S. According to U.S. Census Bureau projections, the U.S. population is projected to increase to 392 million by 2050. The age group of 65 and older is projected to increase to 88.5 million in 2050, more than double the number in 2008 (38.7 million). About 80 percent of seniors have at least one chronic health condition and the number of people diagnosed with arthritis is projected to increase to 67 million in 2030 compared to 50 million today. The animal nutraceutical / herbal market is in large part an extension of the health and wellness preferences of the pet owners. Hence, the growth of the animal market is influenced by similar growth dynamics to the human nutraceutical / herbal supplement market. While certain important distinctions between the human and animal nutraceutical / herbal supplement markets exist, the threats facing both markets are closely intertwined. This is because both markets draw on a common therapeutic property of Devil's Claw. In the human nutraceutical / herbal supplement market, Devil's Claw has been found to reduce pain from muscular skeletal problems (i.e. back pain), as well as to reduce the inflammation of joints that is associated with arthritis. These therapeutic findings for humans have subsequently been used to justify the inclusion of Devil's Claw in the nutraceutical / herbal supplement market for animal populations. Because both markets draw on these therapeutic properties, the human and animal markets share similar threats. The important distinctions between opportunities in the human and animal markets are outlined in this report but, in terms of the recommendations, similarities dominate and thus we largely discuss the two markets together.

Substitutes for Devil's Claw Products In terms of Devil's Claw’s therapeutic properties (i.e. an anti-inflammatory and pain relief agent), human and animal markets face natural as well as non-natural substitutes. Natural substitutes are Glucosamine, Chondroitin Sulfate, Boswellia, and / or Methylsulfonylmethane (MSM). With respect to non-natural substitutes, these include anti-arthritic agents, Nonsteroidal Drugs (NSAIDs), and Steroidal drugs. However, NSAIDs are the most commonly used non-natural substitute. In our judgment, there is a significant threat of substitutes not only because there are a great number of natural and non-natural items that exhibit similar therapeutic benefits to Devil's Claw, but also because they are competitively priced. There are at least 7,500 product listings on the Internet that draw on these active ingredients either individually or in combination--in capsule,

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powder, liquid or juice forms. Because of the great number of natural substitutes as well as variation in product forms and prices, the threat of substitutes in acting as a “price ceiling” poses a significant challenge to Devil's Claw.

Threats from Rivals and Potential Entrants Both human and animal markets have direct rivals involved in the manufacture of Devil's Claw products. However, unlike the European markets, Devil's Claw in the U.S. market is relatively immature. Thus, the number of manufacturers, especially in the animal market, is limited. Furthermore, because the market for joint health care products is an emerging segment of growth -- in both human and animal markets -- direct rivalry amongst manufacturers is mitigated. That is, several rivals can co-exist successfully in the growing market that is anticipated for joint health remedies. Hence, direct competition or rivalry in the human and animal markets is not a significant threat. In addition to the rivals in business today, the outlook for new entrants to the sector must be considered, and in this regard we identify a significant threat. The same growth outlook that reduces concern about rivals raises the prospect that new competitors will arise, driven by the expected growth in the market for anti-inflammatory supplements. Moreover, as nutritional / herbal supplement providers face less government regulation than pharmaceutical products, entry barriers due to regulation are not a major deterrent to new entrants. In terms of production, through “contract” manufacturing, entry into the manufacturing of herbal supplements can be achieved in ways that not only abide by current regulations but can also be achieved with relatively low costs. The contract manufacturing option is available to parties from the United States and from overseas, most notably China, so that the universe of potential entrants is wide. Hence, while there are few manufacturers or rivals that are currently involved in the production of Devil's Claw products, the projected growth in the human and animal market coupled with relatively low entry barriers presents a significant threat of new or potential entrants. Thus, while a Devil’s Claw product can feasibly enter the U.S. market, so can other competitors.

Market Access Considerations While the threat of entry, rivalry, and substitutes underscore the close and potential rivals to Devil's Claw, the Namibian stakeholders will need to operate in a global, multi-level supply chain in which the influences of customers or suppliers can also compromise the profitability or attractiveness of an industry. We consider the immediate customer to be both online and mass market retailers, and the power of those buyers relative to the Namibian stakeholders is a pending concern. Online retailers operate in a generally competitive environment, especially for human dietary supplements. Online distributors carry multiple Devil's Claw products from different manufacturers. This increases the threat of buyer power because online retailers can source from multiple manufacturers to compete on price and thus reduce manufacturer profits. There is also an increasing trend toward consolidation, especially in the mass retail market. The large retailers have the buyers' influence with respect to manufacturers, which face fewer

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alternatives to distributing their products and a Namibian supplier may well be captive to the price demands of these retailers. With respect to upstream threats to manufacturers of Devil's Claw, there does not appear to be any significant distinction in the quality of raw supplies of Devil's Claw for either human or animal markets. Specifically, there appears to be limited differentiation by suppliers in terms of the level of the active ingredient, harpagoside, or its dosage. This lack of differentiation may be due to the emergent or immature nature of these markets and thus buyers do not require suppliers to develop specialized raw ingredients that match the demands of each of these markets. In the absence of any significant distinction in this “quality” aspect of Devil's Claw, the supplier market appears to be competitive. In particular, while there are sixteen listed suppliers of Devil's Claw from southern Africa, we have also found that according to supplier procurement sources, there are 450 supplier/distributors from China. There potentially are multiple options for procurement of extracts and raw materials and thus there is a highly competitive supplier market. Furthermore, given that businesses in Namibia are likely to source their raw supplies of Devil's Claw from their local partners, who comprise a fragmented group of harvesters, supplier power is currently not likely to be a significant concern in the manufacturing of Devil's Claw products. That is, while there are current efforts by MCA to coordinate the production of at least 21 Devil’s Claw groups that harvest in Namibia, their contributions constitute 10-20% of the market (communications with David Cole) and thus do not hold a strong supplier position.

Regulatory Issues Devil’s Claw products marketed to human or animal markets will be within the purview of the Food and Drug Administration. Human dietary supplements do not require pre-market approval, although informational communications with FDA and strict adherence to labeling rules are important. Products destined for animals must be marketed as food additives or drugs. Overall, regulatory uncertainty is a modest risk.

Value Chain Analysis and Market Entry Study

In addition to the industry analysis of the five forces competitive framework, the conceptual framework of value chain is taken from the resource-based view of the firm, where the business analyst considers the available resources and capabilities of a company at a finer level of detail. According to this firm level view, value chains involve both primary and support activities that are used by a firm to efficiently deploy the available resources in a manner that creates durable competitive advantage. The various functional areas of the value chain include technology, regulatory and legal support, infrastructure for distribution support, and sales marketing or merchandising.

The Namibian stakeholders have strength in the harvest and primary production activities of the value chain. In the United States, the buyers of ingredients for dietary supplements may be found in specialized broker businesses or the procurement staff of manufacturing firms. Much of the trade accepts imported goods only where manufacturing quality standards are assured. Thus, while supplies of Devil’s Claw from China and India remain limited today, those foreign

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suppliers have strong scale and distributional advantages that can pose a significant challenge to Namibian suppliers who seek further value added processing. That is, because Namibian suppliers of Devil’s Claw may also provide post-harvesting activities involving drying, slicing and other value added processing and distribution activities, Namibian suppliers thereby need to also contend with Chinese or Indian manufacturing/trading companies as another potential source of supply for the U.S. market. Thus, strength of scale and distribution support from China and India implies a significant challenge to stakeholders interested in marketing directly from southern Africa to the United States.

With regard to marketing and merchandising support, the U.S. market for dietary supplements is very active and dynamic. Current trends point to the use of food ingredients in addition to herbal supplements and an emphasis on anti-inflammatory mechanisms. The market for pain remedies is considered mature and no longer a leader within supplements. The ecologically-oriented market niche is very small and retails through the fragmented specialty store channel. These highly quality sensitive buyers prefer to receive raw, unprocessed product to allow them to have complete control of the processing to their own specifications.

If the Namibian stakeholders desire to enter the USA market, they will need to find reliable business partners and to be prepared for those business partners to capture a large share of the returns from value-adding business. We believe that the identification of business partners and the execution of contracts for transactions involving raw materials and primary processing can be pursued by a Namibian stakeholder. When it comes to formulation, the scientific expertise and ability to show credible results are not likely to be organized in Namibia. Thus the avenue to the market must be to identify research partners at the level of product formulation.

Recommendations As one of the goals of this study is to determine a course of action that would enable entry into the U.S. human and animal nutraceutical / herbal supplement markets, the following recommendations are offered to mitigate key threats and thus alleviate some of the uncertainties of entry into these markets.

Differentiation to Reduce the Threat of Substitutes While the therapeutic benefits of Devil’s Claw are generally well documented in scientific literature and known to customers in Europe, such benefits are less well established in the U.S. market. In particular, the therapeutic benefits of Devil's Claw remain generally unclear within the animal market and thus differentiation through investments in clinical studies is one means to mitigate the threats from both natural and non-natural substitutes. Since natural substitutes reflect the most immediate threat to Devil's Claw, clinical studies that compare the therapeutic benefits of Devil's Claw to that of Glucosamine, Chondroitin and /or MSM in either of the human and animal markets are suggested. While such studies will benefit producers of Devil’s Claw, they are nevertheless expensive and would involve a highly specialized research study.

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Such investments in clinical studies can be an important source of differentiation, but as explained shortly, can also yield other indirect benefits. To date, we have found no clinical studies that compare substitute products (the natural supplements for joint health) directly to Devil’s Claw. Investments in research and development, such as clinical trials on the therapeutic properties of Devil's Claw, serve a double purpose in raising a barrier to entry by potential rivals to the extent that a differentiating trait is identified and can be capitalized on through manufacturing. We suggest research to address at least the following: 1. Efficacy and/or toxicity tests in combinations with Boswellia and other natural supplements. 2. Effects on pregnancy under recommended dosages (human and animal). 3. Feasibility to incorporate in soft gel pill form which is easy to swallow and is an increasingly popular form of delivery. 4. Anti-inflammatory effects compared with existing natural substitutes such as resveratrol. 5. Toxicity studies for the veterinary channel with a focus on the canine and feline market.

Phased Entry to Test Market Access and Acceptance with U.S. Buyers. To limit the risks associated with capital investments in R&D and possibly plant and equipment, a staged entry strategy is recommended. In the first stage, “contract manufacturing” is to be undertaken while technical and market uncertainties are being resolved. Contract manufacturing can leverage the Namibian stakeholder’s advantages in its raw ingredient production of Devil's Claw. Production through certified means in Namibia is likely to be more feasible after a period of experience with outsourcing manufacturing to an agent certified by industry-accepted agencies, to assure Good Manufacturing Practices (GMP). Certification will be minimally necessary to meet the specifications of buyers in any retail channel. Indeed, the buyers at smaller specialty firms that manufacture in-house prefer the product to enter the country un-refined in order to have maximum control over the processing. With respect to value-added opportunities, a vertically coordinated value chain with a contract manufacturer under the brand name of a Namibian stakeholder may be developed through alliance with the following companies: • in the USA (Pharmachem, SoftGel Technologies, Novagroup), • in China (Jiaherb) with headquarters in New Jersey, USA • and in India (Advantage Botanical). The products would bear a Namibian company’s own label without the need for investment in the entire processing technology. The Namibian company will need to invest in the expertise about formulation so that its specifications can be delivered to the contract manufacturer. During the period of contract manufacturing, studies to identify costs of transportation and distribution as well as quality assurance for GMP status should be undertaken. The cost analysis will establish the feasibility of competing as a low-cost entrant using powder, extracts or other products manufactured in Namibia at some point in the future.

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TABLE OF CONTENTS

EXECUTIVE SUMMARY ............................................................................................................ ii Analytical Approach ....................................................................................................................... ii Market Size and Boundaries .......................................................................................................... iii Substitutes for Devil's Claw Products ............................................................................................ iii Threats from Rivals and Potential Entrants ................................................................................... iv INTRODUCTION AND BACKGROUND ................................................................................... 1 

Description of the Product Market ............................................................................................................ 1 

Market Size ............................................................................................................................................... 2 

Regulatory Environment ........................................................................................................................... 2 

Special Considerations for the Animal Nutraceutical / Herbal Supplement Market ................................ 5 Equine ................................................................................................................................................... 5 Canine and Feline ................................................................................................................................. 5 

COMPETITIVE LANDSCAPE ANALYSIS WITH PORTERS FIVE FORCES......................... 6 Overview of Porter’s Five Forces ............................................................................................................. 7 

Human Nutraceutical / Herbal Supplement Market Forces ................................................................. 8 

Threat of Rivalry ................................................................................................................. 8 Threat of Entry .................................................................................................................... 9 Threat of Substitutes ......................................................................................................... 10 Threat of Supplier Power .................................................................................................. 12 Threat of Buyer Power ...................................................................................................... 13 

Animal Nutraceutical / Herbal Supplement Market Forces ............................................................... 14 

Threat of Rivalry ............................................................................................................... 15 Threat of Entry .................................................................................................................. 16 Equine ............................................................................................................................... 16 Canine and Feline ............................................................................................................. 17 Threat of Substitutes ......................................................................................................... 17 Threat of Supplier Power .................................................................................................. 18 Threat of Buyer Power ...................................................................................................... 19 

CONCLUSION on COMPETITIVE LANDSCAPE.................................................................... 20 Threat of Substitutes ............................................................................................................................... 20 

Threat of Rivalry ..................................................................................................................................... 21 

Threat of Entry ........................................................................................................................................ 21 

Threat of Buyer Power ............................................................................................................................ 21 

Threat of Supplier Power ........................................................................................................................ 22 

Recommendations / Implications ............................................................... Error! Bookmark not defined. 

Mitigating Key Threats ........................................................................................................................... 22 Threat of Substitutes ........................................................................................................................... 22 Threat of Entry .................................................................................................................................... 23 Threat of Buyer Power ........................................................................................................................ 23

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VALUE CHAIN ANALYSIS AND MARKET ENTRY STUDY .............................................. 25 Primary Activities: Harvest and Processing ............................................................................................ 26 

Harvest ................................................................................................................................................ 26 Primary processing ............................................................................................................................. 26 Further processing .............................................................................................................................. 27 

Distribution support activities ................................................................................................................. 31 

Retail distribution and marketing activities ............................................................................................ 31 

Recommendations for Market Entry ....................................................................................................... 32 

Cost Estimates for Performing Clinical Studies on Efficacy of Devil’s Claw  ....................................... 33 Human Markets –Efficacy as a Dietary Supplement .......................................................................... 33 Veterinary drug status ......................................................................................................................... 34 

FIGURES ...................................................................................................................................... 37 TABLES ....................................................................................................................................... 40 APPENDIX- FDA LETTERS ...................................................................................................... 63 REFERENCES ............................................................................................................................. 76 

COMPETITIVE ASSESSMENT AND MARKET ENTRY STUDY OF DEVIL’S CLAW IN THE U.S. NUTRACEUTICAL / HERBAL SUPPLEMENT MARKET

INTRODUCTION AND BACKGROUND

As Devil’s Claw is primarily used as a nutraceutical / herbal supplement, an assessment of Devil’s Claw competitive landscape is contingent on first defining the nature of the nutraceutical / herbal supplement market and its associated therapeutic properties. The nutraceutical / herbal supplement market is defined by “any substance that may be considered a food or part of a food and provides medical and health benefits, including the prevention and treatment of diseases” (Williams, 2009, p. 87). While there appears to be some overlap between the human and animal nutraceutical / herbal supplement markets, each market nevertheless faces a number of notable distinctions. In outlining these distinctions, the following discussion elaborates on the therapeutic and market specific considerations for the human and animal markets.

Description of the Product Market

In the context of Devil’s Claw, there is a growing body of clinical literature that supports the therapeutic benefits of Devil’s Claw (Harpagophytum procumens). The active ingredients of interest consist of Iridroid glycosides –that include four categories of harpagoside, harpagide, procumbide and procumboside, acetylated phenolic glycosides, and terpenoid (Fiebich et al., 2001; Hsun-Wei Huang et al., 2006). Studies have indicated that Devil’s Claw exhibits pain killing and anti-inflammatory properties (Williams, 2009; Fiebich et al., 2001; Hsun-Wei Huang et al., 2006). In the human nutraceutical / herbal supplement market, Devil’s Claw has been found to not only reduce pain from muscular skeletal problems, but also reduce the inflammation of joints from osteo and rheumatic arthritis (Fiebich et al., 2001; Katerere and Naidoo, 2010; Chrubasik et al., 1996; Chrubasik et al., 2006; McGregor et al., 2005) 1 . For instance, in Williams’ (2009) review of studies of Devil’s Claw, Williams finds that “most of the clinical studies in humans, some of which were blinded, revealed decreased pain intensity and increased flexibility in patients taking Devil’s Claw extract (p. 90).” With respect to the relief of pain from musculoskeletal problems involving the treatment of back pain, human subjects who were treated with Devil’s Claw who reported “pain free” in greater number than did a placebo group (Chrubasik et al., 1996; McGregor et al., 2005; Hsun-Wei Huang et al., 2006). Furthermore, other studies have confirmed the anti-inflammatory properties of Devil’s Claw (Fiebich et al. 2001; Ernst and Chrubasik etal., 2000; McGregor et al., 2005; Hsun-Wei Huang et al., 2006). In the human market, there is a body of research that supports the use of Devil’s Claw in the treatment of back pain (e.g. Chrubasik et al, 1996; Chrubasik et al., 2007; Brien et al., 2006) and also as a potential treatment for osteoarthritis (see also Chrubasik et al., 2007; Brien et al., 2006; 1 For studies that do not support such therapeutic benefits, please see Whitehouse et al. (1983) and McLeod et al, (1979).

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McGregor et al., 2005). As McGregor et al. (2005) notes, “the data indicate that Devils’ Claw relieves pain, and has anti-inflammatory properties and is, therefore, a potential treatment for alleviating the systems of osteoarthritis of the knee and other large joints” (p. 52). Furthermore, because pain relief and osteoarthritis are treated by using analgesics and / or NSAID medication, these alternatives have serious side effects including, heartburn, nausea, dyspepsia, vomiting, abdomen pain, perforated ulcers and gastro intestinal bleeding. In the UK alone, NSAID have contributed to 12,000 hospitalizations and 2,000 deaths (Brien et al., 2006). As an alternative to NSAID, human studies have been conducted on the safety and toxicity of Devil’s Claw to which some have suggested that Devil’s Claw can be viewed as a possibly safer alternative to NSAID (Brien et al., 2006). Human studies have found that Devil’s Claw can be an effective replacement to the use of NSAID because it does not exhibit such adverse health effects (see in human studies Chrubasik et al., 2007; Brien et al., 2006).

These studies however tend to be hampered by small population samples to which Brien et al. (2006) contend that “Devil’s Claw appears to be associated with minor risk (relative to NSAIDs); however, no firm conclusion regarding the herb’s safety can be made. Further assessment of safety risk is needed” (p. 981). There are also other concerns that surround the therapeutic benefits of Devil’s Claw. The available studies are based on methodologies that prevent a full clinical assessment of the therapeutic value of Devil’s Claw (McGregor et al., 2005). As a result, many researchers contend that the therapeutic value of Devil’s Claw requires further research attention (McGregor et al., 2005; Chrubasik et al., 2007; Brien et al., 2006). Because findings from human clinical trials are often used to justify the use of Devil’s Claw in the animal market (e.g. Williams, 2009; Cavaliere et al., 2009), there is greater uncertainty about the therapeutic benefits in the animal nutraceutical / herbal supplement market than in the dietary supplements market for humans.

Market Size The total estimated sales for U.S. herbal supplements in 2009 was $5.03 billion and rose by 4.8% over the previous year (Cavaliere et al., 2010; ABC, 2010; various NBJ sources). Of that figure, an estimated $1 billion was spent on treatments for pets. The category of joint health supplements in particular is significant: glucosamine and chondroitin sales constitute 21% of the U.S. supplement market or around $803 million in sales in 2009 (NBJ, 2010e).

Regulatory Environment

Foods and drugs marketed for human or animal use are regulated by the FDA. The Federal Food, Drug and Cosmetic Act is the legislative authority by which FDA distinguishes the regulatory status of food and drugs. Drugs are “substances intended for use in diagnosis, cure, mitigation of disease…” The Act also defines drugs as: "articles (other than food) intended to affect structure or function of the body of man or other animals." Food additives are a separate type of substance under U.S. regulation. The 1996 Food Quality Protection Act is intended to implement science-based risk assessment with respect to the safety of an additive. Additives must show that there is “reasonable certainty of no harm.” The list of

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approved additives is known as the GRAS list (Generally Recognized as Safe). Separate GRAS lists are maintained for additives used in human foods and those destined for the animal market.

The FDA undertakes enforcement actions for two issues: misbranded goods or adulterated goods. Misbranding actions are classified as fraudulent or misleading labeling, or the failure to label. Adulteration arises when the product includes ingredients that are not legally marketable, or if there is contamination by filth, pests, or pathogens.

Dietary supplements are distinct from food or drugs in regulatory status as a result of the 1994 legislation entitled the Dietary Supplement Health and Education Act (DSHEA). The dietary supplements category includes essential nutrients (vitamins, minerals) and herbs or botanicals. Dietary supplements marketed to humans under DSHEA are exempt from the pre-market approvals required of new foods and drugs. To be covered under DSHEA, items may not make claims as to disease or the structure or function of the body. Further, products must be labeled as dietary supplements and there must be a supplement facts label disclosing the ingredients. Thus, the regulatory burden for dietary supplements is clearly less than the premarket proofs for drugs that are marketed for human use.

Enforcement actions on dietary supplements highlight FDA’s concern that supplements may not make health claims. For example, three products marketed for human use that contain Devil’s Claw were involved in enforcement action by FDA due to mislabeling. Two product labels made health claims for the supplement that went beyond the type of statements that are acceptable under DSHEA. In addition, the topical gel was an unapproved new use of the ingredient as well as having medical claims. See Appendix for FDA enforcement letters.

For animal products, there is no legal approved market in dietary supplements (FDA, 1995). Products sold for use by animals therefore will be categorized as either a food additive or a drug (AAFCO). Animal feed labels may not bear claims that products can be used for mitigation of disease or to alter structure or function of the body. This type of claim triggers regulation as a veterinary drug.

Foods and drugs administered to animals concern the FDA because of the risk to the production animal sector and the risk that residue from an ingredient could remain in the foods and subsequently harm consumers. The companion animals market is segmented from the production animal market in important ways, however both are regulated. FDA exercises discretion in pursuing its oversight over products intended for companion animals and thus some

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observers feel that there is room for supplement-type products to enter the US market. Indeed, such products are sold today. However the legal status is ambiguous. Well-known incidents have blemished the quality record of animal feed ingredients, particularly with respect to imported ingredients. In 2007, deliberate contamination of pet food with melamine affected goods imported from China (FDA, 2010a). The deaths of companion animals in the USA caused a public reaction and a large product recall. Herbal and botanical ingredients in particular have a questioned reputation in the USA. In 1998, contamination was found in a number of herbal ingredients imported from Asia (Machado and Benz, 2000).

The rationale for opening up the dietary supplement market to herbs and botanicals is that these supplements had a long history of use in human communities and therefore, concerns about toxicity are low. Toxicity in animals is different than in humans, and there is no historical record of supplement use in animals. Less information is available on safe dosages in animals. And because animal populations are more heterogeneous than humans, there are specific gaps in information.

Devil's Claw products are marketed to companion animals in the USA, in spite of the fact that they have not been approved (Machado and Benz, 2000). FDA provides comments on its intent and the conditions for acceptable marketing of herbal / botanicals for pets. These conditions will be elaborated in value chain studies in the next phase of this project.

In addition to the issues described above that relate primarily to mislabeling, the oversight by FDA extends to safety and quality. Problems in this regard are referred to as “adulteration” and FDA takes measures to prevent entry or remove products from the market that are adulterated. Pet food products have been recalled from the market after several foodborne illness outbreaks among pets and pet owners. Further, FDA is currently pursuing a national testing program regarding salmonella contamination in dog and cat food (FDA, 2010b). Hence, the sensitivity of the U.S. market to contamination of herbal and imported ingredients is high in both human and animal product markets.

Proof of sanitary conditions in production (and distribution) is needed to avoid the imported product being deemed adulterated. Quality for herbal and botanical ingredients has at least three aspects: (1) free of contamination with heavy metals or pesticide residue, (2) production in a certified facility using Current Good Manufacturing Practices, and (3) testing and documentation of the levels of active ingredients.

Sanitary and quality concerns can be raised by government agencies or the private sector. While the FDA has primary responsibility, attention can arise from legislative agencies or state-level officials. In 2010, the GAO, under the direction of Congress, investigated supplements. The focus of that investigation was on false or misleading promotional activities. At virtually any moment, an investigative body might focus on the content of the product in terms of cleanliness, pathogens, or control over the chain of custody from harvest through manufacture. Any number of non-governmental organizations also might undertake testing and then disclose failings of a product.

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Special Considerations for the Animal Nutraceutical / Herbal Supplement Market

With respect to the animal nutraceutical / herbal supplement market, Devil’s Claw has some notable therapeutic and market specific considerations. This body of therapeutic evidence on humans has been subsequently used in justifying the use of Devil’s Claw in the animal nutraceutical / herbal supplement market (e.g. Cavaliere, 2009; Katerere and Naidoo, 2010). As Katerere and Naidoo (2010) note, “most of the human clinical studies reported reduced pain intensity and increased joint flexibility, and these studies have been used to justify the use of Devil’s Claw preparations in animals, particularly horses [in which] Pearson, McKee and Clarke (1999) reported an anti-inflammatory effect in horses due to a reduction of the prostaglandin E2 (PGE2) synovial fluid content” (p. 395). The use of Devil’s Claw in the animal market is largely confined to equine, canine, and feline sub-animal species.

Equine In terms of the equine sub-animal market, there are few, if any, clinical studies that examine the anti-inflammatory and pain relief properties of Devil’s Claw. Most animal studies have been conducted on rats (Whitehouse et al., 1983; McLeod et al, 1979) which did not find any anti-inflammatory and pain reducing effects. There are nevertheless various marketing claims that contend Devil’s Claw not only exhibits anti-inflammatory and pain relief properties, but they also suggest that Devil’s Claw is effective in weaning horses from non-steroidal anti-inflammatories (NSAID), such as phenylbutazone (“bute”). Commonly used as an anti-inflammatory in the horse market, phenylbutazone can lead to gastric ulcer diseases. Furthermore, while Devil’s Claw has been viewed as a safer alternative to NSAIDs and as a supplement that aids in joint health, the use of Devil’s Claw is banned for competitive and racing purposes (Williams). As Williams (2009) notes,

“In the United States, most breeds and competition operate under U.S. Equestrian Equine Drug testing rules…The following excerpt is from the U.S. Equestrian Federation (USEF) Drugs and Mediations Guidelines (2006) [which states]… Just of the examples of the hundreds and perhaps thousands of examples of herbal / natural or plant ingredients that would cause a product to be classified as forbidden are Valerian, Kava Kava, Passion flower….Devil’s Claw…”(p. 87)

This indicates Devil’s Claw will be strictly limited to horses used for recreational purposes only, which, as indicated in our subsequent competitive analysis, will significantly constrain the commercial potential of this product in the animal nutraceutical / herbal supplement market.

Canine and Feline

There are few if any clinical trials that have examined the therapeutic benefits of Devil’s Claw in the canine and feline sub-animal market. This is because, like the equine market, the development of Devil’s Claw products is based on the presumption that the therapeutical properties observed in human can be extrapolated to the animal market (Cavaliere, 2009). For instance, pet supplement manufacturers, such as Natural Remedy, extended their human dietary supplement products to the animal market largely on the premise that the therapeutical properties

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observed in humans can be transcended to the animal market (Cavaliere, 2009). Yet, as noted in Cavaliere (2009), pet supplement manufacturers do not typically conduct clinical trials on the efficacy of their products because they are considered “natural.” Hence the current practice of domestic industry is to not provide a research base to differentiate pet products in terms of higher quality.

COMPETITIVE LANDSCAPE ANALYSIS WITH PORTERS FIVE FORCES

As competition is defined by the extent to which products exhibit similar valued traits (Porter, 1980), the clinical studies used in assessing Devil’s Claw’s therapeutic properties are used to define such valued traits. Specifically, there appears to be a general clinical consensus on the anti-inflammatory properties of Devil’s Claw in its treatment of joint related problems that involve the reduction of pain and the alleviation of arthritis. As a result, competition in the human and animal nutraceutical / herbal supplement market is defined by manufacturing firms that produce Devil’s Claw products that draw on these anti-inflammatory properties. Furthermore, as competition also includes firms that produce substitute products (Porter, 1980), Glucosamine, Chondroitin sulfate, and to a lesser extent, Methylsulfonylmethane (MSM), are considered as natural substitutes to Devil’s Claw. That is, since the competition facing Devil’s Claw is based on its anti-inflammatory properties, clinical studies have indicated that Glucosamine / Chondroitin sulfate exhibit “mild anti-inflammatory effects” (Plumb, 2011, p. 473) and appear to have the minimal adverse effects as that of Devil’s Claw (Plumb, 2011, p. 475). Namely, like Devil’s Claw, Glucosamine / Chondroitin sulfate appear not to have the serious side effects of NSAID and appear to be well tolerated in horses, dogs and cats (Plumb, 2011, p. 474; see also PFI, 2011c; See also Brien et al., 2006). This is because like Devil’s Claw, they are derived from “natural sources” (Plumb, 2011, p. 474) and thereby reflect a “natural substitute” to Devil’s Claw. Although there are other natural substitutes to Devil’s Claw that exhibit such anti-inflammatory properties, such as bee pollen, Echinacea, flaxseed, ginger, ginseng, yucca, these natural substitutes are not included because they either lack clinical evidence in support of anti-inflammatory properties or they do not possess the minimal adverse effects of Devil’s’ Claw (see Williams, 2009). These other natural remedies are thereby not included as legitimate substitutes for Devil's Claw. A further set of substitutes are the non-natural pharmaceutical preparations. There is a variety of clinically supported “non-natural” anti-inflammatory products, in three main classes of drugs: anti-arthritic agents, Non-steroidal Anti-arthritic drugs (NSAID) and Steroid drugs (Bayer, 2009).

Given this clinically based definition of competition, Porter’s (1980) five forces is used to assess the competitive landscape of Devil’s Claw and its associated value chain in the human and animal nutraceutical / herbal supplement markets. Porter’s (1980) five forces is a well-established framework to conduct an industry analysis of their competitors (Sanburn, 2011). In the context of the objectives of this study, Porter’s five forces is suited to not only assessing Devil’s Claw’s competitive landscape and its associated value chain, but also useful in determining the attractiveness of entry into the U.S. human and animal nutraceutical / herbal supplement markets. In fact, marketing studies have utilized Porter’s five forces to assess the

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attractiveness of foreign market entry (e.g. Cavusgil and Zou, 1994; Dian and Burrell, 1995). The prediction of success of any entry event is often marred with significant uncertainties. While five forces analysis is typically used to assess the competitive structure of a value chain system, the identification of such threats serves to also identify the nature of those uncertainties involved in the entry to the U.S. human and animal nutraceutical / herbal supplement markets. Identifying such key threats and their associated factors will serve to not only better manage the uncertainties of this entry but if they can be mitigated, can improve the potential profitability of Devil’s Claw products in these markets.

Overview of Porter’s Five Forces

Porter’s framework underscores that the attractiveness or profitability of an industry is determined by five threats: the threat of entry, rivalry, substitutes, buyer and supplier power (Figure 1). While increases to all of these threats reduce industry profitability and thus entry attractiveness, there are nevertheless numerous underlying factors that can contribute to each threat. Figure 1 summarizes all factors pertaining to each of these threats. As different industries emphasize different threats and factors, we will analyze only those threats and factors that are most pertinent to the Devil’s Claw nutraceutical / herbal supplement market.

Such an analysis draws from a rich collection of sources provided by The Texas A&M Vet-Medical and business libraries. In fact, while the assessment of new markets will undoubtedly require obtaining varied and often difficult to acquire market and medical based information, Texas A&M has one of largest and most extensive business, veterinarian and medical collections in the country. To complement these library sources, this study also draws on internet sources, such as Google product search.

Google product search when used in conjunction with our referenced resources is an important tool to assessing Devil’s Claw competition. Namely, according to the Nutrition Business Journal, internet sales of nutraceutical supplements lead direct mainstream channel sales (i.e. retail store sales). In 2009, internet sales of dietary supplement constitute a little over 50% of the total $5.03 billion in the U.S. herbal supplement market (Cavaliere et al. 2010) and is also supported more recently in the Nutrition Business Journal (NBJ, 2010c). As a result, since a significant portion of sales in the natural herbal supplement is conducted through the internet and that online purchases are driven by online user reviews, Google product search in conjunction with our library resources seems to be well suited to conducting a five forces assessment of the competition facing Devil’s Claw. Specifically, product searches in Google are ordered in descending sequence of the most to least popular products. Such rankings are largely influenced by seller rating and user reviewers and thus a Google product search will serve to reflect the space of the most popular products being searched by users, and will indicate those products that are most likely to be in competition.

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Human Nutraceutical / Herbal Supplement Market Forces

Threat of Rivalry

Threat of rivalry refers to the degree of direct competition by producers of the same or identical product (Barney, 2003; Porter, 1980). In the context of human nutraceutical / herbal supplement market, rivals are defined as the manufacturing firms that produce products that directly employ Devil’s Claw as an anti-inflammatory in the treatment of joint problems. Specifically, as this definition of rivalry is rooted in the therapeutic properties of Devil’s Claw, we search for rivals through the aforementioned Google product search. To ensure that we have a robust sample of direct rivals, the term Devil’s Claw along with its therapeutic properties were used as search terms in the Google product search. For instance, the search term Devil’s Claw was combined with search terms: anti-inflammatory, pain relief, joint health, arthritis etc. This search process was iterated until there was convergence of re-occurring product-firm pairings. Table 1 shows the competitive characteristics of Devil’s Claw’s direct rivals. The number of direct rivals positively influences the threat of rivalry (Barney, 2003; Porter, 1980). At least 13 distinct rival manufacturers employ Devil’s Claw as an active ingredient in products that treat joint related problems. There is, however, no clear benchmark in determining the “number” of firms that constitutes a high threat of rivalry.

Analysis of rivalry takes into account the concentration levels, trends for consolidation, and growth in a market segment. Concentration of herbal supplement manufacturers must be considered in light of the diversity of other herbal supplements. Concentration is defined broadly as the number of companies sharing market presence. Industries that face a less concentrated - meaning a large number of smaller players - market tend to have greater threat of rivalry. Muth et al., (1999) finds that the concentration ratio - CR4 and CR8- for the top four and eight dietary supplement manufacturers is 23% and 39% respectively. The dietary manufacturer industry also has a reported Herfindahl Index (HHI) of 250. According to the U.S. Department of Justice’s Horizontal merger guidelines, industries with HHI below 1000 are not considered concentrated (Muth et al., 1999). Both these measures suggest low concentration. As a result, in the absence of significant concentration, there appears to be a high degree of rivalry which includes those members shown in Table 1. However, this needs to be tempered by the fact that the overall dietary supplement market is facing an increasing trend towards consolidation (Muth et al., 1999). Furthermore, the threat of rivalry is positively influenced by a slow rate of industry growth whereby threat of rivalry increases when a large number of rivals compete for a slow or declining market (Barney, 2003; Porter, 1980). The herbal supplement market, however, does not appear to be experiencing slow growth. In fact, according to Nutrition Business Journal (NBJ, 2010c), the total estimated sales for U.S. herbal supplements in 2009 was $5.03 Billion and rose by 4.8% over the previous year (Cavaliere et al, 2010; ABC, 2010; various NBJ sources).

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Within herbal supplements, the growth in anti-inflammatory products in the treatment of joint health is likely to increase (Cavaliere et al., 2010; Muth et al., 1999). This is because the U.S. not only faces an aging population, but due to rising health care costs, there has been an increasing awareness to seek alternative medicinal remedies in the treatment of joint related illnesses (Cavaliere et al., 2010; Muth et al., 1999). As a result, due to the increasing rate of market growth for joint related products, the market for Devil’s Claw is likely to be in an immature stage of market development in which its potential for growth will likely mitigate the threat of direct rivals for Devil’s Claw. Relative to other threats, threat of rivalry is not likely to be a key threat.

Threat of Entry Threat of entry refers to the potential for new competitors to gain access to the market. Closely related to the threat of rivalry, threat of entry deals with “potential” rivals who enter an industry at a later date. Threats of new entrants are driven by the expected profits of an industry, which are often determined by projected growth in the market (Barney, 2003; Porter, 1980). As a result, the threat of rivalry and threat of entry are highly intertwined. Namely, the rate of industry growth (i.e. threat of rivalry) in the nutraceutical / herbal supplement market is determined by the expected profits that accrue from projected growth in the market (i.e. threat of entry). Various industry reports have projected a growth in the herbal supplement market (Heller, 2011; DaVanzo et al., 2009; Muth et al., various NBJ sources; Cavaliere et al., 2010). While such growth is driven by various factors, Cavaliere et al., (2010) contends that “an article published in Newsweek in Oct. 2009 noted that some stores selling vitamins, minerals, and supplements benefitted from the recession due to some Americans exchanging bad and / or expensive habits for healthier ones and from some Americans losing their health insurance and choosing supplements over costly prescriptions” (see also Muth et al., 1999). Other studies (Davanzo et al. 2009) find that the herbal supplement market has been able to maintain itself at more than 1% of total U.S. health expenditures. As health expenditures grow, the herbal supplement industry is thereby likely to also grow. Furthermore, while the U.S. – as well as other developed countries – faces a growing retirement population, their quality of life and life expectancy has increased over prior generations. According to the U.S. Census Bureau projections, the U.S. population is projected to increase to 392 million by 2050. A substantial increase in the number of older people will occur during the 2010 and 2030 period, after the first Baby Boomers turn 65 in 2011. In 2030, when all the baby boomers will be 65 and older, nearly one in five U.S. residents is expected to be 65 and older. This age group is projected to increase to 88.5 million in 2050, more than double the number in 2008 (38.7 million) (U.S. Census Bureau, 2008 National Population Projections). About 80 percent of seniors have at least one chronic health condition and 50 percent have at least two. Arthritis is one of the leading causes of activity limitations among older people. As the U.S. population ages, the number of people diagnosed with arthritis is projected to increase to 67 million in 2030 compared to 50 million now (CDC, 2011).

Basic improvement in the quality of life and advances in health care have resulted in more active lifestyles (i.e. such as gardening, golfing, hiking etc.) and thus likely to further advance the future demand for joint health products (Katz and Marshall, 2003; NBJ, 2011). Such problems of

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joint health have been reported as an increasingly important health concern in developed countries by the U.N. and WHO, and especially amongst an aging population (Woolf, 2000). The demand for herbal supplements in their treatment of joint problem is thus likely to drive the growth of this market. Given recessionary influences, an aging demographic and rising health care costs, there is a general trend by consumers who, in their efforts to avoid costly doctor visits and prescription drugs, seek natural alternatives (NBJ, 2009, 2010e). While the projected growth in the market for nutraceutical / herbal supplements is a key driver of this threat of entry, the relatively lower barriers to entry or low costs of entry reinforces this threat. Because nutraceutical / herbal supplements face less stringent FDA regulations than that of prescription drugs, potential manufacturers of herbal supplements do not have to incur the additional costs associated with clinical trials. For instance, as a basis for comparison, the cost associated with clinical trials in the FDA approval averages $800 million per drug (Powell et al., 1996). Hence, potential entrants into the nutraceutical / herbal supplement market are thus not likely to incur a high cost of entry. This is consistent with industry observations that contend that, aside from manufacturing costs, most dietary supplement manufacturers do not incur significant additional R&D outlays (see Muth et al, 1999). Furthermore, according to Muth et al. (1999) there are over 1,000 supplement manufacturers, of which 16 have annual sales greater than $100 million in sales, 38 have sales of $20-100 million and 996 supplement manufacturers have less than $20 million in sales. This indicates dietary supplement manufacturing is not a capital and scale intensive production process (Muth et al., 1999) and thus capital investments are also not likely to be a barrier to entry.

Lastly, there are “contract” manufacturers, such as Nutricaps (www.nutricaplabs.com), who can provide for such manufacturing services on a for-hire basis. Contract manufacturers circumvent requirements for capital investments and thus overcome any remaining barriers to entering the nutraceutical / herbal supplement market.

As the threat of entry is driven by the potential profits that accrue from projected market growths, growth in the demand for nutraceutical / herbal supplements in the treatment of joint related problems is likely to attract entry (see also Muth et al., 1999; see also NBJ, 2009) and can subsequently increase the degree of rivalry in the Devil’s Claw market. For instance, if past projections are any indications of future growth, the U.S. nutrition industry has grown at an annual rate of approximately 7-9% between periods 2008 at a total market value of $101.8 billion (NBJ, 2009). Note that this is the nutrition industry broadly defined. As a result, while the threat of direct rivalry does not reflect an “immediate” threat, the threat of potential entrants can be a key threat to the future attractiveness of Devil’s Claw.

Threat of Substitutes Threat of substitutes involves products that “approximately” serve the needs of consumers but in way that slightly differs from that of direct rivals (Barney, 2003; Porter, 1980). Because substitutes are closely related to the products produced by rivals, substitutes have the effect of placing a “price ceiling” on what rivals can charge for their products and thus limit their profit potential (Barney, 2003). Specifically, “relative price differences” between the pricing of the rival product and that of the substitute product directly impact the threat of substitutes (Barney, 2003; Porter, 1980). Devil’s Claw products shown in Table 1 face two classes of substitutes. As

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noted earlier, in the treatment of joint problems, the threat of substitutes consists of natural and non-natural anti-inflammatory products. As glucosamine and chondroitin sulfate exhibit very similar therapeutic properties to that of Devil’s Claw, joint products that employ these natural ingredients reflect the closest natural substitute to Devil’s Claw. In order to identify these natural substitutes, a Google product search was conducted to search for products in the treatment of joint related problems that contain Glucosamine, Chondroitin Sulfate and / or combinations thereof –which may also include anti-inflammatory ingredients such as MSM. Through this search, there are at least 7,500 product listings that draw on these active ingredients either individually or in their combination in capsule, powder, liquid or juice forms. To confine this space of natural substitutes, we limited substitutes to only the “most popular brands” found in Google product search. The listing of companies and the number of natural substitute products that contain Glucosamine, Chondroitin Sulfate and or combinations is in Table 2. Although these do not reflect an exhaustive list, they are nevertheless ranked by Google as the most popular. Table 2 shows that there is much variation in the form (i.e. capsule, power, liquid or juice, or creams) and prices of these natural substitutes. Because of the great number of natural substitutes as well as variation in product forms and prices, the threat of substitutes in acting as a “price ceiling” is difficult to assess. Nevertheless, due to the great number of substitutes and their associated price ranges, it is very likely that the natural substitute market poses a significant threat to Devil’s Claw. For instance, in comparing products, the price of Glucosamine products from a retailer called Now Foods (60 capsules of Glucosamine at 1000 mg for $6.15), while a Devil’s Claw product sold by the same retailer is 100 capsules for $6.99 at retail. While there is further work that might be done to make the comparison more direct, by factoring in differences in dosage requirements, the price differences between natural substitutes and Devil’s Claw products do not appear to be large. Thus, the natural substitutes are likely placing a very significant limit on a rival firm’s ability to exert price increases in Devil’s Claw products. Furthermore, although the total demand for Devil’s Claw supplements is not known, the percentage of consumers using Glucosamine / Chondroitin constitutes 21% of the U.S. supplement market or $803 million in sales for 2009 (NBJ, 2010e). This size of the market supports many natural substitute products in the treatment of joint health (see table 2) which increases the likelihood that any one of these products might place a price ceiling on the charges by rival producers of Devil’s Claw.

Moreover, NSAIDs are the most commonly used anti-inflammatory in the treatment of joint and arthritic pain. Table 3 shows the threat of this class of non-natural substitutes to Devil’s Claw products. Table 3 shows a listing (not a complete listing) of Over the Counter and Prescription based Non-steroidal Anti-inflammatory drugs.

As NSAID can yield adverse health effects, such as gastric bleeding, these non-natural drugs are secondary or more distant substitutes to Devil's Claw, relative to the natural counterparts. Nevertheless, as non-prescription based NSAID tends to be competitively priced, especially generic brands of aspirin, there is not likely to be a large relative price difference between Devil’s Claw and aspirin or other generic analgesics. For instance, Wal-Mart’s house brand, Equate, retails a 300 count bottle of generic aspirin for $3.94. While in comparison (table 1), the lowest price product for Devil’s Claw from Puritan’s Pride retails for $3.99 for 50 capsules. In

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conjunction with the other NSAIDs, these substitutes are likely to exert a strong price ceiling on Devil’s Claw products and thus present a high threat of substitutes.

Threat of Supplier Power Threat of supplier power refers to the ability of suppliers in a value chain to raise prices and / or reduce the quality of raw materials provided to input purchasing firms (Barney, 2003; Porter 1980). Threat of supplier power is commonly an issue in concentrated markets in which a small number of suppliers can raise input prices to (manufacturers) and thus reduce the profits available to the manufacturer. In the nutraceutical / herbal supplement market, supplier concentration is not a significant threat. According to the Nutrition Business Journal, agents in the nutraceutical / herbal supplement market consist of over 300+ suppliers, 100+ brokers / distributors and 1000+ growers, harvesters, refiners and extractors2 (see DaVanzo et al. 2009). This lack of concentration in the supplier market is also consistent with Muth et al. earlier study (1999) where the supplying stages of the nutraceutical / herbal supplement market is characterized as highly fragmented. For instance, Muth et al. (1999) study found that there were over 150 herb and botanical suppliers in which 127 had less than $5 million in sales, 15 with $5- 20 million in sales, and 8 with sales of greater than $20 million. Although these studies do not provide a direct indication of the degree of supplier concentration in the U.S. supply chain of Devil’s Claw, it nevertheless characterizes a structure that likely is typical in the U.S. today. Further, many foreign suppliers of Devil’s Claw exist. For instance, according to an online raw ingredient sourcing site (www.alibaba.com), there are 447 Chinese Manufacturing / trading companies involved in the raw supply of Devil’s Claw, such as, Shaanxi Undersun Biomedtech Co., followed by 15 in South Africa, such as Global Fusion Trading CC. Thus, while supplies of Devil’s Claw from China – and also India- remain generally limited, they have strong scale and distributional advantages that can pose a significant challenge to those Namibia suppliers who seek further value add processing. That is, because Namibian suppliers of Devil’s Claw may also include post harvesting activities involving drying, slicing and other value added processing and distribution activities (see section on Value Chain Analysis and Market Entry), Namibian suppliers thereby need to also contend with Chinese manufactures/ trading companies as another potential source of supply for the U.S. market As there are a great number of suppliers available from these exporting countries, supplier prices tend to be highly competitive (see www.alibaba.com). For instance, according to www.alibaba.com, suppliers appear to market their supplies of Devil’s Claw largely in terms of their competitive pricing as well as a minimum order purchase. This suggests scale economies are driving pricing and thus such competitive pricing is not likely to limit the performance of purchasers that rely on procurement of Devil’s Claw for processing operations. Furthermore, with respect to Namibia market, supplier production remains generally fragmented. While there are current efforts to organize suppliers (24 organized producer groups), they constitute 10-20% of the total market. This suggests while efforts to organize production will eventually lead to a greater supplier power, suppliers currently face a generally fragmented market.

2 Total combined sales of these suppliers amount to $2.8 billion.

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However, in light of such competitive conditions, there appear to be some suppliers who have differentiated their Devil’s Claw supply in terms of quality by the percentage of harpagoside. Specifically, the therapeutic properties of Devil’s Claw stem from Iridroid glycosides – that include four categories of harpagoside, harpagide, procumbide and procumboside (Hsun-Wei Huang et al, 2006) –, acetylated phenolic glycosides, and terpenoid (Fiebich et al., 2001; Hsun- Wei Huang et al., 2006). The anti-inflammatory and pain relief properties of Devil’s Claw have been specifically attributed to the percentage of harposide. Hence, while there is not generally a threat of supplier power, suppliers that differentiate on this therapeutic attribute can command a greater raw ingredient price and as a result can negatively impact a company that procures Devil’s Claw raw materials.

In the United States, there is another plant known as Devil’s Claw (proboscidea parviflora [Woot.] Woot. & Standl). It is found in southwestern United States and northern Mexico. It shares the common name, Devil’s Claw, with the Namibian variety (harpogophytum procumbens DeCandolle [Pedaliaceae]), but little else. The Claws of the U.S. variety are split and used by southwestern Native Americans in basket designs. There is limited small market distribution of the Claws. The seeds are available at sites such as Native Seeds in Tucson, AZ. The seeds and the pods are eaten occasionally within some Native American communities. Some health stores in the southwest sell the African variety as a natural product, so it appears that consumers can differentiate between the two plants and thus there is not a threat from the US-grown variety which is mainly known for its use in basketry.

Threat of Buyer Power Threat of buyer power refers to customers who purchase a rival firm’s products and services (Barney, 2003). Buyers can be end consumers or adjacent consumers in a value chain, such as retailers. Like the threat of supplier power, the threat of buyer power is impacted by the degree of market concentration. The threat of buyer power stems from the buyer / retailer’s ability to reduce a selling firm’s product price. In the context of Devil’s Claw, buyers consist of online and mainstream retailers (see distributors listed in Table 1). These buyers operate in a competitive market. For instance, in the U.S., there are over 1,800 direct distributors that not only include internet retailers, but also include direct marketers selling via television and mail order channels (DaVanzo et al., 2009). Since Devil’s Claw does not require any specialized form of distribution, there are many possible retail outlets and thus sellers face a variety of options in the online retail market. This reduces the threat of buyer power. However in terms of mass market modes of retail distribution (i.e. Walmart, Walgreens, GNC), there is a trend towards increasing consolidation and thus concentration (Muth et al., 1999 who sources from the Nutrition Business Journal, see also NBJ, 2010c). This concentration yields a greater ability by these retailers / buyers to leverage their volume purchasing in depressing prices that can be charged by Devil’s Claw manufacturers. This suggests that the distribution of Devil’s Claw to mass market retailers will likely need to contend with the price pressures of an increasingly concentrated buyer / retail supply stage (see also Muth et al., 1999). Furthermore, the threat of buyer power also stems from a lack of product differentiation (Barney, 2003; Porter, 1980). Namely, when buyers / retailers face products that are highly standardized,

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buyers face a greater number of alternatives which forces selling firms to reduce their prices and profits. In the case of the human nutraceutical / dietary market, Muth et al., (1999) finds that many supplements “are more commodity like and there is little variation among different manufacturers of the product” (p. 5-16). This appears to be also the case for Devil’s Claw. For instance, Table 1 shows that Devil’s Claw is not marketed with any discernible traits and pricing appears generally to be competitive. Yet, clinical studies have shown that Devil’s Claw’s anti-inflammatory and pain relieving (analgesic) properties stem from the key active ingredients: harpagoside and harpagide (Hsun-Wei Huang et al., 2006). Close examination of the branding of products produced by those rivals in Table 1 show that none of these products are differentiated on any of these active components. As a result, while both the online and mainstream retail segments appear to be generally competitive, this lack of product differentiation and an upcoming trend towards consolidation, especially in mainstream retailing, suggests these factors can pose a pending threat of buyer power.

Animal Nutraceutical / Herbal Supplement Market Forces

In addition to human nutraceutical / herbal supplement market, Porter’s five forces is also used to examine the competitive landscape and value chain for Devil’s Claw in the animal market that is comprised of equine, canine and feline. A five forces analysis is conducted on these three pet groups as a whole because some of these pet groups, such as feline, are too small to merit a separate analysis. Furthermore, industry trade reports have defined the animal nutritional / herbal supplement industry to consist of these three types of pets, thus justifying their aggregation. In describing this animal market, the Packaged Facts industry report indicates that the U.S. retail sales of pet supplements and nutraceutical treats amounts to $2.1 billion in 2007 of which supplements accounted for 45% of sales (Cavaliere, 2009). The majority of pet supplements (51%) are purchased for horses, while dog supplements represent 38% of the market and cat supplements at 6% (Cavaliere, 2009). Although we do not conduct a five forces analysis for each pet group, the five forces analysis will point out features salient to each of these animal sub markets. It is important to note that the competitive landscape of this market bears many strong parallels to the human nutrition / herbal supplement market. This is because the demands for pet supplements, especially that pertaining to joint health, mimic that of the human nutraceutical / herbal supplement market (PFI, 2010; PFI, 2011e, PFI, 2011d). In fact, according to the Pet Food Industry report, the demand for pet supplements is only 3 months behind that of human nutraceutical food trends (PFI, 2011e) and “the cycle keeps getting shorter as pets are treated more and more like human family members” (PFI, 2011e). Namely, as pets are increasingly treated as an extended family member, especially amongst an aging demographic, pet owners are treating their pet’s joint health in ways similar to their own (PFI, 2010b).

Furthermore, much like the rising health care costs faced in the human nutraceutical / herbal supplement market, rising veterinarian health care costs have prompted greater interest in seeking natural and holistic alternatives (PFI, 2011b; PFI, 2010). Lastly, there is an increasing perception amongst pet owners that natural ingredients are viewed as safer alternatives to pharmaceutical drugs, especially that of NSAID (PFI, 2011b, PFI, 2010; PFI, 2011c; McGregor et al., 2005).

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Threat of Rivalry

Threat of Rivalry is defined by veterinary manufacturing firms who produce an anti-inflammatory product that directly employs Devil’s Claw as an active ingredient for the treatment of joint related problems (i.e. reduction of inflammation of joints and pain relief) in animals. In following the Google product search procedure described earlier, this definition was used to search for rival manufacturing firms of Devil’s Claw. Like the human nutrition / herbal supplement market, the use of this Google Product search procedure is justified by industry survey data. Packaged Facts survey data indicate that internet sales of pet supplement products continue to outpace pet market growth whereby close to half of pet owners use the internet to research products on line (PFI, 2011c). Hence, as Google product search serves to identify the most popular Devil’s Claw products, this search will also indicate those products that are most likely to be in direct competition. Hence, in adapting our Google search procedure for the animal nutraceutical / herbal supplement market, Table 5 shows a listing of veterinarian manufacturers that satisfy this study’s definition of rivalry. Specifically, when conducting this search for each animal category, we only include unique brand product-company listings in which brands that have multiple SKU involving different size formulations or different products forms (i.e. powders, liquid forms) are not included. Much like the human nutraceutical / herbal supplement market, this was done to focus on rivalry that is based on brand-company pairings rather than rivalry from SKU basis. Table 5 outlines the competitive characteristics of direct rivals for veterinarian manufacturers of Devil’s Claws products by animal subclass. Similar to the human nutraceutical / herbal supplement market, there are a number of direct rivals that offer Devil’s Claw products in the treatment of joint related problems for animals. With respect to the sub-animal markets, there is significantly greater rivalry in the use of Devil’s Claw in the horse sub market than that of the canine and feline market. This is not surprising as 51% of the animal supplement market is consumed by horses.

Yet, as the threat of rivalry would be intensified under a slow-growth environment, the animal nutraceutical / herbal supplement market as a whole is growing fairly well. For instance, according to the Nutritional Business Journal, although the animal nutrition industry only makes up about 6% of the entire US $ 45 billion pet industry, within that small nutrition sector, pet supplements make up 50% of all products (PFI, 2010). This amounts to a $1.35 billion market in 2008 that is projected to grow to under $2 billion by 2013 (PFI, 2010). Despite recessional influences, there has been a steady 5% growth in sales in the pet segment from 2007 to 2011. The “top segments are “joint / senior and skin /coat with weight related products are also picking up steam” (PFI, 2010, PFI, 2011d). A 5% annual sales growth is also expected from the period 2011-2013 (PFI, 2010).

As joint related health problems reflect important segments of growth in the pet supplement market, such growth is likely to mitigate the greater degree of rivalry in the horse sub segment. Furthermore, given the limited number of direct rivals in the canine and feline sub markets, the overall growth in this market for joint care products will further reduce any threat of direct rivals in these sub markets. Hence, like the threat of rivalry in the human nutraceutical / herbal supplement market, the growth in this industry segment, especially on animal products relating to joint health, renders the threat of direct rivals to be limited.

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Threat of Entry

The threat of entry is, however, a significant threat. Like the human nutraceutical / herbal supplement market, the threat of entry into the animal market is dependent upon its expected profits. Specifically, as the growth of the animal nutraceutical / herbal market is in part an extension of the health and wellness preferences of pet owners, the expected profits of this industry are influenced by the growth dynamics of the human nutraceutical / dietary supplement market (see PFI, 2010; PFI, 2011a). Taylor notes, “nutritional supplements for pets have become a fast growth business, as pet owners seek out health products for the cute companions that mimic those they use for themselves” (PFI, 2010). Within the pet supplement market, the majority of pet supplements (51%) are purchased for horse, while dog supplements represent 38% of the market and cat supplements at 6% (Cavaliere, 2009). Pet supplements as whole are expected to grow at an annual sales rate of 5% for the period 2011-2013 (PFI, 2010). In particular as the top segments for growth in the animal nutrition / herbal supplements market is involved with “joint / senior” related products (PFI, 2011a), such potential growth is likely to motivate future entry. Although generally speaking there is a threat of new entry in the animal nutraceutical / herbal supplement market, there are nevertheless some animal specific considerations.

Equine The projected growth in the equine market has been reported at 2.2% for periods between 2011-16 (McBee, 2011). The equine market thereby faces an overall lower rate of growth than the overall pet supplement market (5%) (PFI, 2010; see also Heller, 2010) and thus faces a smaller threat of entry. Specifically, although racing horse and the closely associated thoroughbred breed markets constitute less than 20% of the overall equine market, revenue in this market is primarily driven by the demand for race horses (McBee, 2011). As gambling for racehorses is projected to recover from recessionary periods, the demand for race horses is expected to grow (McBee, 2011) and as a consequence the demand for the treatment of joint related problems is likely to improve. However, since Devil’s Claw is a banned substance in horse racing (Williams, 2009), the use of Devil’s Claw to capture such growth opportunities in racing horses that include breeding mares, and thoroughbred foals and stallions and show horses will not be possible. This legal restraint suggests that there are high barriers to entry.

Horses used for recreational and utility (i.e. farming) purposes are generally owned by a large number of small family owned operations (McBee, 2011). They face considerably smaller returns than that of their racing counterparts and thus the rate of market growth for the treatment of joint related problems in this equine market is likely to be smaller than that of the racing market. In particular, as the manufacture of Devil’s Claw products does not appear to involve capital intensive technologies and face relatively few regulatory restrictions, these factors lower the barriers to entry in this market. When coupling the lower barriers to entry with the relatively limited growth opportunities of the recreational and utility market for horses, these entry conditions can only support a few entrants. Hence, the threat of entry by just a few players can lead to over supply conditions that can significantly reduce the expected profitability of the Devil’s Claw market for horses.

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Canine and Feline With respect to the threat of entry in the canine / feline animal submarkets, the opportunities are closely tied to pet ownership rates (PFI, 2011e). Historically, dog and cat ownership in the USA had experienced significant growth and has impacted the growth of the herbal supplement market, especially the types of products for joint health (PFI, 2011a). Approximately 50% of U.S. households in 2010 have owned a dog or cat. Ownership rates for dogs or cats tend to vary by age and race. For instance, ownership rates for 35-54 age group is 59%, while seniors (65+) have a lower ownership rate of 46% (PFI, 2011f). In terms of race, white non-Hispanic households have an ownership rate of 58% where as it is 40% for Hispanics, 20% for Blacks and 23% for Asians (PFI, 2011f). Growth in minority pet ownership, especially Hispanics, has been argued as an untapped source of market opportunity. This is because according to the U.S. Census Bureau, Hispanics are expected to account for 52% of U.S. population growth from 2010 to 2015 and by 2050 will likely account for one third of the US population (PFI, 2011f). Based on these demographic projections, the threat of entry is likely to increase because increases in pet ownership by the growing Hispanic population will place greater demand for joint health products, such as that of Devil’s Claw. Furthermore, there are generally low barriers to entry in the manufacture of herbal supplements not only because the manufacture of supplements does not require capital intensive technologies but also because there are options to coordinate with “contract” manufacturers (e.g. Nutricaps). Contract manufacturers can process and package raw ingredients, such as Devil’s Claw, into various forms – tablet compression, tablet coating, powder blending, encapsulation, bottling, powder filling and blister packaging that meet certain safety requirements. Out sourcing to companies, such as Nutricaps (www.nutricaplabs.com), in the production of Devil’s Claw can be achieved for the various animal sub categories as well as that of the human market (Personal communications to Andrew at Nutricaps). Such outsourcing activities can thereby lower the barriers to entry in these markets, while also meeting Good Manufacturing Practices (GMP) certification requirements (Nutricaps is GMP certified). Outsourcing to such certified manufacturers is an important means to overcoming the entry barrier that results from the ambiguous regulation of supplements for pets. Namely, due to the general ambiguity involved in FDA regulation of pet supplements, the industry established a National Animal Supplement Council (NASC) to ensure that pet supplement manufacturers conform to strict quality standards; standards that are often higher than their human counterparts (Cavaliere, 2009). NASC certification requires that manufacturers produce pet dietary supplements in accordance to good manufacturing practices (GMPs) that involve high quality control standards (Cavaliere, 2009). Hence, sourcing from contract manufacturers such as Nutricap not only overcomes the capital investments required in the manufacture of Devil’s Claw products but also regulatory based barriers to entry. As a result, there is a significant threat of new entry to the pet market for Devil's Claw.

Threat of Substitutes

The threat of substitutes in the animal market for Devil’s Claw also involves both natural and non-natural substitutes. Similar to that of the human nutraceutical / herbal supplement market,

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Glucosamine and Chondroitin Sulfate and MSM or their combination are the most popular natural substitutes in the treatment of joint related problems in the animal market (PFI, 2010; PFI 2011a). As online sales of animal supplement tend to lead mainstream retailing (PFI, 2011c), a listing of searched products from Google product search was used to identify natural substitutes to Devil’s Claw. The search terms “Glucosamine, Chondroitin Sulfate and / or MSM” and “joint health” are search with the descriptors equine, canine, and / or feline. By animal sub category, Table 6 a, b and c identifies the threat of substitutes facing Devil’s Claw. Although this is not a comprehensive listing of all available natural substitutes, there are nevertheless a great number of substitute products for animal joint health care, especially when compared with that of threat of rivalry. Furthermore, as pet food manufacturers address the all-important issue of palatability, nutraceutical and functional ingredients are appearing in toppers, gravies, foods and treats (PFI, 2010). There are some recent indications that the development of these products is likely to further the threat of substitutes to Devil’s Claw. For instance, MARS, a leading manufacturer of pet food, in 2010 introduced “Pedigree Healthy Joints” that contain Glucosamine and Chondroitin (PFI, 2011a). Similarly, Del Monte’s “Every Day Health Snacks” has been extended to include “Hip and Joint Crunchy Bits” that include Glucosamine and Chondroitin (PFI, 2011a). While it is difficult to accurately assess the price ceiling effects of these varied substitutes, there are an overall great number of natural substitutes in all animal submarkets. Some of these natural substitutes shown in Table 6 a, b, and c appear to be competitively priced to those Devil’s Claw product prices shown in Table 5. Hence, like the human nutraceutical / herbal supplement market, the great number of natural substitutes on the market can exert a significant price constraint on manufacturer’s ability to raise prices for their Devil’s Claw products.

Threat of non-natural substitutes is also an additional challenge to veterinarian manufacturers of Devil’s Claw. Non-natural substitutes consist of anti-arthritic agents, Nonsteroidal Drugs (NSAID), and Steroidal drugs. Table 7 a, b, and c3 provides a listing of these non-natural substitute products by animal sub-class. There are a great number of such non-natural substitutes, especially NSAIDs--there are 180 NSAID products (Bayer, 2009). Because of this great number of substitutes, we did not list the prices for these varied products. Table 8 however summarizes this listing of products by animal sub class. Hence, although prices are not listed by the non-natural substitutes, the great number of these non-natural substitutes especially NSAIDs in the equine market are likely to further the threat of substitutes to manufacturers of Devil’s Claw.

Threat of Supplier Power

The threat of supplier power in the animal nutraceutical / herbal supplement market parallels the situation in the human market. Namely, there does not appear to be any significant distinction made as to the concentration, form, or other attributes of the raw root. This is because both are largely emergent or immature markets and thus buyers do not require suppliers to develop inputs that are specialized to the demands in each of these markets. Manufacturers of Devil’s Claw containing products for animals are likely to face a minimal supplier threat. However, as the animal nutraceutical / herbal supplement market can be perceived as receiving less enforcement of regulations, there has been increasing concern by consumers about misleading claims in the

3 Compendium of Veterinary Products handbook (11th edition)

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pet supplement market (Cavaliere, 2009). For instance according to the Nutrition Business journal survey, 74% of respondents identified that current regulation of pet supplements needed improvement and that pet supplement products have been marketed with misleading claims or claims that lack scientific merit (PFI, 2010). Hence, as a means to signaling quality attributes that are not governed by FDA, suppliers of Devil’s Claw for animal feeds or pet supplements which are able to differentiate on the active ingredient (percentage of harpagoside) may attain some advantages.

Threat of Buyer Power Threat of buyer power is similar to that of the human market in which it is primarily influenced by online retailers and mass merchandisers. Like the human nutritional / herbal market, animal supplements are primarily sold online through a number of internet based distributors (see Table 5 for list of buyers / online retailers). Based on our Google’ product search, Table 5 shows the list of buyer/ distributors. Furthermore, in conducting a separate search of Devil’s Claw products listed by most popular brand, the most commonly listed animal supplement retailers of Devil’s Claw products by Google Product search also include the following buyers / online retailers: Valley Vet Supply, Horse.com, and Equestrian collections, Ranch Division, KV Supply, Ablackhorse, All American Saddles and Smart Pak4. While some of these online retailers clearly have a specific focus to the equine supplement market, such as Equine Collections, there are other online retailers that also focus on herbal supplements for dogs and cats, such as Valley Vet and KV Supply. Overall there appears to be generally large numbers of retail buyers / retailers of Devil’s Claw for the horse market. Furthermore, online retailers tend to source from multiple manufacturers. For instance, one of the more popular online distributors is Valley Vet which retails three Equine Devil’s Claw product brands: DC-Y, FM Solution, and B-L. Hence, while there are generally a number of buyer / retailers, buyers can source products from multiple manufacturers. This increases the threat of buyer power because manufactures not only have fewer alternatives to retailing their products, but also the buyers can engage manufacturers to compete on price and thus reducing their profits.

Furthermore, unlike the human nutraceutical / herbal supplement market, pet supplements are sold through veterinarians (McBee, 2011). Although the number of veterinarian providers in the U.S. can be generalized as competitive, veterinarians are likely to exert considerable buyer power over manufacturers because veterinarians tend to develop long-term relationships with pet owners (equine, canine and feline). These relationships build a pet owner’s trust in the medical expertise of the veterinarian and thus are likely to be highly influenced by veterinarian recommendations. Such relationships not only yield a power or influence over their owners but subsequently that of the manufacturers of the Devil’s Claw product. In particular, as the clinical studies in the treatment of joint health by Devil’s Claw remains generally uncertain, a veterinarian’s experience and subsequent recommendation of Devil’s Claw can have a significant influence on pet owners’ decision to purchase these products. Thus in the absence of

4 Readers should note that Devil’s Claw products are also retailed by non-animal retailers such as Amazon, Newegg, and Sears. We however did not include them because these retailers distribute Devil’s Claw product through third party distributors and thus are not direct distributors of the product. These retailers would thus not directly affect the threat of buyer power.

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further clinical studies in this area, veterinarians are likely to exert significant buyer power over Devil’s Claw manufacturers.

CONCLUSION on COMPETITIVE LANDSCAPE

As one of the objectives of this study is to conduct an analysis of the competitive landscape and value chain of Devil’s Claw, the major highlights and implications of this analysis are summarized. Porter’s five forces framework was used to assess the competitive landscape and value chain of Devil’s Claw for the human and animal nutraceutical / herbal supplement market. Porter’s five forces (see Figure 1), underscores that the attractiveness or profitability of an industry is determined by five threats in which each of these threats have unique factors that reduce industry profitability. Porter five forces are suited to not only assessing the competitive landscape and value chain of Devil’s Claw, but it is also useful in determining the attractiveness of entry into human and animal nutraceutical / herbal supplement markets in the U.S. While there are important distinctions between these markets, a general conclusion from this five forces analysis is that the threats facing both human and animal markets are closely intertwined. This is because the use of Devil’s Claw in both markets draws on a common set of therapeutic benefits. In particular, various clinical studies indicated that Devil’s Claw exhibits pain killing and anti-inflammatory properties (Williams, 2009; Fiebich et al., 2001; Hsun-Wei Huang et al., 2006). In the human nutraceutical / herbal supplement market, Devil’s Claw has been found to not only reduce pain from muscular skeletal problems, but also reduce the inflammation of joints from osteo and rheumatic arthritis (Fiebich et al., 2001; Williams, 2009; Katerere and Naidoo, 2010; Chrubasik et al., 1996; McGregor et al., 2005). These therapeutic findings have been subsequently used in justifying the use of Devil’s Claw in the animal nutraceutical / herbal supplement market, such as equine, canine and feline animal populations (e.g. Cavaliere, 2009; Katerere and Naidoo, 2010). Because both markets draw on these therapeutic properties, both the human and animal market shares similar threats.

Threat of Substitutes Both markets not only leverage the therapeutic properties of Devil’s Claw, but these markets also face a common set of substitute products that offer similar therapeutic benefits. Namely, while, Devil’s Claw has been found to exhibit anti-inflammatory properties and also suggested as a potential treatment to joint related problems (i.e. arthritis), both human and animal markets face a similar set of natural as well as non-natural substitutes. Natural substitutes involve anti-inflammatory / joint care products that use Glucosamine / Chondroitin Sulfate / and MSM. These natural products present a significant threat of substitutes. There is large number of available substitutes that utilize these active ingredients in various forms, such as capsules, power, and liquid and or juices. While, the large number of such natural substitutes is not a sufficient indicator of a substitute threat, they nevertheless increase the likelihood that each of these substitute products can be competitively priced to that of a comparable Devil’s Claw product. Similar observations were also made of the animal nutraceutical / herbal supplement market. With respect to non-natural substitutes that include anti-arthritic agents, Nonsteroidal Drugs

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(NSAID), and Steroidal drugs, NSAID are the most common non-natural substitute (see also PFI, 2011c; McGregor et al., 2005). Although NSAID are generally an effective anti-inflammatory as well as a pain reducer, it has adverse health effects that involve gastric bleeding. Nevertheless in spite of such adverse health effects, there are also a greater number of substitutes that are competitive priced to Devil’s Claw products. As a result, the threat of substitutes is likely to significantly constrain the ability to command premium prices for a Devil’s Claw product.

Threat of Rivalry Both human and animal markets also share a similar competitive structure of direct rivals. Namely, the number of companies that directly manufacture Devil’s Claw for the treatment of joint health problems in the U.S. human and animal markets remain generally limited. This is because unlike European markets, Devil’s Claw in the U.S. market is immature and thus, there is generally a limited number of manufacturers of Devil’s Claw, especially that of the animal market. Hence, direct competition or rivalry in the human and animal markets is not a significant immediate threat. Furthermore, because the demand for joint related health care products reflect an emerging segment of growth, growth in demand for such products – in both human and animal markets- (e.g. NBJ, 2010e, PFI, 2011b, PFI, 2011d) further mitigates the direct rivalry of Devil’s Claw products.

Threat of Entry

The threat of entry, while closely related to the threat of rivalry, is however a significant threat. The threat of entry is driven by expected profits from producing anti-inflammatory supplements that aid in joint health. Specifically, the growth of the animal nutraceutical / herbal industry is in part an extension of the health and wellness preferences of and has similar growth dynamics as that of the human nutraceutical / herbal supplement market (see PFI, 2010; PFI, Feb, 2011a; Woolf, 2000; NBJ, 2011). For instance, in the human market, problems of joint health have been reported as an increasingly important health concern in developed countries and especially amongst an aging population. Such health concerns appear to be translated to the animal nutraceutical / herbal supplement market. Moreover, as both human and animal nutritional / herbal supplement markets face less FDA regulation – relative to that of drugs- there are relatively few regulatory barriers. The costs of entering the industry in the manufacture of Devil’s Claw products are not significant because they can be outsourced contract manufacturers. Hence, with growth in the human and animal market and coupled with low entry costs, risk of entry is a significant threat to the profitability of Devil’s Claw products in these markets.

Threat of Buyer Power

The analysis of the threat of buyer power in both markets is a pending concern. Specifically, a significant amount of the sales – upwards of 50% – of human and animal nutraceutical / herbal supplements is distributed through online retail sites. Buyers, as online retailers, operate in a

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highly competitive market environment, especially that of the human market. For instance, there are 1800 direct distributors that include internet retailers and direct mail order that are involved in sale of nutraceutical related products (DaVanzo et al. 2009). In the absence of a concentrated buyer market, Devil’s Claw manufactures are less vulnerable to buyer demands in reducing their pricing. While the human market generally faces a greater degree of competition, the animal market faces significantly fewer distributors (10+ online distributors). Furthermore, in both human and animal markets, online distributors tend to carry multiple Devil’s Claw products from different manufacturers. For instance, one of the more popular online distributors is Valley Vet who retails three Equine Devil’s Claw product brands: DC-Y, FM Solution, and B-L. This increases the threat of buyer power because online retailers can engage multiple manufacturers to compete on price and thus reduce manufacturer profits. There also appears to be an increasing trend toward consolidation which increases buyer power because manufacturers face fewer alternatives and thus can be captive to the price demands of their retailers.

Threat of Supplier Power With respect to upstream threats to the manufacture of Devil’s Claw products, the threat of supplier power in the animal nutraceutical / dietary supplement market parallels that of the supplier power in the human market. Namely, there does not appear to be any significant distinction in the quality of raw supplies of Devil’s Claw for either of these markets. This is because both are largely emergent or immature markets and thus do not require suppliers that are specialized to the demands to each of these markets. In that, there does not appear to be any significant distinction in terms of the active ingredient -% of harpagoside- in the sourcing of raw / unprocessed suppliers Devil’s Claw (see www.alibaba.com) for either of these markets. In the absence of any significant distinction in this “quality” aspect of Devil’s Claw, the supplier market appears to be competitive. Hence, as a manufacturer of Devil’s Claw, the competitive nature of this supplier market is not likely to be a source of threat as supplies can be sourced at competitive prices. Furthermore, given that MCC Namibia is likely to source from their local sources in the manufacture of a Devil’s Claw product, such threats of supplier power are not likely to be a significant concern in either the human or animal markets.

Mitigating Key Threats

As one of the goals of this study is to determine a course of action that would enable successful entry into the U.S. nutraceutical / herbal supplement market, success depends on mitigating the identified threats outlined by the five forces analysis.

Threat of Substitutes

Differentiation is a common means to mitigate the threat of substitutes (Barney, 2003; Porter, 1980). As the therapeutic benefits of Devil’s Claw remains generally unclear, especially in the animal market, differentiation through investments in clinical studies on Devil’s Claw’s therapeutic properties is one means to mitigate threats from natural and non-natural substitutes.

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Such investment should focus on clinical trials that examine the relative effectiveness of Devil’s Claw as an anti-inflammatory to the treatment of joint health problems, compared directly to its natural and non-natural substitutes. To our knowledge there remain few if any clinical studies that have conducted such clinical comparisons. While the threat of rivalry was not identified as a significant threat, differentiating efforts to neutralize the threat of substitutes will also serve to develop a unique position relative to existing and potential rivals in this market.

Threat of Entry Due to the potential growth in the market for joint care products and given relatively low entry barriers, threat of entry is a significant factor that can affect the future returns in the Devil’s Claw product-market. Such threats of entry are typically mitigated by creating entry barriers through various means (Barney, 2003; Porter 1980). Investments in research and development, such as investments in clinical trials on the therapeutic effectiveness of Devil’s Claw, is one means because such investments serve to not only develop a differentiating trait that mitigates threats of substitutes and to a lesser extent rivalry. But such investments can subsequently yield a greater ability to exert a price premium over new entrants who do not commit to such investments. Yet, since natural products face considerable legal challenges in the protection of property rights, such investments in research need to account for this fact. Other means of creating an entry barrier may thus require early entrant strategies. Early entry strategies are particularly suited for entry into emergent markets in which early entry yields an accumulation of learning experiences that reduce costs. For instance, early entry into the manufacturing of Devil’s Claw products – as opposed to contract manufacturing- can yield learning curve economies that enable market penetration through a low margin-high volume strategy. Currently, the market of manufacturers (i.e. direct rivals) appears to be fragmented which suggests possibilities to exploiting untapped scale and related learning curve advantages. However, such an entry strategy would require significant capital investments. To limit the risky investments an alternative is a staged entry strategy in which “contract manufacturing” is first sought. After uncertainties in the therapeutic benefits of Devil’s Claw and market acceptance by distributors have been resolved, investment in a manufacturing facility should then be considered.

Threat of Buyer Power Threat of buyer power is the remaining threat to the viability of a Devil’s Claw product. Although online distribution of nutraceutical / herbal supplements is generally competitive, online vendors possess considerable market power, because they source from multiple manufacturers. One means to mitigate such market power is to leverage strategies used in mitigating the threat of substitutes. Efforts to differentiate Devil’s Claw through either clinical trials and / or production through certified means, such as contracting to manufacturers that are NASC certified, can serve to mitigate such buyer power. Such differentiation efforts reduce Devil’s Claw’s “commodity like” status and thus provide Devil’s Claw manufacturers an improved bargaining position. While both the human and animal nutraceutical / herbal supplement markets have their own distinctions, they nevertheless share these common threats and thus the above strategies can be

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applied to either of these markets. However, decisions in regards to entry in either of these markets depend on the extent to which these mitigating strategies can be implemented. Nevertheless, when all factors are considered equal, we recommend that if entry is pursued, the following pattern of entry be considered:

1) Although each of the above threats tends to be more acute in the human nutraceutical / herbal supplement market than that of the animal market, growing and aging demographic and basic changes in health care are likely to yield greater growth prospects for humans relative to the animal market. Hence, entry into the human market that emphasizes any one or all of the above mitigating strategies would be recommended. Specifically, a differentiating focus that clinically supports the anti-inflammatory and joint health properties of Devil’s Claw to a senior demographic should be considered. Marketing of such clinical claims through product labels as well as through internet advertisements is important because internet sales constitute a significant share of the market. Subsequently, the development of positive online user rating and reviews is important to receiving higher Google product search rankings and thus can provide an important means of differentiation.

2) Because many of the clinical claims in the human market are used as a basis to justify the development of Devil’s Claw products for animals, entry into the human market is not only conducive to capitalizing on an emerging market for joint health, but the differentiating efforts made in this market can be leveraged into the entry of animal market. With respect to the animal market, the horse market does not appear to be an attractive mode of market entry. Furthermore, there are currently a number of rival products that are available in that market. The remaining markets would thus favor the entry into the Canine and Feline market not only because there are considerably fewer rivals (see table 5), but pet ownership rates are projected to increase, especially that of the Hispanic population.

To conclude, while the prediction of success of any entry event is often marred with significant uncertainties, the identification of these key threats in the five forces analysis serve to identifies the nature of such uncertainties facing a U.S. entry of Devil’s Claw products. Identifying such key threats will serve to not only better manage the uncertainties of this entry but if they can be mitigated, can improve the profitability of Devil’s Claw products in the U.S. human and animal nutraceutical / herbal supplement market.

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VALUE CHAIN ANALYSIS AND MARKET ENTRY STUDY

The business processes, organizational forms, and inter-firm relationships that enable raw materials be transformed into a consumer - ready form comprise the value chain for Devil’s Claw. The conceptual framework that we use in analyzing this chain is taken from the resource-based view of the firm, where the business analyst considers the available resources and capabilities of a company at a fine level of detail (Barney, 2003; Porter, 1980). Value chains involve both primary and support activities that are used by a firm to efficiently deploy the available resources in a manner that creates durable competitive advantage. These resources are characterized by various functional areas of the value chain that involve technology, regulatory and legal support, infrastructure for distribution support, and sales marketing or merchandising. While, value chain analysis is most often conducted within a company or by researchers in consulting firms who have access to a great deal of information about the internal functional areas of the firm, this study extends this firm level focus to that of the system of relationships involved in the commercialization of Devil’s Claw. Such an effort serves to identify the potential parties and functional responsibilities of those involved in the commercialization of Devil’s Claw. As part of the background to this study, we conducted one interview with the principal of a company in Namibia and the value chain analysis is focused around the capabilities and current positioning of that business.

The value chain conceptual framework is used as an organizing method to fix ideas on the current status of Devil’s Claw and identify the near-term prospects for entry into the United States market. Although the initial research plan was to analyze the value chains separately for veterinary products and human dietary supplements, our competitive analysis, as well as our discussions with industry members, indicates that the two markets share much in common. The primary and value added production levels are nearly the same for human and animal markets. Indeed, the major brokers and manufacturer's requirements for ingredients are quite similar. The separation of the two channels largely begins with the manufacturing level in which there needs to be different preparation for the legal and regulatory support activities for products destined for human or animal products.

The market opportunity for Devil's Claw can be seen within the structure of a series of primary and infrastructure functional responsibilities that are shared by many firms, each responsible for a fairly limited phase of the market channel (figure 3). The market channel in the figure is divided into primary activities, distribution activities, and retailing activities arranged vertically down the figure. The current Namibian stakeholders occupy the harvest level of primary activities and provide a limited degree of processing.

The perspective on the U.S. market in figure 3 is similar to the traditional market channel in which a product is transformed in form or location as it moves from raw material to consumer-ready form. We expand into several chains horizontally because there are multiple product options that can be produced with the same raw material. For example, from the manufacturing level, either human or animal products can be produced. At the manufacturing level, there are scope and scale opportunities to diversifying the use of the firm’s processing assets to these two markets. Further, there are niches within the human or animal lines that represent distinct market

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segments—for example, formulations sold only through veterinarians are produced by different companies than those that market to mass channels.

At the retail level on figure 3, moving left to right, the divisions of the consumer market are illustrated. The animal market accessed through the veterinarian channel or (separately) the mass market channels is on the left, and, on the right, the human market accessed through specialty "health food store" retailers or mass market channels. Within the animal market, there are further divisions (not shown) between dogs and horses. The internet distribution option is included within the mass market channel in both human and animal markets.

In the boxes denoted by dotted lines, we list the names of selected key firms involved at that level of the market channel. Contact information for those firms, as well as others indicated from our research and field experience, is provided in a database as a supplement to this report.

Primary Activities: Harvest and Processing

Harvest

At the present time, Devil's Claw is harvested mainly in Namibia but some sources in Botswana, Zambia, and Angola are potential competition to the Namibian business. The ability to source and to document a sustainable method of harvest is a key advantage to Namibian stakeholders. Harvesting is done by agents of the firm who are not directly employed by the company, do not have voting equity, but they do have a formal equity stake in the business, according to management (personal communication). The harvesters maintain adherence to a unique sustainable harvest system affiliated with the Sandveld Conservancy (http://www.sandveld.com/) and with MCA-Namibia. This harvesting system is a form of Good Agricultural Practice (GAP). Considerable organization and coordination has been invested in developing the supply relationships and as a result, the Namibian stakeholder Dynamics has a strong position in the harvest activities.

Primary processing

The first stage in processing, cleaning, slicing, and drying the roots, is done by small scale farmers. There is no certification of GMP (good manufacturing practice) offered for these processing activities. The value proposition for the entire chain will be significantly enhanced by obtaining GMP status for the primary processing. There are important buyers in the USA that strictly control quality of the ingredients they use, therefore they will only purchase whole or sliced root and would not import an extract or powder or other processed form of Devil's Claw. In order to gain their business, a credible quality assurance system is needed. A supervisor who is knowledgeable about contamination risks and has credentials in GMP is a key starting point. GMP-type training for food ingredient suppliers is available at many international trade shows or direct certification of the company’s procedures can begin with one of several third party providers.

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The Namibian supplier buys minimally processed Devil's Claw root from a group of harvesters who have substantive ties with the firm, therefore the buyer is in a position to direct and motivate the use of GMP at the processing stage. GMP expertise can thereby be leveraged by Namibia producers as a point of market entry. Further, the GMP process may be leveraged in the future to assure even higher quality standards with regard to concentration of the active ingredient so that lots are consistent, or those that vary can be priced according to content and quality. Given that the Namibian entity appears to have, or will be developing, a reputation for such quality standards, the ability to leverage on such quality differentiating efforts would be an additional advantage to the Namibia group. At a minimum, close attention to first handling and storage conditions will assure that product shipped to distant markets has not deteriorated in concentration or activation. Temperature, humidity, and time in storage are likely factors in the precision with which raw materials are converted to supplement dosages under exacting standards.

Further, without assurances as to quality from the field, the further processing undertaken by a stakeholder in Namibia or elsewhere will need to include higher levels of sanitation or control in order to yield outputs that are of suitable quality for consumption by pets and humans. To the extent that processing will eventually become part of the value chain, it is important to initiate controls at the primary processor to reduce burdens on further processing and thus increasing Namibia’s position to commanding greater premiums.

However, in spite of the advantages of the stakeholder interviewed for this study, there is no Namibian firm that currently has the critical resources to successfully place products directly into the U.S. market. The subject company lacks a brand and the healthful product image that will be necessary to compete in the specialty product niche in the U.S. market. Clearly the market entry strategy for the near term must be to develop relationships with a business partner to provide services of distribution, further processing, and delivery.

GMP certification of supplies is feasible given that there are existing business connections with the harvesters. It will be possible for the supplier to develop procedures to document training of workers in safety during the cleaning and cutting processes. Of particular concern is that any water used for cleaning follows standard sanitation procedures and that workers have protective equipment when using cutting surfaces. The product must be covered in storage and processing in order to protect it from contamination that might be introduced by birds or other wildlife. These standards may not be common practice in the field or village today but the components are well understood in food production systems. Because risks from pathogen contamination are not high in the primary production process, it is our assessment that an elevation to GMP standards is feasible for processing in very small scale settings. As a result of this enhanced production system, Namibian stakeholders will be able to deliver products to buyers in the USA to be further processed into goods in the form that US consumers desire.

Further processing The trends in product forms for dietary supplements in the USA include soft gel pills and liquids in single-serve bottles. These product forms appeal particularly to senior citizens in the USA because they are easier to swallow than traditional tablets or capsules. In order to apply soft gel technology to Devil's Claw ingredients, laboratory studies of the formulation will be necessary.

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These tests will investigate whether the Devil’s Claw material is compatible with the gel medium and not so dry that it will cause the casing to harden. The resources needed to conduct this sort of technical research are available through contract manufacturers. Sabinsa5 is a major ingredient supplier and a business arrangement with a company of this scale and focus may provide an opportunity in the joint pain relief category. Boswellia (sourced from India) is currently among the fastest growing of the natural supplements for joint pain. Sabinsa contracts growers in India in a closely controlled production system. Devil’s Claw might be complementary to the active ingredients in Boswellia, and there may be an opening for Devil's Claw in a new formulation.

Jarrow6 is a large volume manufacturer of dietary supplements. The company representatives we interviewed suggested that joint pain remedies were not a major emphasis in their business at this time.

There is potential for Devil’s Claw to be marketed in traditional powdered forms that do not require advanced processing. There was one brand with an ecological theme that was sold in large jars of powder (Health Force Nutritionals7) and that company expressed interest in hearing more about Devil's Claw. Health Force Nutritional's product along with most other dietary supplements is a blend of several botanicals. Thus, we see an opportunity for Devil's Claw to be added to an existing product line. In order to capitalize on this opportunity, Namibian companies will need to sponsor scientific testing to assure that the active ingredients in those blends are complementary to Devil's Claw rather than interfering or interacting in a way to generate toxicity or reduce effectiveness.

As an alternative to marketing minimally processed material (sliced dry roots), the Namibian stakeholder we interviewed currently has vertical linkages to manufacture consumer-ready products by contract with a South African custom manufacturer. There is no operating processing facility within Namibia at this time. Thus, a vertically integrated further processing option is not available to any Namibian harvesting entity. A vertically coordinated value chain with contract manufacture under a Namibian brand may be developed in the near future through alliance with the following companies:

in the USA (Pharmachem8, SoftGel Technologies9, Novagroup10), in China (Jiaherb11) with headquarters in New Jersey, USA and in India (Advantage Botanical12).

The products would bear the Namibian brand without the need to invest in systems for complex formulations, for assurances of regulatory compliance, and for packaging in the forms

5 Sabinsa Corporation. Pande, Anurag. (732)-777-1111 anurag@sabinsa.com 6 Jarrow Formulas. (310)-204-6936 info@jarrow.com 7 Health Force Nutritionals. Phillips, Fred. (800)-357-2717 8 Pharmachem Laboratories Inc. (201)-246-1000 info@pharmachemlabs.com 9 Soft Gel Technologies. Bouskila, Roy. (972)-524-8569-34 royb@soft-gel.com 10 Nova Group. Williams, Natalie. (801)-261-2252 n.williams@novagroup.net 11 Jiaherb Inc. 1-888-542-4372 www.jiaherbinc.com/ 12 Advantage Botanical LLC. (845)-610-3673 www.advantagebotanicals.com/

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demanded by U.S. consumers. The Namibian firm will need to invest in the expertise about formulation so that its specifications can be delivered to the contract manufacturer.

Formulation is the key stage in leveraging the further-processing activities into a profitable dietary supplement for the US market. Products are marketed based on therapeutic properties. Even where companies are not making health claims per se, they offer high standards for safety and efficacy. For example, the leading companies advertise GRAS status (Generally Recognized as Safe, a status that requires FDA oversight). Further, companies have obtained patents on the extraction process (ethicalnaturals.com, advertising of resveratrol) similar to the technology that is used to produce Doloteffin (Ardeypharm GmbH), the high quality Devil’s Claw extract produced in Germany. These levels of quality are for the premium ingredients niche and have the potential to yield price advantages.

The competition to a Namibian entrant is providing proof that products are not toxic, are not working against other ingredients in a blend, and have efficacy in the intended use. Information about therapeutic benefits cannot legally be conveyed on labels of the consumer-ready package, but it will be raised as an important issue in discussions with business customers who are considering Devil’s Claw as a new ingredient complementary to its existing lines. Hence we stress that it is crucial for Devil's Claw stakeholders to understand and to convey all information about its therapeutic properties and any possible interactions and side effects. For instance, now that the USA market has been exposed to Devil’s Claw product labels with health warnings about use by pregnant women, there have been contradictory messages about therapeutic value, which, in our opinion, clouds the prospects for Devil's Claw.

Additionally, the company should consider changing to a new name more appealing to consumers in the U.S. than the current Devil’s Claw. There is some confusion in the market about products sourced in Arizona carrying the same name.

Recent presentations on the cutting edge issues in the dietary supplements field highlighted the importance of anti-inflammatory properties of botanicals and foods (Marks, 2009 and 2012). For example, resveratrol (made from grape seeds) is in vogue. There is apparently a body of evidence on Devil's Claw supporting its anti-inflammatory attributes as well as its role as a remedy for pain and natural healing. To our knowledge, customers in the USA do not associate these attributes with Devil’s Claw. Industry contacts who knew of Devil’s Claw classified it in the joint pain remedy product line, which is not as popular currently as the anti-inflammatories. Effectiveness of Devil’s Claw toward inflammation rather than merely pain relief is an area for scientific clarification and might be completed without new research if it is placed in the appropriate context for business development. That is, part of the market entry strategy must be to generate credible scientific testimonials in an industry outreach format.

An avenue for outreach would be the Nutracon conferences or in the trade journals and blogs associated with New Hope media company. A Namibian stakeholder might seek a speaking engagement on the program or offer an interview to the media firm. In this way, the Namibian stakeholders would build an evidence-based strategy for market entry that will facilitate placement in high-value market niches. Information on the therapeutic properties and the efficacy of Devil’s Claw can best be conveyed to the sophisticated buyers and related value chain members in the USA market if it is backed by credible research.

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This information exchange is quite different from the FDA-regulated information that needs to be conveyed on consumer-ready packages. Buyers of ingredients for dietary supplements have a high level of sophistication about the health and wellness effects of certain compounds, and the research base to support benefits must be well documented and explained before a buyer will consider purchasing the product. Major ingredient companies supplying to the dietary supplements products include XTO, Sabinsa and DSM, and they are staffed by individuals with food science and biological expertise.

Both the dietary supplements industry and the US federal regulators at the FDA have a renewed emphasis on enhancing the safety and credibility of the dietary supplements industry. Industry leaders are motivated to a higher level of quality following some scandals in the media recently about companies that have deliberately misled consumers concerning the ingredients in their products (FDA, 2012; Schultz, 2012)13.

As a specific example of the higher emphasis on credibility, please note the draft guidance to industry of July 2011 regarding compliance with the New Dietary Ingredient regulation (NDI). The NDI has been in place for several years, but FDA signaled a new emphasis when it released a draft guidance to industry about a change in focus (FDA, 2011a)14. The NDI requires pre-market notification to FDA (not approval) to assure that a "new dietary ingredient will reasonably be expected to be safe under the conditions of use recommended or suggested in the labeling" (FDA, 2011b and 2011c)15.

Many botanical products are among those that have notified FDA under this regulation, including: stevia, white zapote, bark extract of Pao, fenugreek, periwinkle, resveratrol, and many root crops. Clearly several of these items are like Devil's Claw in that they are natural, traditionally known among certain populations, and have been used for some time. The submissions to the FDA are new uses or new formulations of the well-known ingredients. Thus the submission to FDA will be fairly routine. Nevertheless, the new dietary ingredient notification is likely to be requested by trade partners in the USA. Such a request would be an action consistent with a cautious approach as the industry seeks to understand the intentions of the nonbinding recommendations that the FDA published in July 2011. Thus, Devil's Claw stakeholders should be prepared to assist with or to complete a premarket notification under the NDI regulation.

For animal products to be distributed in the veterinarian office sales channel rather than chain stores or internet, the opportunities for higher margins are attractive. The burden on safety is correspondingly higher. At a minimum, the ingredient supplier must document research to

13 http://www.fda.gov/ForConsumers/ConsumerUpdates/ucm274599.htm http://newhope360.com/supply-chain-management/dry-labbing-dirty-secret-dietary-supplements-industry 14 http://www.fda.gov/Food/GuidanceComplianceRegulatoryInformation/GuidanceDocuments/DietarySupplements/ucm257563.htm 15http://www.fda.gov/Food/DietarySupplements/ucm109764.htm http://www.fda.gov/Food/GuidanceComplianceRegulatoryInformation/GuidanceDocuments/DietarySupplements/ucm257563.htm#topents/DietarySupplements/UCM260199.pdf

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determine the toxicity level of the active ingredient. Research is needed to understand the dosages that are contraindicated for pregnancy and to determine if there are milder symptoms that are also detrimental to market acceptance. Sources from the vet market report that there is a perception that Devil’s Claw is dangerous to mares and breeding dogs. This information has not completely excluded Devil’s Claw from the pet market, according to our source. Within the dog market, Devil’s Claw might be acceptable for the product line specifically targeted to senior pets that would not be breeding. However, if a warning label is necessary, it is likely to be a major limiting factor to consumer acceptance. Research is clearly needed to understand the doses that threaten pregnancy or fertility and whether those risks are different for various species.

Distribution support activities A Namibia-based company manages its export of raw materials from Africa through a spot order of a 20-foot shipping container. With this arrangement, occasional shipments are feasible but there is no ability to mix loads for cost-effectiveness in ocean freight. No detailed data on cost were provided for use in this study. In order for a larger volume to be accommodated for direct exports to the USA, the Namibian value chain will need to be supported with leased or owned storage facilities under temperature and humidity control so that the product quality remains acceptable when stored for longer periods. Our interviews with industry did not identify any U.S. company currently involved in trade of dietary supplement ingredients from Africa; therefore, we lack precise detail on the costs of transportation and logistics. Brokers from Maypro, Inc.16 are knowledgeable advisors about shipping costs. There is a possible low-cost strategy in logistics to align with firms that are producing in India or China. The preponderance of trade in dietary supplement ingredients is from India or China due to the low cost and adequate infrastructure for research and certification. There are large companies processing ingredients and finished goods across several product lines that can constitute a full container load and be handled under effective controls for a traceable distribution system. The cost to distribute directly from Namibia must be contrasted with the alternative of exporting from India or China to the USA, suggesting that the avenue for entry to the USA may be through China.

Retail distribution and marketing activities

Namibian stakeholders do not currently work in a value chain that extends to retail. Companies that might provide retailing support on behalf of a Namibian stakeholder are those in the eco-environmentally conscious niche. While there has been growth in this market in the USA (Soref, 2011) the average consumer and even buyers in the natural foods specialty stores are not associating fair trade or environmental attributes with dietary supplements and herbs.

16 Maypro Industries LLC. Alimonti, Denis (914)251-0701 ext 126 denis.alimonti@maypro.com

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The Fair Trade category is a relevant segment for marketing products that are harvested in an environmentally sustainable manner. The companies that operate in this area are: Guyaki17—marketing the South American product yerba mate; Josef Brinckmann at Traditional Medicinals18 from Sebastopol, CA, Gaia Herbs in North Carolina, and Organic India. The Institute for Marketecology is an international agency for certification of eco-friendly (Soref, 2011).

Recommendations for Market Entry We suggest research to address at least the following: 1. Efficacy and/or toxicity tests in combinations with Boswellia and other natural supplements appears to be a promising avenue as few if any research has tried such combinations. 2. Effects on pregnancy under recommended dosages (human and animal). 3. Feasibility to incorporate in soft gel product form 4. Anti-inflammatory effects compared with existing natural substitutes such as resveratrol. 5. Toxicity studies for the veterinary channel with a focus on the canine and feline market. If the Namibian stakeholders desire to enter the USA market, they will need to find reliable business partners and to be prepared for those business partners to capture a large share of the returns from value-adding business. We believe that the identification of business partners and finalizing contracts for transactions involving raw materials and primary processing can be executed from a remote location, in large part. When it comes to formulation, the scientific expertise and ability to show credible results are not likely to be organized in Namibia. Other issues In light of these recommendations, it is also prudent to outline any other considerations that can impact Devil’s Claw’s U.S. market entry. Although primary production of Devil’s Claw is predominantly in Namibia, the post processing requirements of Devil’s Claw suggests that companies in China and India can fulfill some of these post harvesting activities at a potentially lower cost than Namibian suppliers. Therefore, while China and India are currently not significant suppliers of Devil’s Claw, their low cost position in post manufacturing and distribution and, most importantly, existing market access to U.S. dietary supplements market, are a major source of supplier threat to Namibian producers. Hence, from the standpoint of suppliers, one means of neutralizing this potential supplier threat is for Namibian producers to coordinate rather than compete on the post harvesting requirements of Devil’s Claw with Chinese and Indian manufacturers. Hence, under such a coordinated arrangement, entry may occur through Chinese and Indian exports into the U.S.

Another related supplier consideration is that while the current assessment of the threat of supplier remains relatively low, there is potential to increase the supplier position of Namibia

17 Guyaki. (888)-482-9254 http://guayaki.com/ 18 Traditional Medicinals. 1-800-543-4372 www.traditionalmedicinals.com/

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producers. That is, while there are current efforts by MCA to coordinate the production of at least 21 Devil’s Claw harvester groups, their contributions constitute only 10-20% of the raw material supply (communications with David Cole) and thus do not hold a strong supplier position. This suggests that there are significant opportunities for MCA to continue their efforts to coordinate production amongst Namibian producers. We expect that such coordination will be in close alignment between harvesters and the first handlers in Namibia and is not a significant threat to a Namibian stakeholder. Instead, there is potential to position the Namibian producers in a marginally improved position with respect to foreign buyers, in which higher prices can be charged to U.S. and Chinese / Indian manufacturers.

Cost Estimates for Performing Clinical Studies on Efficacy of Devil’s Claw for Joint Health in Humans and Animals

This section is a compilation of information on the costs of clinical and laboratory research that is suggested to assist in market entry. If there is interest in claiming Devil’s Claw as a drug which would be recognized by the FDA, all regulatory considerations would be satisfied but the expense of the research is daunting. Studies must first be conducted on animals and then followed up with studies of the effects on humans. Outlined are the total financial estimates to conduct studies on the efficacy of Devil’s Claw and the cost to evaluate the safety of Devil’s Claw on horses and dogs. As there is no dietary supplement category for pet food, the research cost estimate is for full FDA approval of a veterinary drug.

Human Markets –Efficacy as a Dietary Supplement

According to Dr. Heather Boon, from the Faculty of Pharmacy of University of Toronto, the cost of clinical trials for natural medicine products is usually calculated as an amount per patient. Drug trials range from several hundred dollars per patient to $1000/patient enrolled. Factors that impact the estimates were identified by Dr. Boon as: payment reception permitted or restricted to recruitment centers for patient recruitment; whether or not participants in the trial are paid for their participation (or just receive free product for example), how many visits to the study center are required, and what kind of data are being collected (amount and invasiveness -- for example are the participants filling our pre- and post-surveys or are physical assessments and blood draws necessary). Clinical trials (if undertaken by Dr. Boon’s laboratory in Canada) need to be pre-approved by Natural Health Products Directorate of Health Canada which regulates clinical trials with natural health products. The review process takes approximately 30-60 days. For Dr. Sandra P. Welch from Virginia Commonwealth University, inflammation/pain studies require testing multiple compounds. The first step in the process requires testing animals. A rough estimate for animal testing includes 50 rats in 100 days, a housing rate of $1 per day and a principal investigator salary for six months. Following the conclusion of the animal testing, the next step in the process is testing humans. A major portion of clinical trials in pharmacology require funding for the physician, statisticians, and staff to work with patients.

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Veterinary drug status

Attempting to make a drug claim for Devil’s Claw could result in a significant regulatory burden, with oversight by the FDA Center for Veterinary Medicine. The Federal Food Drug and Cosmetic Act defines a drug as:

“(A) articles recognized in the official United States Pharmacopoeia, official Homoeopathic Pharmacopoeia of the United States, or official National Formulary, or any supplement to any of them; and (B) articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease in man or other animals; and (C) articles (other than food) intended to affect the structure or any function of the body of man or other animals; and (D) articles intended for use as a component of any article specified in clause (A), (B), or (C).”

Therefore, claims for Devil’s Claw such as for “treatment of osteoarthritis” or “alleviation of pain” would likely result in requirements for studies to be conduct under GLP/GCP conditions, approval of manufacturing processes, and so on. Note that the studies outlined below would require significantly more time and financial resources if they were to be performed in accordance with the legal standards. In order to comply with personnel and facility requirements and provide for quality assurance, an increase of 5-10 times the original cost may arise. All estimates below are approximations and should not be considered as actual budgets. Studies comparing Devil’s Claw to placebo, and studies comparing Devil’s Claw to another product depict that smaller expected differences in variability between Devil’s Claw and similar products will require larger sample sizes in order to show a statistically significant differences; or show that a lack of difference is not due to a lack of power to detect that difference. In addition, the estimates below do not reflect any indirect costs. If these studies were to be conducted by Texas A&M University, indirect costs would add approximately 46% to each study (Dr. Virginia Fajt, Personal communication, April 20, 2012). Horses

1. Efficacy a. Purported efficacy in protecting joint health suggests that changes in joint fluid

and changes in indicators of pain in the joint should be evaluated. Horses with naturally occurring joint disease should be identified and randomly selected for treatment or placebo. One possible pool of animals at Texas A&M is client-owned horses that visit the Veterinary Medical Teaching Hospital. (Horses would need to be NSAID-free for at least 2 weeks and glucocorticoid-free for at least 3 weeks prior to the beginning of the study.) Lameness can be assessed on a 5-point scale (American Association of Equine Practitioners, 1999) prior to the beginning of the study. In addition to comparing attenuation of lameness with Devil’s Claw, glycosaminoglycan, hyaluronic acid, prostaglandin E, and tumor-necrosis-factor (TNF) levels could be evaluated in blood and synovial fluid.

b. Financial consideration would include lump-sum payments to clients for use of client-owned animals ($200/animal x 10-20 animals if comparing to placebo or 50-100 animals if comparing to NSAID or other product), outpatient fees for 4-5

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visits ($50/visit), fees for collecting blood and joint fluid samples ($50/sample), study personnel (technician and clinical veterinarian for developing the Animal Use Protocol and for collecting samples – 25% time over 3 months - $2000 + $6000), and sample analysis ($50/sample type x 4 sampling times x 4-5 sample types).

i. Total estimates 1. Placebo-controlled study: $81,000 2. Comparator study: $377,000

2. Safety

a. As an adjunct to assessing efficacy, safety could also be evaluated. Given that the mechanism of action is still being worked out, several parameters might be evaluated to detect any adverse effects of Devil’s Claw. For example: blood chemistries, levels of glycosaminoglycans and hyaluronic acid in serum and synovial fluid, and prostaglandin E and TNF levels in synovial fluid. Each of these measurements would likely add $50 to each sampling point.

b. Financial consideration would include: purchase of horses ($1000/animal x 10 animals), per diem charges for animals boarded by Comparative Medicine ($7/day x 42 days), study personnel (technician and clinical veterinarian for developing the Animal Use Protocol and for collecting samples – 25% time over 3 months = $2000 + $6000 for 20-animal study), and sample analysis ($50/sample type x 4 sample times x 4-5 sample types).

1. Total estimate = $31,000 Dogs

1. Efficacy a. Purported efficacy in protecting joint health suggests that changes in joint fluid

and changes in indicators of pain in the joint should be evaluated. Dogs with naturally occurring joint disease could be identified and randomly selected for treatment or placebo. One possible pool of animals here at Texas A&M is client-owned horses that visit the Veterinary Medical Teaching Hospital. (Dogs would need to be NSAID-free for at least 2 weeks and glucocorticoid-free for at least 3 weeks prior to the beginning of the study.) Lameness can be assessed using a multi-factor lameness scale such as the one used in Reymond et al., 2012. Glycosaminoglycan, hyaluronic acid, prostaglandin E, and TNF levels could be evaluated in blood and synovial fluid.

b. Financial consideration would include lump-sum payments to clients for use of client-owned animals ($200/animal x 10-20 animals if comparing to placebo or 50-100 animals if comparing to NSAID), outpatient fees for 4-5 visits ($55/visit), fees for collecting blood and joint fluid samples ($50/sample), study personnel (technician and clinical veterinarian for developing the Animal Use Protocol and for collecting samples – 25% time over 3 months = $2000 + $6000 for 20-animal study; $12,000 for 100-animal study), and sample analysis ($50/sample type x 4 sampling times x 4-5 sample types).

i. Total estimates 1. Placebo-controlled: $82,000

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2. Comparator: $380,000

2. Safety a. As an adjunct to assessing efficacy, safety could also be evaluated. Given that the

mechanism of action is still being worked out, several parameters might be evaluated to detect any adverse effects of Devil’s Claw. For example, blood chemistries, levels of polysulfated glycosaminoglycans and hyaluronic acid in serum and synovial fluid, and prostaglandin E and TNF levels in synovial fluid. Each of these measurements would likely add $50 to each sampling point.

b. Financial consideration would include purchase of horses ($650/animal x 10 animals), per diem charges for animals boarded by Comparative Medicine ($5/day x 42 days), study personnel (technician and clinical veterinarian for developing the Animal Use Protocol and for collecting samples – 25% time over 3 months - $2000 + $6000), and sample analysis ($50/sample type x 4 sample times x 4-5 sample types).

i. Total estimate = $27,000 Breathitt Veterinary Center from Murray State University has been recommended as the leading laboratory for pain efficacy research for all animal species. The laboratory’s testing capabilities include clinical pathology, histopathology/necropsy, microbiology, molecular diagnostics, serology, toxicology and virology. The laboratory webpage (https://breathitt.murraystate.edu/handbook/) contains information about the test fees per turnaround times and required specimens for each type of procedure. Also, the laboratory charges a higher fee if the specimen is from outside of Kentucky. For example, a toxicology test for calcium will require a specimen of 200 g ground feed or 500 mL water, a turnaround time of 2 days and a KY fee of $ 26.50 or Non KY fee of $40.00.

According to other industry sources, the toxicity test is crucial for entry into the animal market and should be performed with a histology test. The cost of such test will be $150,000 or less. A toxicity test performed with a small sample of rats can be completed in 28 days for $10,000.

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Figure 1: Human & Animal Nutraceutical / Herb Supplement Market

Porter’s Five Forces

A Model for Industry Analysis

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Figure 2: Example of Disclaimer on Advertisement of Dietary Supplement

39

Figure 3. Devil’s Claw Value Chain

Internet Channel

National Chain

Consumers

Specialty Brands

Garmon Corp.

Del Monte Corp.

Traditional Brands

Veterinarian National Chain Stores

Internet

Consumers

Specialty

Specialty Brands

Aumed Gaia Geromatrix Reservage

Contract Manufacturer

Soft Gel Tech Pharmachem Navagroup Paragon

Broker

Major Manufacturer

Maypro XTO

Sabinsa Jarrow

ECOSO Wholesale/Export

Harvest (Africa)

Manufacturing Human MarketAnimal Market

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Table 1: Threat of Rivalry: Competitive Characteristics of Rivals

Company Name Product Name

Price (based on

lowest retail price)

Distributed by (Buyer)

Now Foods Devil’s Claw Root 500 (100mg)

$4.58 4All Vitamins

Nature’s Way Devil’s Claw extract 90 $5.73 Nutrasource Nature’s Answer Devil’s Claw Extract (1oz) $6.25 The Vitamin Shoppe Swansons Premium

Swanson’s Devil’s Claw $7.98 Swanson Health products

Douglas Lab Douglas Labs Devil’s Claw Max-V (200 mg 60 c)

$14.70 Natural health concepts

Davinci Devil’s Claw 90c – Davinci

$12.47 Pure formulas

Seroyal / Genestra

Devil’s Claw Cream 56 g $23.45 Health Remedies

Puritan’s Pride Puritan Pride Devil’s Claw $3.99 Puritan’s Pride

Solaray Solaray –Devil’s Claw, 525 mg, 100 cap.

$9.77 Best Price Nutrition

Vitamin Shoppe Devil’s Claw Extract, 100 cap.

$6.99 Vitamin Shoppe

Alternative Health and Herb Remedies

Alternative Health and Herb Remedies Yucca Devil’s Claw Vegetarian Capsule, 450 mg, 60 count

$16.20 Amazon

Food Science of Vermont

Food Science of Vermont, Devil’s Claw 90 cap

$12.97 Health designs.com

Eclectic Institute Eclective Institute- Devil’s Claw extract, 1 oz.

$6.38 Herbspro

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Table 2: Threat of “Natural” Substitutes: Dietary supplements containing Glucosamine / Chondroitin Sulfate / and or MSM by most popular brand

Company/ Brand

Number of Natural

Substitute Product Offered

Price range Distributors based on

Google product / company relevance rankings

Dymatize 2 $11-12.36 1) The healthier.com

Dynamic Health

10 $13-16.99 1) Health superstore 2) Bulk Nutrition 3) Cheapvitamins

Elations 10 $5-8.99 1) Drugstore

Joint Juice Supplement

10 $6.29-26.27

2) Walgreens 3) CBS 4) BJ’s Wholesale club 5) Sam’s Club

Nature’s Plus 9 $10-45

6) Amazon 7) Sears 8) Newegg 9) The Vitamin

Shoppes 10) Swanson Health

Products 11) Vitacost

Natrol 10 $6.77-7.41

1) vitacost 2) Cheap vitamins 3) Bulk Nutrition 4) Affordable

supplements

Now Foods 10 $6.15-9.74

1) Herbal remedies 2) Tao of herbs 3) Newegg 4) Swanson health

products 5) Takeherb

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Table 3: Threat of Non-Natural Substitutes: NSAID OTC

Brand Name Generic Name

Advil, Nuprin, Motrin ibuprofenAleve naproxen sodiumAscriptin, Bayer, Ecotrin

aspirin

Source:: http://www.webmd.com/osteoarthritis/guide/anti-inflammatory-drugs

Table 4: Threat of Non-Natural Substitutes: Prescription NSAID19

Brand Name Generic Name

Anaprox naproxen sodiumCelebrex* celecoxibClinoril sulindacDaypro oxaprozinDisalcid salsalateFeldene piroxicamIndocin indomethacinLodine etodolacMobic meloxicamNaprelan naproxen sodiumNaprosyn naproxenOrudis ketoprofenRelafen nabumetone

Toradol Ketorolac

tromethamin2 Source: http://www.webmd.com/osteoarthritis/guide/anti-inflammatory-drugs

19 Source: http://www.webmd.com/osteoarthritis/guide/anti-inflammatory-drugs

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Table 5: Threat of Rivals for Devil’s Claw in the Animal Nutraceutical / Herbal Supplement market

Pet Class Product Name Company

/ManufacturersPrice

($) Distributor

Horses Med-Vet DC-Y 15 lb Joint Support

Met-Vet Pharmaceuticals

167.99 horse.com

Horses Wendals Herbs Liquid Devil’s Claw

Wendals 45.95 equestrian collections

Horses Yucca, Devil’s Claw and Myrrh - 2 pounds

Herbs of the World 48.95 KV Supply

Horses #18 Joint Support

All American Saddles

75 All American

Saddles

Horses Wendals Herbs Devil’s Claw Root

Wendals 69.95 equestrian collections

Horses FM Solution - 32 oz (32 days) Select The Best® 14.79 Valley vet

Horses Equilite Ani-Motion equilite 47.95 equestrian collections

Horses Su-Per SuBstitUTE Liquid - Gallon

Gateway products 32.47 KV Equine

Horses Su-Per SuBstitUTE Liquid - 32 ounces

Gateway products 23.95 KV Equine

Horses Devil’s Claw Plus Uckele Health and

Nutrition 17.95 SmartPak

Horses Smart TLC Pellets Smart Pak 27.95 SmartPak Horses B-L Pellets 5bl Equine America 43.34 ABlackhorse

Horses Equine Conectin 600 mg 20 ounces

In Clover 48.95 KV Equine

Dogs and Cats

Muscle and Joint Support, PetAlive

Native remedies 39.95 gaeastore

Dogs Wendals Herbs Dog Devil’s Claw Liquid

Wendals 29.95 Equestrian collections

Dogs and Cats

Devil’s Claw ZPNCH-007 Zurispridenaturals 16 ecrater

Dogs and Cats

Chudleys Devil’s Claw Root Tincture 250ml

Dodson & Horrell Ltd

13.65 UK company

Dogs and Cats

DEVIL’S CLAW PLUS - 2 LB Uckele Health 34.95 SmartPak

44

Table 6a: Threat of Natural Substitutes: Equine

Product Name Price

($) Company/Manufactures

32oz Fluidflex/Horse Joints 29.39 Farnam

Animed Aniflex GL - Glucosamine for Horses 11.25 AHC Products, Inc.-

Animed™

Animed Aniflex Complete Equine 16oz 27.14 AHC Products, Inc.-

Animed™

AniMed Glucosamine 5000 Powder 5 lb Joint Support 29.95 AHC Products, Inc.-

Animed™ Bci Best Quality Gluco-flex / Size 4 Pound By Equine America

60.42 Equine America

Bci Best Quality Super-Flx Glucosamine Solution / Size Quart by Equine America

34 Equine America

Central Life Sciences 3001032 - 1lb MSM Ultra Pure/Horse Suplm

10 Central Life Sciences

Chondroitin Plus by Horse Guard Inc 216.06 Horse Guard Inc Cosequin Animal Care Cosequin equine optimized formula joint supplements with MSM for horse - 1400 grm

114.89 Nutramax Laboratories. Inc

Cosequin ASU for Horses (1300 gm) 157.94 Nutramax Laboratories. Inc Cosequin ASU Plus Equine Powder (1050 grams) 189.99 Nutramax Laboratories. Inc Cosequin Equine - 700 gram 154.99 Nutramax Laboratories. Inc Cosequin Equine Horse Powder- MAXIMA 500gm 180 Nutramax Laboratories. Inc Cosequin Equine Joint Supplements 1400 grams, 3 lbs (up to 140 ...

154.99 Nutramax Laboratories. Inc

Cosequin Equine Joint Supplements Optimized; 800 Grams, 1.7 lbs

81 Nutramax Laboratories. Inc

Cosequin Equine Optimized (800 Grams) 100.04 Nutramax Laboratories. Inc Cosequin equine optimized formula joint supplements with MSM for horse

114.89 Nutramax Laboratories. Inc

Cosequin Equine Optimized with MSM 1400 gram 114.89 Nutramax Laboratories. Inc Cosequin Equine Optimized With Msm, 1400 Gram Container

127.99 Nutramax Laboratories. Inc

Cosequin® Equine Joint Supplements 114.99 Nutramax Laboratories. Inc Cosequin® Equine Powder 35.95 Nutramax Laboratories. Inc

Duralactin equine joint plus, 3.75 lbs bucket 67.57 Veterinary Products

Laboratories Equine America MSM 32oz Liquid Joint Support 19.99 Equine America Equine America Quart 770A Super-Flx Glucosamine Solution

17 Equine America

Equine Bone & Joint MSM Powder - 1lb Jar 8 Rich's Equinyl Glucosamine for horses 51.95 Vita-Flex Equinyl Glucosamine for horses with HA 58.1 Vita-Flex Equinyl Liquid Glucosamine with Hyaluronic Acid 60 Day 99 Vita-Flex Farnam Equinyl Glucosamine For Horses 158.21 Farnam

45

Table 6a: Threat of Natural Substitutes: Equine

Product Name Price

($) Company/Manufactures

Farnam Equinyl Glucosamine For Horses With Ha 68.09 Farnam Finish Line Horse Products - MSM 10 Lb 63.35 Finish Line Horse Products Finish Line MSM 1 Lb 6 Finish Line Horse Products Finish Line® Horse Products MSM 26.99 Finish Line Horse Products Flex-Force Chondroitin Sulfate - Gallon (64-256 days) 34.95 Corta-flx (continued on the next page) Flex-Force Chondroitin Sulfate Pellets - 12 lb (192-384 days)

59.95 Corta-flx

Flex-Force Glucosamine 5000 Pellets - 12 lb (96-384 days) 46.95 Corta-flx Flex-Force Glucosamine 5000 Solution 128 oz Joint Support

35 Corta-flx

Gluco-Flex Feed Supplement For Horses, 4 Lb 47.23 Equine America Horses Prefer HP-MSM (1 lb Granules) 10.88 Vets Plus, Inc. Joint Combo 3.5 Lb 34 Farnam Joint Combo Hoof and Coat for Horses / Size (8 lbs.) 97.19 Farnam Joint Max Triple Strength Horse Health Supplement (Pack of 2)

145.99 Farnam

Legacy Horse Pellets 10 Lb 59.19 Select the Best Liquid Health Equine 4 in 1 Joint Formula -- 32 fl oz 21.12 Liquid health.Inc Liquid Health Equine Level 5000 Super Concentrated Hip and Joint

39.62 Liquid health.Inc

MaxFlex Chondroitin Pellets for Horses - 3.75 lb. 72 Farnam MaxFlex Glucosamine Pellets for Horses 3.75 lbs 54 Farnam MaxFlex Maximum Relief 8 Lb 105 Farnam MaxFlex Maximum Relief Glucosamine Pellets 33.95 Farnam Med-Vet Glucosamine XL Plus MSM 10 Lb Joint Support 115 Med Vet pharmaceuticals Med-Vet Glucosamine XL Plus MSM 15 Lb Joint Support 167 Med Vet pharmaceuticals Med-Vet Glucosamine XL Plus MSM 25 Lb Joint Support 241 Med Vet pharmaceuticals Med-Vet Glucosamine XL Plus MSM 5 Lb Joint Support 60 Med Vet pharmaceuticals Missing Link Plus with Glucosamine - Equine Formula - 5 Pounds

33 Designing Health

MSM Pellets by SmartPak (formerly SmartMSM® Pellets) 10.95 SmartPak

MSM Powder 2.5 Pound Package 10 AHC Products, Inc.-

Animed™

MSM Powder Horse Supplement 1Lb 21.5 AHC Products, Inc.-

Animed™ Nimble Supreme - Equine - 3.75 lbs 89.99 Adeptus Nutrition, Inc Probios Treats Hip and Joint w/Glucosamine Flavor: Apple 7 Probios® Pure Encapsulations - Glucosamine Complex 500G (Vet Equine Pwd)

206 Pure Encapsulations, Inc

Pure MSM by AniMed(up to 1600 servings) 15.99 AHC Products, Inc.-

46

Table 6a: Threat of Natural Substitutes: Equine

Product Name Price

($) Company/Manufactures

Animed™ Regenex Equine Joint Supplements - Glucosamine - Regenex for Horses - 32oz Liquid

33 Nusentia Horse Supplements

Richdel Inc 20 Pound MSM Powder 89 Richdel Inc Richdel Legacy Horse Pellets 20 Lb 113.52 Richdel Inc Select MSM for Horses / Size (10 lbs) 46 Horse.com Sogeval MSM Equine Pellets, 10 lbs. 105.99 Sogeval Laboratories Springtime J-Flex Concentrate Horse Joint Supplement 48.48 Springtime Inc The Missing Link Plus with Glucosamine 1 lb 14 Designing Health Vita Flex MSM 4 Lb 22 Vita-Flex Vita Flex Ultra Pure MSM Horse Supplement 7.5 Vita-Flex Vita-Flexreg MSM Horse Joint Supplement 99.9 Vita-Flex

47

Table 6b: Threat of Natural Substitutes: EquineProduct Name Prices

($)Company/Manufacturer

1 Alaska Naturals Salmon Oil with Glucosamine, Chondroitin, and MSM for 15 Alaska Naturals 2 Arthogen Plus for Dogs, 360 Tabs 57 PetLabs360 3 Arthrisoothe Gold - Liquid: 16 Ounces 20 NaturVet 4 Bellyrubs Organic 16-ounce Liquid Dog Supplement, Glucosamine HCL W... 15 Bellyrubs Organic 5 Bellyrubs Organic 32-ounce Liquid Dog Supplement, Glucosamine HCL W... 26 Bellyrubs Organic 6 Cosequin Cosequin DS Plus MSM for Dogs -- 60 Chewable Tablets 21.14 Nutramax Laboratories, Inc 7 Cosequin Double Strength Plus MSM Joint Health Dog Supplement 27.99 Nutramax Laboratories, Inc 8 Cosequin DS Plus MSM Joint Health Supplement for Dogs - 180 Chewable Tablets 50 Nutramax Laboratories, Inc 9 Cosequin DS Plus MSM, Joint Health Supplement for Dogs 60 ea. 14.91 Nutramax Laboratories, Inc 10 Cosequin Ds Plus Msm, Joint Health Supplement For Dogs, 60 Scored 21.01 Nutramax Laboratories, Inc 11 Cosequin Soft Chews Glucosamine Chondroitin for Dogs 60ct Nutramax Pet 25.53 Nutramax Laboratories, Inc 12 Cosequin Soft Chews, Glucosamine Chondroitin For Dogs, 60 Soft Chews, 29.36 Nutramax Laboratories, Inc 13 Dasuquin Chew MSM Large Dogs 84ct 54.38 Nutramax Laboratories, Inc 14 Dasuquin with MSM for Large Dogs Over 60lbs 150ct Bottle 52 Nutramax Laboratories, Inc 15 Dasuquin with MSM for Large Dogs Over 60lbs 84ct Bottle 33 Nutramax Laboratories, Inc 16 Dasuquin with MSM for Small to Medium Dogs - 150 Ct 47 Nutramax Laboratories, Inc 17 Dasuquin with MSM for Small to Medium Dogs Under 60lbs 84ct Bottle 38 Nutramax Laboratories, Inc 18 GLC Direct GLC 1000 Canine Glucosamine Powder for Dogs - 12.4 oz 32 Glc Direct Inc 19 Glucosamine Chondroitin for Dogs - 90 + 30 Free - 120 Total Chewable Tablets 25 Dog Glucosamine 20 Glucosamine DS Liquid with MSM: 8 Ounces 9 NaturVet 21 Glucosamine for Dogs w/ Chondroitin & MSM - Regenex for Dogs - 192 Doses 39.95 Nusentia 22 Greens + Paws for Dogs for Healthy Joints Beef -120 Wafers 15 Greens Plus

(continued on the next

page) 23 Healthy Baker Glucosamine Treats Dog Treat Size: 1 Lb Jar 21 Healthy Baker 24 Hip & Joint Peanut Butter Flavor Wafers - 6lb Bag 11 Nutri Vet 25 Hip and Joint Support Plus Chewable Tablets for Dogs, Liver Flavored 20 Nutri Vet

26 I Love Dogs Glucosamine and Chondroitin with Green Tea and Reishi - Medium Dogs (30 tablets)

23 I love dogs

27 I Love Dogs Large- 30 Glucosamine and Chondroitin with Green Tea and Reishi 28 I love dogs

48

Table 6b: Threat of Natural Substitutes: EquineProduct Name Prices

($)Company/Manufacturer

28 Kala Health Comfort MSM Plus for Dogs (90 Chews) 41 NaturVet 29 Mendota Glucosamine 2x Dog Supplement 14 Mendota.Inc 30 Motion Ade Msm For Dogs, 60 Soft Chews, Pet Naturals Of Vermont 9.38 NaturVet 31 NaturVet Glucosamine DS Liquid for Dogs and Cats - 8 oz. 7 NaturVet 32 NaturVet Glucosamine DS Liquid with MSM & Chondroitin for Dogs and Cats, 32oz 28.62 NaturVet 33 NaturVet Glucosamine DS with MSM 120 Tabs for Dogs 18 NaturVet 34 NaturVet Glucosamine DS with MSM and Chondroitin - tablets: 60 Tablets 10 NaturVet 35 Nutri Vet Nutritionals 80404 Large Hip and Joint Wafers 6 Nutri Vet 36 Nutri-Vet Hip & Joint Chewables for Dogs, 90 ct 19.99 Nutri Vet 37 Osteo pet glucosamine chondroitin for dogs 16.95 Nutra paws 38 Osteo pet glucosamine chondroitin for dogs - 720 ct value size 120 Nutra paws

39 Regenex for dogs, glucosamine chondroitin for dogs plus msm - 192 Doses, 32oz Liquid

39.95 Nusentia

40 Single Source Glucosamine for Dogs & Cats: 120 Count 15 Veri-Science 41 Single Source Glucosamine for Dogs & Cats: 60 Count 7 Veri-Science 42 Veterinarian's Best Dog Care Hip & Joint Formula 90-count 20 Nutri Vet 43 Vetri-Science Multi-Source Glucosamine for Dogs (120 capsules) 25 Veri-Science 44 Zukes's Hip Action Beef Glucosamine and Chondroitin Dog Treats 6.36 Zukes

49

Table 6c: Threat of Natural Substitutes: Feline

Product Name Price ($) Manufacturer/Company

1 100% Pure Msm Powder For Dogs And Cats, 16 Oz, Flying Basset Organics 21.06 Flying Basset Organics 2 8in1 Glucosamine Paste 2.5oz 5 8in1 3 Ark Naturals Joint "Rescue", Super Strength Chewable, 500mg 19.59 Ark Naturals 4 Blooming Pets Dog & Cat MSM Cream 100g 7.92 Blooming

5 Catswell Happy Hips for Cats, Chicken Breast, Glucosamine & Chondroitin, 2-Ounce Pouches (Pack of 10)

17.94 Catswell

6 Cosequin For Cats 80 Capsules 19.99 Nutramax Laboratories, Inc. 7 Cosequin for Cats with Glucosamine 55 CT. 8 Nutramax Laboratories, Inc. 8 Cosequin Glucosamine Chondroitin Supplement for Cats 50count 17.72 Nutramax Laboratories, Inc. 9 Cosequin Joint Supplement for Cats 19.99 Nutramax Laboratories, Inc. 10 Flying Basset, Organics, 100% MSM, Methyl Sulfonyl Methane for Dogs An 18 Flying Basset Organics 11 Glucosamine & Chondroitin for Cats 18.99 Kala Health, Inc 12 Glucosamine DS Liquid with MSM: 8 Ounces 9 NaturVet 13 Glucosamine Ds, Chondroitin Hip/joint 60 Tablets 11.99 NaturVet 14 Glucosamine for Cats Regenex Liquid Feline Joint Supplement 24.95 Nusentia 15 Glucosamine, chondroitin & msm supplements for cats - 90 tablets 15.99 KALA Health, Inc 16 Hartz Glucosamine Joint Maintennce for Cats 4 Hartz 17 Iams Senior Premium Protection Cat Food, 5.5 lb 12.77 Iams 18 Joint Care 2 with MSM 100 Tablets 47.99 Foster & Smith, Inc 19 Joint Complete For Dogs & Cats, Beef Flavor, 32 oz (960 ml) 19.52 Tropical Oasis 20 Joint MAX Cat Ganules 60 Doses (Pack of 2) 30.99 Joint Max 21 Methylsulfonylmethane (MSM) For Cats and Dogs, 250 mg, 120 Capsules 6.78 Vetri-Science 22 Motionade Msm Softchews Dogs & Cats 60 Chews 6.97 Pet Naturals

23 NaturVet - Glucosamine DS with Chondroitin Hip & Joint for Cats & Dogs - 60 Chewable Tablets

12.72 NaturVet

(continued on the next page)

50

Table 6c: Threat of Natural Substitutes: Feline

Product Name Price ($) Manufacturer/Company

24 NaturVet - Glucosamine DS with MSM and Chondroitin For Cats & Dogs - 60 Chewable Tablets

14.99 NaturVet

25 NaturVet Cat Joint Support Gel 10.39 NaturVet 26 NaturVet Glucosamine DS Liquid for Dogs and Cats - 8 oz. 7 NaturVet

27 NaturVet Glucosamine DS with Chondroitin Chewable Tablets For Dogs and Cats

23.19 NaturVet

28 NaturVet Glucosamine DS with Chondroitin Liquid For Dogs and Cats 8-oz 14.25 NaturVet 29 NaturVet Glucosamine DS with MSM Liquid For Dogs and Cats 8-oz 18.45 NaturVet 30 NaturVet Glucosamine DS with MSM Tablets for Dogs and Cats - 60 ct. 16.99 NaturVet 31 NaturVet Joint Support Gel for Cats (3 oz) 5.99 NaturVet 32 Nutramax Cosequin DS PLUS MSM Chewable Tablets - 132 Count 132 ... 49.99 NaturVet 33 Pet Naturals Hip + Joint Cat Soft Chews, 2.22 oz. 4.79 Pet Naturals

34 Pet Naturals of Vermont MotionAde MSM Softchews For Dogs & Cats Dogs & Cats 60 Chews by Pet Na

6.58 Pet Naturals

35 PetLabs360 Arthogen for Cats - 2 pk. - 90 ct. each - Health Care 17.39 Pet Labs 36 Single Source Glucosamine for Dogs & Cats: 120 Count 15 Vetri-Science 37 Single Source Glucosamine for Dogs & Cats: 60 Count 7 Vetri-Science 38 Single-Source Glucosamine Caps for Dogs & Cats 120ct 18 Vetri-Science 39 Sogeval msm crystals for dogs and cats, 1 lb 16.91 Sogeval Laboratories 40 Sogeval msm crystals for dogs and cats, 4 lbs. 56.88 Sogeval Laboratories 41 Ultra Flex Plus Glucosamine For Cats - 80 count 17.95 Ultra Flex 42 Ultraflex plus glucosamine for cats - 80 ct 17.95 Ultra Flex 43 Zukes Hip Action Glucosamine & Chondroitin Cat Chicken 2.2lb (12x3oz) 35 Zukes 44 Zukes Hip Action Glucosamine & Chondroitin Cat Salmon 2.2lb (12x3oz) 3 Zukes 45 Zukes HipAction Glucosamine & Chondroiton Chicken Treats for Cats: ... 2.94 Zukes

51

Table 7a: Non-natural substitute products for Equine

Animal Sub Market

Product Name Company Name Drug Class

Equine Legend® Injection Bayer Animal Health Antiarthritic Agent

Equine Legend ® Injectable Solution

(20mg) Bayer Animal Health Antiarthritic Agent

Equine Legend ® Injectable Solution

(40mg) Bayer Animal Health Antiarthritic Agent

Equine Legend Multi Dose Injectable

Solution Bayer Animal Health Antiarthritic Agent

Equine Hy-50® Bexco Antiarthritic Agent

Equine Hyalovet® 20

Binoniche Animal Health

Antiarthritic Agent

Equine Hyvisc ® Boehringer Ingelheim Antiarthritic Agent Equine Hyalovet® Fort Dodge Antiarthritic Agent Equine Adequan ® I. A Luitpold Antiarthritic Agent Equine Adequan ®I.M Luitpold Antiarthritic Agent Equine Adequan® I.A luitpold Antiarthritic Agent Equine Adequan® I.M luitpold Antiarthritic Agent Equine Hylarti® Vet Pfizer Antiarthritic Agent Equine Hylartin® V Pharmacia &Upjohn Antiarthritic Agent Equine Aspirin Bolus-240 Agrilabs Nonsteroidal Drug(NSAID) Equine Aspirin Powder Agrilabs Nonsteroidal Drug(NSAID) Equine Flu-Nix™ D (IVX) Agrilabs Nonsteroidal Drug(NSAID) Equine Flu-Nix™ D(Norborook) Agrilabs Nonsteroidal Drug(NSAID) Equine Aspirin Bolus-480 AgriPharm Nonsteroidal Drug(NSAID) Equine Aspirin Powder AgriPharm Nonsteroidal Drug(NSAID) Equine AniPrin EZ AHC Nonsteroidal Drug(NSAID) Equine AniPrin F AHC Nonsteroidal Drug(NSAID) Equine AniPrin P AHC Nonsteroidal Drug(NSAID) Equine Bupactin™ Apical Nonsteroidal Drug(NSAID) Equine Phenylbutazone Injection 20% Aspen Nonsteroidal Drug(NSAID) Equine VetaMeg™ 50mg/ml Aspen Nonsteroidal Drug(NSAID) Equine Aspirin Bolus Bimeda Nonsteroidal Drug(NSAID)

Equine Flunazine™ Injectable

Solution Bimeda Nonsteroidal Drug(NSAID)

Equine Aspirin Powder Bimeda Nonsteroidal Drug(NSAID) Equine Butatron® Tablets Bimeda Nonsteroidal Drug(NSAID) Equine Flunazine™ Bimeda-MTC Nonsteroidal Drug(NSAID)

Equine Butequine® Binoniche Animal

Health Nonsteroidal Drug(NSAID)

(continued on the next page)

52

Table 7a: Non-natural substitute products for Equine

Animal Sub Market

Product Name Company Name Drug Class

Equine Cronyxin™ Binoniche Animal

Health Nonsteroidal Drug(NSAID)

Equine Aspirin 60 Grain Butler Nonsteroidal Drug(NSAID) Equine Aspirin Powder Butler Nonsteroidal Drug(NSAID)

Equine Aspirin Powder Molasses

Flavored Butler Nonsteroidal Drug(NSAID)

Equine ButaJect Butler Nonsteroidal Drug(NSAID) Equine Buta Paste Butler Nonsteroidal Drug(NSAID) Equine Buta Tabs Butler Nonsteroidal Drug(NSAID) Equine DMSO 90% Butler Nonsteroidal Drug(NSAID) Equine DMSO 99% Butler Nonsteroidal Drug(NSAID) Equine DMSO Gel 90% Butler Nonsteroidal Drug(NSAID) Equine FlunixiJect Butler Nonsteroidal Drug(NSAID) Equine Phenylbutazone Injection Dominion Nonsteroidal Drug(NSAID) Equine Phenylbutazone Tabs Dominion Nonsteroidal Drug(NSAID) Equine Arthri- Eze Aspirin Granules Durvet Nonsteroidal Drug(NSAID) Equine AspirEze Aspirin Gel Durvet Nonsteroidal Drug(NSAID) Equine Aspirin Bolus-240 Durvet Nonsteroidal Drug(NSAID) Equine Equi-Spirin Granules First Companion Nonsteroidal Drug(NSAID) Equine Equi-Spirin Pain Relief Gel First Companion Nonsteroidal Drug(NSAID) Equine Aspirin Bolus-480 Grains First Priority Nonsteroidal Drug(NSAID) Equine Aspirin Powder First Priority Nonsteroidal Drug(NSAID) Equine Flavored Aspirin Powder First Priority Nonsteroidal Drug(NSAID) Equine Pributazone® Tablets First Priority Nonsteroidal Drug(NSAID) Equine Domoso® Gel Fort Dodge Nonsteroidal Drug(NSAID) Equine Domoso® Solution Fort Dodge Nonsteroidal Drug(NSAID) Equine Ketofen® Fort Dodge Nonsteroidal Drug(NSAID) Equine Cool-cast® Hawthorne Nonsteroidal Drug(NSAID) Equine Surpass® Tropical Cream Idexx Pharm Nonsteroidal Drug(NSAID) Equine Quadrisol ® 100 Intervet Canada Ltd Nonsteroidal Drug(NSAID) Equine Quadrisol ® i.v.50 Intervet Canada Ltd Nonsteroidal Drug(NSAID) Equine Amtech® Asprin Bolus IVX Animal Health Nonsteroidal Drug(NSAID)

Equine Amtech® Phenylbutazone

20% Injection IVX Animal Health Nonsteroidal Drug(NSAID)

Equine Amtech® Phenylbutazone 20% Tablet, USP 1 Gram

IVX Animal Health Nonsteroidal Drug(NSAID)

Equine Flunixin Meglumine Injection IVX Animal Health Nonsteroidal Drug(NSAID) Equine Asen 240 Bolus Jaapharm Nonsteroidal Drug(NSAID) (continued on the next page)

53

Table 7a: Non-natural substitute products for Equine

Animal Sub Market

Product Name Company Name Drug Class

Equine Asen P Powder Jaapharm Nonsteroidal Drug(NSAID) Equine Butasone 400 Jaapharm Nonsteroidal Drug(NSAID) Equine Butasone 1000 Jaapharm Nonsteroidal Drug(NSAID) (continued) Equine Butasone Conc Jaapharm Nonsteroidal Drug(NSAID) Equine Suppressor Kane Nonsteroidal Drug(NSAID) Equine Equinphen® Paste luitpold Nonsteroidal Drug(NSAID) Equine EQUIOXX ® Oral Paste Merial Nonsteroidal Drug(NSAID) Equine Anafen® Injection 100mg/ml Merial Nonsteroidal Drug(NSAID) Equine Aspirin U.S.P Powder Neogen Nonsteroidal Drug(NSAID)

Equine Aspirin USP With Apple

Flavoring Neogen Nonsteroidal Drug(NSAID)

Equine Dipyrone 50% P.V.L Nonsteroidal Drug(NSAID) Equine Phenylbutazone Injection P.V.L Nonsteroidal Drug(NSAID) Equine Phenylbutazone Tablets P.V.L Nonsteroidal Drug(NSAID)

Equine Aspirin Bolus-240 Phoenix

Pharmaceutical Nonsteroidal Drug(NSAID)

Equine FluMeglumine® (IVX) Phoenix

Pharmaceutical Nonsteroidal Drug(NSAID)

Equine FluMeglumine®(Norbrook) Phoenix

Pharmaceutical Nonsteroidal Drug(NSAID)

Equine Ketoprofen Sterile Solution Phoenix

Pharmaceutical Nonsteroidal Drug(NSAID)

Equine Phenylbute® Injection 20%

(IVX) Phoenix

Pharmaceutical Nonsteroidal Drug(NSAID)

Equine Phenylbute® Injection 20%

(Sparhawk) Phoenix

Pharmaceutical Nonsteroidal Drug(NSAID)

Equine Phenylbute® Paste Phoenix

Pharmaceutical Nonsteroidal Drug(NSAID)

Equine Phenylbute® Powder Phoenix

Pharmaceutical Nonsteroidal Drug(NSAID)

Equine Phenylbute® Tablets 1

gram(first priority) Phoenix

Pharmaceutical Nonsteroidal Drug(NSAID)

Equine Phenylbute® Tablets 1

gram(IVX) Phoenix

Pharmaceutical Nonsteroidal Drug(NSAID)

Equine Pro-bute™ Injection Prolabs Nonsteroidal Drug(NSAID) Equine Pro-bute™ Tablets 1 gram Prolabs Nonsteroidal Drug(NSAID) Equine Suppressor® RVX Nonsteroidal Drug(NSAID) Equine Suppressor®-Dairy RVX Nonsteroidal Drug(NSAID) (continued on the next page)

54

Table 7a: Non-natural substitute products for Equine

Animal Sub Market

Product Name Company Name Drug Class

Equine Phenylbutazone Tablets RVX Nonsteroidal Drug(NSAID)

Equine Banamine®Sterile Solution

Injectable Schering- Plough

Canada Inc Nonsteroidal Drug(NSAID)

Equine Banamine® Granules Schering-Plough Nonsteroidal Drug(NSAID)

Equine Banamine® Injectable

Solution Schering-Plough Nonsteroidal Drug(NSAID)

Equine Banamine® Paste Schering-Plough Nonsteroidal Drug(NSAID) Equine Phenylzone® Paste Schering-Plough Nonsteroidal Drug(NSAID) Equine Phenylbutazone 20% Injection Sparhawk Nonsteroidal Drug(NSAID) Equine Phenylbutazone Injection Univet Nonsteroidal Drug(NSAID) Equine Aspirin 240 Grain Boluses Vedco Nonsteroidal Drug(NSAID) Equine Aspirin 480 Grain Boluses Vedco Nonsteroidal Drug(NSAID) Equine Aspirin Powder Vedco Nonsteroidal Drug(NSAID) Equine Bute Tabs Vedco Nonsteroidal Drug(NSAID) Equine Equi-Phar ButePaste Vedco Nonsteroidal Drug(NSAID)

Equine Equi-Phar™ Phenylbutazone

Injection 20% Vedco Nonsteroidal Drug(NSAID)

Equine VedaGesic™ Vedco Nonsteroidal Drug(NSAID) Equine Flunixin Meglumine Injection Vet tek Nonsteroidal Drug(NSAID) Equine Phenylbutazone 20% Injection Vet tek Nonsteroidal Drug(NSAID) Equine Phenylbutazone Tablets UPS Vet tek Nonsteroidal Drug(NSAID) Equine Aspirin Bolus VetOne Nonsteroidal Drug(NSAID) Equine Phenylbutazone Tablets Vetone Nonsteroidal Drug(NSAID)

Equine Prevail ™ Flunixin Meglumine

Injection VetOne Nonsteroidal Drug(NSAID)

Equine Acetylsalicylic Acid Boluses Vetoquinol Nonsteroidal Drug(NSAID) Equine Buzone Conc Vetoquinol Nonsteroidal Drug(NSAID) Equine Dipyrone 50% Vetoquinol Nonsteroidal Drug(NSAID) Equine Phenylbutazone Vetoquinol Nonsteroidal Drug(NSAID) Equine Phenylbutazone Powder Vetoquinol Nonsteroidal Drug(NSAID) Equine Domoso® Gel Wyeth Animal Health Nonsteroidal Drug(NSAID) Equine Domoso ® Solution Wyeth Animal Health Nonsteroidal Drug(NSAID) Equine Fluxin Injection Wyeth Animal Health Nonsteroidal Drug(NSAID) Equine Dexamethasone Solution Agrilabs Steroid Equine Dexamethasone Solution Aspen Steroid Equine Dexium™ Injection Bimeda Steroid Equine Dexium-SP ™ Bimeda Steroid Equine DexaJect Butler Steroid (continued on the next page)

55

Table 7a: Non-natural substitute products for Equine

Animal Sub Market

Product Name Company Name Drug Class

Equine DexaJect SP Butler Steroid

Equine Dexamethasone 21 Phosphate

Injection Dominion Steroid

Equine Dexamethasone Powder Dominion Steroid Equine Prednisolone Acetate Dominion Steroid Equine Flucort® Solution Fort Dodge Steroid Equine Vetalog® Parental Veterinary Fort Dodge Steroid

Equine Amtech® Dexamethasone

Sodium Phosphate Injection IVX Animal Health Steroid

Equine Amtech® Dexamethasone

Solution IVX Animal Health Steroid

Equine Dexone Jaapharm Steroid Equine Dexamethasone Injection P.V.L Steroid Equine Prednisolone Acetate P.V.L Steroid

Equine Depo-Medrok ® Sterile

Aqueous Suspension Pfizer Steroid

Equine Predef® 2x Sterile Aqueous

Suspension Pfizer Steroid

Equine Solu-Delta-Cortef®Sterile

Solution Pfizer Steroid

Equine Depo-Medrol® Pharmacia &Upjohn Steroid Equine Solu-Delta-Cortef ® Pharmacia &Upjohn Steroid

Equine Dexamethasone Injection 2

mg/ml(sparhawk) Phoenix

Pharmaceutical Steroid

Equine Dexamethasone Sodium

Phosphate Phoenix

Pharmaceutical Steroid

Equine Dexamethasone Solution(IVX) Phoenix

Pharmaceutical Steroid

Equine Dexacort 5 Rafter 8 Steroid Equine Rafer Dex Rafter 8 Steroid Equine Dexasone RVX Steroid Equine Dexasone 4 mg RVX Steroid Equine Azium® Powder Schering-Plough Steroid Equine Azium® Solution Schering-Plough Steroid

Equine Dexamethasone Injection 2

mg/ml Sparhawk Steroid

Equine Prednisolone Sodium

Succinate Univet Steroid

Equine Uni-cort Univet Steroid (continued on the next page)

56

Table 7a: Non-natural substitute products for Equine

Animal Sub Market

Product Name Company Name Drug Class

Equine Uni-Dex Univet Steroid Equine Uni-Med Univet Steroid Equine Uni-Pred 50 Univet Steroid

Equine Dexamethasone 2.0 mg

Injection Vedco Steroid

Equine Dexamethasone Sodium

Phosphate Injection Vedco Steroid

Equine Dexamethasone Solution 2 mg Vet tek Steroid Equine Dexamethasone 2 mg Injection VetOne Steroid

Equine Dexamethasone- SP 4 mg

Injection Vetone Steroid

Equine Dexamethasone 2 Vetoquinol Steroid Equine Dexamethasone 5 Vetoquinol Steroid Equine Prednisolone Injection Vetoquinol Steroid Equine Vetacortyl® Vetoquinol Steroid Equine Flucort® Injection Wyeth Animal Health Steroid

57

Table 7b: Non-natural substitute products for Feline Animal Sub Market

Product Name Company Name Drug Class

Feline Aspirin Powder Agripharm Nonsteroidal Drug Feline Metacam® 0.5% Injection Boehringer Ingelheim Nonsteroidal Drug Feline Metacan Injection for Cats Boehringer Ingelheim Nonsteroidal Drug Feline Aspirin Powder Butler Nonsteroidal Drug Feline Anafen ® 5mg Tablets Merial Nonsteroidal Drug Feline Anafen ® injection 10mg/ml Merial Nonsteroidal Drug Feline (nv)Ketoprofen Tablets(5mg) Novopharm Nonsteroidal Drug Feline Aspirin Powder Vedco Nonsteroidal Drug Feline Tolfedine® 6mg Tablets Vetoquinol Nonsteroidal Drug Feline Dexamethasone Solutions Aspen Steroid Feline Dexium® Tablets Bimeda Steroid

Feline Triamcinolone Acetonide

Tablets Boehringer Ingelheim Steroid

Feline Triam Tabs Butler Steroid Feline Flucort® Solution Fort Dodge Steroid

Feline Vetalog® Parenteral

Veterinary Fort Dodge Steroid

Feline Dexamethasone Injection P.V.L Steroid

Feline Depo-Medrol ® Sterile Aquenous Suspension

Pfizer Steroid

Feline Solu-Delata-Cortef®Sterile

Solution

Pfizer Steroid

Feline Depo-Medrol® Pharmacia&Upjohn Steroid Feline Medrol® Pharmacia&Upjohn Steroid Feline Solu-Delta-Cortel Pharmacia&Upjohn Steroid

Feline TriAcet® Tablets Phoenix

Pharmacautical Steroid

Feline Dexacort 5 Rafter 8 Steroid Feline Prednisolone 5 mg Tablets Rafter 8 Steroid Feline Rafter Dex Rafter 8 Steroid

Feline Prednisolone Sodium

Succinate Univet Steroid

Feline Cortalone Tablets Vedco Steroid Feline Dexamethasone 2 Vetoquinol Steroid Feline Dexamethasone 5 Vetoquinol Steroid Feline Dextab Vetoquinol Steroid Feline Vetacortyl Vetoquinol Steroid Feline Flucort® Injection Wyeth Animal Health Steroid

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Table 7c: Non-natural substitute products for Canine

Animal Sub Market

Product Name Company Name Drug Class

Canine Adequan® Canine Luitpold Antiarthritic agent Canine Cartrophen Vet Arthropharm Antiarthritic agent Canine Adequan® Canine Luitpold Antiarthritic agent Canine Asprin Powder Agrilabs Nonsteroidal Drug Canine Asprin Powder Agripharm Nonsteroidal Drug Canine Asprin Powder Bimeda Nonsteroidal Drug Canine Butatron® Tablets Bimeda Nonsteroidal Drug Canine Metacam® 0.5% Injection Boehringer Nonsteroidal Drug

Canine Metacam® 1.0 mg Chewable

Tablets Boehringer Nonsteroidal Drug

Canine Metacam® 2.5 mg Chewable

Tablets Boehringer Nonsteroidal Drug

Canine Metacam® Oral Suspension Boehringer Nonsteroidal Drug Canine Metacam® Injection for Dogs Boehringer Ingelheim Nonsteroidal Drug Canine Metacam® Oral Suspension Boehringer Ingelheim Nonsteroidal Drug Canine Asprin Powder Butler Nonsteroidal Drug Canine Buta Tabs D Butler Nonsteroidal Drug Canine DMSO 90% Butler Nonsteroidal Drug Canine DMSO 99% Butler Nonsteroidal Drug Canine DMSO Gel 90% Butler Nonsteroidal Drug Canine Phenyltutazone Injection Dominion Nonsteroidal Drug

Canine Aspir-Flex ™ Aspirin Gel for

Large Dogs Durvet Nonsteroidal Drug

Canine Aspir-Flex ™ Aspirin Gel for

small and medium Dogs Durvet Nonsteroidal Drug

Canine Vetrin™ Canine Pain Relief

Tablets Farnam Nonsteroidal Drug

Canine Asprin Powder First Priority Nonsteroidal Drug Canine Flavored Aspirin Powder First Priority Nonsteroidal Drug Canine Domoso® Gel Fort Dodge Nonsteroidal Drug Canine Domoso® Solution Fort Dodge Nonsteroidal Drug Canine EtoGesic® Injectable Fort Dodge Nonsteroidal Drug Canine EtoGesic® Tablets Fort Dodge Nonsteroidal Drug

Canine Hartx® Advanced Care™

Enteric-Coated Asprin for dogsHarz Mountain Nonsteroidal Drug

Canine AmTech® Phenylbutazone

Tablets, UPS 100mg Ivx animal Health Nonsteroidal Drug

Canine Anafen® 5 mg Tablets Merial Nonsteroidal Drug (continued on the next page)

59

Table 7c: Non-natural substitute products for Canine

Animal Sub Market

Product Name Company Name Drug Class

Canine Anafen® 20 mg Tablets Merial Nonsteroidal Drug Canine Anafen Injection 10mg/ml Merial Nonsteroidal Drug

Canine Previcox™ Chewable Tablets

(57 mg) Merial Nonsteroidal Drug

Canine Previcox™ Chewable Tablets

(227 mg) Merial Nonsteroidal Drug

Canine Previcox Chewable Tablets Merial Nonsteroidal Drug

Canine Asprin UPS with Apple

Flavoring Neogen Nonsteroidal Drug

Canine Deramaxx ® Flavor Tabs™

(25mg) Novartis Nonsteroidal Drug

Canine Deramaxx ® Flavor Tabs™

(100mg) Novartis Nonsteroidal Drug

Canine Deramax® Chewable Tablets Novartis Nonsteroidal Drug Canine (nv)Ketoprofen Tablets(5mg) Novopharm Nonsteroidal Drug Canine (nv)Ketoprofen Tablets(20mg) Novopharm Nonsteroidal Drug Canine Dipyrone 50% P.V.L Nonsteroidal Drug Canine Phenyltutazone Injection P.V.L Nonsteroidal Drug

Canine Canine Aspirin Chewable

Tablets for Large Dogs Pala-Tech Nonsteroidal Drug

Canine Canine Aspirin Chewable

Tablets for Small and Medium Dogs

Pala-Tech Nonsteroidal Drug

Canine Rimadyl® Chewable

Tablets(25mg) Pfizer Nonsteroidal Drug

Canine Rimadyl® Chewable

Tablet(75mg) Pfizer Nonsteroidal Drug

Canine Rimadyl® Chewable

Tablet(100mg) Pfizer Nonsteroidal Drug

Canine Rimadyl Injectable Solution Pfizer Nonsteroidal Drug Canine Rimadyl® Caplets Pfizer Animal Health Nonsteroidal Drug Canine Rimadyl® Chewable Tablets Pfizer Animal Health Nonsteroidal Drug Canine Rimadyl® Injectable Pfizer Animal Health Nonsteroidal Drug

Canine Phenylbute® Tablets 100mg Phoenix

Pharmacautical Nonsteroidal Drug

Canine Phenylbute® Tablets 200mg Phoenix

Pharmacautical Nonsteroidal Drug

Canine Zubrin® Tablets Schering-Plough Nonsteroidal Drug Canine Asprin Powder Vedco Nonsteroidal Drug (continued on the next page)

60

Table 7c: Non-natural substitute products for Canine

Animal Sub Market

Product Name Company Name Drug Class

Canine Novox® Caplets Vedco Nonsteroidal Drug Canine Dipyrone 50% Vetoquinol Nonsteroidal Drug Canine Phenyltutazone Vetoquinol Nonsteroidal Drug Canine Tolfedine®4% Injection Vetoquinol Nonsteroidal Drug Canine Tolfedine® 6 mg Tablets Vetoquinol Nonsteroidal Drug Canine Tolfedine® 20 mg Tablets Vetoquinol Nonsteroidal Drug Canine Tolfedine® 60 mg Tablets Vetoquinol Nonsteroidal Drug Canine Vetprofen™ Caplets Vetoquinol USA Nonsteroidal Drug Canine Domoso (R) Solution Wyeth Animal Health Nonsteroidal Drug Canine Dexamethasone Solutions Aspen Steroid Canine Dexium® Tablets Bimeda Steroid

Canine Triamcinolone Acetonide

Tablets Boehringer Ingelheim Steroid

Canine DexaJect SP Butler Steroid Canine Prednis Tab® Butler Steroid Canine Triam Tabs Butler Steroid Canine Prednisolone Acetate Dominion Steroid Canine Flucort® Solution Fort Dodge Steroid

Canine Vetalog® Parenteral

Veterinary Fort Dodge Steroid

Canine AmTech® Dexamethasone

Sodium Phosphate IVX animal health Steroid

Canine Dexamethasone Injection P.V.L Steroid Canine Prednisolone Acetate P.V.L Steroid

Canine Depo-Medrol® Sterile Aqueous Suspension

Pfizer Steroid

Canine SOlu-Delata-Cortef® Sterile

Solution Pfizer Steroid

Canine Depo-Medrol® Pharmacia&Upjohn Steroid Canine Metrol Pharmacia&Upjohn Steroid Canine Solu-Delta-Cortel Pharmacia&Upjohn Steroid

Canine Dexamethasone Sodium

Phosphate Phoenix

Pharmacautical Steroid

Canine Prednis Tab® Phoenix

Pharmacautical Steroid

Canine TriAcet® Tablets Phoenix

Pharmacautical Steroid

Canine Dexacort 5 Rafter 8 Steroid (continued on the next page)

61

Table 7c: Non-natural substitute products for Canine

Animal Sub Market

Product Name Company Name Drug Class

Canine Prednisolone 5mg Tablets Rafter 8 Steroid Canine Rafter Dex Rafter 8 Steroid Canine Dexasone 4mg RXV Steroid

Canine Prednisolone Sodium

Succcinate Univet Steroid

Canine Uni-Med Univet Steroid Canine Uni-Pred 50 Univet Steroid Canine Cortalone Tablets Vedco Steroid

Canine Dexamethasone Sodium

Phosphate Injection Vedco Steroid

Canine Prednis Tab® Vedco Steroid Canine Prednis Tab® Vet-A- Mix Steroid Canine Dexamethasone 2 Vetoquinol Steroid Canine Dexamethasone 5 Vetoquinol Steroid Canine Dextab Vetoquinol Steroid Canine Prednisolone Injection Vetoquinol Steroid Canine Vetacortyl® Vetoquinol Steroid Canine Genesis® Tropical Spray Virbac Steroid Canine Flucort® Injection Wyeth Animal Health Steroid

62

Table 8: Summary of number substitute non-natural substitutes by Animal Sub class (create a table)

Animal Sub Class Anti-Arthritic Agent NSAID Steroidal Drugs

Equine 14 (8 Companies) 108 (34 companies) 46 (22 companies) Canine 3 (2 companies) 63 (25 companies) 38 (19 companies) Feline 9 (7 companies) 23 (15 companies)

Total 17 180 107

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APPENDIX- FDA LETTERS

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72

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