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 sa ing precious foreign e!change. Pharmaceuticals are the fastest growing segment in the country's e!ports. Total Pakistan Pharma "arket is #$% &.' billion ()s. 89.* billion+ while the total ,orld "arket is #$% -&* billion. The .ndustry has a total alue of, ha ing 6'& drug manufacturers which include /9 multinationals and 6// national companies. The market grew with an a erage growth rate of &01. The industry witnesses an a erage of 0002*00 new product launches e ery year. Twenty of the national and multinational companies contribute o er 601 of the total drug sales as per .nformation "edical $tatistics (."$+ figures. 3alue wise share of the national companies in Pakistan4s total drug market is around *91 and rest '&1 is owned by multinational companies.
R A NKING MA T BA S IS 2008 2007 2006 2005 2004 1 2 3 4 5 6 7 8 9 10 1 2 3 5 4 6 7 11 8 9 1 2 3 4 5 6 9 11 7 10 1 2 4 3 5 13 9 10 6 8 TO P 10 C O R PO R A TIO NS M AT ~ 09/2008 LC-RUP EES Rs 99,795,967,603 10,945,180,634 5,538,880,817 4,690,513,856 3,929,246,038 3,923,604,438 3,723,422,471 3,030,644,043 2,729,561,224 2,722,979,354 2,624,241,312 M AT ~ 09/2007 M AT ~ 09/2006 LC-RUP EES LC-RUP EES Rs Rs 89,412,989,852 78,963,702,333 10,199,577,897 9,355,444,176 5,172,571,430 4,734,814,734 4,039,335,243 3,589,514,678 3,731,683,992 3,564,731,854 3,744,450,653 3,416,043,081 2,852,364,802 2,251,610,223 2,719,876,808 1,931,092,085 2,147,612,983 1,805,102,747 2,481,765,006 2,160,891,814 2,294,887,004 1,923,008,939 M AT ~ 09/2005 LC-RUP EES Rs 70,946,606,611 8,523,511,303 4,428,161,047 3,241,990,263 3,264,230,351 3,116,483,543 1,425,810,443 1,610,135,413 1,596,542,759 2,035,191,211 1,635,008,942

1 GSK 2 ABBO T T 5 N O VART IS 3 S AN O F I-AVEN T IS 4 P F IZER 17 G ET Z 14 RO CHE 11 S AM I 6 M ERCK 12 HILT O N

The medicines in the pharmaceutical market can be broadly distributed into 5T6 (5 er The 6ounter+ and prescription drugs, out of which the share of 5T6 brands is &61 with a -.0'1 growth rate per annum, within 5T6 the top three categories ( alue wise+ are as follows7 8 8 8 9nalgesics (Pain )elie ers+ 6alcium 9ntihistamines (9nti29llergy+

.n the ,est, pharmaceutical companies spend #$% 602-0 billion:year on ) ; <. .t takes around &02&/ years for a molecule to de elop into a drug (medicine+ at an a erage cost of 800 million to & billion #$ dollars. Pharmaceutical ) ; < e!penditure is the highest by any industry (&91 of their annual sales, appro! 0* billion #$% in /00*+. .n Pakistan, this sort of ) ; <

e!penditure is not iable. =!cept for multi2national companies like >la!o$mith?line, @o artis etc., none of the companies in Pakistan ha e the financial muscle to afford such e!penses. Aence, new drugs mainly come from the ,est. Pakistan is self2sufficient in formulation, but there is not a single bulk manufacturing unit. Thus, '00 million #$% is spent on 9P. imports (9cti e Pharmaceutical .ngredients+. 5ut of this, &00 million #$% go directly to .ndia. 9t the moment, .ndia supplies 9P.s to more than '0 countries worldwide and has a potential to increase their 9P. e!ports by &/2&' billion #$% by /0&'. 9lmost *01 of 9P.s used in =urope are being imported from .ndia. "ost multinationals are outsourcing their drug de elopment 9P.s to .ndian companies for cost and Buality reasons (9n opportunity no one in Pakistan is thinking about+. Pakistan has no 9P. capabilities and no apparent serious efforts are being made on this front. "ost of the multinational firms ha e been facing stiff competition from local companies that ha e succeeded in raising their market position, gi en their better resource utiliCation towards introducing Dme2tooE products at relati ely lower prices. To raise re enues and decrease costs, many "@6s ha e entered into contracts with other companies for toll manufacturing. "any companies in Pakistan that ha e 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 e!tra capacity at the plant and to gain additional re enues by working as an outsourced producer. For e!ample7 $earle Pakistan entered into a toll manufacturing agreement with .6. Pharmaceuticals, 9bbot laboratories is also offering toll manufacturing ser ices along with many other companies in Pakistan. The industry pro ides Gobs to nearly one million highly skilled and semi2skilled personnel directly or indirectly. Hut only a few pharmaceutical companies in Pakistan ha e trained pharma2co2 igilance staff to report serious ad erse e ents to regulators. 9n ad erse e ent reporting forms was circulated by "5A in /00&2/00/ to all maGor cities and hospitals, the ministry ne er got a single form back Pakistan has no national pharmaceutical ethics or marketing code in compliance with .nternational 6ode of Pharmaceutical "anufacturing 9ssociation (.FP"9 code+. $ome companies are in ol ed in acti ities that could be seen as inciting prescription in return of economic and material benefits being gi en to doctors, pharmacist and e en regulators. This is all linked to non science based old style pharmaceutical marketing where most companies don4t ha e a medical director. "oreo er, some companies, (local:multinational+ are misusing the terminology of clinical trials by running unethical studies for their e!pensi e medicine. These trials do not follow any >"P guidelines The industry is finding it e!tremely difficult to sur i e and many of the units may be on the erge of closing down because it is no longer economically iable to produce a number of medicines. The industry has not been gi en any

price increases from the last 6 and half years, the last price increase of 02*1 was gi en in <ecember /00&. Hesides there are many medicines whose prices were reduced and froCen for o er &0 years, and no prior across2the2board price increases were allowed on these products, though the raw material prices ha e registered o er fi e times increase in past se eral months. #? and #$ based Pakistanis ha e come back home to e!plore the options and interest of the Pakistani go ernment to set up 6ontract )esearch ser ices in drug de elopment. 9t present, contract research is a %60 billion industry globally and realiCing its potential the .ndian health sector has hea ily in ested in this area attracting an annual business of more than %000 million from other countries. "ost of the e!2pats could not find alid answers, written documentation or processes that could encourage them to in est. The only written document a ailable from the ministry is the checklist of reBuired items for clinical trial appro al by "5A. The local as well as multinational representati es were the most discouraging for these e!2pats, thus resulting in each of these parties opening their parties in .ndia. <espite its problems, the industry is growing and new trends are emerging in the global healthcare market that can positi ely affect the local industry. The patents of "@6s o er their maGor inno ations are e!piring ery soon, opening up new market opportunities for generic brands. Patents worth % &/& billion are e!piring in the ne!t ' years inducing growth in the industry. ,hereas it took o er &02/0 years to bring out a new drug in the market in the past, now it takes only /20 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 inno ations in Pakistan. This reBuires 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 o er26' age group is increasing at /1 worldwide while in 9sia, this growth is /.61. "oreo er, this sector consumes three times more medicine than the younger population, contributing to the rapid growth rate of the pharmaceutical industry. .f an a erage pensioner needs cardiac, diabetic or hypertension medication, he can spend only )s.0002*00 per month on an a erage. 9gain this dramatically increases the need for generic branded medicines. 9dditionally, the incidence of diabetes is higher in the mid twenties age group, contributing to the growth of this segment. >ood health is an important personal and social reBuirement. People are becoming more aware of the symptoms of diseases they are suffering from and they also ha e an idea about 6orporate $ocial )esponsibility. Pharmaceutical firms play a uniBue role in meeting society4s need for popular

wellbeing which cannot be underestimated. .n recent times, the impact of arious global epidemics e.g. $9)$, 9.<$, 6ancers etc ha e also attracted media attention to the industry. The effect of the intense media and political attention has resulted in increasing industry efforts to create and maintain good go ernment2industry2society communications. The latest trend in the industry is the addition of infant milks as a pharmaceutical product category. This category has shown up in the top &0 products of ."$ for the last &/ months and till date none of the generic branded companies has gi en any attention to this segment. "oreo er, number of intensi e care cases is rising, gi en the ci il disturbances in Pakistan and in such cases oral medication is not possible, inGections are the only way to sa e li es. 9lso, the incidence of heart attacks and other chronic diseases are on the rise, boosting the need for inGections. Thus, this segment has been growing sharply in the recent future. This trend is a good opportunity for pharmaceutical companies to increase re enues and e!tend product lines. ,ith globaliCation process reaching out to Pakistan, the geographical barriers ha e become obsolete. 9ny country will ha e to compete and trade globally in order to progress and sur i e in the years to come. The maGor pharmaceutical companies ha e realiCed this fact and ha e stepped into the global area of competiti e trade. The e!ports of Pakistani Pharmaceutical companies ha e been growing at a rate of /'2001 per annum, contributing to the growth in the industry. Suppliers "aGor suppliers of pharmaceutical industry include chemical suppliers of essential raw materials for drugs, glass manufacturers for bottles and Gars, and plastic manufacturers for bottle caps and closures. Distributors The profit margin for distributors is '.' to &01 <octors (5pinion Ieaders+ Chemists The profit margin of chemists in Pakistan is &'1.

Porter4s Fi e Forces "odel of .ndustry 9ttracti eness

Threat of Entrants:

Yes (+ &+ <o large firms ha e a cost or performance ad antage in your segment of the industry /+ 9re there any proprietary product differences in your industryJ 0+ 9re there any established brand identities in your industryJ *+ <o your customers incur any significant costs in switching suppliersJ '+ .s a lot of capital needed to enter your industryJ 6+ .s ser iceable used eBuipment e!pensi eJ -+ <oes the newcomer to your industry face difficulty in accessing distribution channelsJ 8+ <oes e!perience help you to continuously lower costsJ 9+ <oes the newcomer ha e any problems in obtaining the necessary skilled people, materials or suppliesJ &0+ <oes your product or ser ice ha e any proprietary features that gi e you lower costsJ &&+ 9re there any license, insurance or Bualifications that are difficult to obtainJ &/+ 6an the newcomer e!pect strong retaliation on entering the marketJ &0+ <o large firms ha e a cost or performance ad antage in your segment of the industry &*+ 9re there any proprietary product differences in your industryJ &'+ 9re there any established brand identities in your industryJ &6+ <o your customers incur any significant costs in switching suppliersJ &-+ .s a lot of capital needed to enter your industryJ &8+ .s ser iceable used eBuipment e!pensi eJ &9+ <oes the newcomer to your industry face difficulty in accessing distribution channelsJ /0+ <oes e!perience help you to continuously lower costsJ /&+ <oes the newcomer ha e any problems in obtaining the necessary skilled people, materials or suppliesJ //+ <oes your product or ser ice ha e any proprietary features that gi e you lower costsJ /0+ 9re there any license, insurance or Bualifications that are difficult to obtainJ /*+ 6an the newcomer e!pect strong retaliation on entering the marketJ

!o effe" t !o (#

$O% &ODE'(TE )I*) Threat of new entrants is moderate since large pharmaceutical companies, mainly "@6s, ha e a large performance ad antage as they ha e more resources and established );< departments worldwide that they can use to introduce new drugs and reap profits for /2&0 years before their patent e!pires. This helps them in building brand loyalty. 9n in estment of at least )s. 00 crores is reBuired to enter the industry including land, eBuipment, building and 0 months working capital etc. 9lthough most necessary materials are not difficult to obtain, some specialiCed materials and human resource is a little difficult to obtain. <istribution networks are not difficult to obtain as there are no e!clusi ity agreements between manufacturers and distributors.

+ar,ainin, -ower of +uyers !o To what e.tent are your "ustomers lo"/ed Yes effe into you0 (+ "t &+ 9re there a large number of buyers relati e to the
number of firms in the businessJ /+ <o you ha e a large number of customers, each with relati ely small purchasesJ 0+ <oes the customer face any significant costs in switching suppliersJ *+ <oes the buyer need a lot of important informationJ '+ .s the buyer aware of the need for additional informationJ 6+ .s there anything that pre ents your customer from taking your function in2houseJ -+ Kour customers are not highly sensiti e to price. 8+ Kour product is uniBue to some degree or has accepted brandingJ 9+ Kour customer's businesses are profitable.

!o (#

&0+ Kou pro ide incenti es to the decision makers.

$O% )I*)

&ODE'(TE

Huyers, (chemists+ are spread all o er the country and the company pro ides special discounts for pushing the brand to the customer whene er he asks for a compound. The buyers are aware of the need for information as the consumers trust them implicitly for pro iding the right medicine. The customers would need significant capital costs for entering the business but o erall, since Pakistani pharmaceutical industry is a generic products industry, no significant factors are prohibiting customers from entering the market themsel es, posing a threat for the manufacturers.

Threat of Substitutes
Yes (+ &+ $ubstitutes ha e performance limitations that do not completely offset their lowest price. 5r, their performance is not Gustified by their higher price. /+ The customer will incur costs in switching to a substitute. 0+ Kour customer has no real substitute. *+ Kour customer is not likely to substitute. !o effe "t !o (#

$O% )I*)

&ODE'(TE

9llopathic medicines are much Buicker in effecti eness and ha e a di ersified portfolio including treatments for chronic diseases that Gustify their higher prices. $ubstitutes include homeopathic, organic (Aikmat+ medicine, or e en witch doctors, but they are not any real threat as the substitutes (e.g. homeopathic+ do not ha e brand names and the resources to reach a wide2scale chemist base. 9lso the chemist needs to see the end consumers4 demands and demand for allopathic medicine is increasing as new diseases and their treatments are disco ered.

+ar,ainin, -ower Of Suppliers

Ye !o !o

s (+
&+ "y inputs (materials, labor, supplies, ser ices, etc+ are standard rather than uniBue or differentiated. /+ . can switch between suppliers Buickly and cheaply. 0+ "y suppliers would find it difficult to enter my business or my customers would find it difficult to perform my function in2 house. *+ . can substitute inputs readily. '+ . ha e many potential suppliers. 6+ "y business is important to my suppliers. -+ "y cost of purchases has no significant influence on my o erall costs.

effe "t

(#

$O% )I*)

&ODE'(TE

The suppliers of raw materials are aried from standardiCed products to some specialiCed ingredients for differentiated high2premium products. There are many suppliers for chemical compounds for the Pakistani pharmaceutical industry, ranging from suppliers in #.$, with high price compounds to those in 6hina and .ndia that are pro iding the same at lower costs. $ome products are cheaply a ailable for e.g. sugar, starch or other standard chemicals while for others it may cost )s. '00,000 to obtain Gust &kg of raw material.

'ivalry (mon, E.istin, Competitors

&+ The industry is growing rapidly. /+ The industry is not cyclical with intermittent o ercapacity. 0+ The fi!ed costs of the business are a relati ely low portion of total costs. *+ There are significant product differences and brand identities between the competitors. '+ The competitors are di ersified rather than specialiCed. 6+ .t would not be hard to get out of this business because there are no specialiCed skills and facilities or long2term contract commitments, etc. -+ "y customers would incur significant costs in switching to a competitor. 8+ "y product is comple! and reBuires a detailed understanding on the part of my customer. 9+ "y competitors are all of appro!imately the same siCe as . am.

Yes (+

!o effe "t

!o (#

$O% )I*)

&ODE'(TE

The pharmaceutical industry is growing at the rate of 8291 annually while e!ports are growing by /01 each year. The products are differentiated with strong brand loyalties towards the international brands, howe er Lme too4 brands are also growing in sales. <rugs reBuire understanding of compounds and dosage, etc from the side of the chemists but since manufacturers aim their push efforts towards the chemists, ri alry grows to get shelf space with retailers. Fi!ed costs in terms of personal selling efforts are high countering the other relati ely low fi!ed costs and thus do not ha e any effect on the industry attracti eness.

Overall industry ratin,:

&+ The threat of new entrants. /+ Hargaining power of buyers. 0+ Threat of substitutes. *+ Hargaining power of suppliers.

1avorab le

&odera 2nfavora te ble

'+ .ntensity competitors.

of

ri alry

among

From the o erall industry rating we can conclude that the industry is moderately attracti e. The maGor 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 specialiCed products increasing day by day.

P=$TI 9nalysis

Technological ad ancements, tighter regulatory2compliance o erheads, rafts of patent e!piries and olatile in estor confidence ha e made the modern pharmaceutical industry an increasingly tough and competiti e en ironment. Helow is an analysis of the pharmaceutical industry in Pakistan using the P=$T (political, economic, social and technological+ model, with an addition of legal en ironment in the mi!. -O$ITIC($ 1(CTO'S: 5 er 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 isn4t fa orable to the industry. .ndia which is one of the maGor suppliers of raw materials for the industry is at the erge of war with us, and gi en 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 e!porting their medicines but also while importing raw material and machinery. 9ccording to a ,orld Aealth 5rganiCation study, M,orld "edicine $ituationM, Pakistanis are spending -- per cent of their healthcare budgets on buying medicines. This shows the lack of go ernment public health financing (Pakistan is spending on an a erage a mere 0.'20.8 per cent of the >@P on health+ and the absence of a national health insurance program. .n spite of buying medicines from their own pockets, consumers are still ictims of irrational drug use and fake medicines. This also illustrates that Pakistan's national medicine policy has failed to achie e its public health obGecti es. ECO!O&IC 1(CTO'S: Pharmaceutical industry with a market siCe of % / billion, market growth rate of 91 and more than 600 companies operating locally can be affected by the following factors7 Inflation: $ince the last price increase was gi en (<ecember /00&+ the rupee has been depreciated from )s *8 in /00& to )s -8 right now. N60 percent de aluationO ,hereas the pharmaceutical raw materials and to greater e!tent packaging materials are imported so e ery fractional rupee depreciation directly affects the cost of goods. Further the custom le ies are charged on current rupee:dollar parity the affect of duty and other landing charges of the imports get inflated.

5n a erage, including the current price hikes inflation ha e registered on a erage &'1 growth o er the last fi e years. 6ost of labor has risen from )s /'00 to )s 6000 N&*01O. Dollar appre"iation and 'upee depre"iation: These two factors increase the input costs as most of the raw and packaging material is imported 1uel pri"es: Prices of fuel, utilities and other ser ices ha e increased by more than -' percent due to which freight and local transportation cost ha e increased o er -' percent. E."ise duties:.n the last couple of years, the board imposition of Federal =!cise <uty on all the imports has badly affected the dwindling margin of pharmaceutical products. Ta.ation:.mposition of &6 percent sales ta! on pharmaceutical packaging and promotional items is said to be unGustified. *lobal e"onomi" re"ession: The recent turmoil in the banking industry has also affected Pakistan4s economy which will ha e 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 I:6 margin on many of the ingredient and remo ing the hedging of foreign currency is killing the margin with double edge sword. Stri"ter re,ulations in international mar/ets: .nternational markets are becoming increasingly regulated with more countries wanting to support their local industries and thus induce strict regulations on imports from Pakistan. For e!ample7 )egulators from =thiopia came to Pakistan to conduct an audit and reGected all &9 companies on the agenda on the basis of the slightest de iation from the manual. 9lso, Hangladesh has banned imports from any country unless that country is e!porting to at least two first world companies. #.$ F<94s indirect control of the drug industry in Pakistan may also inhibit the industry4s e!ports to certain countries such as $udan, which are suspected of terrorist acti ities. *lobal events: >lobal e ent, for e!ample, 5lympics in 6hina caused to increase the local industry4s cost in producing medicine. This was mainly due to the withdrawal of the e!port subsidies for local producers of raw material and appreciation of Kuan.

These data clearly demonstrate the serious difficulty facing the pharmaceutical industry. @o other industry in Pakistan has been put under such stringent price controlP and no other industry has been forced to reduce prices. SOCI($ 1(CTO'S: >ood health is an important personal and social reBuirement. People are becoming more aware of the symptoms of diseases they are suffering from and they also ha e an idea about 6orporate $ocial )esponsibility. Pharmaceutical firms play a uniBue role in meeting society4s need for popular wellbeing which cannot be underestimated. .n recent times, the impact of arious global epidemics e.g. $9)$, 9.<$, 6ancers etc ha e also attracted media attention to the industry. The effect of the intense media and political attention has resulted in increasing industry efforts to create and maintain good go ernment2industry2society communications. TEC)!O$O*IC($ 1(CTO'S: "odern scientific and technological ad ances in science are forcing industry players to adapt e er faster to the e ol ing en ironments in which they participate. $cientific ad ancements ha e also increased the need for increased spending on research and de elopment in order to encourage inno ation. .f we look at the local technological scenario, we don4t obser e much of the ad ancements in Pakistan as they are in other de eloping countries. Hut still this industry reBuires technological de elopment in order to impro e the process Buality. Iocal companies in the branded generic category are adapting to this change in order to be competiti e with differentiated processes. "ost of them import machinery and eBuipments for laboratory testing and analysis of drugs. @e ertheless, they need to create awareness to build up local industry and a oid imports. =)P (=nterprise )esource Planning+, which is a way to integrate data and processes of a company into single system, can help organiCations in cost reduction. $E*($ E!3I'O!&E!T: The pharmaceutical industry is a highly regulated and compliance enforcing industry. 9s a result there are immense legal, regulatory and compliance o erheads which the industry has to absorb. This tends to restrict it4s dynamism but in recent years, go ernments ha e begun to reBuest industry proposals on regulatory o erheads so as not to discourage inno ation in the face of mounting global challenges from e!ternal markets. Iocally the F.<.9. (Foods ; <rugs 6ontrol 9dministration+ is the main regulatory body go erning and implementing the rules and regulations for

the <rug ; Pharma industry. The F.<.9. has state branches and sub2 branches all o er the country. ,ith globaliCation process reaching out to Pakistan, the geographical barriers ha e become obsolete. 9ny country will ha e to compete and trade globally in order to progress and sur i e in the years to come. The maGor drugs and Pharma 6ompanies ha e realiCed this fact and ha e stepped into the global area of competiti e trade. .f 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 reBuirements laid by the regulatory authorities of that country. 9lso, 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 appro als and sanctions as per the formats gi en by local regulatory authorities. =.g. 9ppro als to be obtained from #.$.F.<.9. for #.$.9, T.>.9. for 9ustralia ; @ew Qealand, ".6.9 and ".6.". for #.?. ; =uropean countries and .6A guidelines going to be uniform for international le els. $ince, the business in ol ed is worth multibillion dollarsP this branch has assumed tremendous significance and is bound to grow enormously, in the Post2>9TT era. "any big players in the drugs ; pharma field ha e already established separate )egulatory 9ffairs <epartments in their companies. )egulatory e!perts are thus in great demand. $ince, the field is highly technical, Pharmacy professionals again fit in these positions. $imilarly, Patents and Trademarks, ..P.). =!perts are also in high demand as far as the Pharma industry is concerned.

Effe"t of -EST$ on -orter4s 1ive 1or"es

Threat of !ew Entrants: The increasing inflation, global recession, global e ents and depreciation of alue of )upee has decreased the cost ad antage of the e!istent firms. 9lso, strict regulation of price by the go ernment has been cutting into the profit margins of the industry. Thus any new competitor with sufficient resources can enter into the industry and can mo e ahead of the smaller companies that do not ha e a differentiation factor to keep them ahead of the game.

$O% )I*)

&ODE'(TE

+ar,ainin, -ower of +uyers: 9s awareness increases among end consumers and chemists and people become more aware of their health needs, their price sensiti ity decreases as they recogniCe the efficacy of

specific medicines and word of mouth generated by satisfied customers shall increase industry4s power o er buyers.

$O% )I*)

&ODE'(TE

+ar,ainin, -ower of Suppliers: The increased ta!ation, e!cise duties, global recession, and global e ents are increasing the cost of inputs and thus ha ing a negati e impact on the industry4s power o er suppliers.

$O% )I*)

&ODE'(TE

'ivalry amon, Competitors: The rising costs of manufacturing, fuel and power shall gi e way to a battle for shelf space among competitors, turning what might be called a healthy competition into intense ri alry.

$O% )I*)

&ODE'(TE

Threat of Substitutes: Threat of substitutes is decreasing with the rise of education and awareness fortified by media sources as people realiCe the importance of allopathic medicine.

$O% )I*)

&ODE'(TE

=!ternal 9nalysis

E.ternal 1a"tor Evaluation

%ei, ht 0.0' 0.0' 0.0/ 0.0' 0.0' 0.& 0.&' 0.& %ei,ht ed (vera, e 0.& 0.0' 0.0/ 0.0' 0.& 0.0 0.&' 0.&

Opportunities & 91 estimated 69>) of the industry for the ne!t ' years / 9ttracti e market for .3 solutions manufacturing 0 Potential in ointment segment Toll "anufacturing for foreign buyers and for local * competitors ' 6linical )esearch of western companies in Pakistan and .ndia = er increasing awareness of the market about arious drugs 6 and diseases 9lliances or Goint entures to boost competiti e capability for - introducing new molecules 8 Potential in .nfant "ilks segment(Rennifer white+ Threats & / 0 * ' 6 .ncrease in cost of production due to rise in materials cost Han on imports from .ndia $trict Buality regulations in e!port markets 6heaper "e2Too brands that compromise on Buality Fake ; smuggled medicines Han on e!ports to $udan .ncreasing intensity of competition among industry ri als - due to increase in costs 8 Iaunch of new molecule (superior+ product by competitors 6orruption and leak outs at the documentation appro al 9 stage & 0 $trict Price regulations by the >oP

'atin, / & & & / 0 & &

0.& 0.00.0' 0.0/ 0.0& 0.0& 0.0' 0.0' 0.0* 0.00 &

& / 0 * / 0 / & / 0

0.& 0.&* 0.&' 0.08 0.0/ 0.00 0.& 0.0' 0.08 0.09 &.-&

&. /. 0.

Take ad antage of the clinical research done by some western companies by forming an alliance with these companies. <e elop new market segments such as ointment and infants milk segment or solutions manufacturing. 9d ertise to increase awareness and also to communicate the better Buality of products for impro ed health benefits.

*. '. 6. -. 8. 9.

=!porting drugs by taking ad antage of the increased awareness created in the foreign markets such as "iddle =astern and 9frican markets. @egotiating with the go ernment to impro e price regulations. )e amping the alue chain by remo ing unnecessary steps by using acti ity based costing. .mpro ing ) ; < to be able to cope up with the new molecules of other companies. <ifferentiating the products by employing the highest Buality and safety standards. $trict regulations and compliance to pre ent any leak outs and other confidential information.

&0. #sing patents and intellectual property rights to protect market share of newly launched products. &&. Aighlighting the superior Buality and health benefits to foreign importers. &/. 9d ertisement should focus on communicating the superior health benefits, high Buality and hygienic standards and harmful effects of me2too products that compromise on Buality.

-rofile

LAt 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 I ! "#$2% &aboratory Accreditation from P'AC being only the 2nd Pharmaceutical company in Pa(istan to hold this distinction I feel pride in addressing the e)tended *fro+e,Family- the employees, the distributors and the vendors. *fro+e has come a long way from being an entrepreneurial venture, bac( in "/01, to becoming a corporation, with foreign offices across the globe and an ever,e)panding products and pro2ect profile. 3e at *fro+e are in the business of providing a 4uality lifestyle to humanity at large. 5hrough our private and public,private pro2ects 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 *fro+e. May Allah grant us the right direction and the courage to say steadfast in all our dealings. Amen6. # &uhammad (bdullah 1ero5 (&ana,in, Dire"tor6 Efro5e 3ISIO! ST(TE&E!T: $tri e to deli er inno ati e, reliable, and accessible medicines at affordable prices. &ISSIO! ST(TE&E!T: =froCe 6hemical .ndustries is one of the leading pharmaceutical organiCations that manufactures and markets Buality products for the ailing humanity. 9t =froCe we thri e on taking the untrodden path. For us success comes not with the magnitude of our turno er but with what we ha e achie ed in terms of inno ati eness. ,e look for ways ; means to build on our e!pertise in newer, more modern approaches ; techniBues. Thus, from human resource to production e ery facet of operation at =froCe is an ongoing process in learning, de eloping ; implementing. This approach enables us to add alue to our ser ice to the customer and our society on the whole, creating further a enues to e!plore locally ; globally. O2' O'*(!I7(TIO!($ +E)(3IO2'S 6#$T5"=) F56#$ To impro e the Buality of health by deli ering strong and dependable brands and remain in contact through dialogues to utmost customer satisfaction

$#PPI.=) <=3=I5P"=@T ,e know the alue of establishing partnerships and contribution towards finding out ision more amicably <.$T)#H#T5)4$ )=I9T.5@$A.P To pro ide high distincti e alue to our distributors so that their ser ices deli er the utmost customer satisfaction $56.9I )=$P5@$.H.I.TK 6ontributing positi ely to our communities and support institutions to help in creating sustainable impro isation to all their associates. Hoth our 3ision and "ission is to treat MToday only as a stepping2stone for tomorrowE. ,ith our forward2looking philosophy, we stri e to work today to make tomorrow Gust that much better O'*(!I7(TIO! C)('T:

 1968 Foundation of Efroze Chemical Industries (Pvt.) Ltd. as laid in !arachi" Pa#istan. 19$% First &anufacturin' Facilit( )as set u* on +aider ,li -oad. 19$8 &anufacturin' Facilit( moved to !oran'i Industrial ,rea" !arachi. 198. &anufacturin' commenced for /ohrein'er &anheim 0 , 1erman -esearch2/ased Com*an(. 1981 First /lister Pac#a'in' &achine started its )or#in'. 199. International &ar#etin' 3ivision set into motion. 199$ 4e) Cor*orate +ead 5ffice 6uildin' in !arachi. 1998 7oll &anufacturin' commenced for 5tsu#a Pa#istan Ltd. , 8a*anese -esearch2/ased Com*an(. 1999 9nd :tate2of2the2,rt manufacturin' *lant )as set u* in !oran'i Industrial ,rea" !arachi. 9... Certification of I:5 9..92199; 6( :1: Euro*ean <ualit( Institute E.E.:.=. 9..% Certification of I:5 9..129... 9..$ Certification of I:5 1$.9>. FPCCI :*ecial &erit E?*ort 7ro*h( ,)ard" third in a ro) for 9..629..$. 9..8 First in2+ouse /io2E@uivalence :tud(. Com*leted on &etcon.

=froCe 6hemical .ndutries (P t.+ Itd. took a humble start in &968 and now it is a full2fledged pharmaceutical company manufacturing liBuid, suspension, ointment, gel and solid dosage forms of the highest standard in the country. This year, =froCe, is celebrating *0 years of e!cellence in manufacturing, marketing and sales of =thical "edicines of international repute. =froCe has emerged as an important player in the Pakistan health sector by pro iding latest medicines of international standards for maGor diseases, priced with due consideration to the end consumer. =froCe products like @omin, Qetrine, "onis, 6april, >licon, "etphage, "efnac, "aladar, 9lgaphan, $iam, 6alCem, Famtine, )o!in and TriCymal and many more are ery well fa ored and prescribed by doctors of Pakistan. They ha e a network of *0 distributors working nationwide and ensuring the a ailability of =froCe products for the ailing humanity. 9t the le el of =froCe 6hemical .ndustries they belie e in pro iding latest scientific information to the medical doctors through specialiCed field force which maintains continuous contact with them. The scientific information is disseminated though modern ways like round table conferences, focus group discussions, and seminars. <ifferent top class doctors also get in itation from =froCe 6hemical .ndustries to update their colleagues on new happenings at the frontiers of medical science. =froCe 6hemical .ndustries ensures its participation in maGor conferences of societies for doctors of Pakistan. These include the societies for 6ardiology, <iabetology and general physicians. The company also gets latest information from its international partner sources on the new de elopments in different diseases for the people of Pakistan like .schemic heart diseases, Aypertension, <iabetics, )heumatism, .nfections, "alaria and arranges its publications in the form of guidelines and also conducts patients' education programs. =froCe 6hemical .ndustries has a tradition for e!tending a helping hand to the different go ernment, pri ate and semi2pri ate institutions of Pakistan. International &ar/etin, =froCe started its e!port operations in &99/ as a part of its mission of globaliCation. ,ithin eight years =froCe broadened its horiCon by rapidly de eloping markets in 9frica, "iddle =ast, 9sia and 6.$.

.n &99/, =froCe started de eloping new markets by crossing the geographical barrier of Pakistan market. The first such de elopment was in Kemen. ,ith the early success in e!ports, it was realiCed that acti e in ol ement in geographical di ersification of markets can assist in achie ing the ultimate goal of the organiCation. Hy &990, some sectors of 9frica and "iddle =ast were already e!plored. &99* was the year of change in e!ports. ,ith the help of distributors, inputs were taken from the market to incorporate the necessary changes in products to satisfy the market needs. @ew markets e!plored were "yanmar, Hangladesh, $ri2Ianka, "aldi es and $ingapore in Far =astP and ?enya, @igeria and $udan in 9frica. .n &99-, =froCe started its operations in the 6.$ and successfully entered in the lucrati e markets of #Cbekistan, ?yrgyCstan, ?aCakhstan, the )ussian Federation, #kraine ; Helarus. .n /000, by the grace of 9llah, =froCe was e!porting its products to /0 countries, with o er /00 registrations. @ow, international "arketing <i ision is working on e!ploration of new countries as per ision of new management to ma!imiCe .nternational "arketing 5perations of =froCe around the globe. They are corresponding in Philippines, "alaysia, 3ietnam, 6ambodia, #ganda, Hotswana and TanCania. $oon, they will start their operations in these countries.

E8-O'T )O'I7O! O1 E1'O7E *$O+($$Y

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&(;O' (C)IE3E&E!TS: .f there's something that has remained unchanged in the =froCe of &968 and that of the present day, it is the commitment to Buality. 5bser ance of Buality control at all le els by the help of all departments, >"P compliance and maintenance of international standards, enabled =froCe to achie e the .$5 900/ 6ertificate of Suality $ystem $tandard in &999. 5ne more feather in the cap has been the achie ement of the .$5 900&2/000 6ertificate of Suality $ystem $tandard in 9pril /000. The Federation of Pakistan chamber of 6ommerce ; .ndustry has also awarded =froCe =!port trophy for the year &998299. -'OD2CTIO! 1(CI$ITIES:

The success of =froCe is a result of cooperation, teamwork and dedication. ,ell blended with commitment, moti ation and hard2work of =froCe personnel. ,orking conditions at =froCe are true to the standards set forth as per >ood "anufacturing Practices. .n2house training programs are conducted regularly to keep the entire team abreast with the latest changes and impro ements in the pharmaceutical world. The ad ance planning and co2ordination in the e!ecution of these systems within the manufacturing parameter is looked2after by thorough professionals, specially trained in their respecti e fields locally and abroad 2 on modern eBuipment and latest management techniBues. =froCe has some of the latest and most ad anced machinery for the manufacture of syrups and suspensions. To impro e the suspendability of suspensions, =froCe has installed a Fryma mill to break down the suspended particles to colloidal from which make the suspension stable. .n the compression:tablet section, =froCe has installed a FritC mill to pul eriCe the acti e drug into its micro form, thereby increasing the surface area of the acti e drug and thus making it more bio2a ailable. $uch other eBuipment:machinery installed in different areas of manufacturing has impro ed the drug a ailability 2 in other words ha e impro ed the efficacy of the drug The infrastructure of =froCe's manufacturing process contains a built2in fle!ibility and an inherent pro ision for future de elopment. 9 highly trained staff, abiding current >.".P rules, ensures that the Buality of the pharmaceuticals is maintained during e ery stage of the manufacturing process. Suality assurance at e ery stage is part of our commitment with the customers. -'OD2CTS O1 E1'O7E C)E&IC($S: 9lthough, it takes a long while to launch a new productP by new, they mean branded generic product here at =froCe, following the categories and products which are ser ed by them currently is gi en in =!hibit &. The list shows that =froCe is Buite di ersified in terms of categories that makes it lose concentration on one disease category
'ESE('C) (!D DE3E$O-&E!T:

=froCe focuses on efforts towards adopting new standards and impro ised research and de elopment. =froCe4s research and de elopment unit focuses on de eloping effecti e and less time2consuming methods of

analyCing the e!isting range of products and to de elop methods for new locally de eloped products (not a new molecule though+ and bioa ailability studies on locally de eloped products, to in estigate physiochemical characteristics of drug substances as a pre2reBuisite 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 characteriCe endogenous inhibitors. =froCe uses persistent technological inno ations in the production and manufacturing processes.

E8)I+IT < -rodu"t

Selo.. Corbis Delaware ISO 1amtine Eri5ole 'o.in

-rodu"t Se,ment

Introdu"ti *rowt &aturity De"line on h

(ntirheumati" !on#Steroid Cardiovas"ular System Cardiovas"ular System Cardiovas"ular System )= 'e"eptor (nta,onist (nthelminti"s (ntiba"terial 9uinolone>&a"rolide :labid (ntiba"terial 9uinolone>&a"rolide (ntiba"terial 1lo.er 9uinolone>&a"rolide (ntiba"terial Eftran 9uinolone>&a"rolide (ntiba"terial E"in 9uinolone>&a"rolide De"lot (nti#"oa,ulants Dia5epam (nti#depressant !eolip (nti#lipidemi" -anaram (nti#-yreti" *lyper (nti#diabeti" *li"on (nti#diabeti" &et"on (nti#diabeti" E7#1low $a.atives :ontab (nti#inflammatory En5ymes Efome -roton -ump Inhibitor &efna" !S(IDS > !asal De"on,estant -an,o !S(IDS > !asal De"on,estant -efree !S(IDS > !asal De"on,estant 'edu"ea"he !S(IDS > !asal De"on,estant 7etrine (nti#(ller,i"s )istal (nti#(ller,i"s $ipi"or $ipid $owerin, (,ent Tri5ymal Di,estive En5yme &aladar (nti#&alarial (rtedo.in (nti#&alarial *ynae"osid 1emale )ormone Trisil (nta"ids Siam (nta"ids Emod (nti#diarrhoeal

Internal (nalysis

Internal 1a"tor Evaluation

'atin , * 0 0 / * 0 0 0 %ei,ht ed (vera, e 0./ 0.&' 0.06 0.& 0.* 0.06 0.06 0./*

& / 0 * ' 6 8

Stren,ths *0 years presence in the market26redibility 9cclaimed and trusted by doctors (opinion leaders+ =!ports olume and e!perience of &6 years in the e!ports market $uccessful brands in international markets .$5 &0-/' certified lab that ensures superior product testing $trong supplier network Focused on employee de elopment and communication Suality ensured in each step of the process %ea/nesses Iong time lag in launching new products Iack of strategic alliances with international companies to ensure new molecule introduction @o );< department for de elopment of new molecules Iack of focus and specialiCation on any one disease segment <eficient in financial muscle relati e to the bigger companies in the industry $maller sales force $ales 5riented 6ulture ,eak distribution network

%ei,ht 0.0' 0.0' 0.0/ 0.0' 0.& 0.0/ 0.0/ 0.08

& / 0 * 6 8 9

0.0' 0.&/ 0.& 0.&' 0.0/ 0.0/ 0.0' 0.& &

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0.0' 0./* 0.& 0.0 0.0* 0.0* 0.0' 0./ /./9

Strate,ies
&. #sing key opinion leaders to communicate the superior Buality of products. /. 6ontinuously in esting in research and de elopment to come up with new molecules. 0. 6onduct research and testing acti ities by highlighting .$5 &0-/' certified lab to gain first mo er ad antage in new product segments. *. .ncrease sales by de eloping markets and by introducing new $?#4s.

'. 6hanging the sales oriented culture of the company by in ol ing employees in strategy formulation at e ery step and position. 6. .mpro ing the distribution network by making alliances with distributors and other dealers. -. 5utsourcing the ) ; < acti ities to foreign ) ; < firms. 8. Airing more Buality employees and e!panding the sales force to increase the reach of products in other markets where a ailability is an issue. 9. $pecialiCing a disease segment by focusing on ) ; < for that particular segment. &0. Suickly upgrading the e!isting products and introduce new $?#4s so as to keep an ad antage o er competitors. &&. Focus should be on promoting superior Buality standards, brand image and e!perience.

1inan"ial 'atio (nalysis

1I!(!CI($ '(TIOS 6urrent )atio Suick )atio <ebt to =Buity .n entory Turno er 9ccounts )ecei able Turno er )eturn on in estment (!($YSIS: The abo e mentioned si! ratiosP IiBuidity ratios (6urrent and Suick ratios+, Ie erage ratio (<ebt to =Buity+, 9cti ity ratios (.n entory Turno er and 9ccounts )ecei able Turno er+ and Profitability ratio ( )eturn on .n estment+ show that =froCe is not doing as good financially as the industry. The debt to eBuity depicts that liabilities taken by =froCe are more than the industry that may pro e to be risky. The company is comparati ely less liBuid. Efro5e &.'0 0.80.66 6.// 6.9* /./01 Industry (vera,e /.'0' &.60/' 0.&*0-' 0.6/-' */.*'-' &'.0*1

The profitability of the company is Gust /./01 as compared to industry4s &'.0*1 that e!plains that the company cannot co er its in estment with profits after ta!. ,hen we compare acti ity ratios, in entory turno er is better than industry whereas accounts recei able turno er is not. This shows that =froCe has problems with collecting their recei ables. Aowe er, the in entory is being utiliCed efficiently as compared to the industry.

3alue Chain
<etermine model of supply:distribution T )econcile needs and resources T <e elop criteria for tender T .ssue tender T = aluate bids T 9ward supplier T <etermine contract terms T "onitor order T "ake payment Suality assurance 9dherence to >"Ps T Suality management T Packaging and labeling acti e pharmaceutical ingredients T "aster, batch, and laboratory control records Production and in2process controls T 6ertificates of analysis T 3alidation T Tracking complaints and recalls

-ro"urem ent
"arketing Auman )esources &anufa"turi n,

Finance &i"robiolo,i" al Testin,

<etermine effecti e dose range <etermine safety 6onfirm =ffecti eness "onitor $ide =ffects 6omparison to other commonly used treatments 6ollect information

9dmin

-a"/a,in,

.T

T )ecei e and check drugs with order T =nsure appropriate transportation and deli ery to health facilities T 9ppropriate storage T >ood distribution practices and in entory control of drugs T <emand monitoring

Distribution

End Consumer

CO&-ETITO' (!($YSIS

CO&-ETITO'S
"ultinational 6ompanies7 )s. */.' Hillion (3alue+ '&1 ("arket $hare+ @ational 6ompanies7 )s. *0.6 Hillion (3alue+ *91 ("arket $hare+

-a/istan -harma"euti"al &ar/et 9< =??@# 9< =??A

&ar/et Si5e ('sB In +illion 60.' 6'.9 -'.6 80.& Industry *rowth &-.-01 8.901 &*.901 &01 &ultination als /9 /9 /9 /9 !ationa l '6* '-/ 600 6//

Time S& /00* S& /00' S& /006 S& /00-

Total '90 60& 6/9 6'&

(TCO $aboratories
9T65 Iaboratories has a history of o er *0 years in the health care business. .t is one of the pioneers in the pharmaceutical industry sector of Pakistan. The $tate of the art manufacturing plant is housed in a double story building encompassing an area of /0,000 sB feet. "anufacturing undergoes continuous impro ement in production and Buality assurance facilities to ensure the Buality of products as per international standards. The plant is segregated into two units for manufacturing sterile products (.nGections, 5phthalmic <rops, and 5intments+ and non sterile products (Tablets, 6apsules, <ry Powder, Topical 5intments, 6reams, Iotions and IiBuids+. Sualified and e!perienced staff super ises the manufacturing process in accordance with >"P and ,A5 guidelines. 9T65 has some well2 known drugs for 9n!iety (9@U.T T9HI=T$+, Aypertension (I5$T)=$$+, cholesterol (T=)H.<=)"+, Iipid <isorder (39$T5)+, 9sthma ($5I5+ and other multi2 itamins (69$9@, Q.@69T+ and 9ntibiotics. &9-8 is a significant year in the history of 9T65 when it was acBuired by one of the largest conglomerate business groups of Pakistan. The acBuisition was a di ersification in the health care business by ?ohinoor >roup 5f .ndustries, ha ing successful businesses in the fields of

6osmetics, Personal 6are products, Hattery 6ells, $oaps, <etergents, etc. 9fter the acBuisition there has been no looking back for the company. The ?ohinoor group4s strength lies in its strong professional background, business acumen and timely a ailing of business opportunities. These strengths ha e resulted in 9T65 Iaboratories becoming one of the fastest growing pharmaceutical companies, with modern manufacturing facilities, and Goint business entures with renowned "ultinational Pharmaceutical companies. $e eral 9merican and =uropean "ultinational pharmaceutical companies with research based products ha e collaborated with 9T65 laboratories on profitable Goint entures. $ankyo, Aelsinn, $chwarC Pharma, Ferring Pharmaceuticals, .psen, 6assara, Iaboratoire .nnotech .nternational are some of its maGor collaborators. These companies ha e entered a growing pharmaceutical market in Pakistan relying on 9T65's market dri en confidence in production, Buality assurance, >"P marketing and sales abilities. 9T65 Iaboratories is known for its Buality products in domestic as well as international markets. 9T65 has the licensing franchise of a reputable research based foreign company, and enGoys a considerable share in domestic as well as foreign markets. 9T65 has gained a foothold in the $ri Iankan market. The e!ports are further e!tended to $udan, =thiopia, ?enya, #ganda, Kemen, Hangladesh, "yanmar, TanCania, #Cbekistan, ?aCakhstan, 9fghanistan, and Turkmenistan.

+roo/es -harma"euti"al $aboratories (-a/istan $imited

Hrookes Pharmaceutical Iaboratories (Pakistan+ Iimited is one of the leading and fastest growing pharmaceutical companies of Pakistan. .t has been operating since &986 as a premium Buality manufacturer of medicines. Hrookes has a sophisticated and ad anced production facility, dedicated to making a broad array of highly standardiCed, ethical medicines in a ast range of dosage forms. The product portfolio of Hrookes includes medicines under product lines of gastro2enterology, anesthesia, dermatology, cardiology, @$9.< and anti2septic drugs. $ituated in ?orangi .ndustrial 9rea, ?arachi o er a co ered area of /00,000 sBuare feet, Hrookes operates under licenses and technical collaboration of large2scale pharmaceutical organiCations including "erC Pharma >ermany and =dmond Pharma .taly. Heing a company that belie es in a collecti e endea or and cooperation, Hrookes remains in pursuit of establishing and maintaining business relationships that could help achie e its broader goals

of

Buality,

efficiency

and

growth.

.t is an internationally recogniCed name with its presence in pharmacies of a number of countries across the globe. Hrookes is prepared to make further headways into many more countries as it re amps and upgrades its operations with the construction of a new sterile production unit. =ngaged in third party manufacturing for companies including reputed multinationals, the organiCation4s strict adherence to 6urrent >ood "anufacturing Practices (c>"P+ and its commitment for the preparation of products of the highest Buality, ha e won for it a uniBue place among Pakistani pharmaceutical companies. Hrookes is the first Pakistani pharmaceutical organiCation to ha e four international certifications including .$5 900&, .$5 &*00&, $9 8000 and 5A$9$ &8000 certificates.

!(+I9(SI&
@9H.S9$." is a @ational companies dealing in manufacturing and marketing of pharmaceutical and healthcare products in Pakistan as well as in o erseas markets of 9sia, "iddle =ast ; 9frica. Today, its products are accessible to millions of patients at hospitals, clinics and pharmacies in o er // countries. For more than 08 years, @9H.S9$." has been pro iding Buality products and ser ices to its clients across the country. .ts core business acti ity is pharmaceutical formulations which includes product de elopment, manufacturing and marketing. .ts product range e!ceeds o er -0 products in the form of capsules, tablets, syrups, suspensions, drops, gels, creams and inGections in the field of psychiatry (HuCon+, 6ardiology (9mdipine+, @eurology (<iaCepam+, 5rthopedics (9rthrofen+, Pediatrics (9cefyl+, <ermatology (<emosporin+, >ynecology (>landin 2=/+, "edicine (Folitab+, $urgery, =@T and ophthalmology (6omycetin+. @9H.S9$." ser es both domestic as well as international markets. The company has more than 60 <istributors across the country and abo e *00 "arketing $taff nation wide. @9H.S9$." is e!porting to a number of regions around the globe. <ue to its high Buality of products, price competiti eness and e!ceptional ser ice standards, the products are well recei ed in the international markets. ,ith a separate international marketing department, it is stri ing to enhance the international market olume both by growing in e!isting markets and by e!panding into promising new ones. ,ith the most modern plant and eBuipments, coupled with highly Bualified and competent personnel, @9H.S9$." has achie ed tremendous growth and has won numerous accolades in the last decade. The company has also

acBuired .$52900/ S"$ certification and is strictly following c>"P standards. .t has been recently certified for .$52900&7/000 as well.

-harmevo

Pharme o is backed by a reputable corporate group with a history of successful business entures spread o er 00 years. The group made its debut in &9-&, with the sales and marketing of prestigious brands of consumer products. The group's in ol ement in pharmaceutical and healthcare business started in &9-*. This was a modest beginning, but it lead to the emergence of the di ersified group. The group turno er is now around #$ -0 million dollars. Pharme o has come a long way since its launch back in $eptember &999. <uring this short span, Pharm= o has successfully car ed a niche amongst the giants of the pharmaceutical industry purely based on Buality, professionalism and marketing ethics. .t is the management4s utmost desire that Pharm= o should be percei ed as a company pro iding a 7 ervice which means to ma(e a difference7 , and they are stri ing hard to foster a healthier en ironment. Their product portfolio is a true reflection of this desire, as it comprises some of the most ad anced treatment options a ailable around the globe. Therapeuti" Cate,ories !ame 9llergy : 9sthma +rand

6ardio ascular

<entistry

<iabetes

>astroenterology

.nfectious

<iseases

5steoporosis

Psychiatry

Pain

.nflammation

!ovartis -harma (-a/istan $imited

@o artis .nternational 9> is a multinational pharmaceutical company based in Hasel, $witCerland that manufactures drugs such as cloCapine (6loCaril+, diclofenac (3oltaren+, carbamaCepine (Tegretol+, alsartan (<io an+, imatinib mesylate (>lee ec : >li ec+, cyclosporin 9 (@eoral : $andimmun+, letroCole (Femara+, methylphenidate hydrochloride ()italin+, terbinafine (Iamisil+, and others. Their global Pharmaceuticals portfolio includes more than *' key marketed products, many of which are leaders in their respecti e therapeutic areas. They ha e recei ed &- new pharmaceutical product appro als in the #$ since /000, the most of any pharmaceutical company. @o artis was created in &996 from the merger of Ciba#*ei,y and Sando5 $aboratories, both $wiss companies with long histories. 9t the time it was said to be the largest corporate merger in history. 6iba2>eigy was formed in &9-0 by the merger of ;B 'B *ei,y (founded in Hasel in &-'8+ and Ciba

(founded in Hasel in &8'9+. 6onsidering the histories of the merger partners, the company's history spans /'0 years. 9fter the merger, @o artis reorganiCed its acti ities, and spun out its chemicals acti ities as 6iba $pecialty 6hemicals. .n /000, @o artis created $andoC, the generic pharmaceuticals di ision of @o artis. .t is a global leader in offering high2 Buality and low2cost pharmaceutical products no longer protected by patents. .n additional to de eloping and marketing generic drugs, $andoC is a leading manufacturer of anti2infecti e and acti e substances for other pharmaceutical and biotechnology products. 5n 5ctober /0, /00', as an immediate response to the earthBuake in the northern areas of Pakistan, @o artis made initial donations of more than % *00,000 to the President4s )elief Funds, additional financial support to other relief organiCations as well as pro ided access to critical medicine. =mployees in Pakistan oluntarily donated 02days salary to the relief efforts, with the company matching employee contributions rupee for rupee. 5n 9pril /0, /006 @o artis acBuired the 6alifornia2based 6hiron 6orporation. 6hiron was formerly di ided into three units7 6hiron 3accines and 6hiron Hlood Testing, which now combine to form @o artis 3accines and <iagnostics, and 6hiron HioPharmaceuticals, to be integrated into @o artis Pharmaceuticals. <uring /00-, @o artis increased );< in estments by more than /01 to #$< 6.* billion. This is one of the highest figures in the industry relati e to sales (&6.91+. >roup results in /00- set new record as net sales rise 81 (V01 in local currencies+ to #$< 09.8 billion and net income reached #$< &/.0 billion (V 661+ with earnings per share up 681 to #$< '.&'. @o artis );< efforts are dri en by human health and well2being, contributing to o erall prosperity and Buality of life. "aGor therapeutic areas7

9utoimmunity:Transplantation:.nflammatory <isease 6ardio ascular <isease <iabetes >astrointestinal <isease .nfectious <iseases "usculoskeletal <isease @euroscience 5ncology 5phthalmology )espiratory <isease

.n addition to internal research and de elopment acti ities @o artis is also in ol ed in publicly funded collaborati e research proGects, with other industrial and academic partners. 5ne e!ample in the area of non2clinical safety assessment is the .nno"ed PredTo!. The company is e!panding its acti ities in Goint research proGects within the framework of the .nno ati e "edicines .nitiati e of =FP.9 (=uropean Federation of Pharmaceutical .ndustries and 9ssociations+ and the =uropean 6ommission.

*la.oSmith:line -a/istan $imited

>la!o$mith?line Pakistan Iimited was created on Ranuary &st /00/ through the merger of $mith?line and French of Pakistan Iimited, Heecham Pakistan (Pri ate+ Iimited and >la!o ,ellcome (Pakistan+ Iimited2 standing today as the largest pharmaceutical company in Pakistan. 9s a leading international pharmaceutical company, they aim make a real difference to global healthcare and specifically to the de eloping world. >$? Pakistan operates mainly in two industry segments7 Pharmaceuticals (prescription drugs and accines+ and consumer healthcare (o er2the2 counter2 medicines, oral care and nutritional care+. >$? leads the industry in alue, olume and prescription market shares. .t has consistent sales, profits and growth. $ome of the key brands include 9ugmentin, Panadol, $eretide, Hetno ate, Qantac and 6alpol in medicine and renowned consumer healthcare brands include Aorlicks, 9Buafresh, "acleans and =@5. ,ith its headBuarters in the #nited ?ingdom, >$? has operations in o er &80 markets around the world. Patients today are doing more, feeling better and li ing longer 2 benefiting from many medical ad ances which include pharmaceutical research. .n addition, >$? is also deeply in ol ed with communities and undertake arious 6orporate $ocial )esponsibility initiati es including working with the @ational 6ommission for Auman <e elopment (@6A<+ for whom >$? is one of the largest corporate donors. >$? participates in year round charitable acti ities which include organiCing medical camps, supporting welfare organiCations and donating to:sponsoring arious de elopmental concerns and hospitals. Furthermore, >$? maintains strong partnerships with non2go ernment organiCations such as 6oncern for 6hildren, which is also e!tremely in ol ed in the design, implementation and replication of models for the sustainable de elopment of children with specific emphasis on primary healthcare and education.

.n Pakistan, >$? has a market share of &&.6'1. .n /00-, the company had a profit of )s. &,6-0,'/' with net sales of )s. &0,6&0,88/ leading to an =arning per share of )s. 9.-9.

Indus -harma
In &969 when Pakistan was thinking for economic structuring and pharmaceutical industry was dependent on multinationals which were yet to install their manufacturing units, .ndus Parma (P t+ Itd. =stablished their manufacturing unit in the heart of Pakistan ?arachi. Aa ing started in &969 from water for inGection ampoules, today .ndus Parma is known for producing high Buality formulation like dry powered ials, ampoules capsules, tablets pallets dry syrups and liBuid syrups. .ndus ser es both domestic as well as international markets. 6ountries in which .ndus Pharma e!ports7

The product 6ategories ser ed by .ndus Pharma7 9ntibiotics7 6iplet (6iproflo!acin+ =!ef (6efota!ime+ 9nti2.nflammatory7 6eletab (6eleco!ib+ <yclo2P (<yclofenac Potassium+ 9n!ilytic7 Hromale! (HromaCepam+ 9nti2ulcerant7 9nCol()anitidine+ 6imetmat (6imetidine+ Iipid Iowering 9gent7 $nolip (9tor astatin+

5poid 9nalgesics7 Fentyl (Fentanyl+ <iaCepam (<iaCepam+ Premedicament $edati es7 "ilam ("idaColam+ 9nti29sthmetic7 .ndokast ("ontelukast $odium+ 9nti29llergy7 9ller il (Pheniramine "aleate+ .nCee (6etiriCine <i2A6l+ 9nti2=metic7 "etocolon ("etoclopramide+ <iuretics7 Frusid (Frusemide+ >eneral 9nesthesia7 .nstigmine (@eostigmine "ethylsulphate+ Proton Pump .nhibitor7 .ndaCole (=somperaCole+ 3itamins ; "inerals7 Aemoton2$ (.ronV "ulti itamins+ Following are the salient features of .ndus Pharma7 Hranded >eneric Formulations 6ontract "anufacturing of all dosage forms Aas undergone tremendous changes to upgrade the manufacturing facility, train people and produce and ensure Buality medicine. .ndus Pharma has a dedicated field force of o er '00 people co ering the entire country and calling more then 60,000 doctors and other prescribers e ery month as well as approaching all big and small pharmacies and institutions introducing .PPI products. .ndus Pharma has more then '0 distributors nationwide ensuring a ailability of goods to almost e ery maGor towns and cities. 9s per ."$ statistics of ST)2.., /00-, .ndus Pharma stands at 00th position in Pakistan pharmaceutical industry ( alue wise+ out of 6*0 multinational and national pharmaceutical manufacturing companies.

C-&

Efro5e

Indus

-harmev o

!abi 9asim

(t"o

+roo/es

Criti"al Su""ess 1a"tors "arket $hare Product Buality 5pinion Ieader Ioyalty $trategic 9lliances Product Testing Financial $trength <istribution @etwork $peed to market

%ei,hta ,e 0.0' 0.& 0.& 0./ 0./ 0.0' 0.&' 0.&' <

' &
0 /

& 0 &
& &

% BS B 0. 0' 0. 0 0. / 0. / 0. 6 0. 0' 0. &' 0. &' <B A

' 0
0 /

%BSB 0.&' 0.0 0./ 0.6 0./ 0.&' 0.0 0.0 =B=

' 0
0 0

%BS B 0.&' 0.0 0.0 0.* 0./ 0.& 0.*' 0.*' =B@ C

' &
0 /

%B SB 0.0 ' 0.0 0./ 0./ 0./ 0.0 ' 0.* ' 0.& ' <BD

%BS B 0.0 & ' '

0 /

' &
0 /

%B SB 0.0 ' 0.0 0./ 0./ 0./ 0.0 ' 0.* ' 0.& ' <BD

0.0 0./ 0.6 0./ 0.0 ' 0.* ' 0.& ' =

0 & 0
/ /

/ & /
0 0

& & &

0 &

0 & &
0 &

& & &

0 &

.ndus and 9tco ha e the highest ratings in $trategic alliance and apparently =froCe has no focus in this aspect..f =froCe forms a strategic alliance with an international research based organiCation, it has an opportunity to enter into a new segment of the market.

Product testing is strength and a competiti e ad antage of =froCe pharma. .t must be Gealously guarded and communicated. <istribution network appears to be a serious problem for =froCe as all other competitors are eBually good at this. =froCe has to create pull by increasing doctor detailing so that =froCe products become profitable for the distributor

Strate,i" (nalysis E 'e"ommendations

Su,,ested Strate,y: Iook at the $,5T analysis of =froCe Pharma, we ha e

suggested a focused differentiation strategy for the company mainly because it seems that the company has spread itself into too many segments e en though it does not ha e 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. ,e suggest that =froCe should focus its attention at a few product segments and try to become one of the top 0 companies in those markets, while di esting the products that are at a decline. The market segments chosen should be close to what =froCe does best or the segments that are offering the best chances of growth. =froCe can consider 9nti2diabetics, Pediatrics, >ynecology, 9nti2ulcerants and 6ardio ascular as its competition markets and establish its position in these segments first. -ros of 1o"used Differentiation 9llows specialiCation in the chosen segments 9llows streamlining of costs Possibility of gaining higher market share in chosen segments by offering a bunch of products .ncreased credibility among opinion leaders (doctors+

Cons of 1o"used Differentiation Trade2off between segments may inhibit growth if the left o er e!perience a boost segments

Possibility of increased supplier power if the products in chosen segments need uniBue raw materials

Corporate Strate,y -roposed

6orporate $trategy proposed to the company is $trategic 9lliance. >i en the en ironment of the pharmaceutical sector in Pakistan, and the financial constraints inhibiting ) ; < efforts, =froCe needs to find a source of inno ati e products to bring it to the front of competiti e arena. $trategic alliance with an international company shall enable the company to e ol e technologically. $pecifically, this step shall help =froCe in the following ways7 .t will increase the pace of introduction of new drugs Aelp in o ercoming deficiency in technical and manufacturing e!pertise "ay help in mastering inno ati e drugs and building new competencies that cannot be otherwise achie ed

E.istin, Strate,y of Efro5e# +est Cost Strate,y

9s we can see from the e!ternal and internal analysis, =froCe is stuck between the two generic strategies, trying to get the best of both worlds but failing on both counts. The danger of their e!isting 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.

$T)9T=>K F5)"#I9T.5@

The IE &atri.
The I1E Total %ei,hted S"ore

Aigh 0.0 to 0.99 "ediu m /.0 to /.99 Iow &.0 to &.99

$trong 0.0 to *.0 .

9 erage /.0 to /.99 ..

,eak &.0 to &.99 ...

.3

3.

The E1E Total %ei,hted S"ore

3..

3... Efro5e

.U

)arvest Or Divest: Aar est or di est strategies are characteriCed by the following actions7

"ake only essential commitments Prepare to di est $hift resources to a more attracti e segment

Following strategies are suggested7 9lliances with international companies to launch new products in Pakistan to cater to une!plored market. 9cBuire funds by issuing shares decreasing the le erage, to make in estments in to new product markets. <i est the products in the declining phase of the product life cycle such as Iipid Iowering 9gent, <igesti e =nCyme etc and shift resources to more profitable segments like anti2diabetics, anti2allergy etc (Products in the growth and maturity phase+ 6on ey the high Buality standards to target market through increased ad ertising. .ncrease sales force to build brand eBuity among doctors

 <e elop distribution network in international market.

Spa"e &atri.
9ggressi ati e Buadrant implies staying close to the firm's F$ e and not taking e!cessi e risks. 6onser ati e include market penetration, market de elopment, and concentric di ersification.

9 firm in the 6onser 6onser ati e basic competencies strategies most often product de elopment,

69

.$

<efensi e

=$

6ompetiti e

"arket penetration through better training of sales force $teps must be taken in order to increase product recall through gi eaways and seminars. 6reate molecules with international research companies through strategic alliances and de elop specialiCed products. )esearch on molecules and out license them to bigger companies.

*rand Strate,y &atri.

)9P.< "9)?=T >)5,TA Suadrant .. =froC e ,=9? 65"P=T.T.3= P5$.T.5 @ $T)5@> 65"P=T.T.3 = P5$.T.5@ Suadrant .

Suadrant ... $I5, "9)?=T >)5,TA &. "arket de elopment /. "arket penetration 0. Product de elopment *. AoriContal integration '. <i estiture 6. IiBuidation

Suadrant .3

.n the second Buadrant the firm needs to re ise its competiti e positioning. 9s the industry growth is brisk, first iable option is considering a set of intensi e strategies. Therefore intensi e strategies include product de elopment, market de elopment and market penetration.

&. <e elop products that ha e a higher profit margin, with in the regulations of price. /. <e elop ointment products with increased alue addition 0. =!plore markets in the "iddle =ast to further increase e!port sales *. .mpro e brand eBuity by promoting image of high Buality manufacturing '. "erger with firms that ha e distincti ely good research abilities to ha e a competiti e ad antage in pro iding clinical research to western companies. 6. 5btain franchising or licensing from international companies which do not ha e strong distribution network in Pakistan

"atri! 9nalysis and T5,$ $ummary

(lternative Strate,ies Forward .ntegration Hackward .ntegration AoriContal .ntegration "arket Penetration "arket <e elopment Product <e elopment 6oncentric <i ersification 6onglomerate <i ersification AoriContal <i ersification Roint 3enture )etrenchment <i estiture IiBuidation $ynopsis of $trategies7 &. Take ad antage of the clinical research done by some western companies by forming an alliance with these companies. /. <e elop new market segments such as ointment and infants milk segment or solutions manufacturing. IE S-(C E *'(! D CO2! T 0 0 & 0 0 0 & 0 0 0 0 / &

U U U

U U U U

U U U U

U U

0. 9d ertise to increase awareness and also to communicate the better Buality of products for impro ed health benefits. *. =!porting drugs by taking ad antage of the increased awareness created in the foreign markets such as "iddle =astern and 9frican markets. '. @egotiating with the go ernment to impro e price regulations. 6. )e amping the alue chain by remo ing unnecessary steps by using acti ity based costing. -. .mpro ing ) ; < to be able to cope up with the new molecules of other companies. 8. <ifferentiating the products by employing the highest Buality and safety standards. 9. $trict regulations and compliance to pre ent any leak outs and other confidential information. &0. #sing patents and intellectual property rights to protect market share of newly launched products. &&. Aighlighting the superior Buality and health benefits to foreign importers. &/. 9d ertisement should focus on communicating the superior health benefits, high Buality and hygienic standards and harmful effects of me2too products that compromise on Buality. &0. #sing key opinion leaders to communicate the superior Buality of products. &*. 6ontinuously in esting in research and de elopment to come up with new molecules. &'. 6onduct research and testing acti ities by highlighting .$5 &0-/' certified lab to gain first mo er ad antage in new product segments. &6. .ncrease sales by de eloping markets and by introducing new $?#4s.

&-. 6hanging the sales oriented culture of the company by in ol ing employees in strategy formulation at e ery step and position. &8. .mpro ing the distribution network by making alliances with distributors and other dealers. &9. 5utsourcing the ) ; < acti ities to foreign ) ; < firms.

/0. Airing more Buality employees and e!panding the sales force to increase the reach of products in other markets where a ailability is an issue. /&. Form strategic alliances with international companies to launch new molecules //. Product line e!tension by going into inGectibles an outsourced manufacturer for other

/0. ,orking as pharmaceuticals

/*. 6onducting clinical research for including "@6s in Pakistan

international companies

/'. <e elop new ointments for <ermatological .nfestations and =cCema /6. /-. /8. /9. 00. 0&. <e elop e!port market in #9=. Promote brand image of Buality and reliability =!plore new international markets for e!ports $treamlining alue chain through acti ity based costing Find new low cost suppliers of raw materials 9dopting latest Buality measures in product testing procedures products in e!isting segments to create

0/. <e elop new specialiCed offerings

00. Forming technology transfer agreements with international pharma companies to buy licenses and sell their products in Pakistan

0*. $trengthening company position by acBuiring small, less profitable companies 0'. "anufacturing drugs for other pharmaceutical companies

06. Harter agreement with international companies to conduct clinical research in e!change of e!clusi e marketing licenses for their latest products 0-. $ponsoring promising pharma students to go into research based programs abroad in e!change of e!clusi e rights to their researches 08. Forming alliances with foreign companies to market latest molecules 09. <e elop specialiCed brands in specific disease categories

*0. Form strategic alliance with A=R chemical research institute to buy marketing rights of their research. *&. .ndus and 9tco ha e the highest ratings in $trategic alliance and apparently =froCe has no focus in this aspect. .f =froCe forms a strategic alliance with an international research based organiCation, it has an opportunity to enter into a new segment of the market. */. Product testing is strength and a competiti e ad antage of =froCe pharmaceutical. .t must be Gealously guarded and communicated. *0. <istribution network appears to be a serious problem for =froCe as all other competitors are eBually good at this. =froCe has to create pull by increasing doctor detailing so that =froCe products become profitable for the distributor **. <e elop products that ha e a higher profit margin, with in the regulations of price. *'. <e elop ointment products with increased alue addition

*6. .mpro e brand eBuity by promoting image of high Buality manufacturing

*-. "erger with firms that ha e distincti ely good research abilities to ha e a competiti e ad antage in pro iding clinical research to western companies. *8. 5btain franchising or licensing from international companies which do not ha e strong distribution network in Pakistan 9lliances with international companies to launch new products in Pakistan to cater to une!plored market. *9. 9cBuire funds by issuing shares decreasing the le erage, to make in estments in to new product markets. '0. 6on ey the high Buality standards to target market through increased ad ertising. '&. '/. .ncrease sales force to build brand eBuity among doctors <e elop distribution network in international market.

'0."arket penetration through better training of sales force

'*. $teps must be taken in order to increase product recall through gi eaways and seminars. ''. 6reate molecules with international research companies through strategic alliances and de elop specialiCed products.
'6.)esearch on molecules and out license them to bigger companies. "arket

penetration through better training of sales force.

'-. $teps must be taken in order to increase product recall through gi eaways and seminars.

'8. 6reate molecules with international research companies through strategic alliances and de elop specialiCed products.

'9. )esearch on molecules and out license them to bigger companies. 60. <i est the products in the declining phase of the product life cycle such as Iipid Iowering 9gent, <igesti e =nCyme etc and shift

resources to more profitable segments like anti2diabetics, anti2allergy etc (Products in the growth and maturity phase+

(nalysis
From the S$P" "atri!, we found that strategy 0 is more attracti e as the sum total score of the strategy is *.90. $trategy & can also be considered as an attracti e strategy as its total attracti eness score of *.'6 wh is closer to the score of strategy 0.

Strate,y =
-rodu"t Development: Strate,i" (llian"es Companies to Introdu"e $atest &ole"ules with International

The parties of the alliance will benefit in such a way that the international company will be able to e!ploit a new market through =froCe and will be able to use its certified laboratory for its tests. .n this way =froCe will be able to enter into the field of 6)5 which is another great opportunity for the company. 5n the other hand, =froCe can gain competiti e edge by getting e!clusi e rights to market latest molecules of international companies. This can also lead to higher market share.

<B &a"ro#environmental analysis and Industry (ttra"tiveness: $tudents will research the application of Porters4 ' forces model of the industry your company is in. They will use their findings, to describe, using this model, the strategic competiti e dynamics within the industry. $tudents will research the political, legal, economic, social and technological factors which impact on the industry the company is in. 9nalyCe these factors and draw inferences on how they determine the key dri ing forces affecting the industry in general. $ummariCe what strategic issues the macro2en ironment entails for your company in general terms. 6onstruct an =F= matri! from the researched data and deduce strategic e aluations from it. =!plain what competiti e threats and opportunities your company would need to address in order to gain competiti e ad antage and how. $ummariCe pro isionally what particular courses of actions it would need to undertake.

=B Company and "ompetitor analysis:# )esearch what the key success factors are likely to be in your companies industry. =mploying the method of comparati e strength assessment rank your companies4 performance on the key success factors in relation to its competitors (6P"+.

= aluate the particular internal competencies the company needs to de elop or strengthen, to address the key success factors.

=B &i"ro#environmental analysis and internal "ompany resour"es: )esearch and analyCe the internal resources of the company7 "anagement of its alue chain, its core competencies if any, its strategic cost management processes and the trend of key financial ratios and its functional competencies. 6onstruct an .F= from the research and make a strategic e aluation.

FB Strate,i" analysis and re"ommendations: Hased on your research and analysis in &, / and 0, report to the board what generic strategy the company needs to gain a comparati e or competiti e ad antage. = aluate the strategy in terms of your understanding of the pros and cons of the generic strategies. Aow would you recommend the company to e ol e a 6orporate $trategy from its 6ompetiti e 9d antageJ 6ompare this to what you think their e!isting strategy is. $hould the company change strategyJ ,hy or notJ = aluate your alternati e strategy recommendations using the input : matching : decision model.

CB Strate,i" Implementation: =mploying the components of strate,i" implementation6 e!plain to the board what the company will need to do to implement a new strategy or fine tune its e!isting strategy. ,hat pitfalls could arise in implementationJ )ecommend to the board, the balan"ed business s"ore"ard as a strategic performance e aluation process distinct from the traditional accounting:financial, marketing and A) e aluation methods.