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University of Dhaka

A Report on-
Pharmaceutical Industry Analysis of Bangladesh




Submitted to:

Md. Maksudur Rahman Sarker, FCMA
Professor
Departmaent of Accounting & Information Systems
University of Dhaka.







Prepared by:
S.M. Ibne Sad (16118)
Md. Azizur Rahman (16131)

Rafsan Mahbub Robin (16178)
Department of Accounting & Information Systems
University of Dhaka



Date of Submission: 29
th
August, 2013.

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Pharmaceuticals
Industry of
Bangladesh






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Contents
Executive Summary ........................................................................................................................ 4
Introduction ..................................................................................................................................... 5
INDUSTRY OVERVIEW .............................................................................................................. 6
Competitive structure ...................................................................................................................... 7
Recent Development: .................................................................................................................... 11
Period of Tax Holiday and Tax Holiday Rate .............................................................................. 12
TRIPS ............................................................................................................................................ 12
API Park ........................................................................................................................................ 13
Formulations Market:.................................................................................................................... 13
Industry Outlook: .......................................................................................................................... 14
Local Market ............................................................................................................................. 14
Export ........................................................................................................................................ 15
Expected scenario after TRIPS Implementation ....................................................................... 16
Growth Trend in recent years in Pharmaceuticals industry: ......................................................... 18
Pharmaceuticals Trade information of Bangladesh: ..................................................................... 19
Regulatory environment................................................................................................................ 20
ROE calculation: ........................................................................................................................... 21
Ratio analysis: ............................................................................................................................... 24
What should be the share price? ................................................................................................... 29
SWOT Analysis ............................................................................................................................ 32
Porter's Five Forces Analysis for the Pharmaceutical Industry .................................................... 33
Findings of our study: ................................................................................................................... 34
Recommendation: ......................................................................................................................... 35
Conclusion: ................................................................................................................................... 36
References: .................................................................................................................................... 37





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Executive Summary

Pharmaceutical is the core of Bangladeshs Healthcare sector, and serves as one of the most
important manufacturing industry. With a history since 1950s, the industry has now turned one
of the most successful pharmaceuticals manufacturing industry among the developing countries.
Presently, the industry meets 97% of local demand and exports to more than 80 countries.

Being part of healthcare sector, its performance is related to demographic variables like
population growth as well as economic growth and healthcare policy. In our country, with
improving demographic characteristics, recent economic growth and favorable policy, the
industry has seen good growth.

The industry has been expanding locally and internationally. Local market grew at 23% in 2010,
while import reached USD 50 Million landmark. A number of firms got accreditations from
USA, UK, Australia etc. developed markets, and are underway toward expansion into the
developed markets. Locally, firms are preparing themselves for post 2016 scenario, when TRIPS
will be implemented. Almost all the firms are upgrading their facilities and taking up precautions
for post 2016 scenario, while aggressively expanding in both local and export markets.

While TRIPS and import dependence on raw materials put challenges to the growing sector,
prospect of the sector depends largely on the interactions among the players, regulatory bodies
and the govt., whether they can meet up the requisites to continue growth of the sector while
facing the challenges




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Introduction

The biggest problem that Bangladesh is facing at this time is consistent break down. And the
government as ever is not ready to play any role to solve this problem. The economy of
Bangladesh is suffering allot due to this problem. The unemployment ratio is climbing high and
high.

While geographic diversification and investment into the pharmaceutical and healthcare sector of
emerging economies, such as Bangladesh, may be a favorable strategy for any multinational
pharmaceutical company it is vital that a company recognizes both the rewards and the risks
present in a market. With regards to assessing risks in the Bangladeshi healthcare sector, we have
identified those emanating from the states political/economic profile (such as high inflation) and
industry specific dangers (such as low per-capita spending and poor access to healthcare
facilities) that call into question the likelihood of anticipated returns being realized over the
assessed time period.






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INDUSTRY OVERVIEW

A brief history

The history of Pharmaceuticals industry dates back to 1950s. Over the years, the industry has
gone through some significant changes. After liberation in 1971, the industry was largely
dominated by MNCs, and the country was very much imported dependent. In 1982, through the
formulation of national drug policy, and drug control ordinance, a defined guideline for the
development of the industry was created. By then, 75% of the market was dominated by the
MNCs, whereas the rest were shared by some 133 local firms. Since then, the local firms have
established a stronger foothold, and the country has become from an import dependent to an
active exporter of pharmaceuticals products

Industry Classification

As per Global Industry Classification Standard (GICS), it can be defined as Pharmaceuticals
industry, a part of Healthcare Sector.

Industry Structure

The industry has some distinct features compared to other countries. First, R&D activity is
virtually nil in Bangladesh pharmaceutical industry it is a branded generic market. At present,
there is approximately 258 manufacturers, with approximately 8000 branded generics in
Bangladesh pharmaceuticals market. Companies basically manufacture finished formulation by
assembling known generic and patented (in some cases) product combination. Some firms have
been engaged in producing APIs, the core of pharmaceutical products, but these productions are
limited to synthesis stage (final stage) only


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Competitive structure

Degree of concentration

Being Branded-generic product oriented business, manufacturers usually are able to charge a
premium for established brands, and enjoy a relatively stable market share. As a result, the list of
top performing firms has been quite consistent over the years, with the leader, Square
pharmaceuticals topping since 1985.

Over the last three years, the top 4 players are consistent, with 5th to 10th position interchanged
among 6 market players. As a total, top 5 firms capture on average 45% of the aggregate market.
Adding 5 more to the list brings on average 66% of total market to Top 10. Thus the market is
very much concentrated.

Market Dominance

Prior to formulation of National Drug Policy and Drug control ordinance, the market was chiefly
controlled by MNCs, holding about 75% of total market (1985). Since then, market structure has
changed, and now local firms dominate the industry. At present, 97% of local demand is met
from local production, and the top 10 MNCs possess only 9.05% of market share, compared to
67.6% held by local top 10 firms.




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Key Players:
Due to the branded generic nature of products, companies are usually able to charge a premium
price, while enjoy stable position. As a result, the top performing companies in the industry are
relatively consistent over the years, often along with their respective market position. The market
leader is Square pharmaceuticals, which have enjoyed the top position since 1985. At present, it
has a 19.19% market share. The next player is Incepta, followed by Beximco, Acme, Opsonin,
and others. The top 5 firms are almost the same over the years, often with little change in order
Market share of the top 5 firms over last two years are presented below:


0.00% 20.00% 40.00% 60.00% 80.00% 100.00%
Series 3

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Segmentation
The overall business activities of pharmaceuticals can be classified in three layers. The primary
layer is R&D Activities where research and development of new drugs are done, and this
business concerns Drug Discovery, and development. This is often a very costly and high risk
business, and for many of global Pharmaceutical firms, represent the majority of costs. However,
in Bangladesh, this activity is nil, and all the firms are producers of known and established drugs.
The second layer is manufacture of ingredients for finished formulations. These activities cover
production of Active Pharmaceuticals Ingredients (API), Excipients, and Solvents etc. that are
used as raw material in producing the final drug formulations. Among these, the major business
area is in production of APIs, also known as Bulk drugs business that has a large global market.
In Bangladesh, companies have only recently entered API business.


API, Excipients and other ingredients
Historically, Bangladesh has been dependent on imports for APIs and other ingredients.
Companies imported APIs and other materials and used them for final production. The
pharmaceutical manufacturers in Bangladesh procure raw materials from various countries
namely UK, France, Germany, Japan, Holland, Italy, Denmark, China, Switzerland, Austria,
Hungary, India, Ireland etc. Recently, local firms have been approaching to producing

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ingredients locally, especially API. These have reduced dependency on imported raw materials
to 70% of total.

Active Pharmaceutical Ingredient or API is the core element of pharmaceutical products, and is
the primary cost component for production. At present, there are 21 companies in Bangladesh
manufacturing 41 APIs. Industry participants claim already becoming self-sufficient in some
APIs, namely, Penicillin, Cephalexin, NSAID and Anti-Pyretic. The production of APIs is
confined to the last stage of Synthesis. Presently, Local APIs take a 20% share in domestic
production. The rest 80% is imported. These imported APIs represent majority of raw materials
import by Bangladesh, approximately 70%.





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Recent Development:
Budget

In the recent budget 2012-13, Pharmaceuticals industry has seen some positive moves.
Withdrawal of VAT (15%) and Import duty (5%) from leukocyte filter import by
pharmaceutical companies.
Withdrawal of supplementary duty (20%) and reduction of import duty (12% from
25%) for Cartridge/ Membrane filters import by pharmaceutical companies.
Reduced duty (3% from 12%) for sandwich panel import by pharmaceutical
companies.
Reduced duty for import of certain pharmaceuticals raw materials (5% from 12%).
Extending eligibility for tax holiday from June 2011 to June 2013. The declared moves
will most likely result in following changes -
Reduced duty will lower product cost for certain product classes (Anticancer
drugs, Analgesics, Antipyretics, and Injectables) providing potentials for local
pharmaceuticals manufacturers.
In addition, completion of the API Park within 2011-12 would provide
pharmaceutical industry a cheaper source of API, improving cost efficiency.
Meanwhile, tax holiday would help reduce eligible producers (API and Finished

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formulation) tax obligations and achieve better return. Active Fine Ltd. will be
one of the major beneficiaries from the inclusion of this sector under tax holiday.
Period of Tax Holiday and Tax Holiday Rate
For Dhaka and Chittagong divisions (excluding districts of Dhaka, Narayangonj, Gazipur,
Chittagong and three hill districts) other divisions and three hill districts .


Tax holiday period Tax holiday rate Tax holiday period Tax holiday rate
First two years 100% First three years 100%
Next two years 50% Next three years 50%
Next one year 25% Next one year 25%
TRIPS
In 2001, under the trade-related aspects of intellectual property rights (TRIPS), the World
Trade Organization allowed developing and poor nations to produce generic drugs without
compulsory licenses or paying the patent holders for a certain time frame. For developing
countries like India and China, the timeline was up to 2005. For Least developed
countries, including Bangladesh, the time line was up to 2016. Within this timeframe,
pharmaceutical industries are legally allowed to reverse engineer, manufacture and sell
generic versions of on-patent pharmaceutical products for domestic consumption as well as for
export to other LDCs.

And as 2005 passed, developing countries like India and China had to stop exporting to
other LDCs due to TRIPS implementation. This opened a wide export opportunity for
Bangladesh, since it is the only country among the 49 LDCs having a strong
manufacturing base in Pharmaceuticals. And since then, Bangladeshi firms has been
experiencing a surge in exports.
Recently, the least developed countries have sought an extension of the deadline from 2016 to
2021, as most of them have not yet enjoying the benefits of TRIPS relaxation. In addition, WTO

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still could not finalize the list of patented products. If such an extension is provided,
Bangladeshi pharmaceutical industry is most likely to enjoy a good growth from exports
to LDCs. (Source: IDLC Research)

API Park
The government has undertaken a Pharmacy Ingredient project with an estimated cost of
BDT 235Crore, which is to be completed by Dec-12. The project would include common
ETP and adequate utility services. The costs would be borne by Plot Owners, on a 60%
Allotment and 40% Installments basis. The Projected impact of this project is to save 90% of
pharma ingredient (API) import. At present, land filling of the park is to be completed by June
2011.

Formulations Market:
Presently, the formulations market is shifting gradually from acute care to chronic care. Many of
the previous high growth Branded generic products are experiencing lower growth, and price
based competition is getting intense over time. Regionally, pharmaceutical business is
experiencing higher growth in areas like Chittagong and Rajshahi. Whereas Dhaka region had a
growth of 18% in 2010, Chittagong and Rajshahi showed a growth of 24% and 33%
respectively.

Due to higher direct sales and aggressive marketing strategy pursued by companies, wholesalers
role is on the decline. In 2008, their contribution stood about 20.73%; by 2010, it has
fallen to 16.19%. (Source: IMS)
A tendency toward producing Raw materials locally has been seen as firms are now
manufacturing everything from pellets to freeze-dried injections to IV amino acids.
Alongside, entry of local firms into High end product segment (Insulin, Anticancer etc)
is also noticeable. In the insulin market, Square Pharmaceuticals has already made its
entry, providing at 22% lower price than imported ones. Novo-Nordisk, the largest producer

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of insulin (80% of local market), has established a 5 million vials insulin plant that is to be
operational from October 2011. In the anticancer field, Beacon Pharma, Orion, Square
pharmaceuticals, Renata etc several firms have made entry.
Firms has been establishing cGMP compliant plants, and some has already achieved
accreditations from UK,USA, Australia etc countries which suggest a stronger
international presence in upcoming future. Among the top firms, Beximco Pharmaceuticals
Ltd. has already made an agreement with Adamis Pharmaceuticals of USA to introduce
four drugs in the US market over within 2013.

Industry Outlook:
Globally, Bangladesh market has demonstrated the highest growth among all countries in
2010. Whereas Global market and Afro-Asian market is growing at a rate of 6.70% and
15.70% only, our country is demonstrating an annualized growth of 24.58%. As a result
of such significant growth along with a consistent economic growth of around 6%,
recently Bangladesh was included on the Goldman Sachs "Next Eleven" list as well as
the JP Morgan "Frontier Five". As per their observation, Bangladesh represents significant
potentials to become an important global manufacturer of pharmaceuticals, joining China, India,
Brazil and Russia. (Source: IMS)


Local Market
Being part of health care sector, domestic market size of pharmaceuticals has a direct
relationship with economic variables, such as population growth, healthcare expenditure,
income level etc. In Bangladesh, the industry has been experiencing a good growth over
the last few years. The growth is attributable to rising population with increasing healthcare
expenditure per capita. Noticeably, the increase in healthcare expenditure is due to higher
level of private pending, demonstrating a rising health awareness among the people. As
demographic variables improve over the coming years, the industry is expected to
continue its growth at least up to the implementation of TRIPS [2016 expected]. However,

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the growth is not expected to be uniform across the market due to differences among the
segments.

API
The API industry is still at its infancy and significant growth opportunity exists for the
companies. In local market, there is a large gap between local demand and local supply,
as 80% of total demand is yet fulfilled from imported APIs.

Formulation
In formulations, several changing trends are observed. Price based competition is increasing
within the local market. New investments are also taking place. Firms are entering into
previously unencharted territories like insulin, Anti Cancer etc products. And almost all the
firms are increasing product lines each year. Thus growth is likely to continue for the coming
future.

Export
The export market has shown significant growth over the years. Since 2004, Exports have
increased multifold, with export destinations rising from 37 in 2004 to 84 in 2011.

API
Due to the relaxations provided by TRIPS up to 2016, APIs can bring huge opportunities
from exports. This is because for API (also known as Bulk Drugs), there is no stringent
registration requirement and the operational as well as promotional costs are also
nominal. The only decisive factor in this regard is the cost competitiveness. API can be
exported to several countries if cost effectiveness is ensured. But Being confined to synthesis
stage only, Bangladesh has to rely on import of core compound, solvent and other
intermediates. Thus cost effectiveness of local production can be a bit dependent on
import costs. Alongside, these productions often also entail effluent treatment plans, requiring a
high investment. Further, economy of scale is yet to be achieved, and high investment
requirement has troubled achieving entrepreneurs attention.

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Formulation

Finished formulations (finished products) have a global market with varying rules and
regulations. In terms of regulatory structure, overseas markets can be categorized in three ways.
First one is the Highly Regulated Markets like USA, UK etc. that require various certifications
like USEDA, UKMCA etc. And need huge investment in facilities and documentation. Second
one is the Moderately Regulated Markets like Russia, Singapore etc. which usually ask for
Bioavailability, Bioequivalence, Clinical Trials etc. Third category is the Less Regulated
Markets like Myanmar, Sri Lanka, Nepal, Kenya, Yemen etc. Bangladesh has already
entered less regulated markets. And entry in moderately regulated markets are already
taking place. To continue future growth in exports, Bangladesh will have to enter the
highly regulated markets soon. In this regard, some of the major companies have already
made million dollar investment in their manufacturing and R&D facilities, and are going for
certification in the highly regulated markets.



Expected scenario after TRIPS Implementation
The present relaxation of TRIPS is to be withdrawn from 2016. This will create a radical
change in the industry scenario as several major changes is expected. First, price control
will be lifted. Producers have to pay for patented products, as well as license fees. Meanwhile,
export of patented products will face problems, as Bangladesh cannot export patented
products without patent owners approval [which will be more costly]. In addition, foreign
firms will get access to local market, and MNCs can produce several products in
Bangladesh that are not allowed now. However, the impact will not be as much devastating as it
seems, because about 75% of the drugs in the WHO list are not subject to Patent
protections. And many of the products in Bangladesh are generics, thus not subject to
patent protections. However, costs from licensing fees, impeded access to export markets,
withdrawal of local protection, and potential rise in import costs (especially APIs) represent

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significant challenges in the post TRIPS implementation scenario for Bangladesh
pharmaceuticals industry.














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Growth Trend in recent years in Pharmaceuticals industry:















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Pharmaceuticals Trade information of Bangladesh:

Year Value USD Mn (current prices)
2000 2119652 2.12
2001 3957480 3.96
2002 6995071 7.00
2003 6423924 6.42
Pharmaceuticals export 2004 1953941 19.53
2005 1817710 18.18
2006 26960916 26.96
2007 37740790 37.74
2008 46541954 46.54
2009 45714931 45.71

2000 139700056 139.70
2001 124578340 124.58
2002 137591660 137.59
2003 145064519 145.06
Pharmaceuticals Import 2004 149661640 149.66
2005 147419132 147.42
2006 171527526 171.53
2007 229142923 229.14
2008 293733231 293.73
2009 269029761 269.03




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Regulatory environment
The industry is regulated by Drug regulatory authority (DRA) through the Drug Control
Ordinance of 1982, and National Drug policy 2004.

Pricing:
Under the present regulatory structure, government fixes the maximum retail prices (MRP) of
209 essential drug chemical substances. Other drugs, listed as non-essential, are priced through
an indicative price system. For imported finished products, whether they fall in the category of
vital or non-vital drugs, a fixed percentage of markup is applied to the C&F price to obtain the
MRP. For local distribution, all drugs must be registered with DRA. However, for export
purpose, such registration is not mandatory.

Key registration areas:

1. Combination drugs (other than vitamins, nutritional preparations or therapeutically useful) are
not allowed
2. For imported drugs, GMP validation, bioavailability and bio-equivalency are important
registration criteria

Drug Production regulations:

1. Firms are required to upgrade their productive facilities to ensure cGMP is followed.
2. Foreign and MNCs are allowed to manufacture drugs in Bangladesh only if at least three of
their original research drug products are registered in at least two of the following countries:
USA, UK, Switzerland, Germany, France, Japan, and Australia.
3. Drugs not in BP, USP, IP, INN or BPC will not be allowed to manufacture.
4. Foreign firms can produce drugs in Bangladesh under licensing agreement following certain
conditions.
5. For export purpose only, any drug can be produced in Bangladesh
Drug distribution, storage and sale:
1. Only registered drugs are allowed for sale

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2. Other than OTC drugs, no drugs should be sold without prescriptions.
3. Advertisements are not allowed
ROE calculation:

Bexemco Pharma:

ROE (2012) =



=

= 7.4256%

ROE (2011) =



=

= 7.2414%

ROE (2010) =



=

= 7.8307%

Square Pharma:

ROE (2012) =



=

= 19.2638%

ROE (2011) =




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=

= 19.8289%

ROE (2010) =



=

= 19.1847%

IBN sina:

ROE (2012) =



=

= 10.4807%


ROE (2011) =



=

= 9.204%

ROE (2010) =




=

= 11.33%





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Reneta Pharma:

ROE (2012) =



=

= 27.42%

ROE (2011) =



=

= 31.39%
ROE (2010) =



=

= 33.23%

GlaxoSmithKline Pharma:

ROE (2012) =



=

= 21.14%

ROE (2011) =



=

= 20.12%

ROE (2010) =



=

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= 33.72%

Explanation: Return on equity measures the performance of a company. Return on equity
implies how the stakeholders of a company getting back their money from the investment. High
ROE is the indication of well being of the company. At the same time, Risk factors must be
considered along with ROE. From the analysis of the top pharmaceuticals company of our
country, we found that Square, Reneta, Glaxosmithkline are in the top position in case of ROE.
Ratio analysis:

Square Pharma 2012:

P/E ratio = Current share price EPS
= 222.6 10.94
= 20.34

Current ratio = Current asset Current liabilities
= 674550708 4252934845
= 1.5860

Gross profit margin = GP Net sales
= 6887171623 16054425243
= .4289 or 42.89%

Return on Asset = Net Income Average total asset
= 2897710641 20449077208
= .1417 or 14.17%

Debt/Equity ratio = Total liability Shareholders equity
= 5186900507 16266884255
= .3188 or 31.88%

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Fixed Asset turnover = Revenue Property, Plant and Equity
= 16054225243 8767827062
= 1.83106

Square Pharma 2011:

P/E ratio =Share price EPS
= 161 12.3
= 13.08

Current ratio = Current asset Current liabilities
= 7022213840 4668189426
= 1.504


Gross profit margin = GP Net sales
= 5767763459 13471424469
= .4281 or 42.81%

Return on Asset = Net Income Average total asset
= 2532054550 15448177104
= .1639 or 16.39%

Debt/Equity ratio = Total liability Shareholders equity
= 5626700664 13817708990
= .4072 or 40.72%

Fixed Asset turnover = Revenue Property, Plant and Equity
= 13471424469 6981559781
= 1.9295

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Beximco Pharma 2012:

P/E ratio =Share price EPS
= 49 4.33
= 11.31

Current ratio = Current asset Current liabilities
= 819742195 3064944769
= .2674 or 26.74%

Gross profit margin = GP Net sales
= 4389401427 9289115284
= .4725 or 47.25%

Return on Asset = Net Income Average total asset
= 1319389328 238115755625
= .0055 or .55%


Debt/Equity ratio = Total liability Shareholders equity
= 6181648733 18408161859
= .3358 or 33.58%

Fixed Asset turnover = Revenue Property, Plant and Equity
= 9289115284 16201858216
= .5733

Beximco Pharma 2011:

P/E ratio =Share price EPS
= 45 3.93

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= 11.45

Current ratio = Current asset Current liabilities
= 714846275 2648161988
= .2699 or 26.99%

Gross profit margin = GP Net sales
= 3786532822 7890241843
= .4790 or 47.90%

Return on Asset = Net Income Average total asset
= 1198525342 207123254617
= .0057 or .57%

Debt/Equity ratio = Total liability Shareholders equity
= 5905212356 17128128177
= .3447 or 34.47%

Fixed Asset turnover = Revenue Property, Plant and Equity
= 7890241843 15745492625
= .5011
IBN Sina Pharma 2012:

P/E ratio = Share price EPS
= 77 4.13
= 16.64

Current ratio = Current asset Current liabilities
= 324503396 281239972
= 1.1538


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Gross profit margin = GP Net sales
= 779328141 2009421297
= .3878 or 38.78%

Return on Asset = Net Income Average total asset
= 66826417 1013739725
= .06592 or 6.592%

Debt/Equity ratio = Total liability Shareholders equity
= 387260530 661316493
= .5855 or 58.55%

Fixed Asset turnover = Revenue Property, Plant and Equity
= 2009421297 372063184
= 5.4075

IBN sina 2011:

P/E ratio = Share price EPS
= 90 3.39
= 26.54

Current ratio = Current asset Current liabilities
= 294802418 285818423
= 1.0314

Gross profit margin = GP Net sales
= 679640307 1755260815
= .3872 or 38.72%

Return on Asset = Net Income Average total asset

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= 54916571 9032548832
= .0060 or .60%

Debt/Equity ratio = Total liability Shareholders equity
= 364987324 613915103
= .5945 or 59.45%

Fixed Asset turnover = Revenue Property, Plant and Equity
= 1755260815 32916404
= 5.3324

What should be the share price?
Square Pharma:

What should be the share price =

= 162.03
Explanation: The share price of the Square pharmaceuticals limited is not overpriced. A rational
investor always tries to find out whether the share price is underpriced or overpriced.
Workings: Where, Growth = ROE * Retention ratio
= 19.2638* (1-.0597)
= 18.11%

Required rate of return (Ke) =

= 36.33%


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Beximco Pharma:
What should be the price of share =

= 52.05
Explanation: The share price of the Beximco pharmaceuticals limited is not overpriced. A
rational investor always tries to find out whether the share price is underpriced or overpriced.

Workings: Where, Growth = ROE * Retention ratio
= 7.4256 * (1-.6149)
= 2.8595%

Required rate of return (Ke) =

= (5*1.028595)/ 52 + 2.8595
= 12.74%

IBN sina:
What should be the price of share =

= 77
Explanation: The share price of the IBN Sina pharmaceuticals limited is not overpriced. A
rational investor always tries to find out whether the share price is underpriced or overpriced.

Workings: Where, Growth = ROE * Retention ratio
= 10.4807*.3212
= 3.365%

Required rate of return (Ke) =

+ .03365

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= .1678%


Glaxosmithkline Pharma:
What should be the price of share =

= 541
Explanation: The share price of the Glaxosmithkline pharmaceuticals limited is overpriced. A
rational investor always tries to find out whether the share price is underpriced or overpriced. If
share price is more than what it is likely to be, an investor should not buy the share of that
company.

Workings: Where, Growth = ROE * Retention ratio
= 21.14 * .2802
= 5.9252%

Required rate of return (Ke) =

+ .0592
= .0886 or 8.86%










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SWOT Analysis


Strengths

Capital
Work force
Strong Research and Development
Low environment hazardous pro
activities


Opportunities

Tax Rebate
Cheap Labor
Latitude Advantage
Government is pro rata
High future increase in demand for
drugs
Drug Shortage

Weaknesses

High cost and insufficiency in
acquiring raw materials and
machineries
High initial investment and high cost
of running the business
Transportation Cost and machineries
plantation cost
Long time
Limitations of land space
Threats

Political Situation of our country
Entry of Competitors
Tax of import of raw
Export quota(voidable)
Weather






T
S
W
O

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Porter's Five Forces Analysis for the Pharmaceutical Industry

Porter's Five Forces Model helps strategic business managers analyze the industry in which their
companies operate to determine what can be done to get an advantage over their existing
competitors and also to determine how attractive a particular industry would be for new entrants.

Porter's Five Forces are:
1) Threats of entry posed by new or potential competitors
2) Degree of rivalry among existing firms
3) Bargaining power of buyers
4) Bargaining power of suppliers
5) Closeness of substitute products.

1. Threats of entry posed by new or potential competitor (LOW)
High entry barriers due to costs associated with research & development of new drugs
(i.e. years of investment in R&D for a drug that may/may not work)
Government regulation (i.e. FDA)
The threat of entry posed by new or potential competitor is a LOW competitive force due
to the above entry barriers & regulatory constraints.
2. Degree of rivalry among existing firms (HIGH)

High rivalry among main companies in the industry. For example the current rivalry in
the erectile dysfunction space where Bayer & GlaxoSmithKline claim that Levitra works
faster or Eli Lilly & ICOS claim that Cialis works longer than Pfizers Viagra

The degree of rivalry among existing firms is a HIGH competitive force

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3. Bargaining power of buyers (MEDIUM)
Hospitals & other health care organizations buy in bulk quantities and exert pressure on
pharmaceutical companies to keep prices in check
Regular patients have lost bargaining power due to price increases in generic drugs
The bargaining power of buyers is a MEDIUM competitive force.
4. Bargaining power of suppliers (LOW)
Sales for the pharmaceutical industry concentrate in a handful of large players and that
has decreased the bargaining power of suppliers.
The bargaining power of suppliers is a LOW competitive force
5. Closeness of substitute products (HIGH)
Demand for generic versus brand name drugs has increased because of the costs
Generic drug companies do not have the high costs associated with the research &
development of new drugs and that allows them to sell at cheaper prices
The closeness of substitute products is a HIGH competitive force

(Overall and based on the above analysis of Porters Five Forces, we can conclude that the
pharmaceutical industry is not attractive for new entrants.)
Findings of our study:
In Pharmaceuticals industry maintaining a good environment is a critical successful factor. It is
seen that a lot of companies fail to maintain proper environment for the production of drugs. To
be successful here in this industry, company must control the environment.

Although pharmaceuticals industry has a bright opportunity to be grown here in Bangladesh,
there is no separate park for the industry.


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Government and Company owners are less conscious of R&D activities. R&D is the soul of any
kind of industry. Without proper research and development it is impossible to meet the demand
of time.

From the neighbor country cheap and less quality drug may enter illegally into the country.
Thats why; Government needs to be careful enough in all the site of this industry.

Recommendation:

Expanding Pharma Market:

Expansion of the pharma market in abroad will be a key potential success factor of this industry.
Although we are exporting our drugs, we are facing a lot of pressure. If government takes
initiative, this problem can be solved very easily.

Applying field force strategy:

In capturing the market share there must have some key personnel like filed forces, medical
promotion officers, and regional officers. To be competitive in the market, companies must
appoint these personnel.

Proper distribution channel and availability of drugs:

Drugs should be distributed by owned distribution channels to the market. Random distribution
by unauthorized persons creates a lot of problems. Sometimes they take illegal way to distribute
the drugs and make variation to the price of medicines.

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Conclusion:
The pharmaceutical market of Bangladesh is very dynamic and competitive. The market here is
comparable to the market in the developed countries. Every year the national market is
expanding. Most of the inputs are imported which causes high volume of inventory and lower
number of orders. The market is characterized with having huge diversified products, higher
level of inventory and aggregate liquidity requirement. To sustain in this highly competitive
environment firms engage in sophisticated and efficient working capital management. The firms
engage in global level software tools with traditional methodologies to be in their optimum level.
Firms with better working capital management gain better competitive advantage.



















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