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Industry Overview

The pharmaceutical industry of Pakistan is one of the most structured


industries of the country, which has nearly 680 manufacturing units and
licensed companies, besides importers. These units cater to the 90 percent of
the needs of the country's medicines thus saving precious foreign exchange.
Pharmaceuticals are the fastest growing segment in the country's exports.

Total Pakistan Pharma Market is US$ 1.5 billion (Rs. 89.4 billion) while the total
World Market is US$ 714 billion. The Industry has a total value of, having 651
drug manufacturers which include 29 multinationals and 622 national
companies. The market grew with an average growth rate of 13%. The
industry witnesses an average of 300-400 new product launches every year.
Twenty of the national and multinational companies contribute over 60% of
the total drug sales as per Information Medical Statistics (IMS) figures. Value
wise share of the national companies in Pakistan’s total drug market is around
49% and rest 51% is owned by multinational companies.
R A NK ING M A T B A SIS M AT ~ 09M / 2 0A 0T8 ~ 0 9 /M2 0A 0T7 ~ 0 9 /M2 0A 0T6 ~ 0 9 / 2 0 0 5
TO P 10 L C - R U P E EL SC - R U P E ELS C - R U P E ELS C - R U P E E S
2 0 0 82 0 0 72 0 0 62 0 0 52 0 0 4 C O R P O R A T I O N RS s R s R s R s
9 9 , 7 9 5 , 9 6 78 , 96 ,04 31 2 , 9 8 97, 8 ,5926 3 , 7 0 27 , 03 ,39 34 6 , 6 0 6 , 6 1 1
1 1 1 1 1 G SK 1 0 , 9 4 5 , 1 8 01 , 06 , 31 49 9 , 5 7 7 ,98 , 93 75 5 , 4 4 4 ,81 , 75 62 3 , 5 1 1 , 3 0 3
2 2 2 2 2 ABBO T T 5 , 5 3 8 , 8 8 0 , 58 ,11 77 2 , 5 7 1 , 4 3, 70 3 4 , 8 1 4 ,47 , 34 42 8 , 1 6 1 , 0 4 7
3 3 3 4 5 N O V A R T IS 4 , 6 9 0 , 5 1 3 , 48 ,50 63 9 , 3 3 5 , 23 4, 53 8 9 , 5 1 4 ,36 , 72 84 1 , 9 9 0 , 2 6 3
4 5 4 3 3 S A N O F I - A V E N 3T, 9I S2 9 , 2 4 6 , 30 ,37 83 1 , 6 8 3 , 93 9, 52 6 4 , 7 3 1 ,38 , 52 46 4 , 2 3 0 , 3 5 1
5 4 5 5 4 P F IZ E R 3 , 9 2 3 , 6 0 4 , 34 ,37 84 4 , 4 5 0 , 63 5, 43 1 6 , 0 4 3 ,30 , 81 11 6 , 4 8 3 , 5 4 3
6 6 6 13 17 G ET Z 3 , 7 2 3 , 4 2 2 , 24 ,78 15 2 , 3 6 4 , 82 0, 22 5 1 , 6 1 0 ,12 , 24 32 5 , 8 1 0 , 4 4 3
7 7 9 9 14 R O C HE 3 , 0 3 0 , 6 4 4 , 20 ,47 31 9 , 8 7 6 , 81 0, 98 3 1 , 0 9 2 ,10 , 86 51 0 , 1 3 5 , 4 1 3
8 11 11 10 11 SAM I 2 , 7 2 9 , 5 6 1 , 22 ,21 44 7 , 6 1 2 , 91 8, 83 0 5 , 1 0 2 ,17 , 45 79 6 , 5 4 2 , 7 5 9
9 8 7 6 6 M ER C K 2 , 7 2 2 , 9 7 9 , 23 ,54 48 1 , 7 6 5 , 02 0, 16 6 0 , 8 9 1 ,28 , 10 43 5 , 1 9 1 , 2 1 1
10 9 10 8 12 H IL T O N 2 , 6 2 4 , 2 4 1 , 23 ,12 29 4 , 8 8 7 , 01 0, 94 2 3 , 0 0 8 ,19 , 36 93 5 , 0 0 8 , 9 4 2

The medicines in the pharmaceutical market can be broadly distributed into


OTC (Over The Counter) and prescription drugs, out of which the share of OTC
brands is 16% with a 7.35% growth rate per annum, within OTC the top three
categories (value wise) are as follows:

· Analgesics (Pain Relievers)


· Calcium
· Antihistamines (Anti-Allergy)

In the West, pharmaceutical companies spend US$ 60-70 billion/year on R &


D. It takes around 10-12 years for a molecule to develop into a drug
(medicine) at an average cost of 800 million to 1 billion US dollars.
Pharmaceutical R & D expenditure is the highest by any industry (19% of their
annual sales, approx 34 billion US$ in 2004). In Pakistan, this sort of R & D
expenditure is not viable. Except for multi-national companies like
GlaxoSmithKline, Novartis etc., none of the companies in Pakistan have the
financial muscle to afford such expenses. Hence, new drugs mainly come from
the West. Pakistan is self-sufficient in formulation, but there is not a single
bulk manufacturing unit. Thus, 500 million US$ is spent on API imports (Active
Pharmaceutical Ingredients). Out of this, 100 million US$ go directly to India.
At the moment, India supplies APIs to more than 50 countries worldwide and
has a potential to increase their API exports by 12-15 billion US$ by 2015.
Almost 40% of APIs used in Europe are being imported from India. Most
multinationals are outsourcing their drug development APIs to Indian
companies for cost and quality reasons (An opportunity no one in Pakistan is
thinking about). Pakistan has no API capabilities and no apparent serious
efforts are being made on this front.

Most of the multinational firms have been facing stiff competition from local
companies that have succeeded in raising their market position, given their
better resource utilization towards introducing “me-too” products at relatively
lower prices. To raise revenues and decrease costs, many MNCs have entered
into contracts with other companies for toll manufacturing. Many companies in
Pakistan that have idle capacity at their plants are manufacturing drugs for
other companies in the industry. This is done to reduce costs incurred in terms
of keeping extra capacity at the plant and to gain additional revenues by
working as an outsourced producer. For example: Searle Pakistan entered into
a toll manufacturing agreement with ICI Pharmaceuticals, Abbot laboratories is
also offering toll manufacturing services along with many other companies in
Pakistan.

The industry provides jobs to nearly one million highly skilled and semi-skilled
personnel directly or indirectly. But only a few pharmaceutical companies in
Pakistan have trained pharma-co-vigilance staff to report serious adverse
events to regulators. An adverse event reporting forms was circulated by MOH
in 2001-2002 to all major cities and hospitals, the ministry never got a single
form back Pakistan has no national pharmaceutical ethics or marketing code
in compliance with International Code of Pharmaceutical Manufacturing
Association (IFPMA code). Some companies are involved in activities that could
be seen as inciting prescription in return of economic and material benefits
being given to doctors, pharmacist and even regulators. This is all linked to
non science based old style pharmaceutical marketing where most companies
don’t have a medical director. Moreover, some companies,
(local/multinational) are misusing the terminology of clinical trials by running
unethical studies for their expensive medicine. These trials do not follow any
GMP guidelines

The industry is finding it extremely difficult to survive and many of the units
may be on the verge of closing down because it is no longer economically
viable to produce a number of medicines. The industry has not been given any
price increases from the last 6 and half years, the last price increase of 3-4%
was given in December 2001. Besides there are many medicines whose prices
were reduced and frozen for over 10 years, and no prior across-the-board
price increases were allowed on these products, though the raw material
prices have registered over five times increase in past several months.

UK and US based Pakistanis have come back home to explore the options and
interest of the Pakistani government to set up Contract Research services in
drug development. At present, contract research is a $60 billion industry
globally and realizing its potential the Indian health sector has heavily
invested in this area attracting an annual business of more than $300 million
from other countries. Most of the ex-pats could not find valid answers, written
documentation or processes that could encourage them to invest. The only
written document available from the ministry is the checklist of required items
for clinical trial approval by MOH. The local as well as multinational
representatives were the most discouraging for these ex-pats, thus resulting
in each of these parties opening their parties in India.

Despite its problems, the industry is growing and new trends are emerging in
the global healthcare market that can positively affect the local industry. The
patents of MNCs over their major innovations are expiring very soon, opening
up new market opportunities for generic brands. Patents worth $ 121 billion
are expiring in the next 5 years inducing growth in the industry.

Whereas it took over 10-20 years to bring out a new drug in the market in the
past, now it takes only 2-3 years to research a new molecule and in marketing
it. For generic companies this opens up a whole new arena of competition as
many companies are forming strategic alliances with international
pharmaceuticals to market their latest innovations in Pakistan. This requires
deep understanding of healthcare needs of the local industry as the costs of
such alliances are high and should be reciprocated by enough demand to
support them.

The over-65 age group is increasing at 2% worldwide while in Asia, this growth
is 2.6%. Moreover, this sector consumes three times more medicine than the
younger population, contributing to the rapid growth rate of the
pharmaceutical industry. If an average pensioner needs cardiac, diabetic or
hypertension medication, he can spend only Rs.300-400 per month on an
average. Again this dramatically increases the need for generic branded
medicines. Additionally, the incidence of diabetes is higher in the mid twenties
age group, contributing to the growth of this segment.

Good health is an important personal and social requirement. People are


becoming more aware of the symptoms of diseases they are suffering from
and they also have an idea about Corporate Social Responsibility.
Pharmaceutical firms play a unique role in meeting society’s need for popular
wellbeing which cannot be underestimated. In recent times, the impact of
various global epidemics e.g. SARS, AIDS, Cancers etc have also attracted
media attention to the industry. The effect of the intense media and political
attention has resulted in increasing industry efforts to create and maintain
good government-industry-society communications.

The latest trend in the industry is the addition of infant milks as a


pharmaceutical product category. This category has shown up in the top 10
products of IMS for the last 12 months and till date none of the generic
branded companies has given any attention to this segment. Moreover,
number of intensive care cases is rising, given the civil disturbances in
Pakistan and in such cases oral medication is not possible, injections are the
only way to save lives. Also, the incidence of heart attacks and other chronic
diseases are on the rise, boosting the need for injections. Thus, this segment
has been growing sharply in the recent future. This trend is a good opportunity
for pharmaceutical companies to increase revenues and extend product lines.

With globalization process reaching out to Pakistan, the geographical barriers


have become obsolete. Any country will have to compete and trade globally in
order to progress and survive in the years to come. The major pharmaceutical
companies have realized this fact and have stepped into the global area of
competitive trade. The exports of Pakistani Pharmaceutical companies have
been growing at a rate of 25-30% per annum, contributing to the growth in the
industry.

Suppliers
Major suppliers of pharmaceutical industry include chemical suppliers of
essential raw materials for drugs, glass manufacturers for bottles and jars, and
plastic manufacturers for bottle caps and closures.

Distributors
The profit margin for distributors is 5.5 to 10%
Doctors (Opinion Leaders)

Chemists
The profit margin of chemists in Pakistan is 15%.
Porter’s Five Forces Model of
Industry Attractiveness
Threat of Entrants:
No
Yes effec
(+) t No (-)
1) Do large firms have a cost or performance advantage in
your segment of the industry 
2) Are there any proprietary product differences in your
industry? 
3) Are there any established brand identities in your
industry? 
4) Do your customers incur any significant costs in switching
suppliers? 
5) Is a lot of capital needed to enter your industry? 
6) Is serviceable used equipment expensive? 
7) Does the newcomer to your industry face difficulty in
accessing distribution channels? 
8) Does experience help you to continuously lower costs? 
9) Does the newcomer have any problems in obtaining the
necessary skilled people, materials or supplies? 
10) Does your product or service have any proprietary
features that give you lower costs? 
11) Are there any license, insurance or qualifications that
are difficult to obtain? 
12) Can the newcomer expect strong retaliation on
entering the market? 
13) Do large firms have a cost or performance advantage
in your segment of the industry 
14) Are there any proprietary product differences in your
industry? 
15) Are there any established brand identities in your
industry? 
16) Do your customers incur any significant costs in
switching suppliers? 
17) Is a lot of capital needed to enter your industry? 
18) Is serviceable used equipment expensive? 
19) Does the newcomer to your industry face difficulty in
accessing distribution channels? 
20) Does experience help you to continuously lower costs? 
21) Does the newcomer have any problems in obtaining
the necessary skilled people, materials or supplies? 
22) Does your product or service have any proprietary
features that give you lower costs? 
23) Are there any license, insurance or qualifications that
are difficult to obtain? 
24) Can the newcomer expect strong retaliation on
entering the market? 
LOW MODERATE
HIGH
Threat of new entrants is moderate since large pharmaceutical companies,
mainly MNCs, have a large performance advantage as they have more
resources and established R&D departments worldwide that they can use to
introduce new drugs and reap profits for 2-13 years before their patent
expires. This helps them in building brand loyalty. An investment of at least
Rs. 30 crores is required to enter the industry including land, equipment,
building and 3 months working capital etc. Although most necessary materials
are not difficult to obtain, some specialized materials and human resource is a
little difficult to obtain. Distribution networks are not difficult to obtain as there
are no exclusivity agreements between manufacturers and distributors.

Bargaining Power of Buyers

No
To what extent are your customers locked Yes effe No
into you? (+) ct (-)
1) Are there a large number of buyers relative to the 
number of firms in the business?
2) Do you have a large number of customers, each with 
relatively small purchases?
3) Does the customer face any significant costs in
switching suppliers? 

4) Does the buyer need a lot of important information?
5) Is the buyer aware of the need for additional 
information?
6) Is there anything that prevents your customer from
taking your function in-house? 
7) Your customers are not highly sensitive to price. 
8) Your product is unique to some degree or has 
accepted branding?

9) Your customer's businesses are profitable.

10) You provide incentives to the decision makers.
LOW MODERATE
HIGH

Buyers, (chemists) are spread all over the country and the company
provides special discounts for pushing the brand to the customer whenever
he asks for a compound. The buyers are aware of the need for information
as the consumers trust them implicitly for providing the right medicine.
The customers would need significant capital costs for entering the
business but overall, since Pakistani pharmaceutical industry is a generic
products industry, no significant factors are prohibiting customers from
entering the market themselves, posing a threat for the manufacturers.

Threat of Substitutes
Yes No No
(+) effe (-)
ct
1) Substitutes have performance limitations that do not
completely offset their lowest price. Or, their 
performance is not justified by their higher price.
2) The customer will incur costs in switching to a 
substitute.
3) Your customer has no real substitute. 
4) Your customer is not likely to substitute. 

LOW MODERATE
HIGH

Allopathic medicines are much quicker in effectiveness and have a


diversified portfolio including treatments for chronic diseases that justify
their higher prices. Substitutes include homeopathic, organic (Hikmat)
medicine, or even witch doctors, but they are not any real threat as the
substitutes (e.g. homeopathic) do not have brand names and the resources
to reach a wide-scale chemist base. Also the chemist needs to see the end
consumers’ demands and demand for allopathic medicine is increasing as
new diseases and their treatments are discovered.

Bargaining Power Of Suppliers


Ye No No
s effe (-)
(+) ct
1) My inputs (materials, labor, supplies, services, etc) are 
standard rather than unique or differentiated.
2) I can switch between suppliers quickly and cheaply. 

3) My suppliers would find it difficult to enter my business or


my customers would find it difficult to perform my function in- 
house.
4) I can substitute inputs readily. 
5) I have many potential suppliers. 

6) My business is important to my suppliers. 


7) My cost of purchases has no significant influence on my 
overall costs.

LOW MODERATE
HIGH

The suppliers of raw materials are varied from standardized products to


some specialized ingredients for differentiated high-premium products.
There are many suppliers for chemical compounds for the Pakistani
pharmaceutical industry, ranging from suppliers in U.S, with high price
compounds to those in China and India that are providing the same at
lower costs. Some products are cheaply available for e.g. sugar, starch or
other standard chemicals while for others it may cost Rs. 500,000 to obtain
just 1kg of raw material.

Rivalry Among Existing Competitors


No
Yes effe No
(+) ct (-)
1) The industry is growing rapidly. 
2) The industry is not cyclical with intermittent
overcapacity. 
3) The fixed costs of the business are a relatively low
portion of total costs. 
4) There are significant product differences and brand
identities between the competitors. 
5) The competitors are diversified rather than specialized. 
6) It would not be hard to get out of this business because
there are no specialized skills and facilities or long-term
contract commitments, etc. 
7) My customers would incur significant costs in switching
to a competitor. 
8) My product is complex and requires a detailed
understanding on the part of my customer. 
9) My competitors are all of approximately the same size as
I am. 

LOW MODERATE
HIGH

The pharmaceutical industry is growing at the rate of 8-9% annually while


exports are growing by 20% each year. The products are differentiated with
strong brand loyalties towards the international brands, however ‘me too’
brands are also growing in sales. Drugs require understanding of
compounds and dosage, etc from the side of the chemists but since
manufacturers aim their push efforts towards the chemists, rivalry grows to
get shelf space with retailers. Fixed costs in terms of personal selling
efforts are high countering the other relatively low fixed costs and thus do
not have any effect on the industry attractiveness.
Favorab Modera Unfavora
Overall industry rating: le te ble
1) The threat of new entrants. 
2) Bargaining power of buyers. 
3) Threat of substitutes. 
4) Bargaining power of suppliers. 
5) Intensity of rivalry among
competitors. 

From the overall industry rating we can conclude that the industry is
moderately attractive. The major factors for concern in the industry are the
threat of entry posed by buyers, suppliers or distributors and the rising
power of suppliers due to demand for specialized products increasing day
by day.
PESTL Analysis
Technological advancements, tighter regulatory-compliance overheads, rafts
of patent expiries and volatile investor confidence have made the modern
pharmaceutical industry an increasingly tough and competitive environment.
Below is an analysis of the pharmaceutical industry in Pakistan using the PEST
(political, economic, social and technological) model, with an addition of legal
environment in the mix.

POLITICAL FACTORS:
Over the years, the industry has witnessed increased political attention due to
the increased recognition of the economic importance of healthcare as a
component of social welfare. Political interest has also been generated
because of the increasing social and financial burden of healthcare.
The present political scenario of Pakistan is still not out of instability which
isn’t favorable to the industry. India which is one of the major suppliers of raw
materials for the industry is at the verge of war with us, and given the current
hostile situation, there is a great risk that trade relations of the two countries
will be discontinued. For this reason, local industries face difficulties not only
in exporting their medicines but also while importing raw material and
machinery.

According to a World Health Organization study, "World Medicine Situation",


Pakistanis are spending 77 per cent of their healthcare budgets on buying
medicines. This shows the lack of government public health financing
(Pakistan is spending on an average a mere 0.5-0.8 per cent of the GNP on
health) and the absence of a national health insurance program. In spite of
buying medicines from their own pockets, consumers are still victims of
irrational drug use and fake medicines. This also illustrates that Pakistan's
national medicine policy has failed to achieve its public health objectives.

ECONOMIC FACTORS:
Pharmaceutical industry with a market size of $ 2 billion, market growth rate
of 9% and more than 600 companies operating locally can be affected by the
following factors:

• Inflation: Since the last price increase was given (December 2001)
the rupee has been depreciated from Rs 48 in 2001 to Rs 78 right now. {63
percent devaluation} Whereas the pharmaceutical raw materials and to
greater extent packaging materials are imported so every fractional rupee
depreciation directly affects the cost of goods.

Further the custom levies are charged on current rupee/dollar parity the affect
of duty and other landing charges of the imports get inflated.
On average, including the current price hikes inflation have registered on
average 15% growth over the last five years. Cost of labor has risen from Rs
2500 to Rs 6000 {140%}.

• Dollar appreciation and Rupee depreciation: These two factors


increase the input costs as most of the raw and packaging material is
imported

• Fuel prices: Prices of fuel, utilities and other services have


increased by more than 75 percent due to which freight and local
transportation cost have increased over 75 percent.

• Excise duties:In the last couple of years, the board imposition of


Federal Excise Duty on all the imports has badly affected the dwindling margin
of pharmaceutical products.

• Taxation:Imposition of 16 percent sales tax on pharmaceutical


packaging and promotional items is said to be unjustified.

• Global economic recession: The recent turmoil in the banking


industry has also affected Pakistan’s economy which will have an effect on this
industry in one way (increasing borrowing rates) or the other( affected credit
ratings). Financing cost has doubled in the recent times. Further putting L/C
margin on many of the ingredient and removing the hedging of foreign
currency is killing the margin with double edge sword.

• Stricter regulations in international markets: International


markets are becoming increasingly regulated with more countries wanting to
support their local industries and thus induce strict regulations on imports
from Pakistan. For example: Regulators from Ethiopia came to Pakistan to
conduct an audit and rejected all 19 companies on the agenda on the basis of
the slightest deviation from the manual. Also, Bangladesh has banned imports
from any country unless that country is exporting to at least two first world
companies. U.S FDA’s indirect control of the drug industry in Pakistan may
also inhibit the industry’s exports to certain countries such as Sudan, which
are suspected of terrorist activities.

• Global events: Global event, for example, Olympics in China caused


to increase the local industry’s cost in producing medicine. This was mainly
due to the withdrawal of the export subsidies for local producers of raw
material and appreciation of Yuan.
These data clearly demonstrate the serious difficulty facing the
pharmaceutical industry. No other industry in Pakistan has been put under
such stringent price control; and no other industry has been forced to
reduce prices.

SOCIAL FACTORS:
Good health is an important personal and social requirement. People are
becoming more aware of the symptoms of diseases they are suffering from
and they also have an idea about Corporate Social Responsibility.
Pharmaceutical firms play a unique role in meeting society’s need for
popular wellbeing which cannot be underestimated.
In recent times, the impact of various global epidemics e.g. SARS, AIDS,
Cancers etc have also attracted media attention to the industry. The effect
of the intense media and political attention has resulted in increasing
industry efforts to create and maintain good government-industry-society
communications.

TECHNOLOGICAL FACTORS:
Modern scientific and technological advances in science are forcing
industry players to adapt ever faster to the evolving environments in which
they participate. Scientific advancements have also increased the need for
increased spending on research and development in order to encourage
innovation.

If we look at the local technological scenario, we don’t observe much of the


advancements in Pakistan as they are in other developing countries. But
still this industry requires technological development in order to improve
the process quality. Local companies in the branded generic category are
adapting to this change in order to be competitive with differentiated
processes. Most of them import machinery and equipments for laboratory
testing and analysis of drugs.
Nevertheless, they need to create awareness to build up local industry and
avoid imports. ERP (Enterprise Resource Planning), which is a way to
integrate data and processes of a company into single system, can help
organizations in cost reduction.

LEGAL ENVIRONMENT:
The pharmaceutical industry is a highly regulated and compliance enforcing
industry. As a result there are immense legal, regulatory and compliance
overheads which the industry has to absorb. This tends to restrict it’s
dynamism but in recent years, governments have begun to request
industry proposals on regulatory overheads so as not to discourage
innovation in the face of mounting global challenges from external markets.

Locally the F.D.A. (Foods & Drugs Control Administration) is the main
regulatory body governing and implementing the rules and regulations for
the Drug & Pharma industry. The F.D.A. has state branches and sub-
branches all over the country.

With globalization process reaching out to Pakistan, the geographical


barriers have become obsolete. Any country will have to compete and trade
globally in order to progress and survive in the years to come. The major
drugs and Pharma Companies have realized this fact and have stepped into
the global area of competitive trade. If a Pakistani manufacturer wants to
sell his drug or formulation to a foreign country it is mandatory that he has
to fulfill all the statutory requirements laid by the regulatory authorities of
that country. Also, his product needs to be perfectly as per the
specifications laid down by the concerned regulatory authority. Thus, in
order to enter into trade with the foreign countries it is mandatory to get
the necessary approvals and sanctions as per the formats given by local
regulatory authorities. E.g. Approvals to be obtained from U.S.F.D.A. for
U.S.A, T.G.A. for Australia & New Zealand, M.C.A and M.C.M. for U.K. &
European countries and ICH guidelines going to be uniform for international
levels. Since, the business involved is worth multibillion dollars; this branch
has assumed tremendous significance and is bound to grow enormously, in
the Post-GATT era. Many big players in the drugs & pharma field have
already established separate Regulatory Affairs Departments in their
companies. Regulatory experts are thus in great demand. Since, the field is
highly technical, Pharmacy professionals again fit in these positions.
Similarly, Patents and Trademarks, I.P.R. Experts are also in high demand
as far as the Pharma industry is concerned.

Effect of PESTL on Porter’s Five Forces


Threat of New Entrants: The increasing inflation, global recession, global
events and depreciation of value of Rupee has decreased the cost
advantage of the existent firms. Also, strict regulation of price by the
government has been cutting into the profit margins of the industry. Thus
any new competitor with sufficient resources can enter into the industry
and can move ahead of the smaller companies that do not have a
differentiation factor to keep them ahead of the game.

LOW MODERATE
HIGH

Bargaining Power of Buyers: As awareness increases among end


consumers and chemists and people become more aware of their health
needs, their price sensitivity decreases as they recognize the efficacy of
specific medicines and word of mouth generated by satisfied customers
shall increase industry’s power over buyers.

LOW MODERATE
HIGH

Bargaining Power of Suppliers: The increased taxation, excise duties,


global recession, and global events are increasing the cost of inputs and
thus having a negative impact on the industry’s power over suppliers.

LOW MODERATE
HIGH

Rivalry among Competitors: The rising costs of manufacturing, fuel and


power shall give way to a battle for shelf space among competitors, turning
what might be called a healthy competition into intense rivalry.

LOW MODERATE
HIGH

Threat of Substitutes: Threat of substitutes is decreasing with the rise of


education and awareness fortified by media sources as people realize the
importance of allopathic medicine.

LOW MODERATE
HIGH
External Analysis
External Factor Evaluation
Weight
ed
Weig Averag
Opportunities ht Rating e

1 9% estimated CAGR of the industry for the next 5 years 0.05 2 0.1
2 Attractive market for IV solutions manufacturing 0.05 1 0.05
3 Potential in ointment segment 0.02 1 0.02
Toll Manufacturing for foreign buyers and for local
4 competitors 0.05 1 0.05
5 Clinical Research of western companies in Pakistan and India 0.05 2 0.1
Ever increasing awareness of the market about various drugs
6 and diseases 0.1 3 0.3
Alliances or joint ventures to boost competitive capability for
7 introducing new molecules 0.15 1 0.15
8 Potential in Infant Milks segment 0.1 1 0.1

Threats

1 Increase in cost of production due to rise in materials cost 0.1 1 0.1


2 Ban on imports from India 0.07 2 0.14
3 Strict quality regulations in export markets 0.05 3 0.15
4 Cheaper Me-Too brands that compromise on quality 0.02 4 0.08
5 Fake & smuggled medicines 0.01 2 0.02
6 Ban on exports to Sudan 0.01 3 0.03
Increasing intensity of competition among industry rivals
7 due to increase in costs 0.05 2 0.1
8 Launch of new molecule (superior) product by competitors 0.05 1 0.05
Corruption and leak outs at the documentation approval
9 stage 0.04 2 0.08
1
0 Strict Price regulations by the GoP 0.03 3 0.09
1 1.71

1. Take advantage of the clinical research done by some western


companies by forming an alliance with these companies.

2. Develop new market segments such as ointment and infants milk


segment or solutions manufacturing.

3. Advertise to increase awareness and also to communicate the better


quality of products for improved health benefits.
4. Exporting drugs by taking advantage of the increased awareness
created in the foreign markets such as Middle Eastern and African markets.

5. Negotiating with the government to improve price regulations.

6. Revamping the value chain by removing unnecessary steps by using


activity based costing.

7. Improving R & D to be able to cope up with the new molecules of


other companies.

8. Differentiating the products by employing the highest quality and


safety standards.

9. Strict regulations and compliance to prevent any leak outs and other
confidential information.

10. Using patents and intellectual property rights to protect market share
of newly launched products.

11. Highlighting the superior quality and health benefits to foreign


importers.

12. Advertisement should focus on communicating the superior health


benefits, high quality and hygienic standards and harmful effects of me-too
products that compromise on quality.
Profile
‘At this important crossroad in the history of company, where it had been
awarded the FPCCI Merit Award for the 2nd time being the only
pharmaceutical company to receive this prestigious award – and having
achieved the ISO 17025 Laboratory Accreditation from PNAC – being only
the 2nd Pharmaceutical company in Pakistan to hold this distinction – I feel
pride in addressing the extended Efroze-Family; the employees, the
distributors and the vendors.

Efroze has come a long way from being an entrepreneurial venture, back in
1968, to becoming a corporation, with foreign offices across the globe and
an ever-expanding products and project profile.

We at Efroze are in the business of providing a Quality lifestyle to humanity


at large. Through our private and public-private projects we have been
promoting sports, education, community building and good health care to
the populace of this country

It is therefore important for each of us to contribute wholeheartedly,


towards the mission and vision of Efroze. May Allah grant us the right
direction and the courage to say steadfast in all our dealings. Amen’.

- Muhammad Abdullah Feroz (Managing Director, Efroze)

VISION STATEMENT:
Strive to deliver innovative, reliable, and accessible medicines at affordable
prices.

MISSION STATEMENT:

Efroze Chemical Industries is one of the leading pharmaceutical


organizations that manufactures and markets quality products for the ailing
humanity. At Efroze we thrive on taking the untrodden path. For us success
comes not with the magnitude of our turnover but with what we have
achieved in terms of innovativeness. We look for ways & means to build on
our expertise in newer, more modern approaches & techniques. Thus, from
human resource to production every facet of operation at Efroze is an
ongoing process in learning, developing & implementing. This approach
enables us to add value to our service to the customer and our society on
the whole, creating further avenues to explore locally & globally.

OUR ORGANIZATIONAL BEHAVIOURS

CUSTOMER FOCUS
To improve the quality of health by delivering strong and dependable
brands and remain in contact through dialogues to utmost customer
satisfaction
SUPPLIER DEVELOPMENT
We know the value of establishing partnerships and contribution towards
finding out vision more amicably

DISTRUBUTOR’S RELATIONSHIP
To provide high distinctive value to our distributors so that their services
deliver the
utmost customer satisfaction

SOCIAL RESPONSIBILITY
Contributing positively to our communities and support institutions to help
in creating
sustainable improvisation to all their associates.

Both our Vision and Mission is to treat "Today only as a stepping-stone for
tomorrow”. With our forward-looking philosophy, we strive to work today to
make tomorrow just that much better

ORGANIZATION CHART:
• 1968
Foundation of Efroze Chemical Industries (Pvt.) Ltd.
Was laid in Karachi, Pakistan.
• 1973
First Manufacturing Facility was set up on Haider Ali
Road.
• 1978
Manufacturing Facility moved to Korangi Industrial
Area, Karachi.
• 1980
Manufacturing commenced for Bohreinger Manheim
– A German Research-Based Company.
• 1981
First Blister Packaging Machine started its working.
• 1990
International Marketing Division set into motion.
• 1997
New Corporate Head Office building in Karachi.
• 1998
Toll Manufacturing commenced for Otsuka Pakistan
Ltd. A Japanese Research-Based Company.
• 1999
2nd State-of-the-Art manufacturing plant was set up in
Korangi Industrial Area, Karachi.
• 2000
Certification of ISO 9002-1994 by SGS European
Quality Institute E.E.S.Y.
• 2003
Certification of ISO 9001-2000
• 2007
Certification of ISO 17025.
FPCCI Special Merit Export Trophy Award, third in a
row for 2006-2007.
• 2008
First in-House Bio-Equivalence Study.
Completed on Metcon.
Efroze Chemical Indutries (Pvt.) Ltd. took a humble start in 1968 and now it
is a full-fledged pharmaceutical company manufacturing liquid, suspension,
ointment, gel and solid dosage forms of the highest standard in the
country. This year, Efroze, is celebrating 40 years of excellence in
manufacturing, marketing and sales of Ethical Medicines of international
repute.

Efroze has emerged as an important player in the Pakistan health sector by


providing latest medicines of international standards for major diseases,
priced with due consideration to the end consumer. Efroze products like
Nomin, Zetrine, Monis, Capril, Glicon, Metphage, Mefnac, Maladar,
Algaphan, Siam, Calzem, Famtine, Roxin and Trizymal and many more are
very well favored and prescribed by doctors of Pakistan.
They have a network of 40 distributors working nationwide and ensuring
the availability of Efroze products for the ailing humanity.

At the level of Efroze Chemical Industries they believe in providing latest


scientific information to the medical doctors through specialized field force
which maintains continuous contact with them. The scientific information is
disseminated though modern ways like round table conferences, focus
group discussions, and seminars. Different top class doctors also get
invitation from Efroze Chemical Industries to update their colleagues on
new happenings at the frontiers of medical science.

Efroze Chemical Industries ensures its participation in major conferences of


societies for doctors of Pakistan. These include the societies for Cardiology,
Diabetology and general physicians. The company also gets latest
information from its international partner sources on the new developments
in different diseases for the people of Pakistan like Ischemic heart diseases,
Hypertension, Diabetics, Rheumatism, Infections, Malaria and arranges its
publications in the form of guidelines and also conducts patients' education
programs.

Efroze Chemical Industries has a tradition for extending a helping hand to


the different government, private and semi-private institutions of Pakistan.

International Marketing

Efroze started its export operations in 1992 as a part of its mission of


globalization.

Within eight years Efroze broadened its horizon by rapidly developing


markets in Africa, Middle East, Asia and CIS.
In 1992, Efroze started developing new markets by crossing the
geographical barrier of Pakistan market. The first such development was in
Yemen.
With the early success in exports, it was realized that active involvement in
geographical diversification of markets can assist in achieving the ultimate
goal of the organization. By 1993, some sectors of Africa and Middle East
were already explored.

1994 was the year of change in exports. With the help of distributors,
inputs were taken from the market to incorporate the necessary changes in
products to satisfy the market needs. New markets explored were
Myanmar, Bangladesh, Sri-Lanka, Maldives and Singapore in Far East; and
Kenya, Nigeria and Sudan in Africa.
In 1997, Efroze started its operations in the CIS and successfully entered in
the lucrative markets of Uzbekistan, Kyrgyzstan, Kazakhstan, the Russian
Federation, Ukraine & Belarus.
In 2003, by the grace of Allah, Efroze was exporting its products to 20
countries, with over 200 registrations.

Now, international Marketing Division is working on exploration of new


countries as per vision of new management to maximize International
Marketing Operations of Efroze around the globe. They are corresponding
in Philippines, Malaysia, Vietnam, Cambodia, Uganda, Botswana and
Tanzania. Soon, they will start their operations in these countries.

EXPORT HORIZON OF EFROZE GLOBALLY

AFGHANISTAN BANGLADESH BELARUS ETHIOPIA

GHANA IRAQ KAZAKHSTAN


KENYA
KYRGYZSTAN MYANMAR NIGERIA
RUSSIA

SINGAPORE SRI LANKA SUDAN UGANDA

UKRAINE UZBEKISTAN VIETNAM YEMEN

BOTSWANA CAMBODIA MALAYSIA PHILIPPINES

MAJOR ACHIEVEMENTS:

If there's something that has remained unchanged in the Efroze of 1968


and that of the present day, it is the commitment to quality. Observance of
quality control at all levels by the help of all departments, GMP compliance
and maintenance of international standards, enabled Efroze to achieve the
ISO 9002 Certificate of Quality System Standard in 1999. One more feather
in the cap has been the achievement of the ISO 9001-2000 Certificate of
Quality System Standard in April 2003. The Federation of Pakistan chamber
of Commerce & Industry has also awarded Efroze Export trophy for the year
1998-99.

PRODUCTION FACILITIES:
The success of Efroze is a result of cooperation, teamwork and dedication.
Well blended with commitment, motivation and hard-work of Efroze
personnel. Working conditions at Efroze are true to the standards set forth
as per Good Manufacturing Practices. In-house training programs are
conducted regularly to keep the entire team abreast with the latest
changes and improvements in the pharmaceutical world.

The advance planning and co-ordination in the execution of these systems


within the manufacturing parameter is looked-after by thorough
professionals, specially trained in their respective fields locally and abroad -
on modern equipment and latest management techniques.

Efroze has some of the latest and most advanced machinery for the
manufacture of syrups and suspensions. To improve the suspendability of
suspensions, Efroze has installed a Fryma mill to break down the
suspended particles to colloidal from which make the suspension stable.

In the compression/tablet section, Efroze has installed a Fritz mill to


pulverize the active drug into its micro form, thereby increasing the surface
area of the active drug and thus making it more bio-available. Such other
equipment/machinery installed in different areas of manufacturing has
improved the drug availability - in other words have improved the efficacy
of the drug

The infrastructure of Efroze's manufacturing process contains a built-in


flexibility and an inherent provision for future development. A highly
trained staff, abiding current G.M.P rules, ensures that the quality of the
pharmaceuticals is maintained during every stage of the manufacturing
process. Quality assurance at every stage is part of our commitment with
the customers.

PRODUCTS OF EFROZE CHEMICALS:

Although, it takes a long while to launch a new product; by new, they mean
branded generic product here at Efroze, following the categories and
products which are served by them currently is given in Exhibit 1. The list
shows that Efroze is quite diversified in terms of categories that makes it
lose concentration on one disease category

RESEARCH AND DEVELOPMENT:

Efroze focuses on efforts towards adopting new standards and improvised


research and development. Efroze’s research and development unit
focuses on developing effective and less time-consuming methods of
analyzing the existing range of products and to develop methods for new
locally developed products (not a new molecule though) and bioavailability
studies on locally developed products, to investigate physiochemical
characteristics of drug substances as a pre-requisite to formulation and
design of new products, to conduct drug stability studies, to conduct drug
me tabloid study in specific areas such as acute chronic renal failure and to
isolate, purify and characterize endogenous inhibitors. Efroze uses
persistent technological innovations in the production and manufacturing
processes.
EXHIBIT 1

Product Product Segment Introducti Growt Maturity Decline


on h
Seloxx Antirheumatic Non-Steroid
Corbis Cardiovascular System
Delaware Cardiovascular System
ISO Cardiovascular System
Famtine H2 Receptor Antagonist
Erizole Anthelmintics
Roxin Antibacterial
Quinolone/Macrolide
Klabid Antibacterial
Quinolone/Macrolide
Antibacterial
Floxer Quinolone/Macrolide
Antibacterial
Eftran Quinolone/Macrolide
Antibacterial
Ecin Quinolone/Macrolide
Declot Anti-coagulants
Diazepam Anti-depressant
Neolip Anti-lipidemic
Panaram Anti-Pyretic
Glyper Anti-diabetic
Glicon Anti-diabetic
Metcon Anti-diabetic
EZ-Flow Laxatives
Kontab Anti-inflammatory Enzymes
Efome Proton Pump Inhibitor
Mefnac NSAIDS / Nasal Decongestant
Pango NSAIDS / Nasal Decongestant
Pefree NSAIDS / Nasal Decongestant
Reduceache NSAIDS / Nasal Decongestant
Zetrine Anti-Allergics
Histal Anti-Allergics
Lipicor Lipid Lowering Agent
Trizymal Digestive Enzyme
Maladar Anti-Malarial
Artedoxin Anti-Malarial
Gynaecosid Female Hormone
Trisil Antacids
Siam Antacids
Emod Anti-diarrhoeal
Internal Analysis
Internal Factor Evaluation
Weight
ed
Ratin Averag
Strengths Weight g e
1 40 years presence in the market-Credibility 0.05 4 0.2
Acclaimed and trusted by doctors (opinion
2 leaders) 0.05 3 0.15
Exports volume and experience of 16 years in the
3 exports market 0.02 3 0.06
4 Successful brands in international markets 0.05 2 0.1
ISO 10725 certified lab that ensures superior
5 product testing 0.1 4 0.4
6 Strong supplier network 0.02 3 0.06
Focused on employee development and
7 communication 0.02 3 0.06
8 Quality ensured in each step of the process 0.08 3 0.24

Weaknesses
1 Long time lag in launching new products 0.05 1 0.05
Lack of strategic alliances with international
2 companies to ensure new molecule introduction 0.12 2 0.24
No R&D department for development of new
3 molecules 0.1 1 0.1
Lack of focus and specialization on any one disease
4 segment 0.15 2 0.3
Deficient in financial muscle relative to the bigger
6 companies in the industry 0.02 2 0.04
7 Smaller sales force 0.02 2 0.04
8 Sales Oriented Culture 0.05 1 0.05
9 Weak distribution network 0.1 2 0.2
1 2.29

Strategies

1. Using key opinion leaders to communicate the superior quality of


products.

2. Continuously investing in research and development to come up with new


molecules.

3. Conduct research and testing activities by highlighting ISO 10725 certified


lab to gain first mover advantage in new product segments.

4. Increase sales by developing markets and by introducing new SKU’s.


5. Changing the sales oriented culture of the company by involving
employees in strategy formulation at every step and position.

6. Improving the distribution network by making alliances with distributors


and other dealers.

7. Outsourcing the R & D activities to foreign R & D firms.

8. Hiring more quality employees and expanding the sales force to increase
the reach of products in other markets where availability is an issue.

9. Specializing a disease segment by focusing on R & D for that particular


segment.

10. Quickly upgrading the existing products and introduce new SKU’s so
as to keep an advantage over competitors.

11. Focus should be on promoting superior quality standards, brand


image and experience.

Financial Ratio Analysis


FINANCIAL RATIOS Efroze Industry Average
Current Ratio 1.53 2.535
Quick Ratio 0.87 1.6325
Debt to Equity 0.66 0.14375
Inventory Turnover 6.22 3.6275
Accounts Receivable 6.94 42.4575
Turnover
Return on investment 2.23% 15.04%

ANALYSIS:

The above mentioned six ratios; Liquidity ratios (Current and Quick ratios),
Leverage ratio (Debt to Equity), Activity ratios (Inventory Turnover and
Accounts Receivable Turnover) and Profitability ratio ( Return on Investment)
show that Efroze is not doing as good financially as the industry.

The debt to equity depicts that liabilities taken by Efroze are more than the
industry that may prove to be risky.

The company is comparatively less liquid.


The profitability of the company is just 2.23% as compared to industry’s
15.04% that explains that the company cannot cover its investment with
profits after tax.

When we compare activity ratios, inventory turnover is better than industry


whereas accounts receivable turnover is not. This shows that Efroze has
problems with collecting their receivables. However, the inventory is being
utilized efficiently as compared to the industry.

Value Chain
• Determine model of supply/distribution

Procurem
• Reconcile needs and resources
• Develop criteria for tender

ent
• Issue tender
• Evaluate bids
• Award supplier
• Determine contract terms
• Monitor order Marketing
• Make payment

• Quality assurance Adherence to GMPs Human


• Quality management Resources
• Packaging and labeling active pharmaceutical
ingredients
• Master, batch, and laboratory control records
Manufacturi
Production and in-process controls ng
• Certificates of analysis
• Validation
• Tracking complaints and recalls Finance

• Determine effective dose range Microbiologic


• Determine safety al Testing Admin
• Confirm Effectiveness
• Monitor Side Effects
• Comparison to other commonly
used treatments
• Collect information
• Receive and check drugs with order
• Ensure appropriate transportation and IT
Packaging
delivery to health facilities Distribution
• Appropriate storage
• Good distribution practices and
inventory control of drugs
• Demand monitoring End
Consumer
COMPETITOR ANALYSIS
COMPETITORS

Multinational Companies: Rs. 42.5 Billion (Value)


51% (Market Share)

National Companies: Rs. 40.6 Billion (Value)


49% (Market Share)

Pakistan Pharmaceutical Market Q1 2003- Q1 2007

Market Size
(Rs. In Industry Multination Nationa
Time Billion) Growth als l Total
Q1
2004 60.5 17.70% 29 564 593
Q1
2005 65.9 8.90% 29 572 601
Q1
2006 75.6 14.90% 29 600 629
Q1
2007 83.1 10% 29 622 651

ATCO Laboratories

ATCO Laboratories has a history of over 40 years in the health care


business. It is one of the pioneers in the pharmaceutical industry sector of
Pakistan. The State of the art manufacturing plant is housed in a double
story building encompassing an area of 23,000 sq feet. Manufacturing
undergoes continuous improvement in production and quality assurance
facilities to ensure the quality of products as per international standards.
The plant is segregated into two units for manufacturing sterile products
(Injections, Ophthalmic Drops, and Ointments) and non sterile products
(Tablets, Capsules, Dry Powder, Topical Ointments, Creams, Lotions and
Liquids). Qualified and experienced staff supervises the manufacturing
process in accordance with GMP and WHO guidelines. ATCO has some well-
known drugs for Anxiety (ANXIT TABLETS), Hypertension (LOSTRESS),
cholesterol (TERBIDERM), Lipid Disorder (VASTOR), Asthma (SOLO) and
other multi-vitamins (CASAN, ZINCAT) and Antibiotics.

1978 is a significant year in the history of ATCO when it was acquired by


one of the largest conglomerate business groups of Pakistan. The
acquisition was a diversification in the health care business by Kohinoor
Group Of Industries, having successful businesses in the fields of
Cosmetics, Personal Care products, Battery Cells, Soaps, Detergents, etc.
After the acquisition there has been no looking back for the company. The
Kohinoor group’s strength lies in its strong professional background,
business acumen and timely availing of business opportunities. These
strengths have resulted in ATCO Laboratories becoming one of the fastest
growing pharmaceutical companies, with modern manufacturing facilities,
and joint business ventures with renowned Multinational Pharmaceutical
companies.

Several American and European Multinational pharmaceutical companies


with research based products have collaborated with ATCO laboratories on
profitable joint ventures. Sankyo, Helsinn, Schwarz Pharma, Ferring
Pharmaceuticals, Ipsen, Cassara, Laboratoire Innotech International are
some of its major collaborators. These companies have entered a growing
pharmaceutical market in Pakistan relying on ATCO's market driven
confidence in production, quality assurance, GMP marketing and sales
abilities.

ATCO Laboratories is known for its quality products in domestic as well as


international markets. ATCO has the licensing franchise of a reputable
research based foreign company, and enjoys a considerable share in
domestic as well as foreign markets. ATCO has gained a foothold in the Sri
Lankan market. The exports are further extended to Sudan, Ethiopia,
Kenya, Uganda, Yemen, Bangladesh, Myanmar, Tanzania, Uzbekistan,
Kazakhstan, Afghanistan, and Turkmenistan.

Brookes Pharmaceutical Laboratories (Pakistan) Limited


Brookes Pharmaceutical Laboratories (Pakistan) Limited is one of the
leading and fastest growing pharmaceutical companies of Pakistan. It has
been operating since 1986 as a premium quality manufacturer of
medicines.

Brookes has a sophisticated and advanced production facility, dedicated to


making a broad array of highly standardized, ethical medicines in a vast
range of dosage forms. The product portfolio of Brookes includes medicines
under product lines of gastro-enterology, anesthesia, dermatology,
cardiology, NSAID and anti-septic drugs.

Situated in Korangi Industrial Area, Karachi over a covered area of 200,000


square feet, Brookes operates under licenses and technical collaboration of
large-scale pharmaceutical organizations including Merz Pharma Germany
and Edmond Pharma Italy. Being a company that believes in a collective
endeavor and cooperation, Brookes remains in pursuit of establishing and
maintaining business relationships that could help achieve its broader goals
of quality, efficiency and growth.

It is an internationally recognized name with its presence in pharmacies of


a number of countries across the globe. Brookes is prepared to make
further headways into many more countries as it revamps and upgrades its
operations with the construction of a new sterile production unit. Engaged
in third party manufacturing for companies including reputed
multinationals, the organization’s strict adherence to Current Good
Manufacturing Practices (cGMP) and its commitment for the preparation of
products of the highest quality, have won for it a unique place among
Pakistani pharmaceutical companies.

Brookes is the first Pakistani pharmaceutical organization to have four


international certifications including ISO 9001, ISO 14001, SA 8000 and
OHSAS 18000 certificates.

NABIQASIM

NABIQASIM is a National companies dealing in manufacturing and


marketing of pharmaceutical and healthcare products in Pakistan as well as
in overseas markets of Asia, Middle East & Africa. Today, its products are
accessible to millions of patients at hospitals, clinics and pharmacies in
over 22 countries.

For more than 38 years, NABIQASIM has been providing quality products
and services to its clients across the country. Its core business activity is
pharmaceutical formulations which includes product development,
manufacturing and marketing. Its product range exceeds over 70 products
in the form of capsules, tablets, syrups, suspensions, drops, gels, creams
and injections in the field of psychiatry (Buzon), Cardiology (Amdipine),
Neurology (Diazepam), Orthopedics (Arthrofen), Pediatrics (Acefyl),
Dermatology (Demosporin), Gynecology (Glandin -E2), Medicine (Folitab),
Surgery, ENT and ophthalmology (Comycetin).

NABIQASIM serves both domestic as well as international markets. The


company has more than 60 Distributors across the country and above 400
Marketing Staff nation wide. NABIQASIM is exporting to a number of regions
around the globe. Due to its high quality of products, price competitiveness
and exceptional service standards, the products are well received in the
international markets. With a separate international marketing department,
it is striving to enhance the international market volume both by growing in
existing markets and by expanding into promising new ones.

With the most modern plant and equipments, coupled with highly qualified
and competent personnel, NABIQASIM has achieved tremendous growth
and has won numerous accolades in the last decade. The company has also
acquired ISO-9002 QMS certification and is strictly following cGMP
standards. It has been recently certified for ISO-9001:2000 as well.

Pharmevo

Pharmevo is backed by a reputable corporate group with a history of


successful business ventures spread over 30 years. The group made its
debut in 1971, with the sales and marketing of prestigious brands of
consumer products. The group's involvement in pharmaceutical and
healthcare business started in 1974. This was a modest beginning, but it
lead to the emergence of the diversified group. The group turnover is now
around US 70 million dollars.

Pharmevo has come a long way since its launch back in September 1999.
During this short span, PharmEvo has successfully carved a niche amongst
the giants of the pharmaceutical industry purely based on quality,
professionalism and marketing ethics. It is the management’s utmost
desire that PharmEvo should be perceived as a company providing a
'Service which means to make a difference', and they are striving hard to
foster a healthier environment. Their product portfolio is a true reflection of
this desire, as it comprises some of the most advanced treatment options
available around the globe.

Therapeutic Categories Brand


Name
Allergy / Asthma

Cardiovascular

Dentistry
Diabetes

Gastroenterology

Infectious Diseases

Osteoporosis

Psychiatry

Pain & Inflammation

Novartis Pharma (Pakistan) Limited

Novartis International AG is a multinational pharmaceutical company based


in Basel, Switzerland that manufactures drugs such as clozapine (Clozaril),
diclofenac (Voltaren), carbamazepine (Tegretol), valsartan (Diovan),
imatinib mesylate (Gleevec / Glivec), cyclosporin A (Neoral / Sandimmun),
letrozole (Femara), methylphenidate hydrochloride (Ritalin), terbinafine
(Lamisil), and others. Their global Pharmaceuticals portfolio includes more
than 45 key marketed products, many of which are leaders in their
respective therapeutic areas. They have received 17 new pharmaceutical
product approvals in the US since 2000, the most of any pharmaceutical
company.

Novartis was created in 1996 from the merger of Ciba-Geigy and Sandoz
Laboratories, both Swiss companies with long histories. At the time it was
said to be the largest corporate merger in history. Ciba-Geigy was formed
in 1970 by the merger of J. R. Geigy (founded in Basel in 1758) and Ciba
(founded in Basel in 1859). Considering the histories of the merger
partners, the company's history spans 250 years. After the merger,
Novartis reorganized its activities, and spun out its chemicals activities as
Ciba Specialty Chemicals. In 2003, Novartis created Sandoz, the generic
pharmaceuticals division of Novartis. It is a global leader in offering high-
quality and low-cost pharmaceutical products no longer protected by
patents. In additional to developing and marketing generic drugs, Sandoz is
a leading manufacturer of anti-infective and active substances for other
pharmaceutical and biotechnology products.

On October 20, 2005, as an immediate response to the earthquake in the


northern areas of Pakistan, Novartis made initial donations of more than $
400,000 to the President’s Relief Funds, additional financial support to
other relief organizations as well as provided access to critical medicine.
Employees in Pakistan voluntarily donated 3-days salary to the relief
efforts, with the company matching employee contributions rupee for
rupee.

On April 20, 2006 Novartis acquired the California-based Chiron


Corporation. Chiron was formerly divided into three units: Chiron Vaccines
and Chiron Blood Testing, which now combine to form Novartis Vaccines
and Diagnostics, and Chiron BioPharmaceuticals, to be integrated into
Novartis Pharmaceuticals.

During 2007, Novartis increased R&D investments by more than 20% to


USD 6.4 billion. This is one of the highest figures in the industry relative to
sales (16.9%). Group results in 2007 set new record as net sales rise 8%
(+3% in local currencies) to USD 39.8 billion and net income reached USD
12.0 billion (+ 66%) with earnings per share up 68% to USD 5.15.

Novartis R&D efforts are driven by human health and well-being,


contributing to overall prosperity and quality of life. Major therapeutic
areas:

• Autoimmunity/Transplantation/Inflammatory Disease
• Cardiovascular Disease
• Diabetes
• Gastrointestinal Disease
• Infectious Diseases
• Musculoskeletal Disease
• Neuroscience
• Oncology
• Ophthalmology
• Respiratory Disease
In addition to internal research and development activities Novartis is also
involved in publicly funded collaborative research projects, with other
industrial and academic partners. One example in the area of non-clinical
safety assessment is the InnoMed PredTox. The company is expanding its
activities in joint research projects within the framework of the Innovative
Medicines Initiative of EFPIA (European Federation of Pharmaceutical
Industries and Associations) and the European Commission.

GlaxoSmithKline Pakistan Limited

GlaxoSmithKline Pakistan Limited was created on January 1st 2002 through


the merger of SmithKline and French of Pakistan Limited, Beecham
Pakistan (Private) Limited and Glaxo Wellcome (Pakistan) Limited- standing
today as the largest pharmaceutical company in Pakistan.

As a leading international pharmaceutical company, they aim make a real


difference to global healthcare and specifically to the developing world.
GSK Pakistan operates mainly in two industry segments: Pharmaceuticals
(prescription drugs and vaccines) and consumer healthcare (over-the-
counter- medicines, oral care and nutritional care).

GSK leads the industry in value, volume and prescription market shares. It
has consistent sales, profits and growth. Some of the key brands include
Augmentin, Panadol, Seretide, Betnovate, Zantac and Calpol in medicine
and renowned consumer healthcare brands include Horlicks, Aquafresh,
Macleans and ENO. With its headquarters in the United Kingdom, GSK has
operations in over 180 markets around the world. Patients today are doing
more, feeling better and living longer - benefiting from many medical
advances which include pharmaceutical research.

In addition, GSK is also deeply involved with communities and undertake


various Corporate Social Responsibility initiatives including working with
the National Commission for Human Development (NCHD) for whom GSK is
one of the largest corporate donors. GSK participates in year round
charitable activities which include organizing medical camps, supporting
welfare organizations and donating to/sponsoring various developmental
concerns and hospitals. Furthermore, GSK maintains strong partnerships
with non-government organizations such as Concern for Children, which is
also extremely involved in the design, implementation and replication of
models for the sustainable development of children with specific emphasis
on primary healthcare and education.
In Pakistan, GSK has a market share of 11.65%. In 2007, the company had
a profit of Rs. 1,670,525 with net sales of Rs. 10,610,882 leading to an
Earning per share of Rs. 9.79.

Indus Pharma

In 1969 when Pakistan was thinking for economic structuring and


pharmaceutical industry was dependent on multinationals which were yet
to install their manufacturing units, Indus Parma (Pvt) Ltd. Established their
manufacturing unit in the heart of Pakistan Karachi. Having started in 1969
from water for injection ampoules, today Indus Parma is known for
producing high quality formulation like dry powered vials, ampoules
capsules, tablets pallets dry syrups and liquid syrups. Indus serves both
domestic as well as international markets.
Countries in which Indus Pharma exports:

The product Categories served by Indus Pharma:

Antibiotics: Ciplet (Ciprofloxacin) Exef (Cefotaxime)


Anti-Inflammatory: Celetab (Celecoxib) Dyclo-P (Dyclofenac Potassium)
Anxilytic: Bromalex (Bromazepam)
Anti-ulcerant: Anzol(Ranitidine) Cimetmat (Cimetidine)
Lipid Lowering Agent: Snolip (Atorvastatin)
Opoid Analgesics: Fentyl (Fentanyl) Diazepam (Diazepam)
Premedicament Sedatives: Milam (Midazolam)
Anti-Asthmetic: Indokast (Montelukast Sodium)
Anti-Allergy: Allervil (Pheniramine Maleate) Inzee (Cetirizine Di-HCl)
Anti-Emetic: Metocolon (Metoclopramide)
Diuretics: Frusid (Frusemide)
General Anesthesia: Instigmine (Neostigmine Methylsulphate)
Proton Pump Inhibitor: Indazole (Esomperazole)
Vitamins & Minerals: Hemoton-S (Iron+ Multivitamins)

Following are the salient features of Indus Pharma:

• Branded Generic Formulations


• Contract Manufacturing of all dosage forms
• Has undergone tremendous changes to upgrade the manufacturing
facility, train people
and produce and ensure quality medicine.

Indus Pharma has a dedicated field force of over 500 people covering the
entire country and calling more then 60,000 doctors and other prescribers
every month as well as approaching all big and small pharmacies and
institutions introducing IPPL products. Indus Pharma has more then 50
distributors nationwide ensuring availability of goods to almost every major
towns and cities.

As per IMS statistics of QTR-II, 2007, Indus Pharma stands at 30th position
in Pakistan pharmaceutical industry (value wise) out of 640 multinational
and national pharmaceutical manufacturing companies.

CPM
Pharmev Nabi
Efroze Indus o Qasim Atco Brookes
Critical W
Success Weighta .S W.S W. W.S W.
Factors ge R . R W.S. R . R S. R . R S.
0. 0.0 0.0 0.0
Market Share 0.05 1 05 3 0.15 3 0.15 1 5 1 5 1 5
0.
Product quality 0.1 3 3 3 0.3 3 0.3 3 0.3 3 0.3 3 0.3
Opinion Leader 0.
Loyalty 0.1 2 2 2 0.2 3 0.3 2 0.2 2 0.2 2 0.2
Strategic 0.
Alliances 0.2 1 2 3 0.6 2 0.4 1 0.2 3 0.6 1 0.2
0.
Product Testing 0.2 3 6 1 0.2 1 0.2 1 0.2 1 0.2 1 0.2
Financial 0. 0.0 0.0 0.0
Strength 0.05 1 05 3 0.15 2 0.1 1 5 1 5 1 5
Distribution 0. 0.4 0.4 0.4
Network 0.15 1 15 2 0.3 3 0.45 3 5 3 5 3 5
Speed to 0. 0.1 0.1 0.1
market 0.15 1 15 2 0.3 3 0.45 1 5 1 5 1 5
1. 2.3
1 7 2.2 5 1.6 2 1.6

• Indus and Atco have the highest ratings in Strategic alliance and
apparently Efroze has no focus in this aspect.If Efroze forms a
strategic alliance with an international research based organization, it
has an opportunity to enter into a new segment of the market.

• Product testing is strength and a competitive advantage of Efroze


pharma. It must be jealously guarded and communicated.

• Distribution network appears to be a serious problem for Efroze as all


other competitors are equally good at this. Efroze has to create pull
by increasing doctor detailing so that Efroze products become
profitable for the distributor
Strategic Analysis &
Recommendations
Suggested Strategy: Looking at the SWOT analysis of Efroze Pharma, we
have suggested a focused differentiation strategy for the company mainly
because it seems that the company has spread itself into too many segments
even though it does not have that many resources and this is costing the
company as it cannot be the best at any of the segments while trying to be good
at too many of them. We suggest that Efroze should focus its attention at a few
product segments and try to become one of the top 3 companies in those
markets, while divesting the products that are at a decline. The market
segments chosen should be close to what Efroze does best or the segments that
are offering the best chances of growth. Efroze can consider Anti-diabetics,
Pediatrics, Gynecology, Anti-ulcerants and Cardiovascular as its competition
markets and establish its position in these segments first.

Pros of Focused Differentiation

• Allows specialization in the chosen segments


• Allows streamlining of costs
• Possibility of gaining higher market share in chosen segments by offering a
bunch of products
• Increased credibility among opinion leaders (doctors)

Cons of Focused Differentiation

• Trade-off between segments may inhibit growth if the left over segments
experience a boost
• Possibility of increased supplier power if the products in chosen segments
need unique raw materials

Corporate Strategy Proposed


Corporate Strategy proposed to the company is Strategic Alliance. Given the
environment of the pharmaceutical sector in Pakistan, and the financial
constraints inhibiting R & D efforts, Efroze needs to find a source of innovative
products to bring it to the front of competitive arena. Strategic alliance with an
international company shall enable the company to evolve technologically.
Specifically, this step shall help Efroze in the following ways:

• It will increase the pace of introduction of new drugs


• Help in overcoming deficiency in technical and manufacturing expertise
• May help in mastering innovative drugs and building new competencies
that cannot be otherwise achieved

Existing Strategy of Efroze- Best Cost Strategy

As we can see from the external and internal analysis, Efroze is stuck between
the two generic strategies, trying to get the best of both worlds but failing on
both counts. The danger of their existing strategy is that the low cost leader
can gain their market by selling at a lower price while a differentiator can take
away its market by distinguishing its offerings in a superior manner.
STRATEGY FORMULATION
The IE Matrix
The IFE Total Weighted Score

Strong Average Weak


3.0 to 4.0 2.0 to 2.99 1.0 to 1.99
High I II III
3.0 to
3.99

Mediu
m IV V VI
The EFE 2.0 to
Total 2.99
Weighted
Score
Low VII VIII IX
1.0 to
1.99
Efroze

Harvest Or Divest: Harvest or divest strategies are characterized by the


following actions:

• Make only essential commitments


• Prepare to divest
• Shift resources to a more attractive segment

Following strategies are suggested:

• Alliances with international companies to launch new products in Pakistan


to cater to unexplored market.

• Acquire funds by issuing shares decreasing the leverage, to make


investments in to new product markets.

• Divest the products in the declining phase of the product life cycle such as
Lipid Lowering Agent, Digestive Enzyme etc and shift resources to more
profitable segments like anti-diabetics, anti-allergy etc (Products in the
growth and maturity phase)

• Convey the high quality standards to target market through increased


advertising.

• Increase sales force to build brand equity among doctors


• Develop distribution network in international market.

Space Matrix

Ag
Conservative FS gressive
A firm in the Conservative quadrant implies staying close to the firm's
basic competencies and not taking excessive risks. Conservative
strategies most often include market penetration, market development,
product development, and concentric diversification.

CA IS

Com
Defensive ES petitive

• Market penetration through better training of sales force

• Steps must be taken in order to increase product recall through


giveaways and seminars.

• Create molecules with international research companies through


strategic alliances and develop specialized products.

• Research on molecules and out license them to bigger companies.

Grand Strategy Matrix


RAPID
MARKET
GROWTH

Quadrant II Quadrant I

Efroz
e

WEAK
COMPETITIVE STRONG
POSITIO COMPETITIV
N E
POSITION

Quadrant
Quadrant III IV

SLOW
MARKET
GROWTH

1. Market
development
2. Market penetration
3. Product
development
4. Horizontal
integration
5. Divestiture
6. Liquidation

In the second quadrant the firm needs to revise its competitive positioning.
As the industry growth is brisk, first viable option is considering a set of
intensive strategies. Therefore intensive strategies include product
development, market development and market penetration.

1. Develop products that have a higher profit margin, with in the


regulations of price.
2. Develop ointment products with increased value addition
3. Explore markets in the Middle East to further increase export sales
4. Improve brand equity by promoting image of high quality manufacturing
5. Merger with firms that have distinctively good research abilities to have
a competitive advantage in providing clinical research to western
companies.
6. Obtain franchising or licensing from international companies which do
not have strong distribution network in Pakistan

Matrix Analysis and TOWS Summary


Alternative SPAC GRAN
Strategies IE E D COUNT
Forward Integration 0
Backward Integration 0
Horizontal Integration X 1
Market Penetration X X X 3
Market Development X X X 3
Product Development X X X 3
Concentric
Diversification X 1
Conglomerate
Diversification 0
Horizontal
Diversification 0
Joint Venture 0
Retrenchment 0
Divestiture X X 2
Liquidation X 1

Synopsis of Strategies:

1. Take advantage of the clinical research done by some western


companies by forming an alliance with these companies.

2. Develop new market segments such as ointment and infants milk


segment or solutions manufacturing.

3. Advertise to increase awareness and also to communicate the better


quality of products for improved health benefits.

4. Exporting drugs by taking advantage of the increased awareness


created in the foreign markets such as Middle Eastern and African
markets.
5. Negotiating with the government to improve price regulations.

6. Revamping the value chain by removing unnecessary steps by using


activity based costing.

7. Improving R & D to be able to cope up with the new molecules of


other companies.

8. Differentiating the products by employing the highest quality and


safety standards.

9. Strict regulations and compliance to prevent any leak outs and other
confidential information.

10. Using patents and intellectual property rights to protect market


share of newly launched products.

11. Highlighting the superior quality and health benefits to foreign


importers.

12. Advertisement should focus on communicating the superior


health benefits, high quality and hygienic standards and harmful
effects of me-too products that compromise on quality.

13. Using key opinion leaders to communicate the superior quality


of products.

14. Continuously investing in research and development to come


up with new molecules.

15. Conduct research and testing activities by highlighting ISO


10725 certified lab to gain first mover advantage in new product
segments.

16. Increase sales by developing markets and by introducing new


SKU’s.

17. Changing the sales oriented culture of the company by


involving employees in strategy formulation at every step and
position.

18. Improving the distribution network by making alliances with


distributors and other dealers.

19. Outsourcing the R & D activities to foreign R & D firms.


20. Hiring more quality employees and expanding the sales force
to increase the reach of products in other markets where availability
is an issue.

21. Form strategic alliances with international companies to launch


new molecules

22. Product line extension by going into injectibles

23. Working as an outsourced manufacturer for other


pharmaceuticals

24. Conducting clinical research for international companies


including MNCs in Pakistan

25. Develop new ointments for Dermatological Infestations and


Eczema

26. Develop export market in UAE.

27. Promote brand image of quality and reliability

28. Explore new international markets for exports

29. Streamlining value chain through activity based costing

30. Find new low cost suppliers of raw materials

31. Adopting latest quality measures in product testing procedures

32. Develop new products in existing segments to create


specialized offerings

33. Forming technology transfer agreements with international


pharma companies to buy licenses and sell their products in Pakistan

34. Strengthening company position by acquiring small, less


profitable companies

35. Manufacturing drugs for other pharmaceutical companies

36. Barter agreement with international companies to conduct


clinical research in exchange of exclusive marketing licenses for their
latest products
37. Sponsoring promising pharma students to go into research
based programs abroad in exchange of exclusive rights to their
researches

38. Forming alliances with foreign companies to market latest


molecules

39. Develop specialized brands in specific disease categories

40. Form strategic alliance with HEJ chemical research institute to


buy marketing rights of their research.

41. Indus and Atco have the highest ratings in Strategic alliance and
apparently Efroze has no focus in this aspect. If Efroze forms a
strategic alliance with an international research based organization, it
has an opportunity to enter into a new segment of the market.

42. Product testing is strength and a competitive advantage of Efroze


pharmaceutical. It must be jealously guarded and communicated.

43. Distribution network appears to be a serious problem for Efroze


as all other competitors are equally good at this. Efroze has to create
pull by increasing doctor detailing so that Efroze products become
profitable for the distributor

44. Develop products that have a higher profit margin, with in the
regulations of price.

45. Develop ointment products with increased value addition

46. Improve brand equity by promoting image of high quality


manufacturing

47. Merger with firms that have distinctively good research abilities
to have a competitive advantage in providing clinical research to
western companies.

48. Obtain franchising or licensing from international companies which do


not have strong distribution network in Pakistan Alliances with
international companies to launch new products in Pakistan to cater
to unexplored market.

49. Acquire funds by issuing shares decreasing the leverage, to


make investments in to new product markets.
50. Convey the high quality standards to target market through
increased advertising.

51. Increase sales force to build brand equity among doctors

52. Develop distribution network in international market.

53.Market penetration through better training of sales force

54. Steps must be taken in order to increase product recall through


giveaways and seminars.

55. Create molecules with international research companies


through strategic alliances and develop specialized products.

56.Research on molecules and out license them to bigger companies. Market


penetration through better training of sales force.

57. Steps must be taken in order to increase product recall


through giveaways and seminars.

58. Create molecules with international research companies


through strategic alliances and develop specialized products.

59. Research on molecules and out license them to bigger


companies.

60. Divest the products in the declining phase of the product life
cycle such as Lipid Lowering Agent, Digestive Enzyme etc and shift
resources to more profitable segments like anti-diabetics, anti-allergy
etc (Products in the growth and maturity phase)
Analysis

From the QSPM Matrix, we found that strategy 3 is more attractive as the
sum total score of the strategy is 4.90. Strategy 1 can also be considered
as an attractive strategy as its total attractiveness score of 4.56 wh is
closer to the score of strategy 3.

Strategy 2
Product Development: Strategic Alliances with International
Companies to Introduce Latest Molecules

The parties of the alliance will benefit in such a way that the international
company will be able to exploit a new market through Efroze and will be
able to use its certified laboratory for its tests. In this way Efroze will be
able to enter into the field of CRO which is another great opportunity for
the company. On the other hand, Efroze can gain competitive edge by
getting exclusive rights to market latest molecules of international
companies. This can also lead to higher market share.
1. Macro-environmental analysis and Industry Attractiveness:

• Students will research the application of Porters’ 5 forces model of


the industry your company is in. They will use their findings, to
describe, using this model, the strategic competitive dynamics within
the industry.
• Students will research the political, legal, economic, social and
technological factors which impact on the industry the company is in.
• Analyze these factors and draw inferences on how they determine
the key driving forces affecting the industry in general.
• Summarize what strategic issues the macro-environment entails for
your company in general terms.
• Construct an EFE matrix from the researched data and deduce
strategic evaluations from it.
• Explain what competitive threats and opportunities your company
would need to address in order to gain competitive advantage and
how.
• Summarize provisionally what particular courses of actions it would
need to undertake.

2. Company and competitor analysis:-

• Research what the key success factors are likely to be in your


companies industry.
• Employing the method of comparative strength assessment rank your
companies’ performance on the key success factors in relation to its
competitors (CPM).
• Evaluate the particular internal competencies the company needs to
develop or
strengthen, to address the key success factors.

2. Micro-environmental analysis and internal company resources:

• Research and analyze the internal resources of the company:


Management of its value chain, its core competencies if any, its
strategic cost management processes and the trend of key financial
ratios and its functional competencies.
• Construct an IFE from the research and make a strategic evaluation.

4. Strategic analysis and recommendations:

• Based on your research and analysis in 1, 2 and 3, report to the board


what generic strategy the company needs to gain a comparative or
competitive advantage. Evaluate the strategy in terms of your
understanding of the pros and cons of the generic strategies.

• How would you recommend the company to evolve a Corporate Strategy


from its Competitive Advantage?

• Compare this to what you think their existing strategy is. Should the
company change strategy? Why or not?

• Evaluate your alternative strategy recommendations using the input /


matching / decision model.

5. Strategic Implementation:

• Employing the components of strategic implementation,


explain to the board what the company will need to do to implement a
new strategy or fine tune its existing strategy. What pitfalls could arise
in implementation?

• Recommend to the board, the balanced business scorecard as


a strategic performance evaluation process distinct from the traditional
accounting/financial, marketing and HR evaluation methods.