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Chapter 1 - Introduction
------------------------------------------------------------------------------------------------------------------------------------------------
Indian Pharmaceutical Industry
The Indian Pharmaceutical Industry today is in the front rank of India’s science-based industries
with wide ranging capabilities in the complex field of drug manufacture and technology. A highly
organized sector, the Indian Pharma Industry is estimated to be worth $ 4.5 billion, growing at about
8 to 9 percent annually. It ranks very high in the third world, in terms of technology, quality and
range of medicines manufactured. From simple headache pills to sophisticated antibiotics and
complex cardiac compounds, almost every type of medicine is now made indigenously.
Playing a key role in promoting and sustaining development in the vital field of medicines, Indian
Pharma Industry boasts of quality producers and many units approved by regulatory authorities in
USA and UK. International companies associated with this sector have stimulated, assisted and
spearheaded this dynamic development in the past 53 years and helped to put India on the
pharmaceutical map of the world.
The pharmaceutical industry in India meets around 70% of the country's demand for bulk drugs,
drug intermediates, pharmaceutical formulations, chemicals, tablets, capsules, orals and injectibles.
There are about 250 large units and about 8000 Small Scale Units, which form the core of the
pharmaceutical industry in India (including 5 Central Public Sector Units). These units produce the
complete range of pharmaceutical formulations, i.e., medicines ready for consumption by patients
and about 350 bulk drugs, i.e., chemicals having therapeutic value and used for production of
pharmaceutical formulations.
1
ADVANTAGE INDIA
1.
Competent workforce: India has a pool of personnel with high managerial and technical
competence as also skilled workforce. It has an educated work force and English is commonly
used. Professional services are easily available.
2.Cost-effective chemical synthesis: Its track record of development, particularly in the area of
improved cost-beneficial chemical synthesis for various drug molecules is excellent. It provides a
wide variety of bulk drugs and exports sophisticated bulk drugs.

3.Legal & Financial Framework: India has a 53 year old democracyand hence has a solid legal
framework and strong financial markets. There is already an established international industry and
business community.
4.Information & Technology: It has a good network of world-class educational institutions and
established strengths in Information Technology.
5.Globalizations: The country is committed to a free market economy and globalization. Above all,
it has a 70 million middle class market, which is continuously growing.
6.Consolidation: For the first time in many years, the international pharmaceutical industry is
finding great opportunities in India. The process of consolidation, which has become a generalized
phenomenon in the world pharmaceutical industry, has started taking place in India.
2
SWOT Analysis
Strengths
• Cost Competitiveness
• Well Developed Industry with Strong Manufacturing Base
• Access to pool of highly trained scientists, both in India and abroad.
• Strong marketing and distribution network
• Rich Biodiversity
• Competencies in Chemistry and process development.

Weaknesses
• Low investments in innovative R&D and lack of resources to compete with
MNCs for New Drug Discovery Research and to commercialize molecules on a
worldwide basis.
• Lack of strong linkages between industry and academia.
• Low medical expenditure and healthcare spend in the country

• Production of spurious and low quality drugs tarnishes the image of industry at
home and abroad.
• Shortage of medicines containing psychotropic substances. There are 4000 such
brands of medicines that fall under the Narcotics Drugs and Psychotropic
Substances (NDPS) Act, 1985.Under a clause of this Act, the retailer has to sign
the consignment note provided by the stockist. The police check this note
regularly to prevent these medicines getting diverted to the drug mafia and they
can arrest the retailer if the signatures are under suspect. To protest against this
clause, the retailers have stopped stocking these medicines, some of which is life
saving.
3
Opportunities
• Significant export potential.
• Licensing deals with MNCs for NCEs and NDDS.
• Marketing alliances to sell MNC products in domestic market.
• Contract manufacturing arrangements with MNCs
• Potential for developing India as a centre for international clinical trials
• Niche player in global pharmaceutical R&D.
• Supply of generic drugs to developed markets.

Threats• Product patent regime poses serious challenge to domestic industry unless it
invests in research and development
• R&D efforts of Indian pharmaceutical companies hampered by lack of enabling
regulatory requirement. For instance, restrictions on animal testing outdated

patent office.
• Drug Price Control Order puts unrealistic ceilings on product prices and
profitability and prevents pharmaceutical companies from generating investible
surplus.
• Lowering of tariff protection
• The new MRP based excise duty regime threatens the existence of many small
scale pharma units, especially in the states of Andhra Pradesh and Maharashtra,
that were involved in contract manufacturing for the larger, established players.
These companies are now shifting their manufacturing from these states to states like J&K
that enjoy tax holidays.

4
Identified Problem
The economy worldwide is facing severe recession and the current recession is very severe and
prolonged one after second world war. The share market all along the world is down to a significant
level compared to the levels it was before the current world wide recession. There is pressure on all
the industry due to liquidity crunch. The stock prices are reduced to an extent more than 50% over
past 12 months. Raising capital required for the business expansion has almost stopped with share
market crash. The working capital required for the operations dried up as banks are not willing to
lend as the banks are risk awesome and future of the economy is blink.
Need For Study
The capital market returns are negative since Jan 2008. The market capitalization of several firms
are beaten down to as much as more than 50%. There is continued down trend in the market and
returns are uncertain and investment in the capital market are at greater risk which was never seen
post word war II.
There is need for investors to asses the risk associated with there investments under current market
scenario, and to decide on continued investing and to take fresh investment decisions or reallocate
there current portfolio.

Objectives and Scope
The objectives of the present studies are to find out past performance of top Indian pharmaceutical
companies. To identify and group them in to stable and performers and under performers. The
objective assessment is carried out through ratio analysis for the period of 2004 to 2008.
Deliverables
Identifying performers and under performers among the top Indian pharmaceutical companies and
classifying them for investment decisions.
5
-----------------------------------------------------------------------------------------------------------------------------
Chapter 2 – Literature Survey
---------------------------------------------------------------------------------------------------------------------------------
A ratio: Is the mathematical relationship between two quantities in the form of a fraction or
percentage.
Ratio analysis: is essentially concerned with the calculation of relationships which after proper
identification and interpretation may provide information about the operations and state of affairs of
a business enterprise.
The analysis is used to provide indicators of past performance in terms of critical success factors of
a business. This assistance in decision-making reduces reliance on guesswork and intuition and
establishes a basis for sound judgement.

Types of Ratios
A: Liquidity Ratios
•
Liquidity refers to the ability of a firm to meet its short-term financial obligations when and as
they fall due.
•
The main concern of liquidity ratio is to measure the ability of the firms to meet their short-term maturing
obligations. Failure to do this will result in the total failure of the business, as it would be forced into
liquidation.
6
Current Ratio
The Current Ratio expresses the relationship between the firm’s current assets and its current
liabilities.
Current assets normally includes cash, marketable securities, accounts receivable and inventories.
Current liabilities consist of accounts payable, short term notes payable, short-term loans, current
maturities of long term debt, accrued income taxes and other accrued expenses (wages).
The rule of thumb says that the current ratio should be at least 2, that is the current assets should
meet current liabilities at least twice.
Quick Ratio
Measures assets that are quickly converted into cash and they are compared with current liabilities.
This ratio realizes that some of current assets are not easily convertible to cash e.g. inventories.
The quick ratio, also referred to as acid test ratio, examines the ability of the business to cover its
short-term obligations from its “quick” assets only (i.e. it ignores stock). The quick ratio is
calculated as follows
Clearly this ratio will be lower than the current ratio, but the difference between the two (the gap)
will indicate the extent to which current assets consist of stock.
B: Asset Management/Activity Ratios
If a business does not use its assets effectively, investors in the business would rather take their
money and place it somewhere else. In order for the assets to be used effectively, the business needs
a high turnover.
7
Unless the business continues to generate high turnover, assets will be idle as it is impossible to buy and sell
fixed assets continuously as turnover changes. Activity ratios are therefore used to assess how active various
assets are in the business.

Average Collection Period
The average collection period measures the quality of debtors since it indicates the speed of their
collection.
•
The shorter the average collection period, the better the quality of debtors, as a short collection
period implies the prompt payment by debtors.
•
The average collection period should be compared against the firm’s credit terms and policy to
judge its credit and collection efficiency.
•
An excessively long collection period implies a very liberal and inefficient credit and collection
performance.
The delay in collection of cash impairs the firm’s liquidity. On the other hand, too low a collection period is
not necessarily favourable, rather it may indicate a very restrictive credit and collection policy which may
curtail sales and hence adversely affect profit.

Inventory Turnover
This ratio measures the stock in relation to turnover in order to determine how often the stock turns
over in the business.
It indicates the efficiency of the firm in selling its product. It is calculated by dividing he cost of
goods sold by the average inventory.

8
Total Assets Turnover

Asset turnover is the relationship between sales and assets
•
The firm should manage its assets efficiently to maximise sales.

•
The total asset turnover indicates the efficiency with which the firm uses all its assets to generate
sales.
•
It is calculated by dividing the firm’s sales by its total assets.

•
Generally, the higher the firm’s total asset turnover, the more efficiently its assets have been
utilised.
Fixed Asset Turnover
The fixed assets turnover ratio measures the efficiency with which the firm has been using its fixed
assets to generate sales.
It is calculated by dividing the firm’s sales by its net fixed assets as follows:
•
Generally, high fixed assets turnovers are preferred since they indicate a better efficiency in fixed
assets utilisation.
C: Financial Leverage (Gearing) Ratios
•
The ratios indicate the degree to which the activities of a firm are supported by creditors’ funds
as opposed to owners.
9
•
The relationship of owner’s equity to borrowed funds is an important indicator of financial

strength.
•
The debt requires fixed interest payments and repayment of the loan and legal action can be
taken if any amounts due are not paid at the appointed time. A relatively high proportion of
funds contributed by the owners indicates a cushion (surplus) which shields creditors against
possible losses from default in payment.
The greater the proportion of equity funds, the greater the degree of financial strength. Financial
leverage will be to the advantage of the ordinary shareholders as long as the rate of earnings on
capital employed is greater than the rate payable on borrowed funds.
The following ratios can be used to identify the financial strength and risk of the business.
Equity Ratio
The equity ratio is calculated as follows:
•
A high equity ratio reflects a strong financial structure of the company. A relatively low equity ratio reflects a
more speculative situation because of the effect of high leverage and the greater possibility of financial
difficulty arising from excessive debt burden.

Debt Ratio
This is the measure of financial strength that reflects the proportion of capital which has been
funded by debt, including preference shares.
This ratio is calculated as follows:
10
With higher debt ratio (low equity ratio), a very small cushion has developed thus not giving
creditors the security they require. The company would therefore find it relatively difficult to raise
additional financial support from external sources if it wished to take that route. The higher the debt
ratio the more difficult it becomes for the firm to raise debt.
Debt to Equity ratio
This ratio indicates the extent to which debt is covered by shareholders’ funds. It reflects the relative
position of the equity holders and the lenders and indicates the company’s policy on the mix of
capital funds. The debt to equity ratio is calculated as follows:

Times Interest Earned Ratio
This ratio measure the extent to which earnings can decline without causing financial losses to the
firm and creating an inability to meet the interest cost.
•
The times interest earned shows how many times the business can pay its interest bills from
profit earned.
•
Present and prospective loan creditors such as bondholders, are vitally interested to know how
adequate the interest payments on their loans are covered by the earnings available for such
payments.
•
Owners, managers and directors are also interested in the ability of the business to service the
fixed interest charges on outstanding debt.
The ratio is calculated as follows:
11
D: Profitability Ratios
Profitability is the ability of a business to earn profit over a period of time. Without profit, there is
no cash and therefore profitability must be seen as a critical success factors.
•
A company should earn profits to survive and grow over a long period of time.
•
Profits are essential, but it would be wrong to assume that every action initiated by management
of a company should be aimed at maximizing profits, irrespective of social consequences.
Profitability is a result of a larger number of policies and decisions. The profitability ratios show the
combined effects of liquidity, asset management (activity) and debt management (gearing) on
operating results. The overall measure of success of a business is the profitability which results from
the effective use of its resources.

Gross Profit Margin
•
Normally the gross profit has to rise proportionately with sales.

•
It can also be useful to compare the gross profit margin across similar businesses although there
will often be good reasons for any disparity.
Net Profit Margin
This is a widely used measure of performance and is comparable across companies in similar
industries. The fact that a business works on a very low margin need not cause alarm because there
are some sectors in the industry that work on a basis of high turnover and low margins, for examples
supermarkets and motorcar dealers.
What is more important in any trend is the margin and whether it compares well with similar
businesses.
12
Return on Investment (ROI)
Income is earned by using the assets of a business productively. The more efficient the production, the more
profitable the business. The rate of return on total assets indicates the degree of efficiency with which
management has used the assets of the enterprise during an accounting period. This is an important ratio for all
readers of financial statements.
Investors have placed funds with the managers of the business. The managers used the funds to
purchase assets which will be used to generate returns. If the return is not better than the investors
can achieve elsewhere, they will instruct the managers to sell the assets and they will invest
elsewhere. The managers lose their jobs and the business liquidates.
Return on Equity (ROE)
This ratio shows the profit attributable to the amount invested by the owners of the business. It also
shows potential investors into the business what they might hope to receive as a return. The
stockholders’ equity includes share capital, share premium, distributable and non-distributable
reserves. The ratio is calculated as follows:

Earning Per Share (EPS)
Whatever income remains in the business after all prior claims, other than owners claims (i.e.
ordinary dividends) have been paid, will belong to the ordinary shareholders who can then make a
decision as to how much of this income they wish to remove from the business in the form of a
dividend, and how much they wish to retain in the business. The shareholders are particularly
13
interested in knowing how much has been earned during the financial year on each of the shares held by them.
For this reason, an earning per share figure must be calculated. Clearly then, the earning per share calculation
will be:
E: Market Value Ratios
These ratios indicate the relationship of the firm’s share price to dividends and earnings. Note that when we
refer to the share price, we are talking about the Market value and not the Nominal value as indicated by the
par value.
For this reason, it is difficult to perform these ratios on unlisted companies as the market price for their shares
is not freely available. One would first have to value the shares of the business before calculating the ratios.
Market value ratios are strong indicators of what investors think of the firm’s past performance and future
prospects.
Dividend Yield Ratio
The dividend yield ratio indicates the return that investors are obtaining on their investment in the
form of dividends. This yield is usually fairly low as the investors are also receiving capital growth
on their investment in the form of an increased share price. It is interesting to note that there is
strong correlation between dividend yields and market prices. Invariably, the higher the dividend,
the higher the market value of the share. The dividend yield ratio compares the dividend per share
against the price of the share and is calculated as:

14
Notice a healthy increase in the yield from 2000 to 2002. The main reason for this is that the
dividend per share increased while at the same time, the price of a share dropped.
This is fairly unusual because share prices usually increase when dividends increase. However there
could be number of reasons why this has happened, either due to the economy or to
mismanagement, leading to a loss of faith in the stock market or in this particular stock.
Normally a very high dividend yield signals potential financial difficulties and possible dividend payout cut.
The dividend per share is merely the total dividend divided by the number of shares issued. The price per share
is the market price of the share at the end of the financial year.
Price/Earning Ratio (P/E ratio)
•
P/E ratio is a useful indicator of what premium or discount investors are prepared to pay or
receive for the investment.
•
The higher the price in relation to earnings, the higher the P/E ratio which indicates the higher
the premium an investor is prepared to pay for the share. This occurs because the investor is
extremely confident of the potential growth and earnings of the share.

The price-earning ratio is calculated as follows:
1. High P/E generally reflects lower risk and/or higher growth prospects for earnings.
2. The above ratio shows that the shares were traded at a much higher premium in 2000 than were in 2002. In 2000
the price was 26.8 times higher than earnings while in 2002, the price was only 12 times higher.
Dividend Cover
15
This ratio measures the extent of earnings that are being paid out in the form of dividends, i.e. how many times
the dividends paid are covered by earnings (similar to times interest earned ratio discussed above).
•
A higher cover would indicate that a larger percentage of earnings are being retained and re-
invested in the business while a lower dividend cover would indicate the converse.
Dividend pay-out ratio
This ratio looks at the dividend payment in relation to net income and can be calculated as follows:
Note: Even though the dividend yield has increased, the dividend payout ratio has reduced, showing that a
lower proportion of earnings were paid out as dividend. The ratio has only reduced slightly, however, from
50.7% in 2000 to 49.4% in 2002. Generally, the low growth companies have higher dividends payouts and
high growth companies have lower dividend payouts.

16
-----------------------------------------------------------------------------------------------------------------------------
Chapter 3 – Methodology
---------------------------------------------------------------------------------------------------------------------------------
Type of Project:
The current study is of descriptive and would have secondary data collection from various sources
especially from the annual reports of top Indian pharmaceutical companies.
Tools for data analysis:
Computation of various finical ratios such as profitability, liquidity, efficiency, gearing, investment using
standers known formulas and techniques and plotting the rations to find the spread among the companies
studied to identify those who have ratios which are well with in acceptable range for better performance and
those who would require improvements in the ratios.

17
-----------------------------------------------------------------------------------------------------------------------------
Chapter 4 – Data Analysis and Interpretations
---------------------------------------------------------------------------------------------------------------------------------
LIQUIDITY RATIO:
Liquidity refers to the ability of a firm to meet its short-term financial obligations when and as they
fall due. The main concern of liquidity ratio is to measure the ability of the firms to meet their short-
term maturing obligations. Failure to do this will result in the total failure of the business, as it
would be forced into liquidation.

Financial Ratio
Formula
Measurements
Current Ratio
Current Assets / Current
liabilities
A measure of short-term liquidity.
Indicates the ability of entity to
meet its short-term debts from its
current assets
Quick Ratio
Current Assets less inventory /
Current liabilities
A more rigorous measure of short-
term liquidity. Indicates the ability
of the entity to meet unexpected
demands from liquid current asses
18
Table 1 : Current ratio analysis
Company Name
Current Ratio
2004
2005
2006
2007
2008
Sun Pharma
1.12
1.38
1.34
1.92
1.32
Cipla
1.44
1.55
1.87
1.96
1.86
GSK
1.03
0.75
0.60
0.57
0.45
DRL
1.84
1.20
1.31
1.35
1.16
Ranbaxy
0.97
1.11
1.24
1.28
1.06
Divis
2.20
2.33
1.84
2.48
2.13
Lupin
1.19
1.33
1.41
1.69
1.88
Piramal
1.19
1.11
1.06
1.33
1.13
Glenmark
2.11
3.43
2.64
2.42
2.29
Cadila
1.04
0.50
0.61
0.56
0.74
Biocon
1.37
0.98
1.25
1.68
0.74
Avantis
1.10
1.65
1.32
0.92
1.17
Pfizer
1.14
0.88
0.87
0.85
0.78
Matrix
1.30
0.96
1.05
1.16
1.26
Aztra
1.63
0.70
1.21
0.85
0.94
Torrent
1.07
1.14
1.31
1.60
1.19
Wyetn
1.52
0.68
1.05
0.65
0.57
Aurobindo
3.22
2.74
2.53
2.74
2.70
Novatis
1.18
0.96
0.79
1.25
0.83
Wockhardt
1.06
0.80
1.04
1.13
1.39
Dishman
1.90
2.70
2.54
1.70
2.15
IPCA
2.27
2.38
1.95
1.59
1.69
FDC
1.47
1.56
1.66
1.82
1.12
Abbot
0.51
0.79
0.97
1.36
1.26
Merck
1.15
1.13
1.11
0.76
1.04
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
SunPharma
Cipla GSKDRL
RanbaxyDivi
s
LupinPirama
l
Glenmark
CadilaBioconAvanti
s
PfizerMatri
xAztraTorre
nt
Wyetn
AurobindoNo
vatis
Wockhardt
Dishman
IPCAFDCAbbo
t
Merck
Current Ratio 2004 Current Ratio 2005 Current Ratio 2006 Current Ratio 2007 Current Ratio 2008
19
Quick Ratio
2004
2005
2006
2007
2008
Sun Pharma
0.51
0.77
0.68
0.98
0.97
Cipla
0.67
0.69
0.92
1.03
1.05
GSK
0.40
0.29
0.21
0.15
0.13
DRL
1.22
0.72
0.76
0.96
0.70
Ranbaxy
0.40
0.53
0.60
0.65
0.55
Divis
0.99
1.00
0.69
1.12
0.96
Lupin
0.60
0.67
0.76
0.94
0.95
Piramal
0.59
0.39
0.49
0.70
0.63
Glenmark
1.32
2.48
1.78
1.60
1.58
Cadila
0.56
0.18
0.28
0.24
0.34
Biocon
0.80
0.69
0.83
1.09
0.34
Avantis
0.54
0.86
0.59
0.32
0.36
Pfizer
0.52
0.46
0.44
0.39
0.36
Matrix
0.56
0.43
0.54
0.60
0.55
Aztra
0.60
0.34
0.72
0.52
0.66
Torrent
0.37
0.37
0.56
0.78
0.66
Wyetn
0.63
0.28
0.65
0.28
0.28
Aurobindo
2.10
1.60
1.55
1.48
1.49
Novatis
0.71
0.40
0.33
0.50
0.32
Wockhardt
0.65
0.49
0.58
0.62
0.79
Dishman
0.87
1.35
1.23
0.94
1.04
IPCA
1.11
1.15
0.86
0.71
0.87
FDC
0.71
0.79
0.59
0.54
0.29
Abbot
0.27
0.31
0.39
0.48
0.55
Merck
0.65
0.65
0.64
0.34
0.51
0.00
0.50
1.00
1.50
2.00
2.50
3.00
SunPharma
Cipla GSKDRL
RanbaxyDivi
s
LupinPirama
l
GlenmarkCad
ilaBioconAv
antis
PfizerMatri
xAztraTorre
ntWyetn
AurobindoNo
vatis
Wockhardt
Dishman
IPCAFDCAbbo
tMerck
Quick Ratio 2004 Quick Ratio 2005 Quick Ratio 2006 Quick Ratio 2007 Quick Ratio 2008
20
Inventory Turnover
2004
2005
2006
2007
2008
Sun Pharma
3.12
3.68
3.91
4.11
4.51
Cipla
2.18
2.00
2.04
2.26
2.45
GSK
3.52
3.58
3.85
3.59
4.04
DRL
3.24
2.78
2.53
3.40
3.00
Ranbaxy
2.63
2.26
2.25
2.30
2.51
Divis
2.06
1.71
1.31
1.91
2.03
Lupin
3.56
3.34
3.56
3.35
2.84
Piramal
3.98
3.02
3.61
4.24
4.45
Glenmark
2.19
2.30
2.07
1.92
2.24
Cadila
3.99
3.32
3.39
2.56
2.73
Biocon
3.90
5.96
4.62
3.80
2.73
Avantis
4.70
4.30
3.80
3.60
3.24
Pfizer
3.45
4.26
4.21
3.81
3.86
Matrix
2.73
2.43
2.72
2.39
2.29
Aztra
2.19
3.52
4.75
4.42
5.93
Torrent
2.67
2.00
2.36
2.70
2.99
Wyetn
2.57
2.69
3.01
2.98
3.83
Aurobindo
3.78
2.72
3.01
2.83
2.73
Novatis
5.78
4.52
5.22
4.58
4.49
Wockhardt
4.52
4.87
3.57
3.06
2.91
Dishman
1.73
1.61
1.86
2.11
2.14
IPCA
2.77
2.65
2.79
2.64
2.79
FDC
3.59
3.87
3.09
2.96
3.45
Abbot
9.13
7.65
7.22
5.68
5.58
Merck
5.14
5.80
5.61
5.28
5.05
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
SunPharma
Cipla GSKDRL
RanbaxyDivi
s
LupinPirama
l
Glenmark
CadilaBioco
nAvantis
PfizerMatri
xAztraTorre
ntWyetn
AurobindoNo
vatis
Wockhardt
Dishman
IPCAFDCAbbo
tMerck
Inventory Turnover 2004 Inventory Turnover 2005 Inventory Turnover 2006
Inventory Turnover 2007 Inventory Turnover 2008
21
Average Collection Period
2004
2005
2006
2007
2008
Sun Pharma
47.34
68.23
49.26
45.47 115.11
Cipla
93.01
88.19
98.92 101.97 114.11
GSK
20.69
18.17
13.97
11.97
7.54
DRL
93.94
95.77
97.96
94.06
88.91
Ranbaxy
43.93
71.72
76.54
82.22
71.93
Divis
87.58
94.39
95.95
81.73
71.48
Lupin
65.86
72.07
74.47
79.34
79.19
Piramal
43.20
33.48
45.00
49.11
54.84
Glenmark
125.24 125.35 176.02 172.45 151.80
Cadila
52.27
33.76
50.64
53.96
56.63
Biocon
79.33
92.66 103.22 110.37
56.63
Avantis
28.06
42.97
21.16
25.99
21.76
Pfizer
40.00
43.17
44.10
33.76
21.64
Matrix
57.58
73.93
85.74
94.03 124.43
Aztra
39.32
40.88
48.07
56.32
55.89
Torrent
32.97
41.24
57.55
64.66
73.72
Wyetn
34.70
21.44
25.06
22.61
23.57
Aurobindo
126.49 145.52 142.34 110.00 118.80
Novatis
47.47
28.76
24.46
25.73
23.61
Wockhardt
71.54
58.62
65.35
78.71
92.15
Dishman
107.15 138.46 116.12 137.84 105.14
IPCA
74.34
77.11
66.09
66.07
84.00
FDC
36.32
48.04
19.01
16.79
13.79
Abbot
14.23
13.43
15.04
16.06
16.10
Merck
58.03
45.83
48.46
23.99
31.65
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
200.00
SunPharma
Cipla
GSK
DRL
Ranbaxy
Divis
Lupin
Piramal
Glenmark
Cadila
Biocon
Avantis
Pfizer
Matrix
Aztra
Torrent
Wyetn
Aurobindo
Novatis
Wockhardt
Dishman
IPCA
FDC
Abbot
Merck
Average Collection Period 2004
22
Total Asset Turnover
2004
2005
2006
2007
2008
Sun Pharma
1.47
1.43
1.76
1.76
1.57
Cipla
1.19
1.15
1.09
1.09
1.03
GSK
2.76
3.33
4.19
4.19
4.78
DRL
1.40
0.19
1.33
1.33
1.40
Ranbaxy
2.07
1.52
1.30
1.30
1.40
Divis
0.98
0.92
0.80
0.80
1.08
Lupin
1.24
1.11
1.28
1.28
1.35
Piramal
1.65
1.51
1.30
1.30
1.44
Glenmark
1.05
0.85
0.85
0.85
1.13
Cadila
1.14
1.18
1.21
1.21
1.28
Biocon
1.52
1.49
1.33
1.33
1.28
Avantis
2.13
2.10
2.25
2.25
2.40
Pfizer
2.45
2.65
2.64
2.64
4.34
Matrix
1.32
1.04
1.12
1.12
0.66
Aztra
1.84
2.29
2.52
2.52
2.65
Torrent
1.35
1.21
1.09
1.09
1.18
Wyetn
1.65
1.73
1.74
1.74
2.93
Aurobindo
1.06
0.80
0.84
0.84
1.06
Novatis
3.39
3.85
5.06
5.06
5.04
Wockhardt
1.68
1.62
1.45
1.45
1.14
Dishman
0.72
0.67
0.76
0.76
0.78
IPCA
1.41
1.17
1.16
1.16
1.23
FDC
1.75
1.69
1.75
1.75
1.68
Abbot
5.46
5.13
4.61
4.61
3.41
Merck
2.08
2.86
2.91
2.91
3.26
0.00
1.00
2.00
3.00
4.00
5.00
6.00
SunPharma
Cipla GSKDRL
RanbaxyDivi
s
LupinPirama
l
GlenmarkCad
ilaBioconAv
antis
PfizerMatri
xAztraTorrentWyetn
AurobindoNo
vatis
Wockhardt
Dishman
IPCAFDCAbbo
tMerck
Total Asset Turnover 2004 Total Asset Turnover 2005 Total Asset Turnover 2006
Total Asset Turnover 2007 Total Asset Turnover 2008
23
Debt Ratio
2004
2005
2006
2007
2008
Sun Pharma
1.77
3.38
3.01
2.77
2.05
Cipla
0.91
0.84
0.84
0.97
1.02
GSK
1.59
2.05
2.30
2.89
3.62
DRL
1.73
0.28
1.98
1.98
2.03
Ranbaxy
1.23
1.02
1.16
1.64
1.73
Divis
0.81
0.82
0.97
0.91
0.96
Lupin
0.87
0.89
1.19
1.11
1.07
Piramal
0.90
0.89
1.08
1.08
1.10
Glenmark
0.98
1.18
1.54
1.47
1.25
Cadila
0.95
1.00
1.08
1.01
1.28
Biocon
1.75
1.71
1.68
0.95
1.28
Avantis
1.03
1.21
1.35
1.62
1.78
Pfizer
1.43
1.57
1.47
1.76
2.76
Matrix
0.87
1.04
1.34
1.35
1.11
Aztra
0.97
1.23
1.38
1.22
1.39
Torrent
0.88
1.28
0.98
0.97
1.13
Wyetn
1.45
1.83
1.54
2.07
2.24
Aurobindo
1.15
1.21
1.23
1.53
1.31
Novatis
1.70
2.15
2.99
3.25
3.78
Wockhardt
1.76
2.63
2.25
1.63
1.54
Dishman
0.92
0.99
1.48
1.33
1.46
IPCA
0.90
0.89
0.87
0.91
1.01
FDC
1.25
1.16
1.37
1.21
1.32
Abbot
2.02
2.09
2.03
1.37
1.05
Merck
1.26
1.83
2.10
3.73
3.89
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
SunPharma
Cipla GSKDRL
RanbaxyDivi
s
LupinPirama
l
GlenmarkCad
ilaBioconAv
antis
PfizerMatri
x
AztraTorren
tWyetn
Aurobindo
Novatis
Wockhardt
Dishman
IPCAFDCAbbo
tMerck
Debt Ratio 2004 Debt Ratio 2005 Debt Ratio 2006 Debt Ratio 2007 Debt Ratio 2008
24
Debt-to-Equity
2004
2005
2006
2007
2008
Sun Pharma
1.06
2.36
1.92
1.29
0.76
Cipla
0.58
0.57
0.73
0.71
0.78
GSK
0.53
0.48
0.42
0.52
0.53
DRL
0.83
0.83
1.06
0.79
0.81
Ranbaxy
0.48
0.44
0.85
1.71
1.63
Divis
0.90
0.86
0.97
1.00
0.83
Lupin
1.03
1.14
1.68
1.38
1.22
Piramal
1.13
0.95
0.81
1.03
1.00
Glenmark
1.04
2.11
2.78
2.42
1.14
Cadila
1.12
0.62
0.69
0.35
0.90
Biocon
0.85
0.75
0.82
0.84
0.90
Avantis
0.60
0.77
0.67
0.58
0.70
Pfizer
0.55
0.53
0.45
0.52
0.65
Matrix
1.22
0.55
0.74
0.83
1.03
Aztra
0.51
0.25
0.59
0.28
0.45
Torrent
0.56
1.07
1.07
1.11
1.04
Wyetn
0.72
0.51
0.57
0.52
0.49
Aurobindo
1.55
1.74
1.90
2.66
2.00
Novatis
0.60
0.61
0.62
0.79
0.71
Wockhardt
1.16
1.84
1.59
1.30
1.35
Dishman
2.06
1.41
2.36
1.63
1.34
IPCA
1.09
1.24
1.07
0.95
1.06
FDC
0.75
0.71
0.79
0.78
0.74
Abbot
0.36
0.58
0.62
0.58
0.41
Merck
0.58
0.68
0.70
0.78
0.84
0.00
0.50
1.00
1.50
2.00
2.50
3.00
SunPharma
Cipla GSKDRL
RanbaxyDivi
s
LupinPirama
l
GlenmarkCad
ilaBioconAv
antis
PfizerMatri
xAztraTorrentWyetn
AurobindoNo
vatis
Wockhardt
Dishman
IPCAFDCAbbo
tMerck
Debt-to-Equity 2004 Debt-to-Equity 2005 Debt-to-Equity 2006 Debt-to-Equity 2007 Debt-to-Equity 2008
25
Gross Profit Margin
2004
2005
2006
2007
2008
Sun Pharma
48.39% 44.67% 45.03% 44.20% 46.76%
Cipla
35.64% 37.75% 38.88% 39.08% 37.49%
GSK
39.50% 46.26% 51.68% 52.45% 53.88%
DRL
50.92% 46.28% 47.48% 58.98% 47.15%
Ranbaxy
53.23% 48.66% 47.21% 47.46% 49.76%
Divis
37.97% 39.11% 40.35% 44.75% 48.20%
Lupin
35.11% 29.51% 34.39% 38.14% 38.06%
Piramal
45.89% 45.20% 44.52% 43.03% 43.55%
Glenmark
52.11% 51.22% 50.30% 52.23% 56.50%
Cadila
43.98% 44.77% 45.23% 47.05% 49.67%
Biocon
37.84% 36.69% 32.32% 36.18% 49.67%
Avantis
40.49% 43.12% 40.36% 39.69% 38.35%
Pfizer
43.57% 47.41% 44.00% 49.44% 64.04%
Matrix
41.95% 37.70% 37.62% 34.98% -5.06%
Aztra
42.04% 48.92% 48.57% 47.39% 53.44%
Torrent
46.11% 44.41% 44.53% 45.48% 48.56%
Wyetn
42.56% 44.10% 53.12% 55.15% 55.71%
Aurobindo
24.51% 19.25% 19.91% 24.19% 26.50%
Novatis
43.67% 42.81% 45.12% 47.95% 49.39%
Wockhardt
44.69% 50.88% 46.61% 43.38% 42.96%
Dishman
38.50% 37.58% 34.61% 34.10% 32.29%
IPCA
38.09% 37.26% 34.20% 37.91% 37.81%
FDC
42.44% 37.35% 41.91% 36.42% 36.38%
Abbot
46.89% 36.92% 29.79% 27.88% 28.93%
Merck
35.03% 43.03% 43.04% 54.91% 48.25%
-10.00%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
SunPharma
Cipla
GSK
DRL
Ranbaxy
Divis
Lupin
Piramal
Glenmark
Cadila
Biocon
Avantis
Pfizer
Matrix
Aztra
Torrent
Wyetn
Aurobindo
Novatis
Wockhardt
Dishman
IPCA
FDC
Abbot
Merck
Gross Profit Margin 2004
26
Operating Profit Margin
2004
2005
2006
2007
2008
Sun Pharma
30.09
%
25.82
%
26.67
%
26.46
% 32.03%
Cipla
21.16
%
21.94
%
22.77
%
22.55
% 19.88%
GSK
23.42
%
32.09
%
38.57
%
41.26
% 44.74%
DRL
18.06
% 3.97%
14.13
%
35.34
% 17.00%
Ranbaxy
24.31
%
15.63
% 5.44% 11.88% 17.34%
Divis
27.01
%
27.36
%
27.92
%
32.76
% 36.60%
Lupin
17.26
%
10.00
%
15.68
%
19.93
% 20.87%
Piramal
17.85
%
15.30
%
16.00
%
15.56
% 20.36%
Glenmark
16.69
%
19.82
%
17.76
%
23.92
% 33.64%
Cadila
15.97
%
14.85
%
15.98
%
16.45
% 17.66%
Biocon
28.62
%
28.27
%
22.73
%
19.99
% 17.66%
Avantis
21.05
%
29.41
%
27.18
%
26.34
% 22.92%
Pfizer
9.39%
14.10
%
17.16
%
22.73
% 44.70%
Matrix
28.65
%
25.42
%
25.94
%
15.51
% -34.54%
Aztra
20.59
%
24.63
%
27.93
%
26.24
% 31.45%
Torrent
19.05
%
12.39
%
13.21
%
15.68
% 19.27%
Wyetn
22.64
%
20.47
%
30.23
%
36.68
% 34.55%
Aurobindo
16.08
% 7.44%
10.49
%
14.78
% 16.45%
Novatis
19.43
%
19.48
%
24.40
%
22.50
% 24.53%
Wockhardt
21.18
%
29.25
%
27.25
%
22.63
% 22.86%
Dishman
24.18
%
23.32
%
23.03
%
22.38
% 21.58%
IPCA
17.27
%
15.74
%
12.21
%
17.85
% 17.26%
FDC
26.39
%
19.88
%
22.48
%
18.04
% 15.97%
Abbot
26.96
%
16.25
%
15.28
%
14.98
% 13.04%
27
Merck
18.56
%
28.04
%
28.43
%
40.35
% 28.22%
-40.00%
-30.00%
-20.00%
-10.00%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
SunPharma
Cipla
GSK
DRL
Ranbaxy
Divis
Lupin
Piramal
Glenmark
Cadila
Biocon
Avantis
Pfizer
Matrix
Aztra
Torrent
Wyetn
Aurobindo
Novatis
Wockhardt
Dishman
IPCA
FDC
Abbot
Merck
Operating Profit Margin 2004
28
Net Profit Margin
2004
2005
2006
2007
2008
Sun Pharma
26.54
%
24.38
%
25.21
%
25.98
% 30.88%
Cipla
15.91
%
17.08
%
19.06
%
18.39
% 16.36%
GSK
14.46
%
21.86
%
28.58
%
30.50
% 32.94%
DRL
16.63
% 4.50%
10.51
%
29.37
% 13.60%
Ranbaxy
20.03
%
12.81
% 5.33% 8.99% 12.22%
Divis
17.99
%
17.09
%
17.38
%
26.50
% 32.91%
Lupin
8.37% 7.27%
10.83
%
13.66
% 15.43%
Piramal
15.60
% 11.22%
12.24
% 11.18% 15.30%
Glenmark
11.20%
12.14
% 11.63%
15.57
% 27.56%
Cadila
11.53% 11.32%
12.60
%
12.86
% 12.97%
Biocon
23.69
%
25.77
%
18.58
%
17.66
% 12.97%
Avantis
14.26
%
19.30
%
17.97
%
17.84
% 14.77%
Pfizer
5.77% 9.06% 11.05%
15.14
% 33.81%
Matrix
21.17
%
19.56
%
21.37
%
12.41
% -43.85%
Aztra
13.13
%
14.51
%
18.55
%
17.07
% 20.27%
Torrent
13.63
%
10.14
% 9.47%
12.25
% 16.05%
Wyetn
18.72
%
18.98
%
24.74
%
30.15
% 23.82%
Aurobindo
10.11% 3.05% 5.09% 11.07% 11.78%
Novatis
17.86
%
10.98
%
16.58
%
14.00
% 15.32%
Wockhardt
18.05
%
23.77
%
22.87
%
18.36
% 15.78%
Dishman
13.78
%
17.62
%
19.08
%
19.63
% 16.08%
IPCA
11.89%
10.77
% 8.33%
12.33
% 12.14%
FDC
21.95
%
15.38
%
18.50
%
14.12
% 13.20%
Abbot
20.08
% 11.04%
10.39
%
10.06
%
8.55%
Merck
12.27
18.76
19.18
33.05 19.44%
29
%
%
%
%
-50.00%
-40.00%
-30.00%
-20.00%
-10.00%
0.00%
10.00%
20.00%
30.00%
40.00%
SunPharma
Cipla
GSK
DRL
Ranbaxy
Divis
Lupin
Piramal
Glenmark
Cadila
Biocon
Avantis
Pfizer
Matrix
Aztra
Torrent
Wyetn
Aurobindo
Novatis
Wockhardt
Dishman
IPCA
FDC
Abbot
Merck
Net Profit Margin 2004
30
Return on Total Assets (ROA)
2004
2005
2006
2007
2008
Sun Pharma
39.10%
34.96
% 44.27% 50.28%
48.56%
Cipla
18.94%
19.61
% 20.71% 19.35%
16.91%
GSK
39.95%
72.74
% 119.68%
133.39
% 157.52%
DRL
23.21% 0.85% 13.93% 50.00%
19.07%
Ranbaxy
41.46%
19.44
%
6.91% 11.15%
17.10%
Divis
17.71%
15.68
% 13.82% 25.06%
35.54%
Lupin
10.36% 8.10% 13.90% 18.84%
20.79%
Piramal
25.80%
16.90
% 15.91% 13.98%
22.09%
Glenmark
11.76%
10.38
%
9.92% 14.81%
31.27%
Cadila
13.17%
13.37
% 15.27% 15.54%
16.58%
Biocon
36.08%
38.38
% 24.74% 14.38%
16.58%
Avantis
30.36%
40.61
% 40.35% 44.99%
35.47%
Pfizer
14.13%
24.06
% 29.13% 44.97% 146.64%
Matrix
27.98%
20.27
% 23.88% 11.13% -28.78%
Aztra
24.23%
33.23
% 46.84% 41.79%
53.74%
Torrent
18.41%
12.26
% 10.34% 14.77%
18.89%
Wyetn
30.86%
32.93
% 43.08% 74.01%
69.78%
Aurobindo
10.73% 2.43%
4.28% 11.91%
12.51%
Novatis
60.48%
42.26
% 83.91% 67.90%
77.30%
Wockhardt
30.29%
38.58
% 33.25% 20.92%
17.99%
Dishman
9.86% 11.77% 14.56% 14.50%
12.53%
IPCA
16.81%
12.55
%
9.64% 15.33%
14.88%
FDC
38.39%
25.92
% 32.42% 23.18%
22.17%
Abbot
109.54
%
56.56
% 47.91% 40.50%
29.15%
Merck
25.51%
53.67
% 55.72%
131.80
%
63.33%
31
-50.00%
0.00%
50.00%
100.00%
150.00%
200.00%
SunPharma
Cipla GSKDRL
RanbaxyDivi
s
LupinPirama
l
Glenmark
CadilaBioconAvanti
s
PfizerMatri
xAztraTorrent
Wyetn
AurobindoNo
vatis
Wockhardt
Dishman
IPCAFDCAbbo
t
Merck
Return on Total Assets (ROA) 2004 Return on Total Assets (ROA) 2005 Return on Total Assets (ROA) 2006
Return on Total Assets (ROA) 2007 Return on Total Assets (ROA) 2008
32
Return on Equity (ROE)
2004
2005
2006
2007
2008
Sun Pharma
30.14
%
27.35
%
32.26
%
26.04
% 24.22%
Cipla
24.47
%
26.52
%
30.78
%
20.70
% 19.20%
GSK
25.30
%
35.64
%
52.31
%
46.43
% 43.65%
DRL
13.84
% 3.41% 9.92%
27.14
% 10.28%
Ranbaxy
34.17
%
20.14
% 8.51%
16.01
% 23.52%
Divis
27.99
%
23.48
%
20.56
%
35.41
% 40.63%
Lupin
22.04
%
17.08
%
28.33
%
33.44
% 33.66%
Piramal
55.35
%
31.15
%
17.65
%
17.85
% 29.93%
Glenmark
17.87
%
22.14
% 21.11%
30.40
% 37.83%
Cadila
24.41
%
21.39
%
22.52
%
23.20
% 22.11%
Biocon
23.08
%
24.92
%
16.65
%
16.84
% 22.11%
Avantis
32.40
%
36.75
%
30.79
%
28.59
% 20.32%
Pfizer
9.92%
15.89
%
19.85
%
25.57
% 53.23%
Matrix
70.11%
20.87
%
20.98
%
10.18
% -43.07%
Aztra
25.07
%
26.96
%
33.85
%
34.39
% 38.58%
Torrent
20.82
%
15.52
%
17.21
%
24.33
% 26.57%
Wyetn
21.51
%
18.20
%
28.29
%
36.05
% 31.50%
Aurobindo
17.37
% 4.23% 8.09%
24.33
% 23.36%
Novatis
36.37
%
20.09
%
28.63
%
21.38
% 20.51%
Wockhardt
28.17
%
33.96
%
29.62
%
22.33
% 20.84%
Dishman
30.34
%
20.83
%
27.00
% 23.11% 13.58%
IPCA
29.03
%
23.40
%
16.81
%
25.01
% 23.28%
FDC
32.87
%
22.87
%
24.10
%
19.41
% 17.39%
Abbot
54.83
%
27.34
%
23.79
%
29.62
% 27.96%
33
Merck
20.20
%
29.33
%
26.54
%
35.37
% 16.27%
-60.00%
-40.00%
-20.00%
0.00%
20.00%
40.00%
60.00%
80.00%
SunPharma
Cipla
GSK
DRL
Ranbaxy
Divis
Lupin
Piramal
Glenmark
Cadila
Biocon
Avantis
Pfizer
Matrix
Aztra
Torrent
Wyetn
Aurobindo
Novatis
Wockhardt
Dishman
IPCA
FDC
Abbot
Merck
Return on Equity (ROE) 2004 Return on Equity (ROE) 2005 Return on Equity (ROE) 2006
Return on Equity (ROE) 2007 Return on Equity (ROE) 2008
dc
34
Adjusted Earnings per Share
2004
2005
2006
2007
2008
Sun Pharma
55.889 32.589
50.880
65.949
98.407
Cipla
51.157 68.262 101.324
42.971
46.277
GSK
22.676 37.728
58.587
65.494
70.132
DRL
74.022 18.481
58.527
141.359
58.798
Ranbaxy
42.719 27.152
10.863
20.178
31.997
Divis
50.047 51.942
54.657
148.675 275.089
Lupin
50.047 21.293
45.441
36.979
54.016
Piramal
59.134 44.737
40.933
45.103
72.792
Glenmark
35.443 26.762
28.345
56.997
156.425
Cadila
41.943 41.847
52.803
32.596
37.102
Biocon
24.932 34.616
26.700
31.672
100.670
Avantis
42.579 64.464
67.768
73.513
61.003
Pfizer
10.826 19.223
25.044
37.681
115.700
Matrix
101.317 43.492
59.349
32.313
(94.709)
Aztra
49.160 51.520
86.120
97.480
122.920
Torrent
30.232 25.005
15.559
26.701
36.760
Wyetn
24.177 19.428
30.559
40.726
35.823
Aurobindo
51.777 13.127
27.503
84.792
106.094
Novatis
58.210 35.757
60.488
51.990
57.566
Wockhardt
36.736 38.670
43.640
39.028
39.084
Dishman
18.272 21.318
33.372
42.867
38.507
IPCA
64.024 31.604
25.952
48.624
56.373
FDC
68.135 28.195
36.243
33.413
33.855
Abbot
67.559 38.724
38.272
47.291
45.219
Merck
23.511 43.173
46.922
82.444
40.819
(150.000)
(100.000)
(50.000)
0.000
50.000
100.000
150.000
200.000
250.000
300.000
SunPharma
Cipla
GSK
DRL
Ranbaxy
Divis
Lupin
Piramal
Glenmark
Cadila
Biocon
Avantis
Pfizer
Matrix
Aztra
Torrent
Wyetn
Aurobindo
Novatis
Wockhardt
Dishman
IPCA
FDC
Abbot
Merck
Adjusted Earnings per Share 2004 Adjusted Earnings per Share 2005 Adjusted Earnings per Share 2006
Adjusted Earnings per Share 2007 Adjusted Earnings per Share 2008
35
Price/Earnings Ratio
2004
2005
2006
2007
2008
Sun Pharma
23.32
28.63
33.60
31.18
24.98
Cipla
22.93
18.74
32.32
27.46
23.77
GSK
26.76
19.06
24.84
17.12
14.88
DRL
26.33
79.99
48.57
10.30
20.11
Ranbaxy
22.00
36.65
79.60
34.88
27.41
Divis
29.02
19.18
34.32
20.68
23.07
Lupin
29.02
25.69
24.51
16.39
9.23
Piramal
Glenmark
20.27
52.91
55.58
53.62
31.26
Cadila
21.66
22.21
18.02
20.66
13.66
Biocon
38.83
23.55
33.37
30.70
8.55
Avantis
16.82
19.18
28.47
16.75
12.54
Pfizer
42.98
38.05
46.12
21.29
5.92
Matrix
13.48
18.01
23.73
27.08
Aztra
31.29
21.14
Torrent
10.78
17.70
27.91
14.66
7.66
Wyetn
11.18
12.74
Aurobindo
14.87
44.33
48.24
16.01
5.49
Novatis
Wockhardt
21.52
19.03
23.20
20.39
13.63
Dishman
29.62
29.61
28.83
24.74
36.00
IPCA
10.16
9.50
13.52
12.38
10.95
FDC
15.88
16.06
13.48
9.30
8.31
Abbot
Merck
8.17
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
SunPharma
Cipla GSKDRL
RanbaxyDivi
s
LupinPirama
l
GlenmarkCad
ilaBioconAv
antis
PfizerMatri
xAztraTorre
ntWyetn
AurobindoNo
vatis
Wockhardt
Dishman
IPCAFDCAbbo
tMerck
Price/Earnings Ratio 2004 Price/Earnings Ratio 2005 Price/Earnings Ratio 2006
Price/Earnings Ratio 2007 Price/Earnings Ratio 2008
36
37
PROFITABILITY RATIO:
Financial Ratio Formula
Measurements
Return on Total
Assets
Operating profit before
income tax + interest
expense/ Average total
assets
Measures rate of
return earned through
operating total assets
provided by both
creditors and owners
Return on
ordinary
shareholders’
equity
Operating profit &
extraordinary items after
income tax minus
Preference dividends /
Average ordinary
shareholders’ equity
Measures rate of
return earned on
assets provided by
owners
Gross Profit
Margin
Gross Profit / Net Sales
Profitability of trading
and mark-up
Profit Margin
Operating profit after income
tax / Net Sales Revenue
Measures net
profitability of each
rupees of sales
38
MARKET BASED FINANCIAL RATIO:
Measurements
Earnings per
share
Operating profits after
income tax less Preference
dividends / Weighted
average number of ordinary
shares issued
Measures profit earned on each ordinary share
Price-earnings
ratio
Market price per ordinary
share / Earnings per
ordinary share
Measures the amount
investors are paying
for a rupees of
earnings
Earning Yield
Earnings per ordinary share
/ Market price per ordinary
share
Measures the return
to an investor
purchasing shares at
the current market
price.
Dividend Yield
Annual dividend per ordinary
share / Market price per
ordinary share
Measures the rate of
return to shareholders
based on current
market price.
Dividend Payout
Total dividend per ordinary
share / Market price per
ordinary share
Measures the
percentage of profits
paid out to ordinary
shareholders
Net Asset
Backing (NTA)
Ordinary shareholders’
equity / No of ordinary
shares
Measure the assets
backing per share
39
LIQUIDITY RATIO:
Measurements
Current Ratio
Current Assets / Current
liabilities
A measure of short-
term liquidity.
Indicates the ability
of entity to meet its
short-term debts from
its current assets
Quick Ratio
Current Assets less
inventory / Current liabilities
A more rigorous
measure of short-
term liquidity.
Indicates the ability
of the entity to meet
unexpected demands
from liquid current
asses
40
ASSET MANAGEMENT/UTILISATION/ACTIVITY RATIOS:
Measurements
Receivables
turnover
Net sales revenue / Average
receivables balance
Measures the
effectiveness of
collections; used to
evaluate whether
receivables balance
is excessive
Average
collection period
Average receivables
balance x 365 / Net sales
revenue
Measures the
average number of
days taken by an
entity to collect its
receivables
Inventory
turnover
Cost of goods sold /
Average inventory balance
Indicates the liquidity
of inventory.
Measures the
number of times
inventory was sold
on the average
during the period
Total Asset
turnover ratio
Net sales revenue / Average
total assets
Measures the
effectiveness of an
entity in using its
assets during the
period.
Turnover of
Fixed Assets
Net Sales / Fixed Assets
Measure the
efficiency of the
usage of fixed assets
in generating sales
41
GEARING/FINANCIAL STABILITY RATIO:
Measurements
Debt ratio
Total Liabilities / Total assets
Measures
percentage of assets
provided by creditors
and extent of using
gearing
Equity ratio or
Proprietary ratio
Total shareholders’ equity /
Total assets
Measures
percentage of assets
provided by
shareholders and the
extent of using
gearing
Capitalization
ratio
Total assets / Total
shareholders’ equity
The reciprocal of the equity ratio and thus measures the same thing
Times interest
earned
Operating profit before
income tax + Interest
expense / Interest expense
+ Interest capitalized
Measures the ability
of the entity to meet
its interest payments
out of current profits.
42
CASH SUFFICIENCY RATIO:

Financial Ratio
Formula
Measurements
Cash flow
adequacy
Cash from
operations / Long-
term debt paid +
Assets acquired +
Dividends paid
Measures the entity’s
ability to cover its
main cash
requirements
Long-term debt
repayment
Long-term debt
repayments / Cash
from operations
long-term debt out of
cash from operations
Dividend payment
Dividends paid /
Cash from
operations
dividend payment
Reinvestment
Non-current asset
payments / Cash
from operations
ability to pay for its
non-current assets
out of cash from
operations
Debt coverage
Total long-term debt /
Cash from
operations
Measures the
payback period for
coverage of long-
term debt.
43
CASH FLOW EFFICIENCY RATIO:

Measurements
Cash flow to
sales
Cash from
operations / Net
sales revenue
Measures ability to
convert sales
revenue into cash
flows
Operation index
Cash from
operations /
Operating profit
after income tax
An index measuring
the relationship
between profit from
operations and
operating cash
flows
Cash flow return
on assets
Cash from
operation + Tax
paid + Interest paid
/ Average total
assets
Measures the
operating cash flow
return on assets
before interest and
tax
44
---------------------------------------------------------------------------------------------------------------------------
Chapter 7 -- Conclusions
--------------------------------------------------------------------------------------------------------------------------------
Among the companies studied the quick ratio was at comfortable level for all the companies except Glenmark
(1.58, Aurobindo 1.48) for the year 2008 show that the Indian pharmaceutical companies are better solvent.
The asset to turnover ratio of GloxoSmithklin (4,.78), Pfizer (4.3), Novatis (5.04), are the top 3 three and have
better asset utilization compared to Dishman (0.78), matrix (0.66), Cipla (1.03), Aurobindo (1.06), Divis (1.08)
and these companies could improve the financials by better asset utilization.
Dept to equity ratio of Aurobino (2.0), Ranbaxy (1.63) are highly leveraged and those of Abbot
(0.41), Wyeth (0.49), Aztra (0.45) GloxoSmithkline (0.53) are least leveraged.
The net profit margin of Sun pharmaceuticals (30.88%), GloxoSmithkline (32.94%), and Divis (32.91%) are
most profitability ratio and those of Matrix (-43.85%), Abbot (8.55%), Ranbaxy (12.2%), Aurobindo
(11.78%), IPCA (12.14%) have low profit margin in the operation.
The retun on equty is higher for Pfizer (53.2%), Divis (40.63%), GloxoSmithkline (43.65%) are
giving high return on equity and those of Matrix (-43.07%), Dr. Reddy’s (10.28%), Dishman
(13.58%) are much lower.
45
---------------------------------------------------------------------------------------------------------------------------------
Reference
--------------------------------------------------------------------------------------------------------------------------------
1.
Prof. C. Jeevanadam, Sardar Vallabhbhai Institute of Textile Management,
Coimbatore, Notes on Financial Statements, Short Term Programme on Financial
Management at Bannari Amman Institute of Technology, Sathyamangalam on
05.01.2005.
2.
Principles of Accounting, Dr. Vinayagam, P. C. Mani, K. L. Nagarajan, Kalyani
Publications, New Delhi, 2002.
3.
Financial Management, Dr. R. S. Kulsherestha, Kalyani Publications, New
Delhi,2002
4.
Dr. B. K. Behra, Class notes on Costing and Management,IIT-Delhi,2003
5.
Corporate Finance: Theory and Practice By S. R. Vishwanath
6.
The Indian Pharmaceutical Industry – An Overview of Internal Efficiencies
using Data Envelopment Analysis - Haritha Saranga1 and B.V. Phani
7.
Annual reports of Indian pharmaceutical companies and consolidated balance
sheets published as a part of Annual reports.
8.
Scrip report on Indian Pharmaceutical Industry.
9.
Research reports published by various agencies and brokerage houses on Indian
Pharmaceutical Industries.
46
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Pharmaceutical industry
From Wikipedia, the free encyclopedia
Jump to: navigation, search
The pharmaceutical industry develops, produces, and markets drugs licensed for use as
medications.[1] Pharmaceutical companies can deal in generic and/or brand medications. They are
subject to a variety of laws and regulations regarding the patenting, testing and marketing of
drugs.
Contents
[hide]
• 1 History
• 2 Research and development
○ 2.1 The cost of innovation
○ 2.2 Controversy about drug development and testing
• 3 Product approval in the US
○ 3.1 Orphan drugs
○ 3.2 Legal issues
• 4 Product approval elsewhere
• 5 Industry revenues
○ 5.1 Market leaders in terms of revenue
○ 5.2 Market leaders in terms of sales
○ 5.3 Patents and generics
○ 5.4 Medicare Part D
○ 5.5 Mergers, acquisitions, and co-marketing of drugs
○ 5.6 Prescriptions
○ 5.7 Publications
• 6 Marketing
○ 6.1 To healthcare professionals
○ 6.2 To insurance and public health bodies
○ 6.3 To retail pharmacies and stores
○ 6.4 Direct to consumer advertising
○ 6.5 Controversy about drug marketing and lobbying
• 7 Developing world
○ 7.1 Patents
○ 7.2 Nigerian clinical trial
○ 7.3 Charitable programmes
• 8 Industry associations
• 9 Regulatory authorities
• 10 See also
• 11 Notes
• 12 Further reading
○ 12.1 Economics of the industry
○ 12.2 Relationship between pharma and the medical profession
○ 12.3 Relationship between pharma and consumers (general public)
○ 12.4 Industry trends
[edit] History
The earliest drugstores date back to the Middle Ages. The first known drugstore was opened by
Arabian pharmacists in Baghdad in 754,[2] and many more soon began operating throughout the
medieval Islamic world and eventually medieval Europe. By the 19th century, many of the drug
stores in Europe and North America had eventually developed into larger pharmaceutical
companies.
Most of today's major pharmaceutical companies were founded in the late 19th and early 20th
centuries. Key discoveries of the 1920s and 1930s, such as insulin and penicillin, became mass-
manufactured and distributed. Switzerland, Germany and Italy had particularly strong industries,
with the UK, US, Belgium and the Netherlands following suit.
Legislation was enacted to test and approve drugs and to require appropriate labelling.
Prescription and non-prescription drugs became legally distinguished from one another as the
pharmaceutical industry matured. The industry got underway in earnest from the 1950s, due to
the development of systematic scientific approaches, understanding of human biology (including
DNA) and sophisticated manufacturing techniques.
Numerous new drugs were developed during the 1950s and mass-produced and marketed
through the 1960s. These included the first oral contraceptive, "The Pill", Cortisone, blood-
pressure drugs and other heart medications. MAO Inhibitors, chlorpromazine (Thorazine),
Haldol (Haloperidol) and the tranquilizers ushered in the age of psychiatric medication. Valium
(diazepam), discovered in 1960, was marketed from 1963 and rapidly became the most
prescribed drug in history, prior to controversy over dependency and habituation.
Attempts were made to increase regulation and to limit financial links between companies and
prescribing physicians, including by the relatively new U.S. Food and Drug Administration
(FDA). Such calls increased in the 1960s after the thalidomide tragedy came to light, in which
the use of a new tranquilizer in pregnant women caused severe birth defects. In 1964, the World
Medical Association issued its Declaration of Helsinki, which set standards for clinical research
and demanded that subjects give their informed consent before enrolling in an experiment.
Phamaceutical companies became required to prove efficacy in clinical trials before marketing
drugs.
Cancer drugs were a feature of the 1970s. From 1978, India took over as the primary center of
pharmaceutical production without patent protection.[citation needed]
The industry remained relatively small scale until the 1970s when it began to expand at a greater
rate.[citation needed] Legislation allowing for strong patents, to cover both the process of manufacture
and the specific products, came in to force in most countries. By the mid-1980s, small
biotechnology firms were struggling for survival, which led to the formation of mutually
beneficial partnerships with large pharmaceutical companies and a host of corporate buyouts of
the smaller firms. Pharmaceutical manufacturing became concentrated, with a few large
companies holding a dominant position throughout the world and with a few companies
producing medicines within each country.
The pharmaceutical industry entered the 1980s pressured by economics and a host of new
regulations, both safety and environmental, but also transformed by new DNA chemistries and
new technologies for analysis and computation.[citation needed] Drugs for heart disease and for AIDS
were a feature of the 1980s, involving challenges to regulatory bodies and a faster approval
process.
Managed care and Health maintenance organizations (HMOs) spread during the 1980s as part of
an effort to contain rising medical costs, and the development of preventative and maintenance
medications became more important. A new business atmosphere became institutionalized in the
1990s, characterized by mergers and takeovers, and by a dramatic increase in the use of contract
research organizations for clinical development and even for basic R&D. The pharmaceutical
industry confronted a new business climate and new regulations, born in part from dealing with
world market forces and protests by activists in developing countries. Animal Rights activism
was also a problem.
Marketing changed dramatically in the 1990s, partly because of a new consumerism.[citation needed]
The Internet made possible the direct purchase of medicines by drug consumers and of raw
materials by drug producers, transforming the nature of business. In the US, Direct-to-consumer
advertising proliferated on radio and TV because of new FDA regulations in 1997 that
liberalized requirements for the presentation of risks. The new antidepressants, the SSRIs,
notably Fluoxetine (Prozac), rapidly became bestsellers and marketed for additional disorders.
Drug development progressed from a hit-and-miss approach to rational drug discovery in both
laboratory design and natural-product surveys. Demand for nutritional supplements and so-called
alternative medicines created new opportunities and increased competition in the industry.
Controversies emerged around adverse effects, notably regarding Vioxx in the US, and
marketing tactics. Pharmaceutical companies became increasingly accused of disease mongering
or over-medicalizing personal or social problems.[3]
[edit] Research and development
Main articles: Drug discovery and Drug development
Drug discovery is the process by which potential drugs are discovered or designed. In the past
most drugs have been discovered either by isolating the active ingredient from traditional
remedies or by serendipitous discovery. Modern biotechnology often focuses on understanding
the metabolic pathways related to a disease state or pathogen, and manipulating these pathways
using molecular biology or Biochemistry. A great deal of early-stage drug discovery has
traditionally been carried out by universities and research institutions.
Drug development refers to activities undertaken after a compound is identified as a potential
drug in order to establish its suitability as a medication. Objectives of drug development are to
determine appropriate Formulation and Dosing, as well as to establish safety. Research in these
areas generally includes a combination of in vitro studies, in vivo studies, and clinical trials. The
amount of capital required for late stage development has made it a historical strength of the
larger pharmaceutical companies. Suggested citation: Tufts Center for the Study of Drug
Development, Annual Impact Report, http://csdd.tufts.edu/[citation needed]
Often, large multinational corporations exhibit vertical integration, participating in a broad range
of drug discovery and development, manufacturing and quality control, marketing, sales, and
distribution. Smaller organizations, on the other hand, often focus on a specific aspect such as
discovering drug candidates or developing formulations. Often, collaborative agreements
between research organizations and large pharmaceutical companies are formed to explore the
potential of new drug substances.
[edit] The cost of innovation
Drug discovery and development is very expensive; of all compounds investigated for use in
humans only a small fraction are eventually approved in most nations by government appointed
medical institutions or boards, who have to approve new drugs before they can be marketed in
those countries. Each year, only about 25 truly novel drugs (New chemical entities) are approved
for marketing. This approval comes only after heavy investment in pre-clinical development and
clinical trials, as well as a commitment to ongoing safety monitoring. Drugs which fail part-way
through this process often incur large costs, while generating no revenue in return. If the cost of
these failed drugs is taken into account, the cost of developing a successful new drug (New
chemical entity or NCE), has been estimated at about 1 billion USD[4](not including marketing
expenses). A study by the consulting firm Bain & Company reported that the cost for
discovering, developing and launching (which factored in marketing and other business
expenses) a new drug (along with the prospective drugs that fail) rose over a five year period to
nearly $1.7 billion in 2003.[5]
These estimates also take into account the opportunity cost of investing capital many years
before revenues are realized (see Time-value of money). Because of the very long time needed
for discovery, development, and approval of pharmaceuticals, these costs can accumulate to
nearly half the total expense. Some approved drugs, such as those based on re-formulation of an
existing active ingredient (also referred to as Line-extensions) are much less expensive to
develop.
Calculations and claims in this area are controversial because of the implications for regulation
and subsidization of the industry through federally funded research grants.[citation needed] It is
important in drug formulation.
[edit] Controversy about drug development and testing
There have been increasing accusations and findings that clinical trials conducted or funded by
pharmaceutical companies are much more likely to report positive results for the preferred
medication.[6]
In response to specific cases in which unfavorable data from pharmaceutical company-sponsored
research was not published, the Pharmaceutical Research and Manufacturers of America have
published new guidelines urging companies to report all findings and limit the financial
involvement in drug companies of researchers.[7] US congress signed into law a bill which
requires phase II and phase III clinical trials to be registered by the sponsor on the clinical
trials.gov website run by the NIH.[8]
Drug researchers not directly employed by pharmaceutical companies often look to companies
for grants, and companies often look to researchers for studies that will make their products look
favorable. Sponsored researchers are rewarded by drug companies, for example with support for
their conference/symposium costs. Lecture scripts and even journal articles presented by
academic researchers may actually be 'ghost-written' by pharmaceutical companies.[9] Some
researchers who have tried to reveal ethical issues with clinical trials or who tried to publish
papers that show harmful effects of new drugs or cheaper alternatives have been threatened by
drug companies with lawsuits.[10][11]
[edit] Product approval in the US
Main article: Food and Drug Administration #Regulation of drugs
In the United States, new pharmaceutical products must be approved by the Food and Drug
Administration (FDA) as being both safe and effective. This process generally involves
submission of an Investigational new drug filing with sufficient pre-clinical data to support
proceeding with human trials. Following IND approval, three phases of progressively larger
human clinical trials may be conducted. Phase I generally studies toxicity using healthy
volunteers. Phase II can include Pharmacokinetics and Dosing in patients, and Phase III is a very
large study of efficacy in the intended patient population.
A fourth phase of post-approval surveillance is also often required due to the fact that even the
largest clinical trials cannot effectively predict the prevalence of rare side-effects. Post-marketing
surveillance ensures that after marketing the safety of a drug is monitored closely. In certain
instances, its indication may need to be limited to particular patient groups, and in others the
substance is withdrawn from the market completely. Questions continue to be raised regarding
the standard of both the initial approval process, and subsequent changes to product labeling (it
may take many months for a change identified in post-approval surveillance to be reflected in
product labeling) and this is an area where congress is active.[12]
The FDA provides information about approved drugs at the Orange Book site.[13]
[edit] Orphan drugs
Main article: Orphan drug
There are special rules for certain rare diseases ("orphan diseases") involving fewer than 200,000
patients in the United States, or larger populations in certain circumstances. [14] Because medical
research and development of drugs to treat such diseases is financially disadvantageous,
companies that do so are rewarded with tax reductions, fee waivers, and market exclusivity on
that drug for a limited time (seven years), regardless of whether the drug is protected by patents.
[edit] Legal issues
Where pharmaceutics have been shown to cause side-effects, civil action has occurred, especially
in countries where tort payouts are likely to be large. Due to high-profile cases leading to large
compensations, most pharmaceutical companies endorse tort reform. Recent controversies have
involved Vioxx and SSRI antidepressants.
[edit] Product approval elsewhere
In many non-US western countries a 'fourth hurdle' of cost effectiveness analysis has developed
before new technologies can be provided. This focuses on the efficiency (in terms of the cost per
QALY) of the technologies in question rather than their efficacy. In England NICE approval
requires technologies be made available by the NHS, whilst similar arrangements exist with the
Scottish Medical Consortium in Scotland and the Pharmaceutical Benefits Advisory Committee
in Australia. A product must pass the threshold for cost-effectiveness if it is to be approved.
Treatments must represent 'value for money' and a net benefit to society. There is much
speculation[15] that a NICE style framework may be implemented in the USA to ensure Medicare
and Medicaid spending is focused to maximise benefit to patients and not excessive profits for
the pharmaceutical industry.
In the UK, the British National Formulary is the core guide for pharmacists and clinicians.
[edit] Industry revenues
For the first time ever, in 2006, global spending on prescription drugs topped $643 billion, even
as growth slowed somewhat in Europe and North America. The United States accounts for
almost half of the global pharmaceutical market, with $289 billion in annual sales followed by
the EU and Japan.(pdf) Emerging markets such as China, Russia, South Korea and Mexico
outpaced that market, growing a huge 81 percent.[16]
US profit growth was maintained even whilst other top industries saw little or no growth.[17]
Despite this, "..the pharmaceutical industry is — and has been for years — the most profitable of
all businesses in the U.S. In the annual Fortune 500 survey, the pharmaceutical industry topped
the list of the most profitable industries, with a return of 17% on revenue."[18]
Pfizer's cholesterol pill Lipitor remains a best-selling drug world wide. Its annual sales were
$12.9 billion, more than twice as much as its closest competitors: Plavix, the blood thinner from
Bristol-Myers Squibb and Sanofi-Aventis; Nexium, the heartburn pill from AstraZeneca; and
Advair, the asthma inhaler from GlaxoSmithKline.[16]
IMS Health publishes an analysis of trends expected in the pharmaceutical industry in 2007,
including increasing profits in most sectors despite loss of some patents, and new 'blockbuster'
drugs on the horizon.[19]
Teradata Magazine predicted that by 2007, $40 billion in U.S. sales could be lost at the top 10
pharmaceutical companies as a result of slowdown in R&D innovation and the expiry of patents
on major products, with 19 blockbuster drugs losing patent.[20]
[edit] Market leaders in terms of revenue
Main article: List of pharmaceutical companies
The following is a list of the 20 largest pharmaceutical and biotech companies ranked by
healthcare revenue. Some companies (e.g., Bayer, Johnson and Johnson and Procter & Gamble)
have additional revenue not included here. The phrase Big Pharma is often used to refer to
companies with revenue in excess of $3 billion, and/or R&D expenditure in excess of $500
million.
Revenue Total Healthcare Net income/

Rank Revenues R&D 2006 (loss) 2006 Employees
Company Country (USD millions) (USD millions) (USD millions)
2006
2008
1 Novartis Switzerland 53,324 7,125 11,053 138,000
2 Pfizer USA 48,371 7,599 19,337 122,200
3 Bayer Germany 44,200 1,791 6,450 106,200
United
4 GlaxoSmithKline 42,813 6,373 10,135 106,000
Kingdom
Johnson and
5 USA 37,020 5,349 7,202 102,695
Johnson
6 Sanofi-Aventis France 35,645 5,565 5,033 100,735
Hoffmann–La
7 Switzerland 33,547 5,258 7,318 100,289
Roche
8 AstraZeneca UK/Sweden 26,475 3,902 6,063 50,000+
9 Merck & Co. USA 22,636 4,783 4,434 74,372
Abbott
10 USA 22,476 2,255 1,717 66,800
Laboratories
11 Wyeth USA 20,351 3,109 4,197 66,663
Bristol-Myers
12 USA 17,914 3,067 1,585 60,000
Squibb
Eli Lilly and
13 USA 15,691 3,129 2,663 50,060
Company
14 Amgen USA 14,268 3,366 2,950 48,000
Boehringer
15 Germany 13,284 1,977 2,163 43,000
Ingelheim
16 Schering-Plough USA 10,594 2,188 1,057 41,500
Baxter
17 USA 10,378 614 1,397 38,428
International
Takeda
18 Pharmaceutical Japan 10,284 1,620 2,870 15,000
Co.
19 Genentech USA 9,284 1,773 2,113 33,500
Procter &
20 USA 8,964 n/a 10,340 29,258
Gamble
Source: Top 50 Pharmaceutical Companies Charts & Lists, Med Ad News, September 2007[21]
[edit] Market leaders in terms of sales
The top 15 pharmaceutical companies by 2008 sales are:[5]
[22]
Rank Company Sales ($M) Based/Headquartered in

1 Pfizer 43,363 US
2 GlaxoSmithKline 36,506 UK
3 Novartis 36,506 Switzerland
4 Sanofi-Aventis 35,642 France
5 AstraZeneca 32,516 UK/Sweden
6 Hoffmann–La Roche 30,336 Switzerland
7 Johnson & Johnson 29,425 US
8 Merck & Co. 26,191 US
9 Abbott 19,466 US
10 Eli Lilly and Company 19,140 US
11 Amgen 15,794 US
12 Wyeth 15,682 US
13 Teva 15,274 Israel
14 Bayer 15,660 Germany
15 Takeda 13,819 Japan
[edit] Patents and generics
Depending on a number of considerations, a company may apply for and be granted a patent for
the drug, or the process of producing the drug, granting exclusivity rights typically for about 20
years.[23] However, only after rigorous study and testing, which takes 10 to 15 years on average,
will governmental authorities grant permission for the company to market and sell the drug.[24]
Patent protection enables the owner of the patent to recover the costs of research and
development through high profit margins for the branded drug. When the patent protection for
the drug expires, a generic drug is usually developed and sold by a competing company. The
development and approval of generics is less expensive, allowing them to be sold at a lower
price. Often the owner of the branded drug will introduce a generic version before the patent
expires in order to get a head start in the generic market.[25]
[edit] Medicare Part D
In 2003 the United States enacted the Medicare Prescription Drug, Improvement, and
Modernization Act (MMA), a program to provide prescription drug benefits to the elderly and
disabled. This program is a component of Medicare (United States) and is known as Medicare
Part D. This program, set to begin in January 2006, will significantly alter the revenue models
for pharmaceutical companies. Revenues from the program are expected to be $724 billion
between 2006 and 2015.[26]
Pharmaceuticals developed by biotechnological processes often must be injected in a physician's
office rather than be delivered in the form of a capsule taken orally. Medicare payments for these
drugs are usually made through Medicare Part B (physician office) rather than Part D
(prescription drug plan).
[edit] Mergers, acquisitions, and co-marketing of drugs
A merger, acquisition, or co-marketing deal between pharmaceutical companies may occur as a
result of complementary capabilities between them. A small biotechnology company might have
a new drug but no sales or marketing capability. Conversely, a large pharmaceutical company
might have unused capacity in a large sales force due to a gap in the company pipeline of new
products. It may be in both companies' interest to enter into a deal to capitalize on the synergy
between the companies.
[edit] Prescriptions
In the U.S. , prescriptions have increased over the past decade to 3.4 billion annually, a 61
percent increase. Retail sales of prescription drugs jumped 250 percent from $72 billion to $250
billion, while the average price of prescriptions has more than doubled from $30 to $68.
Retail prescription drug sales 1995 to 2006 PDF from www.census.gov
[edit] Publications
The drug company Merck & Co. publishes the Merck Manual of Diagnosis and Therapy, the
world's best-selling medical textbook, and the Merck Index, a collection of information about
chemical compounds.
[edit] Marketing
A promotional item given to a psychiatrist

Main article: Pharmaceutical marketing
Pharmaceutical companies commonly spend a large amount on advertising, marketing and
lobbying. In the US, drug companies spend $19 billion a year on promotions.[7] Advertising is
common in healthcare journals as well as through more mainstream media routes. In some
countries, notably the US, they are allowed to advertise direct to the general public.
Pharmaceutical companies generally employ sales people (often called 'drug reps' or, an older
term, 'detail men') to market directly and personally to physicians and other healthcare providers.
In some countries, notably the US, pharmaceutical companies also employ lobbyists to influence
politicians. Marketing of prescription drugs in the US is regulated by the federal Prescription
Drug Marketing Act of 1987.
[edit] To healthcare professionals
Physicians, physician assistants, and nurse practitioners are perhaps the most important players
in pharmaceutical sales because they write the prescriptions that determine which drugs will be
used by the patient. Influencing the physician is often seen as the key to prescription
pharmaceutical sales.[27] A medium-sized pharmaceutical company might have a sales force of
1000 representatives. The largest companies have tens of thousands of representatives. Currently,
there are approximately 100,000 pharmaceutical sales reps in the United States pursuing some
120,000 pharmaceutical prescribers.[28] The number doubled in the four years from 1999 to 2003.
Drug companies spend $5 billion annually sending representatives to physician offices.
Pharmaceutical companies use the service of specialized healthcare marketing research
companies to perform Marketing research among Physicians and other Healthcare professionals.
[edit] To insurance and public health bodies
Private insurance or public health bodies (e.g. the NHS in the UK) decide which drugs to pay for,
and restrict the drugs that can be prescribed through the use of formularies. Public and private
insurers restrict the brands, types and number of drugs that they will cover. Not only can the
insurer affect drug sales by including or excluding a particular drug from a formulary, they can
affect sales by tiering or placing bureaucratic hurdles to prescribing certain drugs as well. In
January 2006, the U.S. instituted a new public prescription drug plan through its Medicare
program known as Medicare Part D. This program engages private insurers to negotiate with
pharmaceutical companies for the placement of drugs on tiered formularies.
[edit] To retail pharmacies and stores
Commercial stores and pharmacies are a major target of non-prescription sales and marketing for
pharmaceutical companies.
[edit] Direct to consumer advertising
Main article: Direct-to-consumer advertising
Since the 1980s new methods of marketing for prescription drugs to consumers have become
important. Direct-to-consumer media advertising was legalised in the FDA Guidance for
Industry on Consumer-Directed Broadcast Advertisements.
[edit] Controversy about drug marketing and lobbying
There has been increasing controversy surrounding pharmaceutical marketing and influence.
There have been accusations and findings of influence on doctors and other health professionals
through drug reps, including the constant provision of marketing 'gifts' and biased information to
health professionals;[29][30] highly prevalent advertising in journals and conferences; funding
independent healthcare organizations and health promotion campaigns; lobbying physicians and
politicians (more than any other industry in the US[31]); sponsorship of medical schools or nurse
training; sponsorship of continuing educational events, with influence on the curriculum;[32] and
hiring physicians as paid consultants on medical advisory boards.
To help ensure the status quo on U.S. drug regulation and pricing, the pharmaceutical industry
has thousands of lobbyists in Washington, DC that lobby Congress and protect their interests.
The pharmaceutical industry spent $855 million, more than any other industry, on lobbying
activities from 1998 to 2006, according to the non-partisan Center for Public Integrity.[33]
Some advocacy groups, such as No Free Lunch, have criticized the effect of drug marketing to
physicians because they say it biases physicians to prescribe the marketed drugs even when
others might be cheaper or better for the patient.[34]
There have been related accusations of disease mongering[3] (over-medicalising) to expand the
market for medications. An inaugural conference on that subject took place in Australia in 2006.
[35]
In 2009, the Government-funded National Prescribing Service launched the "Finding
Evidence - Recognising Hype" program, aimed at educating GPs on methods for independent
drug analysis.
A 2005 review by a special committee of the UK government came to all the above conclusions
in a European Union context[36] whilst also highlighting the contributions and needs of the
industry.
There is also huge concern about the influence of the pharmaceutical industry on the scientific
process. Meta-analyses have shown that studies sponsored by pharmaceutical companies are
several times more likely to report positive results, and if a drug company employee is involved
(as is often the case, often multiple employees as co-authors and helped by contracted marketing
companies) the effect is even larger.[37][38][39] Influence has also extended to the training of doctors
and nurses in medical schools, which is being fought.[40]
It has been argued that the design of the Diagnostic and Statistical Manual of Mental Disorders
and the expansion of the criteria represents an increasing medicalization of human nature, or
"disease mongering", driven by drug company influence on psychiatry.[41] The potential for direct
conflict of interest has been raised, partly because roughly half the authors who selected and
defined the DSM-IV psychiatric disorders had or previously had financial relationships with the
pharmaceutical industry.[42] The president of the organisation that designs and publishes the
DSM, the American Psychiatric Association, recently acknowledged that in general American
psychiatry has "allowed the biopsychosocial model to become the bio-bio-bio model" and
routinely accepted "kickbacks and bribes" from pharmaceutical companies.[43]
[edit] Developing world
The role of pharmaceutical companies in the developing world is a matter of some debate,
ranging from those highlighting the aid provided to the developing world, to those critical of the
use of the poorest in human clinical trials, often without adequate protections, particularly in
states lacking a strong rule of law. Other criticisms include an alleged reluctance of the industry
to invest in treatments of diseases in less economically advanced countries, such as malaria;
Criticism for the price of patented AIDS medication, which could limit therapeutic options for
patients in the Third World, where the most people have AIDS.
In September 2008 the Open Source Drug Discovery Network was launched in India to combat
infectious diseases common to developing countries.
[edit] Patents
See also: Criticism of patents
Under World Trade Organization rules, a developing country has options for obtaining needed
medications under compulsory licensing or importation of cheaper versions of the drugs, even
before patent expiration (WTO Press Release). Pharmaceutical companies often offer much
needed medication at no or reduced cost to the developing countries. In March 2001, South
Africa was sued by 41 pharmaceutical companies for their Medicines Act, which allowed the
import and generic production of cheap AIDS drugs. The case was later dropped after protest
around the world.
[edit] Nigerian clinical trial
See also: Kano trovafloxacin trial litigation
In 1996, a pediatric clinical trial conducted on behalf of Pfizer tested the antibiotic Trovan
allegedly without first obtaining the informed consent of participants or their parents.[44][45][46][47]
[edit] Charitable programmes
Charitable programs and drug discovery & development efforts are routinely undertaken by
pharmaceutical companies. Some examples include:
• "Merck's Gift," wherein billions of River Blindness drugs were donated in Africa [48]
• Pfizer's gift of free/discounted fluconazole and other drugs for AIDS in South Africa [49]
• GSK's commitment to give free albendazole tablets to the WHO for, and until, the
elimination of lymphatic filariasis worldwide.
• In 2006, Novartis committed USD 755 million in corporate citizenship initiatives around
the world, particularly focusing on improved access to medicines in the developing world
through its Access to Medicine projects, including donations of medicines to patients
affected by leprosy, tuberculosis, and malaria; Glivec patient assistance programmes; and
relief to support major humanitarian organisations with emergency medical needs.[50]
However, some NGOs such as Médecins Sans Frontières do not routinely accept corporate
donations of medicines. More precisely, they do not become reliant on such supplies of
medicines because the supply is dependent upon the fluid, profit-driven charities of said
pharmaceutical companies, and thus may dry up during a critical or otherwise important time.
[citation: "An Imperfect Offering" by ex-MSF president James Orbinski]
[edit] Industry associations
• European Confederation of Pharmaceutical Entrepreneurs (EUCOPE)
• Drug Information Association (DIA)
• European Federation of Pharmaceutical Industries and Associations (EFPIA)
• European Pharmaceutical Market Research Association (EphMRA)
• International Federation of Pharmaceutical Manufacturers and Associations (IFPMA)
• Japan Pharmaceutical Manufacturers Association (JPMA)
• New York Health Products Council (NYHPC)
• Pharmaceutical Research and Manufacturers of America (PhRMA)
• Irish Pharmaceutical Healthcare Association (IPHA)
[edit] Regulatory authorities
• International Conference on Harmonisation of Technical Requirements for Registration
of Pharmaceuticals for Human Use (ICH)
• European Medicines Agency (EMEA)
• U.S. Food and Drug Administration (FDA)
• Ministry of Health, Labour and Welfare (Japan)
• Medicines and Healthcare products Regulatory Agency (MHRA)
• Central Drugs Standards Control Organisation (India) CDSCO
• Ukrainian Drug Registration Agency[2]
[edit] See also
• Biotechnology • List of top selling drugs
• Cautionary and advisory label • List of pharmaceutical companies
• Clinical trial • List of pharmacies
• Contamination control • National pharmaceuticals policy
• Cost effectiveness analysis • NICE
• Drug development • Orphan drug
• Drug design • Pharmaceutical marketing
• Drug discovery • Pharmaceutical lobby
• Generic drug • Prescription drug prices in the United States
• Health care system • Use of biotechnology in pharmaceutical
manufacturing
[edit] Notes
1. ^ John L. McGuire, Horst Hasskarl, Gerd Bode, Ingrid Klingmann, Manuel Zahn
"Pharmaceuticals, General Survey" Ullmann's Encyclopedia of Chemical Technology"
Wiley-VCH, Weinheim, 2007.DOI: 10.1002/14356007.a19_273.pub2
2. ^ Information taken from the abstract of Hadzović, S (1997). "Pharmacy and the great
contribution of Arab-Islamic science to its development" (in Croatian). Medicinski arhiv
51 (1–2): 47–50. ISSN 0350-199X. OCLC 32564530. PMID 9324574.
3. ^ a b Ray Moynihan and Alan Cassels (2005). Selling Sickness: How Drug Companies
are Turning Us All Into Patients. Allen & Unwin. New York. ISBN 1-74114-579-1
4. ^ Tufts Center for the Study of Drug Development
5. ^ a b Has the Pharmaceutical Blockbuster Model Gone Bust?, Bain & Company press
release, December 8, 2003. Press release
6. ^ Bhandari M, Busse JW, Jackowski D, Montori VM, Schunemann H, Sprague S, Mears
D, Schemitsch EH, Heels-Ansdell D, Devereaux PJ (2004-02-17). "Association between
industry funding and statistically significant pro-industry findings in medical and surgical
randomized trials". PubMed. http://www.ncbi.nlm.nih.gov/entrez/query.fcgi?
cmd=retrieve&db=pubmed&list_uids=14970094&dopt=Abstract. Retrieved 2007-05-24.
7. ^ a b Moynihan R (2003-05- cvc31). Who pays for the pizza? Redefining the relationships
between doctors and drug companies. 2: Disentanglement. BMJ: British Medical Journal.
Volume 326, Issue 7400, Pages 1193–1196. Retrieved on 2007-10-06.
8. ^ "Hogan & Hartson Update on Pharmaceutical Trial Registration" (PDF). 2008-03-03.
http://www.hhlaw.com/files/Publication/edbf3429-125c-41c9-9442-
b552e69b756c/Presentation/PublicationAttachment/972a9053-8c8d-46e4-ac96-
ecf4892a8643/Pharma.pdf. Retrieved 2008-06-02.
9. ^ Barnett, Antony (2003-12-07). "Revealed: how drug firms 'hoodwink' medical
journals". London: The Observer.
http://observer.guardian.co.uk/uk_news/story/0,6903,1101680,00.html. Retrieved 2007-
05-24.
10. ^ "How whistleblowing cost one doctor £550000". PubMed. 2002-05-25.
http://www.pubmedcentral.nih.gov/articlerender.fcgi?tool=pmcentrez&artid=1123215.
Retrieved 2007-05-24.
11. ^ Lenzer, Jeanne (2005-05-27). "What Can We Learn from Medical Whistleblowers?".
PubMed. http://www.pubmedcentral.nih.gov/articlerender.fcgi?
tool=pmcentrez&artid=1140678. Retrieved 2007-05-24.
12. ^ "US Congress Warned of Gathering Storm at FDA". PharmaTimes.
http://www.pharmatimes.com/WorldNews/article.aspx?id=12822. Retrieved 2008-02-
08.
13. ^ "Electronic Orange Book". U.S. Food and Drug Administration.
http://www.fda.gov/cder/ob/default.htm. Retrieved 2007-05-31.
14. ^ "The Orphan Drug Act (as amended)". U.S. Food and Drug Administration.
http://www.fda.gov/orphan/oda.htm. Retrieved 2007-09-24.
15. ^ Harris, Gardiner (2008-12-03). "British Balance Benefit vs. Cost of Latest Drugs". The
New York Times. http://www.nytimes.com/2008/12/03/health/03nice.html?
pagewanted=3&_r=1&incamp=article_popular_3. Retrieved 2010-05-22.
16. ^ a b Herper, Matthew and Kang, Peter (2006-03-22). "The World's Ten Best-Selling
Drugs". Forbes. http://www.forbes.com/home/sciencesandmedicine/2006/03/21/pfizer-
merck-amgen-cx_mh_pk_0321topdrugs.html. Retrieved 2007-05-31.
17. ^ "IMS Reports 11.5 Percent Dollar Growth in '03 U.S. Prescription Sales". IMS Health.
2004-02-17.
http://www.imshealth.com/ims/portal/front/articleC/0,2777,6025_3665_44771558,00.htm
l. Retrieved 2007-06-01.
18. ^ [1] "Why We Pay So Much," TIME magazine, Feb. 2, 2004
19. ^ "IMS Health Forecasts 5 to 6 Percent Growth for Global Pharmaceutical Market in
2007". IMS Health. 2006-10-24.
http://www.imshealth.com/ims/portal/front/articleC/0,2777,6025_3665_79210022,00.htm
l. Retrieved 2007-06-19.
20. ^ "Prescription for change". Teradata Magazine online. March 2005.
http://www.teradata.com/t/page/131951/. Retrieved 2007-06-19.
21. ^ Med Ad News, September 2007
22. ^ IMS Health 2008, Top 15 Global corporations
23. ^ Frequently Asked Questions (FAQs)
24. ^ "New Drug Approvals in 2006" (PDF). March 2007.
http://www.phrma.org/files/NDA2006.pdf. Retrieved 2008-02-23.
25. ^ "Assessment of Authorized Generics in the U.S." (PDF). IMS Consulting. June 2006.
http://www.phrma.org/files/IMS%20Authorized%20Generics%20Report_6-22-06.pdf.
26. ^ "The medicare Prescriptions Drug Benefit" (PDF). Kaiser Family Foundation.
September 2005.
http://web.archive.org/web/20060217051127/http://www.kff.org/medicare/upload/7044-
02.pdf. Retrieved 2007-06-12.
27. ^ Myers, Kelly D. (2007-01-01). "Marketing to Professionals: Tomorrow's Changes
Today". PharmExec.com.
http://www.pharmexec.com/pharmexec/article/articleDetail.jsp?id=395598. Retrieved
2007-06-20.
28. ^ Robinson, James T. (November 2003). "Changing the Face of Detailing by Motivating
Physicians to See Pharmaceutical Sales Reps" (PDF). Health Banks.
http://www.healthbanks.com/PatientPortal/Public/support_documents/PMT_Robinson.pd
f. Retrieved 2007-06-20.
29. ^ "No Free Lunch". http://www.nofreelunch.org/. Retrieved 2007-05-23.
30. ^ Kaufman, Marc (2005-05-06). "Merck CEO Resigns as Drug Probe Continues".
Washington Post. http://www.washingtonpost.com/wp-
dyn/content/article/2005/05/05/AR2005050501115_pf.html. Retrieved 2007-05-23.
31. ^ "Drug Lobby Second to None: How the pharmaceutical industry gets its way in
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http://www.publicintegrity.org/rx/report.aspx?aid=723. Retrieved 2007-05-23.
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[edit] Further reading

• Coyne J. Lessons in conflict of interest: “The construction of the martyrdom of David
Healy and the dilemma of bioethics.” American Journal of Bioethics 5 (1): W3-W14,
2005.
• Greene, Jeremy A., and Scott H. Podolsky, “Keeping Modern in Medicine:
Pharmaceutical Promotion and Physician Education in Postwar America,” Bulletin of the
History of Medicine, 83 (Summer 2009), 331–77
• Marcia Angell: The truth about the drug companies. Random House, New York, 2004,
305 S. ISBN 0-375-50846-5.
• Diana A. Taylor: HEALTHYWORDS Towards a Betterment in Medical Communications
across the Drug Industry ISBN 3-8288-9083-0 Tectum Verlag 2006 S.187
[edit] Economics of the industry
• Merrill Goozner: The $800 million pill. University of California Press, Berkeley, 2004,
297 S. ISBN 0-520-23945-8.
[edit] Relationship between pharma and the medical profession
• Joanna Moncrieff, "An Unholy Alliance? Psychiatry and the influence of the
pharmaceutical industry", Spinwatch, 27 June 2006.
• Jaconelli T, "The Pharmaceutical Industry and its Influence on Doctors and Medical
Students", Lancet, 2008.
[edit] Relationship between pharma and consumers (general public)
• Ray Moynihan, Alan Cassels: Selling sickness: How the world's biggest pharmaceutical
companies are turning us all into patients. Nation Books, New York, 2005.
[edit] Industry trends
• Carlson, Bruce (2008-08-01). "Pharma Outsourcing on Upward Trajectory". Genetic
Engineering & Biotechnology News (Mary Ann Liebert) 28 (14): pp. 14. ISSN 1937-
8661. http://www.genengnews.com/articles/chitem.aspx?aid=2547. Retrieved 2008-09-
26
• Outsourcing List: pharmaceutical contract-manufacturing overview by pharmaceutical
doseform and formulation.
About Us
Medopharm was born in 1970 with its sights set on becoming a global leader in the
pharmaceutical industry. Today, with operations spanning over 60 countries worldwide, this
forward-looking company, one of the top contenders on the Indian pharmaceutical scene, is on
the right path to turning its vision into a reality.
Medopharm s values, management principles and business practices act as a compass to guide the
company to success. Having won recognition for trustworthiness, reliability and world-class
standards, the company is poised for a major breakthrough in cross-boundary sales.
To meet global standards, Medopharm s procurement, production, planning, manufacturing,

testing, despatch, finance and human resource systems are ERP focused. It also places emphasis
on TQM.
Value building in human relations is a core element of Medopharm. Our employees and
associates are important to us and are cherished as part of our ever-growing family.
• Quality Policy / Processes

• Quality Policy
• The Mainstay of our Success
Quality Assurance remains Medopharm s number one priority for our clients. Thus, every
stage of manufacturing - from procurement of raw materials to the finished product -
follows strict quality control measures in keeping with international norms and standard
operating procedures. These quality control procedures were developed by Medopharm’s
experienced and qualified personnel manning the QC department.
Being awarded with ISO 9001-2000 status, all our systems are validated to meet
international standards. With an outstanding track record for maintaining quality, we
continue to operate one of India’s top-notch Quality Control and Analytical Research
Laboratories. Our Quality Control Laboratory has also met the approval of the Drug
Control Authority of India.
This has paved the way for us to carry out tests and conduct research for other drug
companies. Regulatory affairs is one area of expertise for Medopharm and our
professional in-house team takes the appropriate measures to file DMFS/Technical
dossiers with the Ministry of Health and other regulatory bodies.
•
Fact Sheet
Year of Establishment : 1970
Nature of Business : Manufacturer
Number of Employees : 101 to 500 People
Turnover : US$ 10-25 Million (or Rs. 40-100 Crore Approx.)
Major Markets : Indian Subcontinent
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pharmaceutical map of the world.

wide variety of bulk drugs and exports sophisticated bulk drugs.

• Well Developed Industry with Strong Manufacturing Base

• Access to pool of highly trained scientists, both in India and abroad.

• Strong marketing and distribution network

• Competencies in Chemistry and process development.

• Low investments in innovative R&D and lack of resources to compete with

MNCs for New Drug Discovery Research and to commercialize molecules on a

• Lack of strong linkages between industry and academia.

• Low medical expenditure and healthcare spend in the country

home and abroad.

• Shortage of medicines containing psychotropic substances. There are 4000 such

• Significant export potential.

• Licensing deals with MNCs for NCEs and NDDS.

• Marketing alliances to sell MNC products in domestic market.

• Contract manufacturing arrangements with MNCs

• Potential for developing India as a centre for international clinical trials

• Niche player in global pharmaceutical R&D.

• Supply of generic drugs to developed markets.

invests in research and development

• R&D efforts of Indian pharmaceutical companies hampered by lack of enabling

regulatory requirement. For instance, restrictions on animal testing outdated

profitability and prevents pharmaceutical companies from generating investible

• Lowering of tariff protection

that enjoy tax holidays.

there current portfolio.

establishes a basis for sound judgement.

assets are in the business.

curtail sales and hence adversely affect profit.

over in the business.

goods sold by the average inventory.

Total Assets Turnover

The firm should manage its assets efficiently to maximise sales.

It is calculated by dividing the firm’s sales by its total assets.

assets to generate sales.

The relationship of owner’s equity to borrowed funds is an important indicator of financial

possible losses from default in payment.

capital employed is greater than the rate payable on borrowed funds.

difficulty arising from excessive debt burden.

capital funds. The debt to equity ratio is calculated as follows:

the effective use of its resources.

Normally the gross profit has to rise proportionately with sales.

supermarkets and motorcar dealers.

readers of financial statements.

reserves. The ratio is calculated as follows:

against the price of the share and is calculated as:

extremely confident of the potential growth and earnings of the share.

high growth companies have lower dividend payouts.

those who would require improvements in the ratios.

would be forced into liquidation.

CASH SUFFICIENCY RATIO:

CASH FLOW EFFICIENCY RATIO:

MBA Project New Report

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