PT.Kalbe Farma Tbk.

 Company Profile
Kalbe Farma (KLBF) was established in 1966 in a humble garage house in North Jakarta by six
siblings: Khouw Lip Tjoen, Khouw Lip Hiang, Khouw Lip Swan, Boenjamin Setiawan, Maria
Karmila and F Bing Aryanto.

Kalbe’s vision is to become dominant in the health business in Indonesia and become a player in
the global market with strong brands, increased through good management and advanced
technology. Kalbe’s mission is to improve health for a better life. The main values of Kalbe are
integrity, a strong collaboration, innovation, agility and give their best to consumers.
There are many factors that support, stimulate and accelerate the progress of Kalbe. Basically
there are 4 keys to success that makes Kalbe capable of achievement, namely (1) innovator
product variety, (2) a solid marketing strategy, (3) strong commitment to Research and
Development and (4) human resources are reliable.

For over 40 years, the company has been aggressively expanding its business, both organically
and through strategic acquisitions, to become a provider of integrated health care solutions. It
acquired Dankos Laboratories in 1977, Bintang Toedjoe and Hexpharm Jaya in 1985, Woods’
brand and Saka Farma Laboratories in 1997, as well as Sanghiang Perkasa in 1993.KLBF has
also been active in research and development (R&D) for leading-edge generic drug formulations,
as well as developing innovative consumer and nutritional products.

Through strategic alliances with international partners, KLBF has also started to support several
successful R&D ventures working on cancer drugs, stem cells and biotechnology research. The
company established the Stem Cell and Cancer Institute in 2007. KLBF also entered the business
of medical device trading by establishing Renalmed Tiara Utama in 2008.

The company listed the shares of its subsidiaries, Igar Jaya and Dankos Laboratories, on the
Indonesia Stock Exchange in 1989. KLBF itself and its subsidiary Enseval Putera Megatrading
conducted their initial public offerings in 1991 and 1994, respectively. Today, KLBF has become
the largest-publicly listed pharmaceutical company in South-east Asia with market capitalization
of nearly $6bn. KLBF businesses are grouped into four major segments: prescription
pharmaceuticals, consumer health, nutritionals, and distribution and packaging. In Indonesia,
KLBF maintains coverage of over 70% of general practitioners, 90% of specialists, 100% of
hospitals and 100% of pharmacies for the prescription pharmaceuticals market, as well as 80%
for the consumer health and nutritional markets.

 Development Strategy
In the prescription pharmaceutical segment, Indonesia’s expanded National Healthcare Insurance
programmers should exert a positive impact on KLBF unbranded generic products. However,
margins on unbranded generic products are thin. To compensate for this, KLBF has assigned
more effort into developing oncology products; we expect this will contribute approximately 5-
10% to the segment revenue by 2016. In the consumer health segment, energy drinks (Extra
Joss) and ready-to-drink products will continue to drive top line growth. New over-the-counter
products, such as Hydro Coco, Original Love Juice and Bintang Toedjoe Masuk Angin, should
also continue to enjoy robust growth in 2015. In the nutritional segment, growth will come from
new product launches such as Zee, Fitbar and Dive, along with top-selling products like
Morinaga, Prenagen and Diabetasol. In the distribution and packaging segment, we see great
challenges emerging from stricter regulations from the government, along with increasing
integration with clients’ distribution chains.

 SWOT Analysis of PT.Kalbe Farma Tbk.

Kalbe Farma Strength.
Kalbe is the market leader for public health products and the market leader for ethical products.
Its product is a leading brand with a variety of specific market segments. In addition, its product
is an innovator, developing drugs and chemical entities either by itself or through strategic
alliances with international partners. As well as producing many new products based on high
technology.

On December 16, 2005, Kalbe Management has successfully completed a merger with Dankos
and PT Enseval (“Enseval”) into one company in order to create a publicly listed pharmaceutical
company and the largest in Southeast Asia. This merger will provide opportunities for the future
of Kalbe in improving the efficiency and effectiveness. Mergers involving PT Enseval as super
holding and three subsidiaries listed on the JSE – Kalbe Farma Laboratories (DNKS), Farma
(EPMS) – as well as forming a company truly integrated. Horizontally, Kalbe “new” offer a
range of products is much broader, ranging from various forms of drug and health food to
supplements and energy drinks. Vertically, they do activities from procurement of raw materials,
finished product manufacturing, marketing, to sales and distribution.

Kalbe have long experience and in terms of financial, Kalbe revenues increased approximately
18% per year.

Kalbe Management has experienced personnel, including former director general BPOM in
developing, producing, marketing and selling healthcare products and pharmaceuticals. Equipped
with a solid team and good cooperation between departments internally and close relationships
with partners, PT. Kalbe Farma Tbk increasingly established itself in the ranks of big companies
in Indonesia.
In the production, Kalbe has 7 GMP (Good Manufacturing Practice) that have an international
standard with 2 additional GMP still under construction. Kalbe’s commitments in this regard
have been recognized through a series of test results certification department. All production
facilities owned subsidiary of Kalbe and has obtained ISO 9001 certification, while Kalbe, PT
Laboratories Tbk. (“Dankos”) and PT Kalbe also gained certification of ISO14001 and OHSAS
18001/SMK3 (Health Management Systems and Safety). Kalbe and Dankos have consistently
maintained a very satisfactory achievement in the application of the principles of Good
Corporate Governance, namely the number five and number two among all the companies listed
on the Bursa Efek Jakarta in 2005.
In the distribution, Kalbe have 6000 sales force personnel to 1 million outlets across Indonesia.
Sustained a fairly complete business structure, namely a distribution company and a hospital
network that carries the brand Families and Partners International Partners, including school
nurses.

Kalbe Farma Weakness

Expansion into noncore-business, such as the business property (PT Kalbe Land) and education
(STIE Kalbe). This expansion may result in less focus on business development pharmaceutical
company.
Export sales to September 2005 grew by 127.7 percent compared with same period last year.
While domestic sales grew by 28.6 percent. Although exports grew very large, but weakening of
the rupiah against the U.S. dollar can not bring big profits as well. The reason is, about 90
percent of raw materials are imported so the price is also soaring. As a result, gross profit
percentage (gross margin) only reached 54.3 percent. This is because the import component of
the drug is still very high, amounting to 90% of the raw materials used (the active ingredient and
auxiliary materials) and around 50% of used packaging materials.
The active ingredients that can be produced in the country there were not significant and can not
be obtained with a competitive price compared to sources from abroad. Efforts to increase self-
sufficiency in the field of procurement of raw materials often stumble on the problem :
 Many kinds of raw materials used by the pharmaceutical industry (up to 6000 items) so
much usage per item that does not meet the scale of economic production.
 The main problem is the procurement of basic raw material for local production of raw
materials associated with :
i. Underdeveloped upstream chemical industry that can sustain the provision of intermediates for
the manufacture of drugs. Dependence on intermediates from abroad to a certain extent can
reduce the benefits derived from local synthesis.
ii. Lack of coordination among related industries such as petrochemical and pharmaceutical
industries. It often happens that the pharmaceutical industry have difficulty because of its
intermediate can not be made locally.
Weakness, basically the pharmaceutical industry is indeed a knowledge-intensive industries and
highly-regulated, but regulatory aspects of pharmaceutical industry in Indonesia is considered
sufficient weight that comes from :

 Policy is made with passion and not a development control;

 Implementation was slow due to the imbalance Among the number of inspectors from the
government with private parties to be served. Another chain that is part of the marketing
 aspect and distribution of pharmaceutical industrial production is still not balanced both
qualitatively and quantitatively:
 For example ratio of doctors per population in Indonesia, about 140 doctors for 1 million
inhabitants.
 The number of pharmacy (drug store) currently numbers about 6,000 pieces which
concentrated in the cities to serve the people of Indonesia are more than 200 million
inhabitants. Pharmaceutical care programs have not worked well so that the subtraction of an
optimal drug utilization in the community.
 Distributors which is quite a lot but do not have a wide reach and an efficient network
that distribution costs are relatively expensive.
Kalbe Farma Opportunity
1. The size of the Indonesian population and the still low per capita drug consumption cause
a potential market that could be developed. Opportunity to enter into six key markets in
Southeast Asia with a population reaching 500 million or approximately 8% of the world
population. The total market is more than $ 890 billion in GDP and is likely to grow 5% per
year over the next 5 years. Consumption of pharmaceutical products including prescription
and OTC estimated 7 billion and growing to 13% from 2005 to 2010. And export
opportunities as a result of the decline of the rupiah and the implementation of Good
Manufacturing Practice good governance in Indonesia. In 2000, Kalbe began giving greater
attention to international markets. Initially, the company tossed products into ASEAN
markets, like Malaysia and Singapore. Then, the wing also widened its export business to
South Africa. This is evidenced Kalbe by implementing strategies. The first strategy, trading
based, namely the Kalbe appoint local distributors in export destination countries. This
cooperation is very simple because it merely buying and selling activities only. However,
through this network of traders Kalbe products exist in many countries, like Pakistan and
Iran, while Kalbe not yet have distribution partners in these countries. The second strategy,
marketing-based. Kalbe establish representative offices in each country of destination of an
internal survey has the potential for the development of export products. We have 8 offices
Kalbe in some countries, like Malaysia (for the markets of Singapore and Malaysia),
Myanmar, Cambodia, Vietnam, Philippines, Sri Lanka and Thailand. They were assigned to
conduct marketing activities, monitor the market and conducting surveys. PT Kalbe Farma
plans to build a factory in Orange Kalbe Nigeria Limited. Construction of this plant to
strengthen its market share in West Africa. “Nigeria will serve as the basis of marketing
products Kalbe Farma,” said president director of PT Kalbe Farma Johannes Setijono. The
plan that the factory will be used to manufacture OTC drugs (drugs without a prescription)
and energy drinks.
2. Health Care System growth fast so as to channel the power doctors including specialists
as required.
Kalbe Farma Company Threats
1. The existence of internal competition is quite hard. Something termed “civil war” is
especially true in marketing channels. More specifically, in pharmaceutical products in the
same category. In the cold medicine, for example, Kalbe have Procold while a mainstay
Laboratories powerful enough, Mixagrip. Because of Kalbe and Dankos can see each
individual data, they can bring down each other.
2. The existence of the economic crisis has made the purchasing power of Indonesian folk
medicine to decrease and threatening the survival of the national pharmaceutical industry
mainly for the local market.
3. The implementation of the Patent Act, 1997 and revised in 2001, Kalbe Farma
pharmaceutical industry, which used to rely on the development of its products on a copy
cat strategies of new products still under patent, it becomes harder to develop its products.
4. Legal system can not effectively tackle counterfeit drugs so that drug prices be more
difficult to control.
5. The more the extent of the market who want to achieve, namely penetrate the
international market will also increase the pharmaceutical business competitors. Kalbe
admitted if the product is still not able to compete with products from the United States.

 Kalbe’s Corporate Governance

Kalbe always recognizes the importance of applying the highest standards of corporate
governance and the application of Good Corporate Governance (GCG) principles in the entire
Company’s operations. At Kalbe, GCG is implemented by applying the principles of
Transparency, Accountability, Responsibility, Independency, and Fairness. This is to ensure the
creation of a comprehensive balance between economic and social, individual and public internal
and external, short-term and long-term interests as well as the interests of the stakeholders.
GCG principles are implemented to:
1. Govern and control work practices within the Company’s Organs: the General Meeting of
Shareholders (GMS), the Board of Commissioners and Board of Directors;
2. Improve the accountability of the Company’s management toward the shareholders by taking
into account the interests of all stakeholders;
3. Ensure clarity in job relationships, between the Company and its stakeholders;
4. Promote and support effective business expansion, resources management and risk
management to ensure sustainable enhancement of the Company’s values;
5. Guide the attainment of the Company’s Vision and Mission;
6. Improve human resources’ professionalism;
7. Serve as the basis for the implementation and development of Company Culture.
Kalbe’s commitment in GCG practices is manifested in the Company’s sets of guidelines,
established to guide the implementation of GCG within the Company. These guidelines were
developed based on the prevailing regulations in Indonesia as well as the widely accepted
international GCG best practices, consisting of:
a. The Company’s Vision, Mission, Motto and Panca Sradha Kalbe as corporate values,
which have been cultivated throughout the history of Kalbe and continuously updated in
line with the Company’s business development
b. GCG Guidelines of PT Kalbe Farma Tbk, enacted since 2001
c. GCG Implementation Guideline Book, which has been distributed to all Kalbe employees
since 2005
d. Audit Committee Charter
e. Internal Audit Charter
f. Kalbe Good Legal Practices as legal policy since 2006
g. Information Technology Policy
h. Kalbe Management System Guide Book launched in 2013
i. Kalbe Business Ethics, launched in 2015
j. Policies on employee’s rights and obligations, includes Collective Working Agreement
and Company Regulation
k. Policies on the Company’s social responsibilities
l. Various Standard Operating Procedures

Kalbe’s corporate governance structure follows the Law of the Republic of Indonesia No. 40
Year 2007 regarding Limited Company (Law of Limited Company). The structure consists of the
General Meeting of Shareholders (GMS), the Board of Commissioners and the Board of
Directors. This structure is set to ensure systematic implementation of Kalbe’s GCG principles
and clear definition of roles and responsibilities. In carrying their duties, the GMS, Board of
Commissioners and the Board of Directors are guided by the transparency, accountability,
responsibility, independency, and fairness principles to ensure the sustainability of the
Company’s business by taking into account the interests of all shareholders.
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