Industry Overview

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

Total Pakistan Pharma Market is US$ 1.5 billion (Rs. 89.4 billion) while the total World
Market is US$ 714 billion. The Industry has a total value of, having 651 drug manufacturers
which include 29 multinationals and 622 national companies. The market grew with an
average growth rate of 13%. The industry witnesses an average of 300-400 new product
launches every year. Twenty of the national and multinational companies contribute over
60% of the total drug sales as per Information Medical Statistics (IMS) figures. Value wise
share of the national companies in Pakistan’s total drug market is around 49% and rest 51%
is owned by multinational companies.
RANKING MAT BASIS MAT ~ 09/2008 MAT ~ 09/2007 MAT ~ 09/2006 MAT ~ 09/2005
TOP 10 LC-RUPEES LC-RUPEES LC-RUPEES LC-RUPEES
2008 2007 2006 2005 2004 CORPORATIONS Rs Rs Rs Rs
99,795,967,603 89,412,989,852 78,963,702,333 70,946,606,611
1 1 1 1 1 GSK 10,945,180,634 10,199,577,897 9,355,444,176 8,523,511,303
2 2 2 2 2 ABBOTT 5,538,880,817 5,172,571,430 4,734,814,734 4,428,161,047
3 3 3 4 5 NOVARTIS 4,690,513,856 4,039,335,243 3,589,514,678 3,241,990,263
4 5 4 3 3 SANOFI-AVENTIS 3,929,246,038 3,731,683,992 3,564,731,854 3,264,230,351
5 4 5 5 4 PFIZER 3,923,604,438 3,744,450,653 3,416,043,081 3,116,483,543
6 6 6 13 17 GETZ 3,723,422,471 2,852,364,802 2,251,610,223 1,425,810,443
7 7 9 9 14 ROCHE 3,030,644,043 2,719,876,808 1,931,092,085 1,610,135,413
8 11 11 10 11 SAMI 2,729,561,224 2,147,612,983 1,805,102,747 1,596,542,759
9 8 7 6 6 MERCK 2,722,979,354 2,481,765,006 2,160,891,814 2,035,191,211
10 9 10 8 12 HILTON 2,624,241,312 2,294,887,004 1,923,008,939 1,635,008,942

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

·        Analgesics (Pain Relievers)

·        Calcium
·        Antihistamines (Anti-Allergy)

In the West, pharmaceutical companies spend US$ 60-70 billion/year on R & D. It takes
around 10-12 years for a molecule to develop into a drug (medicine) at an average cost of
800 million to 1 billion US dollars. Pharmaceutical R & D expenditure is the highest by any
industry (19% of their annual sales, approx 34 billion US$ in 2004). In Pakistan, this sort of R
& D expenditure is not viable. Except for multi-national companies like GlaxoSmithKline,
Novartis etc., none of the companies in Pakistan have the financial muscle to afford such
expenses. Hence, new drugs mainly come from the West. Pakistan is self-sufficient in
formulation, but there is not a single bulk manufacturing unit. Thus, 500 million US$ is spent
on API imports (Active Pharmaceutical Ingredients). Out of this, 100 million US$ go directly
to India.
At the moment, India supplies APIs to more than 50 countries worldwide and has a potential
to increase their API exports by 12-15 billion US$ by 2015. Almost 40% of APIs used in
Europe are being imported from India. Most multinationals are outsourcing their drug
development APIs to Indian companies for cost and quality reasons (An opportunity no one
in Pakistan is thinking about). Pakistan has no API capabilities and no apparent serious
efforts are being made on this front.

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

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

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

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

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

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

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

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

The latest trend in the industry is the addition of infant milks as a pharmaceutical product
category. This category has shown up in the top 10 products of IMS for the last 12 months
and till date none of the generic branded companies has given any attention to this segment.
Moreover, number of intensive care cases is rising, given the civil disturbances in Pakistan
and in such cases oral medication is not possible, injections are the only way to save lives.
Also, the incidence of heart attacks and other chronic diseases are on the rise, boosting the
need for injections. Thus, this segment has been growing sharply in the recent future. This
trend is a good opportunity for pharmaceutical companies to increase revenues and extend
product lines.
With globalization process reaching out to Pakistan, the geographical barriers have become
obsolete. Any country will have to compete and trade globally in order to progress and
survive in the years to come. The major pharmaceutical companies have realized this fact
and have stepped into the global area of competitive trade. The exports of Pakistani
Pharmaceutical companies have been growing at a rate of 25-30% per annum, contributing
to the growth in the industry.

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

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

Chemists
The profit margin of chemists in Pakistan is 15%.
Porter’s Five Forces Model of
Industry Attractiveness
Threat of Entrants:
Yes No
(+) effect No (-)
1) Do large firms have a cost or performance advantage in your
segment of the industry 
2) Are there any proprietary product differences in your industry? 
3) Are there any established brand identities in your industry? 
4) Do your customers incur any significant costs in switching suppliers? 
5) Is a lot of capital needed to enter your industry? 
6) Is serviceable used equipment expensive? 
7) Does the newcomer to your industry face difficulty in accessing
distribution channels? 
8) Does experience help you to continuously lower costs? 
9) Does the newcomer have any problems in obtaining the necessary
skilled people, materials or supplies? 
10)Does your product or service have any proprietary features that give
you lower costs? 
11)Are there any license, insurance or qualifications that are difficult to
obtain? 
12)Can the newcomer expect strong retaliation on entering the market? 
13)Do large firms have a cost or performance advantage in your
segment of the industry 
14)Are there any proprietary product differences in your industry? 
15)Are there any established brand identities in your industry? 
16)Do your customers incur any significant costs in switching suppliers? 
17)Is a lot of capital needed to enter your industry? 
18)Is serviceable used equipment expensive? 
19)Does the newcomer to your industry face difficulty in accessing
distribution channels? 
20)Does experience help you to continuously lower costs? 
21)Does the newcomer have any problems in obtaining the necessary
skilled people, materials or supplies? 
22)Does your product or service have any proprietary features that give
you lower costs? 
23)Are there any license, insurance or qualifications that are difficult to
obtain? 
24)Can the newcomer expect strong retaliation on entering the market? 

LOW MODERATE HIGH

Threat of new entrants is moderate since large pharmaceutical companies, mainly MNCs,
have a large performance advantage as they have more resources and established R&D
departments worldwide that they can use to introduce new drugs and reap profits for 2-13
years before their patent expires. This helps them in building brand loyalty. An investment of
at least Rs. 30 crores is required to enter the industry including land, equipment, building
and 3 months working capital etc. Although most necessary materials are not difficult to
obtain, some specialized materials and human resource is a little difficult to obtain.
Distribution networks are not difficult to obtain as there are no exclusivity agreements
between manufacturers and distributors.

Bargaining Power of Buyers

Yes No
To what extent are your customers locked into you? (+) effect No (-)
1) Are there a large number of buyers relative to the number of
firms in the business? 
2) Do you have a large number of customers, each with relatively
small purchases? 
3) Does the customer face any significant costs in switching
suppliers? 
4) Does the buyer need a lot of important information? 
5) Is the buyer aware of the need for additional information? 
6) Is there anything that prevents your customer from taking your
function in-house? 
7) Your customers are not highly sensitive to price. 
8) Your product is unique to some degree or has accepted
branding? 
9) Your customer's businesses are profitable. 
10) You provide incentives to the decision makers. 

LOW MODERATE HIGH

Buyers, (chemists) are spread all over the country and the company provides special
discounts for pushing the brand to the customer whenever he asks for a compound. The
buyers are aware of the need for information as the consumers trust them implicitly for
providing the right medicine. The customers would need significant capital costs for
entering the business but overall, since Pakistani pharmaceutical industry is a generic
products industry, no significant factors are prohibiting customers from entering the
market themselves, posing a threat for the manufacturers.
 Threat of Substitutes
Yes No No (-)
(+) effect
1) Substitutes have performance limitations that do not completely
offset their lowest price. Or, their performance is not justified by 
their higher price.
2) The customer will incur costs in switching to a substitute. 
3) Your customer has no real substitute. 
4) Your customer is not likely to substitute. 

LOW MODERATE HIGH

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

Bargaining Power Of Suppliers

Yes No No (-)
(+) effect
1) My inputs (materials, labor, supplies, services, etc) are standard rather 
than unique or differentiated.
2) I can switch between suppliers quickly and cheaply. 
3) My suppliers would find it difficult to enter my business or my
customers would find it difficult to perform my function in-house. 
4) I can substitute inputs readily. 
5) I have many potential suppliers. 
6) My business is important to my suppliers. 
7) My cost of purchases has no significant influence on my overall costs. 
 LOW MODERATE HIGH

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

Rivalry Among Existing Competitors

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

LOW MODERATE HIGH

The pharmaceutical industry is growing at the rate of 8-9% annually while exports are growing by 20%
each year. The products are differentiated with strong brand loyalties towards the international
brands, however ‘me too’ brands are also growing in sales. Drugs require understanding of
compounds and dosage, etc from the side of the chemists but since manufacturers aim their push
efforts towards the chemists, rivalry grows to get shelf space with retailers. Fixed costs in terms of
personal selling efforts are high countering the other relatively low fixed costs and thus do not have
any effect on the industry attractiveness.
Overall industry rating: Favorable Moderate Unfavorable
1) The threat of new entrants. 
2) Bargaining power of buyers. 
3) Threat of substitutes. 
4) Bargaining power of suppliers. 
5) Intensity of rivalry among competitors. 

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

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

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

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

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

Further the custom levies are charged on current rupee/dollar parity the affect of duty and
other landing charges of the imports get inflated.

On average, including the current price hikes inflation have registered on average 15%
growth over the last five years. Cost of labor has risen from Rs 2500 to Rs 6000 {140%}.

 Dollar appreciation and Rupee depreciation: These two factors increase the
input costs as most of the raw and packaging material is imported
 Fuel prices: Prices of fuel, utilities and other services have increased by more
than 75 percent due to which freight and local transportation cost have increased over 75
percent.

 Excise duties:In the last couple of years, the board imposition of Federal Excise
Duty on all the imports has badly affected the dwindling margin of pharmaceutical products.

 Taxation:Imposition of 16 percent sales tax on pharmaceutical packaging and

promotional items is said to be unjustified.

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

 Stricter regulations in international markets: International markets are

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

 Global events: Global event, for example, Olympics in China caused to increase
the local industry’s cost in producing medicine. This was mainly due to the withdrawal of the
export subsidies for local producers of raw material and appreciation of Yuan.

These data clearly demonstrate the serious difficulty facing the pharmaceutical industry.
No other industry in Pakistan has been put under such stringent price control; and no
other industry has been forced to reduce prices.

SOCIAL FACTORS:
Good health is an important personal and social requirement. People are becoming more
aware of the symptoms of diseases they are suffering from and they also have an idea
about Corporate Social Responsibility. Pharmaceutical firms play a unique role in meeting
society’s need for popular wellbeing which cannot be underestimated.
In recent times, the impact of various global epidemics e.g. SARS, AIDS, Cancers etc have
also attracted media attention to the industry. The effect of the intense media and
political attention has resulted in increasing industry efforts to create and maintain good
government-industry-society communications.
TECHNOLOGICAL FACTORS:
Modern scientific and technological advances in science are forcing industry players to
adapt ever faster to the evolving environments in which they participate. Scientific
advancements have also increased the need for increased spending on research and
development in order to encourage innovation.

If we look at the local technological scenario, we don’t observe much of the advancements
in Pakistan as they are in other developing countries. But still this industry requires
technological development in order to improve the process quality. Local companies in
the branded generic category are adapting to this change in order to be competitive with
differentiated processes. Most of them import machinery and equipments for laboratory
testing and analysis of drugs.
Nevertheless, they need to create awareness to build up local industry and avoid imports.
ERP (Enterprise Resource Planning), which is a way to integrate data and processes of a
company into single system, can help organizations in cost reduction.

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

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

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

Effect of PESTL on Porter’s Five Forces

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

LOW MODERATE HIGH

Bargaining Power of Buyers: As awareness increases among end consumers and

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

LOW MODERATE HIGH

Bargaining Power of Suppliers: The increased taxation, excise duties, global recession,
and global events are increasing the cost of inputs and thus having a negative impact on
the industry’s power over suppliers.

LOW MODERATE HIGH

Rivalry among Competitors: The rising costs of manufacturing, fuel and power shall
give way to a battle for shelf space among competitors, turning what might be called a
healthy competition into intense rivalry.

LOW MODERATE HIGH

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

LOW MODERATE HIGH

External Analysis
External Factor Evaluation
Weighted
  Opportunities Weight Rating Average
         
1 9% estimated CAGR of the industry for the next 5 years 0.05 2 0.1
2 Attractive market for IV solutions manufacturing 0.05 1 0.05
3 Potential in ointment segment 0.02 1 0.02
4 Toll Manufacturing for foreign buyers and for local competitors 0.05 1 0.05
5 Clinical Research of western companies in Pakistan and India 0.05 2 0.1
Ever increasing awareness of the market about various drugs and
6 diseases 0.1 3 0.3
Alliances or joint ventures to boost competitive capability for introducing
7 new molecules 0.15 1 0.15
8 Potential in Infant Milks segment 0.1 1 0.1
         
  Threats      
         
1 Increase in cost of production due to rise in materials cost 0.1 1 0.1
2 Ban on imports from India 0.07 2 0.14
3 Strict quality regulations in export markets 0.05 3 0.15
4 Cheaper Me-Too brands that compromise on quality 0.02 4 0.08
5 Fake & smuggled medicines 0.01 2 0.02
6 Ban on exports to Sudan 0.01 3 0.03
Increasing intensity of competition among industry rivals due to
7 increase in costs 0.05 2 0.1
8 Launch of new molecule (superior) product by competitors 0.05 1 0.05
9 Corruption and leak outs at the documentation approval stage 0.04 2 0.08
10 Strict Price regulations by the GoP 0.03 3 0.09
    1   1.71

1. Take advantage of the clinical research done by some western companies by forming an
alliance with these companies.

2. Develop new market segments such as ointment and infants milk segment or solutions
manufacturing.

3. Advertise to increase awareness and also to communicate the better quality of products
for improved health benefits.

4. Exporting drugs by taking advantage of the increased awareness created in the foreign
markets such as Middle Eastern and African markets.

5. Negotiating with the government to improve price regulations.

6. Revamping the value chain by removing unnecessary steps by using activity based
costing.

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

8. Differentiating the products by employing the highest quality and safety standards.

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

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

11. Highlighting the superior quality and health benefits to foreign importers.

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

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

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

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

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

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

- Muhammad Abdullah Feroz (Managing Director, Efroze)

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

MISSION STATEMENT:

Efroze Chemical Industries is one of the leading pharmaceutical organizations that

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

CUSTOMER FOCUS
To improve the quality of health by delivering strong and dependable brands and remain
in contact through dialogues to utmost customer satisfaction

SUPPLIER DEVELOPMENT
We know the value of establishing partnerships and contribution towards finding out
vision more amicably
DISTRUBUTOR’S RELATIONSHIP
To provide high distinctive value to our distributors so that their services deliver the
utmost customer satisfaction

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

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

ORGANIZATION CHART:

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

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

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

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

Efroze Chemical Industries has a tradition for extending a helping hand to the different
government, private and semi-private institutions of Pakistan.

International Marketing

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

Within eight years Efroze broadened its horizon by rapidly developing markets in Africa,
Middle East, Asia and CIS.

In 1992, Efroze started developing new markets by crossing the geographical barrier of
Pakistan market. The first such development was in Yemen.
With the early success in exports, it was realized that active involvement in geographical
diversification of markets can assist in achieving the ultimate goal of the organization. By
1993, some sectors of Africa and Middle East were already explored.
1994 was the year of change in exports. With the help of distributors, inputs were taken
from the market to incorporate the necessary changes in products to satisfy the market
needs. New markets explored were Myanmar, Bangladesh, Sri-Lanka, Maldives and
Singapore in Far East; and Kenya, Nigeria and Sudan in Africa.
In 1997, Efroze started its operations in the CIS and successfully entered in the lucrative
markets of Uzbekistan, Kyrgyzstan, Kazakhstan, the Russian Federation, Ukraine &
Belarus.
In 2003, by the grace of Allah, Efroze was exporting its products to 20 countries, with
over 200 registrations.

Now, international Marketing Division is working on exploration of new countries as per

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

EXPORT HORIZON OF EFROZE GLOBALLY

AFGHANISTAN BANGLADESH BELARUS ETHIOPIA

GHANA IRAQ KAZAKHSTAN KENYA

KYRGYZSTAN MYANMAR NIGERIA RUSSIA

SINGAPORE SRI LANKA SUDAN UGANDA

UKRAINE UZBEKISTAN VIETNAM YEMEN

BOTSWANA CAMBODIA MALAYSIA PHILIPPINES

MAJOR ACHIEVEMENTS:

If there's something that has remained unchanged in the Efroze of 1968 and that of the
present day, it is the commitment to quality. Observance of quality control at all levels by
the help of all departments, GMP compliance and maintenance of international standards,
enabled Efroze to achieve the ISO 9002 Certificate of Quality System Standard in 1999.
One more feather in the cap has been the achievement of the ISO 9001-2000 Certificate of
Quality System Standard in April 2003. The Federation of Pakistan chamber of Commerce
& Industry has also awarded Efroze Export trophy for the year 1998-99.

PRODUCTION FACILITIES:

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

The advance planning and co-ordination in the execution of these systems within the
manufacturing parameter is looked-after by thorough professionals, specially trained in
their respective fields locally and abroad - on modern equipment and latest management
techniques.
Efroze has some of the latest and most advanced machinery for the manufacture of
syrups and suspensions. To improve the suspendability of suspensions, Efroze has
installed a Fryma mill to break down the suspended particles to colloidal from which
make the suspension stable.

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

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

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

PRODUCTS OF EFROZE CHEMICALS:

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

RESEARCH AND DEVELOPMENT:

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

Product Product Segment Introduction Growth Maturity Decline

Seloxx Antirheumatic Non-Steroid        
Corbis Cardiovascular System        
Delaware Cardiovascular System        
ISO Cardiovascular System        
Famtine H2 Receptor Antagonist        
Erizole Anthelmintics        
Roxin Antibacterial Quinolone/Macrolide        
Klabid Antibacterial Quinolone/Macrolide        
Floxer Antibacterial Quinolone/Macrolide        
Eftran Antibacterial Quinolone/Macrolide        
Ecin Antibacterial Quinolone/Macrolide        
Declot Anti-coagulants        
Diazepam Anti-depressant        
Neolip Anti-lipidemic        
Panaram Anti-Pyretic        
Glyper Anti-diabetic        
Glicon Anti-diabetic        
Metcon Anti-diabetic        
EZ-Flow Laxatives        
Kontab Anti-inflammatory Enzymes        
Efome Proton Pump Inhibitor        
Mefnac NSAIDS / Nasal Decongestant      
Pango NSAIDS / Nasal Decongestant        
Pefree NSAIDS / Nasal Decongestant        
Reduceache NSAIDS / Nasal Decongestant        
Zetrine Anti-Allergics        
Histal Anti-Allergics        
Lipicor Lipid Lowering Agent        
Trizymal Digestive Enzyme        
Maladar Anti-Malarial        
Artedoxin Anti-Malarial        
Gynaecosid Female Hormone        
Trisil Antacids        
Siam Antacids        
Emod Anti-diarrhoeal        
Internal Analysis
Internal Factor Evaluation
Weighted
  Strengths Weight Rating Average
1 40 years presence in the market-Credibility 0.05 4 0.2
2 Acclaimed and trusted by doctors (opinion leaders) 0.05 3 0.15
Exports volume and experience of 16 years in the exports
3 market 0.02 3 0.06
4 Successful brands in international markets 0.05 2 0.1
ISO 10725 certified lab that ensures superior product
5 testing 0.1 4 0.4
6 Strong supplier network 0.02 3 0.06
7 Focused on employee development and communication 0.02 3 0.06
8 Quality ensured in each step of the process 0.08 3 0.24
         
  Weaknesses      
1 Long time lag in launching new products 0.05 1 0.05
Lack of strategic alliances with international companies to
2 ensure new molecule introduction 0.12 2 0.24
3 No R&D department for development of new molecules 0.1 1 0.1
4 Lack of focus and specialization on any one disease segment 0.15 2 0.3
Deficient in financial muscle relative to the bigger companies
6 in the industry 0.02 2 0.04
7 Smaller sales force 0.02 2 0.04
8 Sales Oriented Culture 0.05 1 0.05
9 Weak distribution network 0.1 2 0.2
    1   2.29

Strategies

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

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

3. Conduct research and testing activities by highlighting ISO 10725 certified lab to gain
first mover advantage in new product segments.

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

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

6. Improving the distribution network by making alliances with distributors and other
dealers.

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

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

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

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

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

Financial Ratio Analysis

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

ANALYSIS:

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

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

The company is comparatively less liquid.

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

When we compare activity ratios, inventory turnover is better than industry whereas
accounts receivable turnover is not. This shows that Efroze has problems with collecting
their receivables. However, the inventory is being utilized efficiently as compared to the
industry.
Value Chain
 Determine model of supply/distribution
• Reconcile needs and resources
• Develop criteria for tender
Procureme
• Issue tender nt
• Evaluate bids
• Award supplier
• Determine contract terms
• Monitor order
• Make payment

 Quality assurance Adherence to GMPs

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

Microbiological
 Determine effective dose range
 Determine safety
Testing
 Confirm Effectiveness
Finance
 Monitor Side Effects
 Comparison to other commonly used
treatments
 Collect information
Packaging
Admin

• Receive and check drugs with order

• Ensure appropriate transportation and
delivery to health facilities IT
• Appropriate storage Distribution
• Good distribution practices and
inventory control of drugs
• Demand monitoring

End Consumer
COMPETITOR ANALYSIS
COMPETITORS

Multinational Companies: Rs. 42.5 Billion (Value)

51% (Market Share)

National Companies: Rs. 40.6 Billion (Value)

49% (Market Share)

Pakistan Pharmaceutical Market Q1 2003- Q1 2007

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

ATCO Laboratories

ATCO Laboratories has a history of over 40 years in the health care business. It is one of
the pioneers in the pharmaceutical industry sector of Pakistan. The State of the art
manufacturing plant is housed in a double story building encompassing an area of 23,000
sq feet. Manufacturing undergoes continuous improvement in production and quality
assurance facilities to ensure the quality of products as per international standards.
The plant is segregated into two units for manufacturing sterile products (Injections,
Ophthalmic Drops, and Ointments) and non sterile products (Tablets, Capsules, Dry
Powder, Topical Ointments, Creams, Lotions and Liquids). Qualified and experienced staff
supervises the manufacturing process in accordance with GMP and WHO guidelines.
ATCO has some well- known drugs for Anxiety (ANXIT TABLETS), Hypertension
(LOSTRESS), cholesterol (TERBIDERM), Lipid Disorder (VASTOR), Asthma (SOLO) and
other multi-vitamins (CASAN, ZINCAT) and Antibiotics.

1978 is a significant year in the history of ATCO when it was acquired by one of the
largest conglomerate business groups of Pakistan. The acquisition was a diversification in
the health care business by Kohinoor Group Of Industries, having successful businesses in
the fields of Cosmetics, Personal Care products, Battery Cells, Soaps, Detergents, etc.
After the acquisition there has been no looking back for the company. The Kohinoor
group’s strength lies in its strong professional background, business acumen and timely
availing of business opportunities. These strengths have resulted in ATCO Laboratories
becoming one of the fastest growing pharmaceutical companies, with modern
manufacturing facilities, and joint business ventures with renowned Multinational
Pharmaceutical companies.

Several American and European Multinational pharmaceutical companies with research

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

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

Brookes Pharmaceutical Laboratories (Pakistan) Limited

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

Brookes has a sophisticated and advanced production facility, dedicated to making a

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

Situated in Korangi Industrial Area, Karachi over a covered area of 200,000 square feet,
Brookes operates under licenses and technical collaboration of large-scale
pharmaceutical organizations including Merz Pharma Germany and Edmond Pharma
Italy. Being a company that believes in a collective endeavor and cooperation, Brookes
remains in pursuit of establishing and maintaining business relationships that could help
achieve its broader goals of quality, efficiency and growth.

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

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

Brookes is the first Pakistani pharmaceutical organization to have four international

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

NABIQASIM is a National companies dealing in manufacturing and marketing of

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

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

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

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

Pharmevo

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

ventures spread over 30 years. The group made its debut in 1971, with the sales and
marketing of prestigious brands of consumer products. The group's involvement in
pharmaceutical and healthcare business started in 1974. This was a modest beginning,
but it lead to the emergence of the diversified group. The group turnover is now around
US 70 million dollars.
Pharmevo has come a long way since its launch back in September 1999. During this
short span, PharmEvo has successfully carved a niche amongst the giants of the
pharmaceutical industry purely based on quality, professionalism and marketing ethics.
It is the management’s utmost desire that PharmEvo should be perceived as a company
providing a 'Service which means to make a difference', and they are striving hard to foster
a healthier environment. Their product portfolio is a true reflection of this desire, as it
comprises some of the most advanced treatment options available around the globe.

Therapeutic Categories Brand Name

Allergy / Asthma

Cardiovascular

Dentistry

Diabetes

Gastroenterology

Infectious Diseases

Osteoporosis

Psychiatry

Pain & Inflammation

Novartis Pharma (Pakistan) Limited

Novartis International AG is a multinational pharmaceutical company based in Basel,

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

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

On October 20, 2005, as an immediate response to the earthquake in the northern areas
of Pakistan, Novartis made initial donations of more than $ 400,000 to the President’s
Relief Funds, additional financial support to other relief organizations as well as provided
access to critical medicine. Employees in Pakistan voluntarily donated 3-days salary to
the relief efforts, with the company matching employee contributions rupee for rupee.

On April 20, 2006 Novartis acquired the California-based Chiron Corporation. Chiron was
formerly divided into three units: Chiron Vaccines and Chiron Blood Testing, which now
combine to form Novartis Vaccines and Diagnostics, and Chiron BioPharmaceuticals, to
be integrated into Novartis Pharmaceuticals.

During 2007, Novartis increased R&D investments by more than 20% to USD 6.4 billion.
This is one of the highest figures in the industry relative to sales (16.9%). Group results in
2007 set new record as net sales rise 8% (+3% in local currencies) to USD 39.8 billion
and net income reached USD 12.0 billion (+ 66%) with earnings per share up 68% to USD
5.15.

Novartis R&D efforts are driven by human health and well-being, contributing to overall
prosperity and quality of life. Major therapeutic areas:

 Autoimmunity/Transplantation/Inflammatory Disease
 Cardiovascular Disease
  Diabetes
 Gastrointestinal Disease
 Infectious Diseases
 Musculoskeletal Disease
 Neuroscience
 Oncology
 Ophthalmology
 Respiratory Disease

In addition to internal research and development activities Novartis is also involved in

publicly funded collaborative research projects, with other industrial and academic
partners. One example in the area of non-clinical safety assessment is the InnoMed
PredTox. The company is expanding its activities in joint research projects within the
framework of the Innovative Medicines Initiative of EFPIA (European Federation of
Pharmaceutical Industries and Associations) and the European Commission.

GlaxoSmithKline Pakistan Limited

GlaxoSmithKline Pakistan Limited was created on January 1st 2002 through the merger
of SmithKline and French of Pakistan Limited, Beecham Pakistan (Private) Limited and
Glaxo Wellcome (Pakistan) Limited- standing today as the largest pharmaceutical
company in Pakistan.

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

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

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

In addition, GSK is also deeply involved with communities and undertake various
Corporate Social Responsibility initiatives including working with the National
Commission for Human Development (NCHD) for whom GSK is one of the largest
corporate donors. GSK participates in year round charitable activities which include
organizing medical camps, supporting welfare organizations and donating to/sponsoring
various developmental concerns and hospitals. Furthermore, GSK maintains strong
partnerships with non-government organizations such as Concern for Children, which is
also extremely involved in the design, implementation and replication of models for the
sustainable development of children with specific emphasis on primary healthcare and
education.

In Pakistan, GSK has a market share of 11.65%. In 2007, the company had a profit of Rs.
1,670,525 with net sales of Rs. 10,610,882 leading to an Earning per share of Rs. 9.79.

Indus Pharma

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

The product Categories served by Indus Pharma:

Antibiotics: Ciplet (Ciprofloxacin) Exef (Cefotaxime)

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

Following are the salient features of Indus Pharma:

 Branded Generic Formulations

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

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

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

CPM
Nabi
Efroze Indus Pharmevo Qasim Atco Brookes
Critical Success W.
Factors Weightage R S. R W.S. R W.S. R W.S. R W.S. R W.S
0.0
Market Share 0.05 1 5 3 0.15 3 0.15 1 0.05 1 0.05 1 0.05
Product quality 0.1 3 0.3 3 0.3 3 0.3 3 0.3 3 0.3 3 0.3
Opinion Leader
Loyalty 0.1 2 0.2 2 0.2 3 0.3 2 0.2 2 0.2 2 0.2
Strategic Alliances 0.2 1 0.2 3 0.6 2 0.4 1 0.2 3 0.6 1 0.2
Product Testing 0.2 3 0.6 1 0.2 1 0.2 1 0.2 1 0.2 1 0.2
0.0
Financial Strength 0.05 1 5 3 0.15 2 0.1 1 0.05 1 0.05 1 0.05
Distribution 0.1
Network 0.15 1 5 2 0.3 3 0.45 3 0.45 3 0.45 3 0.45
0.1
Speed to market 0.15 1 5 2 0.3 3 0.45 1 0.15 1 0.15 1 0.15
  1   1.7   2.2   2.35   1.6   2   1.6

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

 Product testing is strength and a competitive advantage of Efroze pharma. It must

be jealously guarded and communicated.

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

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

Pros of Focused Differentiation

 Allows specialization in the chosen segments

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

Cons of Focused Differentiation

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

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

 It will increase the pace of introduction of new drugs

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

Existing Strategy of Efroze- Best Cost Strategy

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

Strong Average Weak

3.0 to 4.0 2.0 to 2.99 1.0 to 1.99
High I II III
3.0 to
3.99
     
Medium IV V VI
The EFE 2.0 to
Total 2.99
Weighted
Score      
Low VII VIII IX
1.0 to
1.99
  Efroze  

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

actions:

 Make only essential commitments

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

Following strategies are suggested:

 Alliances with international companies to launch new products in Pakistan to cater to

unexplored market.

 Acquire funds by issuing shares decreasing the leverage, to make investments in to new
product markets.

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

 Convey the high quality standards to target market through increased advertising.

 Increase sales force to build brand equity among doctors

 Develop distribution network in international market.

Space Matrix
Conservative FS Aggressive

CA IS

Defensive ES Competitive

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

 Market penetration through better training of sales force

 Steps must be taken in order to increase product recall through giveaways and
seminars.
 Create molecules with international research companies through strategic
alliances and develop specialized products.
 Research on molecules and out license them to bigger companies.

Grand Strategy Matrix

RAPID
 MARKET
GROWTH
 
Quadrant II   Quadrant I
 
 
Efroze  
   
WEAK  
COMPETITIVE   STRONG
POSITION             COMPETITIVE
  POSITION
 
 
 
 
 
 
Quadrant III   Quadrant IV
 
SLOW
MARKET
GROWTH

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

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

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

Alternative Strategies IE SPACE GRAND COUNT

Forward Integration       0
Backward Integration       0
Horizontal Integration     X 1
Market Penetration X X X 3
Market Development X X X 3
Product Development X X X 3
Concentric Diversification   X   1
Conglomerate
Diversification       0
Horizontal Diversification       0
Joint Venture       0
Retrenchment       0
Divestiture X   X 2
Liquidation     X 1

Synopsis of Strategies:

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

forming an alliance with these companies.

2. Develop new market segments such as ointment and infants milk segment or
solutions manufacturing.

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

products for improved health benefits.

4. Exporting drugs by taking advantage of the increased awareness created in the

foreign markets such as Middle Eastern and African markets.

5. Negotiating with the government to improve price regulations.

6. Revamping the value chain by removing unnecessary steps by using activity based
costing.

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

8. Differentiating the products by employing the highest quality and safety

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

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

11. Highlighting the superior quality and health benefits to foreign importers.

12. Advertisement should focus on communicating the superior health benefits, high
quality and hygienic standards and harmful effects of me-too products that
compromise on quality.

13. Using key opinion leaders to communicate the superior quality of products.

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

molecules.

15. Conduct research and testing activities by highlighting ISO 10725 certified lab to
gain first mover advantage in new product segments.

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

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

18. Improving the distribution network by making alliances with distributors and
other dealers.

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

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

21. Form strategic alliances with international companies to launch new molecules

22. Product line extension by going into injectibles

23. Working as an outsourced manufacturer for other pharmaceuticals

24. Conducting clinical research for international companies including MNCs in

Pakistan

25. Develop new ointments for Dermatological Infestations and Eczema

26. Develop export market in UAE.

27. Promote brand image of quality and reliability

28. Explore new international markets for exports

29. Streamlining value chain through activity based costing

30. Find new low cost suppliers of raw materials

31. Adopting latest quality measures in product testing procedures

32. Develop new products in existing segments to create specialized offerings

33. Forming technology transfer agreements with international pharma companies to

buy licenses and sell their products in Pakistan

34. Strengthening company position by acquiring small, less profitable companies

35. Manufacturing drugs for other pharmaceutical companies

36. Barter agreement with international companies to conduct clinical research in

exchange of exclusive marketing licenses for their latest products

37. Sponsoring promising pharma students to go into research based programs

abroad in exchange of exclusive rights to their researches

38. Forming alliances with foreign companies to market latest molecules

39. Develop specialized brands in specific disease categories

40. Form strategic alliance with HEJ chemical research institute to buy marketing
rights of their research.

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

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

It must be jealously guarded and communicated.

43. Distribution network appears to be a serious problem for Efroze as all other
competitors are equally good at this. Efroze has to create pull by increasing doctor
detailing so that Efroze products become profitable for the distributor

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

45. Develop ointment products with increased value addition

46. Improve brand equity by promoting image of high quality manufacturing

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

48. Obtain franchising or licensing from international companies which do not have
strong distribution network in Pakistan Alliances with international companies to
launch new products in Pakistan to cater to unexplored market.

49. Acquire funds by issuing shares decreasing the leverage, to make investments in
to new product markets.

50. Convey the high quality standards to target market through increased advertising.

51. Increase sales force to build brand equity among doctors

52. Develop distribution network in international market.

53. Market penetration through better training of sales force

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

55. Create molecules with international research companies through strategic

alliances and develop specialized products.

56. Research on molecules and out license them to bigger companies. Market penetration
through better training of sales force.

57. Steps must be taken in order to increase product recall through giveaways and
seminars.

58. Create molecules with international research companies through strategic

alliances and develop specialized products.

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

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

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

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

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

 Students will research the application of Porters’ 5 forces model of the industry
your company is in. They will use their findings, to describe, using this model, the
strategic competitive dynamics within the industry.
 Students will research the political, legal, economic, social and technological
factors which impact on the industry the company is in.
 Analyze these factors and draw inferences on how they determine the key driving
forces affecting the industry in general.
 Summarize what strategic issues the macro-environment entails for your
company in general terms.
 Construct an EFE matrix from the researched data and deduce strategic
evaluations from it.
 Explain what competitive threats and opportunities your company would need to
address in order to gain competitive advantage and how.
 Summarize provisionally what particular courses of actions it would need to
undertake.

2. Company and competitor analysis:-

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

2. Micro-environmental analysis and internal company resources:

  Research and analyze the internal resources of the company: Management of its
value chain, its core competencies if any, its strategic cost management processes
and the trend of key financial ratios and its functional competencies.
 Construct an IFE from the research and make a strategic evaluation.

4. Strategic analysis and recommendations:

 Based on your research and analysis in 1, 2 and 3, report to the board what generic
strategy the company needs to gain a comparative or competitive advantage. Evaluate
the strategy in terms of your understanding of the pros and cons of the generic
strategies.

 How would you recommend the company to evolve a Corporate Strategy from its
Competitive Advantage?

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

 Evaluate your alternative strategy recommendations using the input / matching /

decision model.

5. Strategic Implementation:

 Employing the components of strategic implementation, explain to the board what

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

 Recommend to the board, the balanced business scorecard as a strategic

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