ValuePickr Forum

International Generics 2.0: Embedding new Learnings in a re-drawn Map

NOTE: Posts in this thread are being edited by me.
Week beginning 1st March 2020 we should be in good shape.
Till then, it is better not to refer this thread as I will shuffle around things, remove and add stuff. Please bear with me during this week for editing.

At the outset, kudos to all the folks (@crazymama @ankitgupta @ananth @Donald @spatel ) who as industry outsiders tried to crack the International Generics puzzle and have been making their best efforts to track Indian pharma industry. I have some past working experience in the Industry and am happy to share my understanding of the subject and look forward to collaborate with interested folks. [@stockcollector]

Thanks to @Donald for creating this thread dedicated to International Generics (IG). [Having opened this thread in VP Expert Network, he should also get ready to open his wallet to foot my bill for anti-anxiety medicines that I need to consume to write posts that justify the Expert tag :stuck_out_tongue: ]
This thread intends to cover all aspects of the IG value chain (R&D to Sales in International Market). In a few months, all of us (who are interested in understanding this domain) should have greater clarity (or confusion - some of the existing notions must get shaken!) on functioning of this industry segment, the key risks from investors’ point of view and understand the limitations (due to information asymmetry) that retail folks have to deal with.

Laudable work has already been done by VP community folks in the following threads: [If there are more, kindly point them and I will add them to the list]:

Though many members are already familiar with various aspects of the International Generics(IG) business, I am going to initiate coverage (this is the closest I will ever get to write an Equity Research report :wink:) with the basics. And actually in IG, getting the basics right is a commendable achievement (no exaggeration! yes absolutely no exaggeration - or on second thoughts maybe I should get my IQ checked :smiley: ).

Absolute Basics

For people who are new to the sector, it is essential to understand the fundamentals of New Drug Development (also known as Brand / Innovator / New Chemical Entity) and Generic Drug Development.

New Drug Development

  • Developing a new medicine that has specific mechanism of action and target disease(s) indication.

For example - drugs like Ramipril, Perindopril are ACE Inhibitors which are used to treat hyper-tension and heart related ailments. This video will make it clear:

Now, the process of New Drug Development:

Summary of US FDA’s framework for approval of New Drugs.

The distinction between New Drug Development and Generic Drug Development:

Overview of the International Generics Scenario

Brand / Innovator / NCE (New Chemical Entity) Drugs:

  • Drug Development Cost - [upto bringing the drug to market] - Around 1 Billion USD. [Varies depending on the type of drug - but this is taken as a general benchmark number]
  • Time taken to develop the new drug - Around 10 Years
  • Out of 1000s of potential molecules, only a few get designated as drugs capable of treating a disease wherein their benefits of treating the disease indication outweigh their side-effects.
  • Patent term period - 20 years . There are complexities and nuances - but in a general sense the new drug gets a patent term of 20 years. There are various patents related to the new drug. The most basic being a composition of matter patent that is held for the mother compound (the new chemical entity / compound) and its derivatives. Patents can be challenged through non-infringing routes of development or a direct invalidation challenge to the patent claims filed by the innovator. The patent term begins from the date of filing. And by the time the drug is finally approved for marketing by a regulatory authority (like US FDA) around 8 years maybe lost by the innovator company. Hence there are patent term restoration rules.
  • Clinical Trials are essential for proving - safety, effectiveness, efficacy.

Generic Drugs:

  • Drug Development Cost - 3 Million USD to 5 Million USD [So around 3% to 5% of the Brand / Innovator drug]
  • Time taken to develop the generic - Around 3-4 Years
  • Generic is developed based on literature published by the Innovator - reverse engineering is done for generic drug development.
  • Can be launched only after Innovator’s patent term (in the relevant territory) has lapsed OR the patent is challenged by generic. But, normally, CANNOT be launched upto 5 years from Innovator’s launch because of Data Exclusivity granted to Innovator drugs. [i.e. the Generic CANNOT submit its drug application using Innovator’s data]
  • NO Clinical Trials.
  • Instead Bio-Equivalence is used to demonstrate that the rate and extent of generic drug’s absorption in the body (or at the intended site) when compared to Brand/Innovator does NOT have statistically significant differences. Get this fact clear - Generics do NOT have to prove efficacy / effectiveness of the drug!!. Innovator has already proved that the benefits of using drug outweighs the risks and hence is suitable for treatment of certain disease indications.

What is International Generics and why do health / drug regulatory authorities allow approval of generic drugs?

Industry Resources

  • IQVIA / IQVIA Institute (previously known as IMS) is the go to source for understanding macro scenario of all the major IG markets.

US Market Overview

When you read articles referenced in the following sections (or watch the videos) there would be several terms and scenarios that might sound alien. So if you wish to read (and understand :smiley: ) core concepts of the US Drug Market, it is essential that you first watch these videos (Brookings Institution + Khan Academy). These are the building blocks on which the subsequent sections are built upon:

  • With a population of 330 Million (33 Crores), what makes the US drugs market the most sought after territory/region? [Context - population of Uttar Pradesh + Maharashtra = population of US]

    Primarily its because the spirit of Free Market and Capitalism has prevailed over everything else in the US. [Living in India, I DO NOT have any right to enter in ethical or moral discussions regarding US drugs market.] BUT be very clear that the reasons drug manufacturers / suppliers are obsessed with US are:

  1. There are NO drug price control regulations in any form whatsoever. Neither for Brand/Innovator drugs, nor for generics. This is in stark contrast to how the drug pricing system works in most developed and developing nations.

  2. The US Government, through its Medicaid and Medicare (Part D) plans is the payor (Insurer) for prescription drug bills of nearly 35% of the US population. BUT, as of now, its laws/regulations DO NOT allow the US Govt. to negotiate for prices by using mechanisms such as tenders and reference price system.

    A combination of the above two factors, have led to the scenario where companies can increase drug prices to absurdly high levels and face no legal consequences. Because its Free Market Capitalism :neutral_face:
    Huge price increases made by companies like Mylan, Turing, Valeant have caused public uproar in the past and there is a US Senate report on these (seemingly unethical?) but perfectly legal practices. [The executive summary of the US Senate Report is around 10 pages - can be read to get a gist of the topic.]

Also, the following videos will drive home the point the above articles are talking about. Watch them to reinforce the situation covered by above articles. And there is a good reason why these are being presented to you before any other information.
Forget the 180 day exclusivity and all the FDA stuff, these two points summarize the potential of rewards and on the flipside - if (actually when) regulations/legislations change - the risk of having a bloodbath in prices and huge consolidation on the supplying side. The prevailing situation CANNOT continue for long. [Will come to that after you have watched the videos.]

Given the existing legislations, the US market is so lucrative for manufactures/suppliers because when the right opportunity comes (or the window to create an opportunity is available) then within a year a single drug (even a generic one) itself can push the revenues and profits by millions of dollars. US Govt. (Federal as well as States) are working towards new legislations that will radically change the landscape.

IQVIA published its report and released the webinar in May 2019 for the year 2018. The report deals with US prescription drugs market - comprising of branded as well as generic drugs. Over-the-counter (OTC) drugs which require no prescription are NOT covered in this report.
Note: Please download the report ASAP - may get archived in future. If you get an error on registration (too many existing registrations) then use your corporate email id or email id. For this report and webinar, they have stopped taking registrations from gmail/yahoo type personal email ids.

Key Takeaways

  • The Net Market Size (when referring to US Market, always clarify whether the Brand or Generic sales value referred to is “Gross” or “Net”) of US prescription drugs was around $350 Billion USD. Net reflects the actual realizable sales value by the manufacturer / supplier.
    (Supplier in this context is the US front-end company - which could be the manufacturer’s own group company / subsidiary or a different organization with which the manufacturer has tied up. If the manufacturer and supplier are not of the same group, then realization by manufacturer will be as per the revenue or profit sharing terms with the supplier.)

  • The Gross invoice value was around $480 Bil. USD. This reflects the price at which billing happens from the manufacturer / supplier. The gap between 480 and 350 represents the smoke screen created so that real market price realized by sellers CANNOT be found out. [As the conversation goes in “The Dark Knight Rises”: Theatricality and deception are powerful agents to the uninitiated - Hans Zimmer background music… :clapper: ]

  • 5.8 Billion prescriptions dispensed in 2018. [Context entire US population is around 330 Million. And these prescriptions could be for different time duration - 1 week / 30 days / 60 days / 90 days - depending on chronic or acute disease treatment]. Apart from conveying a general sense that US folks tend to take a lot of prescription drug medication, this statistic doesn’t give any insight into the Market Volume of drugs.

  • Generics comprise 90% of prescriptions dispensed in volume terms (i.e. units sold of tablets, capsules, injections etc.) *. This reflects success of the Hatch-Waxman Act (or if you wish to sound smart then “Drug Price Competition and Patent Term Restoration Act of 1984”) and the US FDA’s efforts in working towards higher accessibility of Generic Drugs. :clap: :clap:
    Generics volume in market was 75% in the year 2009. So there has been steady increase over the years.

  • In Value Terms (Net Market Size), Generics share is around 20% i.e. around 70 Billion USD. Over the coming years, off-patent drugs or Para-IV generics will add to this number, while price erosion across the entire generics basket will reduce the number. [Price Erosion defined: Assume the Brand / Innovator drug was sellling at 100$ per bottle. If the Generic drug sells at 2$ per bottle then 98% is the price erosion. I will add Glossary of all the terms - or will find a URL where it already exists.]

  • So Generics are 90% in Volume Terms and 20% in Value Terms.

  • Innovator/Brand drugs are 10% in volume terms and 80% in value terms.

  • Net per capita spend in 2018 was $1,044 (2009 value was $1,000 - so it has gone up only 4.4% in around 10 years.) 330 Million (US Population) * 1044 will roughly give 350 Billion USD Market Size.

  • Generic competition has intensified fiercely over the last few years. * The ratio of drugs genericized to ANDAs (launched + not launched) has expanded from roughly 1:2 (in 2013) to 1:10 (in 2018). [Please refer Exhibit 19 on Page 25 of the IQVIA 2018 report. Will share screen-shots only if IQVIA gives its permission.]
    So for each new drug which becomes generic, on an average there are 10 competitors in the market now. [The era of Sole-FTFs is long over! These days its common to have 10-15 shared FTFs]


Thank you for putting your hands up! Love it!

Just the other day, we are attempting an International Generics Market activity scan and did notice that it isn’t as if activity (ANDA filing & Approvals e.g.) has diminished across the board, there were big pockets pretty active. @spatel has done great work in doing as complete market map as we can, and will benefit tremendously with some guidance from industry insiders like you - like where to focus more efforts on, how to read between the lines, connecting the dots for market opportunities (esp. after the biggies vacated lots of space); basically use you and others experienced pharma professionals in US generics markets as a solid sounding board for our inspired hunches.

We think there is a new kind of game in International Generics emerging, and some players are proving to be better prepared and better skilled at execution. We are collecting more data points and trying to get better at asking second order questions to both industry professionals like you and Pharma Managements for us to get a better grip on subject.

Your timing couldn’t have been better :slight_smile:. Hope this inspires more pharma international generics industry insiders to put their hands up. Certainly, we feel there is suddenly again more opportunity in International Generics available, and some businesses are poised to benefit well, provided there is a method to the madness. This is a Variant perception - unlike the general consensus against Generics currently - and needs to be validated. As we mentioned before, its still a hunch. But guys like you can help us knuckle down and prepare hard by equipping us to ask more second order questions.

Thanks a lot for the report. Btw, just want to prompt you to recheck to ensure that this report is available for public consumption for free. If it is NOT, then we may be violating someone’s IP and you should immediately remove it. At VP we try to be a responsible community to ensure we are not violating anyone’s intellectual property. Kindly recheck, and act accordingly.

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Q4CY 19 Raw data post 2001.xlsx (987.9 KB) Have updated latest DMF filings data as below

If we see the pace of recent filings, following companies clearly stand out:
Alembic Pharma, Alkem Labs, Granules India, Laurus Labs, Piramal and Shilpa Medicare

Source data sheet attached too.


Thank you for the welcome note.:slightly_smiling_face:
I had read about you and Valuepickr forum in an ET article couple of years ago. That article inspired me to think about capital markets. [I have always been tad too skeptical about manipulations (in organizations as well as markets). Perhaps I am a natural short-seller :grin:]

I respect Intellectual Property Laws and will not post any document that is not available to public at large. As such, I am no longer an Industry insider and do NOT have access to privileged databases. The IQVIA report does mention that


©2019 IQVIA and its affiliates. All reproduction rights, quotations, broadcasting, publications reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording, or any information storage and retrieval system, without express written consent of IQVIA and the IQVIA Institute.


I have NOT taken IQVIA’s permission for uploading the report here. But anybody accessing IQVIA’s general public website could have downloaded the report a few months back.
Source for the IQVIA report attached has been given in the previous post. There is a tab to register for the webinar and access the webinar and report. It was released in May 2019 and now it seems that the report has been archived. Link to download the report doesn’t appear any more. The webinar can still be accessed. [Pro tip: If they refuse a gmail/yahoo id citing too many registrations then use email id.Corporate email ids also work - but depends on company policy whether they can be used for accessing such webinars]

Looking forward to discussions that enhance our collective understanding of the Industry.

I wish to post URLs related to recommended reading materials and videos. What would be the best place to do that?

Also, we need to work towards updating the presentation made by @ananth in the VP Chintan Baithak thread. Some type of rolling master presentation that captures the fundamentals and gets updated for the emerging trends.

Boarded, seat-belts fastened, ready for take-off!


Thank you for posting the update. Hope the numbers reflect only Type II DMFs. (The raw file contains all DMF entries hence re-confirming]

We are all waiting for @crazymama to update his Tableau dashboard. If he has some time to spare then I am ready to learn and take it forward.

Editing this post based on subsequent reply by @valuequest

Actually only Type II DMFs are the Drug Substance / API applications. It so happens that in this case there are no other (Type III, IV or V) DMFs filed by the Indian companies so their DMF numbers are correctly depicted (did a random sample check for 3-4 companies).
But please keep only Type II Active DMF and filter out all other DMF types. This will change the no. of Worldwide total active filings and the corresponding % of Indian companies.

  • Normally, vertically integrated companies would submit DMFs around 6 months before their ANDA filing.
  • Submitting a DMF early would reveal their pipeline product to competitors.
  • Submitting it too close to ANDA filing may be a bit risky from regulatory clearance perspective.
  • Though a DMF is neither approved nor rejected by the FDA. It is simply referred when an ANDA or NDA application is received for the particular drug.

Yes numbers excludes Type I DMF, includes all other DMFs.

I have done a similar check on ANDA approvals as well, data sourced from US FDA

In this as well, just by the numbers, following mid caps clearly stand out - Ajanta Pharma, Alembic Pharma, Alkem Labs, Shilpa Medicare and Torrent.


The good folks at IQVIA have published another report last year - which is Evolution of Indian Players in US Generics Market. We couldn’t have asked for anything better :slight_smile:
The report can be downloaded from here.

Please download the report ASAP. IQVIA may archive it in future.

This is a brief report - around 12-15 pages with charts and graphs. So not summarizing anything. BUT would like to drive home the point that US generics is a BUYER’S Market.

Sharing a paragraph and reference to couple of images from Page 6 of the report.


About a decade ago, US had more than 10 pharmaceutical distributors contributing to ~80% of the US generic market. However, the last decade has been witness to consolidation (Figure 5) so much that the top 3 players — WBAD, Red Oak and McKesson OneStop, have contributed to >80% of the US generics market (Figure 6).


McKesson, CVS Health, AmeriSourceBergen(ABC) are ranked 7, 8 and 10 on Fortune 2019 list (by revenue).
Following them are Cardinal Health and WalgreensBootsAlliance at 16 and 17.

CVS and Cardinal Health have a JV for generic sourcing. The resultant JV company is Red Oak Sourcing. And CVS also aquired Aetna Health Insurance. So, ladies and gentleman, CVS is in Wholesale Distribution (through Red Oak / Cardinal JV), Retail Pharmacy, Health Insurance (Aetna) and PBM (Pharmacy Benefits Manager). CVS is in the entire value chain of US drugs distribution! Maybe someday FTC will scrutinize it - but till then it has enough muscle to bully suppliers.

And the other folks - Walgreens, McKesson, ABC, Cardinal, are known bullies. Well if you command 80% of market share in wholesale distribution and have downstream retail presence as well then suppliers (drug manufacturers) are going to be at your mercy!

Perhaps the only saving grace currently for Drug Suppliers is that the US Government still DOES NOT have a mandatory reference price limit and tendering system for its Medicare (Part D) and Medicaid programs. The US Govt. is the insurer (payor) for around 30%-35% of the US population through these two schemes. Currently, the laws DO NOT allow US Govt. to influence prices under these two programs. Will have a separate post elaborating that.

Imagine being a me-too drug supplier having 10 competitors having perfectly substitutes of the products/drugs in such a market!!!


Companies having FDF (Finished Dosage Form) / Formulation plants in USA will benefit.
Opportunity size is unknown. Will try to get a sense of what is the potential opportunity.


More on this here:

  • Still unable to get an idea of the market size access opened by this ruling. Would request folks holding pharma shares (of any company having its manufacturing facility in US) to reach out to the Investor Relations and get the overall magnitude of impact.

  • Also, need clarity on the situation in which an Indian company has Contract Manufacturing agreement with organization having its plant in US. By looking at the intent of the ruling, CMO FDF manufacturing should also qualify for this Govt. procurement program. But better to have an authoritative clarity on the matter.

  • Clearly Unfavorable for companies who DO NOT have any FDF manufacturing facility in USA.

  • This also reminds us that the overall risk profile of companies having NO FDF manufacturing facilities in USA is higher than their peers. Companies that have several manufacturing facilities in India and NONE in US need to have a hard look at their strategic risk profile. Because, any regulation which promotes more localized manufacturing will reduce the market size accessible by them.

  • We need to tabulate which companies DO NOT have any manufacturing plants in USA and ask their Management in the next round of concalls / Q&A that are they (sort of) compelled now to either own a US manufacturing facility or have a CMO arrangement with US based entities.

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Hi NauticalTwilight,

Thanks for reigniting the pharma discussion which was almost lost in the dust. I need some help regarding the capabilities of front end teams of generic pharma cos. Few questions on US front end:

  1. About pricing and the kind of pricing pressure being experienced in US generic market currently. Has it reduced currently or remains cut throat?
  2. How does a front end help in taking advantage of supply side issues for few products like sartans being experienced in US markets currently?
  3. Views on front end marketing team of companies like Alembic, Ajanta compared to larger peers like Sun, Lupin, DRL.
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  1. About pricing and the kind of pricing pressure being experienced in US generic market currently. Has it reduced currently or remains cut throat?

The US Generics Market is primarily a BUYER’s market. Have explained the macro scenario in previous post.

The Top 3 Wholesalers/Distributors have 80 percent of market share. Generic drugs being perfect substitutes of each other are all me-too products. The supplier generally doesn’t have a say in the prices if the market consists of more than 5-6 competitors. And if Apotex is a competitor in any drug then rest assured the price erosion would have hit peak levels - 98-99 percent (or the maximum erosion possible given the cost of manufacturing and distributing the drug + a nominal margin of 5%-10% -> In some cases some products might be sold at loss as a part of overall product basket - loss leading / bundling strategy). [Will share general cost structure of oral solids in a separate post.] At this price level if existing manufacturers or prospective entrants (who receive approvals later) do not find it viable to sell, then they simply do not launch or temporarily (which may eventually become permanent) discontinue the product. See the ratio of ANDAs not launched in this diagram and the numbers speak for themselves.

In my previous post I had shared the data of how the ratio of Generization of Molecules to No. of ANDAs approved has rised steeply from 1:2 (2013) to 1:10 level in 2018. And this is the market situation when the Chinese API folks are not aggressively pursuing US generics formulation side of the business.

So on one hand while there is massive consolidation on the demand side, for mid-sized and small size generic pharma manufacturers (most Indian companies in the US space), there is a double whammy with some huge consolidation on the supply side as well:

  • Actavis merged with Allergan in 2015. [Allergan managed to escape Valeant Pharma and Bill Ackman’s (almost) hostile bid and should thank heavens for that! Because turn of events later revealed how pharma companies like Valeant can engage in brazen unethical practices to squeeze every dollar out of patients / insurers in the US health care market. [This story deserves a separate post (with some pop corn) in itself - will do that in coming days].
  • Pfizer nearly acquired / merged with Allergan (only a few months after the Actavis-Allergan merger) but had to call off the deal due to opposition of the tax inversion strategy by US Govt.
  • Few months down the line in 2016 - Teva (drunk high on its Copaxone profits) which was unsuccessful in acquiring Mylan, went ahead and acquired Allergen’s generics business. But market dynamics have not been kind to this rather ill-fated acquisition.
  • 2015-16 timeline for Teva-Mylan-Valeant-Actavis-Allergen-Pfizer deals (including attempted deals) was such that we need US pharma analysts with the Amit Shah - “Aap chronology samajhye” meme to explain us the exact sequence of events.
  • Moving ahead, in second half of 2019, Pfizer and Mylan announced creation of Viatris - a new entity to be formed through the merger of Upjohn (Pfizer’s off-patent branded and generics business) and Mylan.
  • Net,net - Teva-Actavis-Allergen is one entity (as far a generics business goes) and Pfizer-Mylan (generics) is one entity. So the landscape changed from five big players becoming two gigantic players.

[Will edit the post to add relevant numbers and their materiality in context of US generics market.]

Having spoken about the demand side and supply side consolidation, would share some thumb rules for judging what might be the price erosion in the market:

  1. 2 to 4 competitors [the great American dream for every generics manufacturer. Sole-FTF is now shifted to history section of the Industry] - who understand each other without talking. Lower Limit - 80 to 90, Upper limit 90 to 95 percent [depending on the product cost and how soon the market formation happens] (Also, provided Apotex is NOT in the list.)
  2. 5 to 7 competitors - Lower Limit - 90 to 95, Upper Limit 95 to 97 percent erosion.
  3. 8 and more competitors - Nearly 98-99 percent erosion. Those who are extremely cost effective will sell, others will not commercialize the ANDA or discontinue. This has been explained in a previous paragraph in this post.

The REAL Price Erosion experienced by each manufacturer can differ by a few percentage points. The real net selling price realized by manufacturers/suppliers is known only to them. I repeat, The real net selling price realized by manufacturers/suppliers is known only to them and in some circumstances even they are not 100percent sure of what the final Avg. NSP (Average Net Selling Price) will be. :astonished:
Welcome to the world of US Gross to Net (G2N) sales. You are now getting initiated :face_with_monocle: into the US pharma industry’s secret cult after which you will find Indian taxation (and other arcane laws) simple :exploding_head:

G2N (GTN) - Gross-to-Net is the smoke screen used to mask the real prices realized by manufacturers/suppliers. The Flow of drugs and financial movement in US drug supply chain is COMPLICATED.

[Instead of conducting CAT and JEE exams, IITs and IIMs can ask students to explain how the US pharma funds flow in the industry :rofl: ]

For manufacturers, guesstimating the Avg. NSP (Net Selling Price) of competitors requires industry databases and multiple data points to triangulate. For people who have no access to highly priced industry databases, the exercise is almost impossible. We can have a general sense of the prevalent drug price in the market through US Govts. NADAC or sites like for drug prices. Type any drug - Valsartan 320, Celecoxib 300 etc. the range you will find is likely to drive you crazy.

To summarize:

  • Generally there is fierce price erosion in most of the drugs
  • Market price realized by a manufacturer CANNOT be known by others.
  • People having access to industry databases can guesstimate manufacturer prices.
  • People having no access to industry databases have a higher chance of winning the lottery ticket than getting correct information about the drug prices realized by manufacturers.
  • Market share can be known reliably through industry databases. [Haven’t spoke about this aspect yet - will think how to flesh it out]

Will edit and continue post from here. Thanks for the patient reading!


Excellent post!
I had a few questions.

  1. Is there a reason why Chinese companies are not agressive in formulations?
  2. Is the price erosion same for all types of products? Eg. Orals or injectables

Thanks for the ongoing education which is real value-additive for us. I will return to this thread when I have more time to go through at leisure.

Meanwhile, I am sure you will address the issue of “shortages” when you have the time in your own lucid way.

But suppose I were to meet a Pharma Industry sourcing Expert, what kind of questions should I look to ask to get a better picture on source of shortages, why some businesses prove nimble enough to execute well on shortages more or less consistently; Sun and Lupin had supposedly mastered the Art? They had like real-time tabs on pharma stock-points across the country? Et al

Any guidance on right questions to ask will be good.
Please answer when you can and in your natural flow. No hurry.