PROJECT REPORT ONDETAILED ANALYSIS OF A

MANUFACTURING ORGANISATION IN RELATION TO ELDER

PHARMACEUTICALS LIMITED.

CONTENTS

1

S No Topic Page 1 Indian Pharmaceutical Market: An

Overview1

2 Introduction: Elder Pharmaceuticals Limited

2

3 History of the Company 24 Profile Of the Products 55 Mission, Objectives and Strategies of

Elder Pharmaceuticals Limited 9

Mission, Vision and Values 9 Strategic Objectives 9 Business Strategies 10

6 SWOT analysis 117 Significant factors for Success 138 Manpower Planning 179 Policies and Procedures Followed 18

10 Training Measures of Elder Pharmaceuticals Ltd

21

11 Product Promotional Measures 2412 Key Result Areas and Activities of the

Organization25

13 HRD Measures 2614 Career Planning and Promotion Policy of

Employees27

15 Performance Appraisal System 2716 System of Accounting Followed 2817 Financial Highlights of the organization 2818 Organization Design 3019 Organisation Structure 3220 Outlook and Future Growth Drivers 3321 System followed for purchase of

materials34

22 Factory Layout 3523 Scope For MBA’s In The Organisation 3624 Conclusion 3725 Annexure 3826 Bibliography

2

Executive Summary

1. OBJECTIVES- To gain a clear knowledge of what is an organization and what are the major factors that lead to structuring of the organization and how a good organization structure will enable in achieving the objectives effectively and efficiently.

2. METHODOLOGY- The study was done after conducting a visit to

Elder Pharmaceuticals Ltd. Herein appointments were taken with the CFO, HR- VP, Projects- VP, Marketing- VP, Corporate Business Strategy- AGM, Finance Manager, Training Executives. They were interviewed and their opinions were recorded. Annual reports and HR reports were also studied.

3. Limitations- The complete working of Elder Pharmaceuticals Ltd is beyond the scope of this study as the organization has complex operations and it is indeed difficult to even understand the method of work. A sincere effort has been made to comprehensively present the working of a manufacturing organization.

3

1. Indian Pharmaceutical Market: An Overview

The pharmaceutical industry is expanding worldwide. For some years now, it has been benefiting from the particular dynamics of the Asian economies growing as purchasers and producers. Indian Pharmaceutical Industry is poised to touch US $20Bn by 2015, making it the 10th largest market in the world. Thanks to low costs, qualified staff and extensive production and research units, India is becoming more and more of a major pharmaceutical location. Among Asian countries, India’s pharmaceuticals industry ranks fourth at 8%, but has lost market share to China, as sales growth there has been nearly twice as high and sales volume nearly four times higher than in India. India’s pharmaceuticals industry currently comprises about 20,000 licensed companies employing approx. 5,00,000 people. The Indian Pharma industry produces a total of about 70,000 different drugs, which is higher than the number produced in Germany (60,000). Affordability and medical infrastructure will drive 75% of demand growth. Demand in India is growing markedly due to rising population figures, the increasing number of old people and the development of incomes. As a production location, the country is benefiting from its wage cost advantages over western competitors in term of production of medicines. Going by the current scenario, India is expected to see drugs sales rise by an annual 8% to nearly 20Bn Euros between 2006 and 2015. This growth rate is higher than that seen for Germany (+5% p.a) and the entire world (+6%).The generic market is expected to capture benefits of patent expiry of a value of over US $16Bn. Patents for high turnover drugs with a volume of 100Bn Euros will expire in the next few years. Of these drugs, roughly Indian companies will likely produce one-third. The generics market will grow in both the developed countries and in the emerging markets. Most vital medicines are already exempt from patent protection. The manufacture of generic drugs in that segment is growing strongly. Growth will arise due to focus on specialty and niche products through drug discovery and CRAMS. Generics will continue to dominate and 10% of the Indian market is likely to be patent protected by 2015. Anti-infective and gastro-intestinal will continue to comprise half of the market. 140 Mio Indians will move above the poverty line in the next decade. R&D spent of Indian pharmaceutical companies has been steadily increasing in the last 3 years. The growth of Indian companies in the International market space has led to great opportunities in CRAMS.

4

2. Introduction: Elder Pharmaceuticals Limited

Elder Pharmaceuticals Limited (Elder Pharma) is one of the fast growing pharmaceutical companies that:

Is engaged in:o Manufacturing and marketing of a wide range of

pharmaceutical products developed in-house.o Marketing and manufacturing of diverse products through

in-licensing arrangements with international pharmaceutical companies.

o Manufacturing of active pharmaceutical ingredients (APIs)

Has manufacturing facilities in Nerul, Pawane and Patalganga (all in the state of Maharashtra). At Sela Qui near Deharadun in Uttarakhand and at Paonta Sahib in Himachal Pradesh. While Patalganga plant is US FDA compliant, the one at Nerul is WHO approved. All the Company’s plants conform to and follow, the most stringent quality control standards recommended as per GMP guidelines.

Is headquartered in Mumbai, with zonal offices in Chennai, Kolkata and New Delhi and sales depots in almost every state in the country.

Has an export house status, with shipments being made to African and South Asian Countries.

Has its shares listed on the Mumbai and National stock exchanges and enjoys a market capitalization of Rs 750 crs (NSE) as on 31st March 2008.

Is equipped with an international division that spearheads the Company’s foray into global markets, with an existing global penetration of more than 35 countries.

3. History of the Company

Mr. Jagdish Saxena, 69, Managing Director of the Rs. 553 crore (Rs.

5525 billion)

company calls himself as an entrepreneur by accident. In 1988, when

5

Apeejay group decided to close down its pharmaceutical division, JS

who had joined them as a Marketing Manager and then went on to

become the director and then Managing Director, found himself in a

position where he could either stand by as 400-odd employees lost

their jobs or could venture into the treacherous waters of

entrepreneurship.

With an existing skilled pool of pharmaceutical sales and marketing

professionals under his care, he decided to take a gigantic step of

starting-up his own venture. At his peril, he invested his entire personal

savings & with loans from banks laid the foundation for what today, is

among the top 30 pharmaceutical companies in India – Elder

Pharmaceuticals Ltd.

A belief to stand on: That point in time is comparable to standing on

sinking sand – for himself, his family and his employees. From having a

stable monthly income and amenities, Mr. Jagdish Saxena had to rely

on his grit; perseverance and vision to provide the wind in the sails for

this newly founded company. When registering the company, all

suggested names were rejected. On a trip to Australia, Mr. J. Saxena

happened to come across a passing truck with the name Elder Food

Production and thus on returning, Elder Pharmaceuticals was

registered.

The initial phase was hard and trying and with every passing month,

the future of the company seemed unpredictable and daunting. The

real break-through came within the first year, when a large order from

Russia set the ball rolling.

A glimpse into Mr. Jagdish Saxena’s vision: It was his visionary

ingenuity itself that made Shelcal, the brand it is today. He chose to

launch a naturally sourced calcium supplement in a then small but

growing market and not just as a mere OTC supplement but as a

prescriptive treatment for post-menopausal osteoporosis. In addition,

the product was priced 10 times higher than available calcium

6

supplements in the market. Everyone assured it to be a sure failure

and a grave error on his part. But in a year’s time, given the product’s

therapeutic potential and in conjunction with strategic marketing

efforts, Shelcal made a turnover of Rs. 6 crore (Rs. 60 million). Today,

Shelcal is the market leader in calcium supplements and a brand most

prescribed in this therapeutic category by doctors All India.

3.1. Presence:

Elder, which has it’s headquarter in Mumbai, is ably supported by branch offices in Chennai, Kolkata and New Delhi.

Principal Facilities: The Company has its main operations in India and its principal facilities include six manufacturing units and one head office. Refer appendix (Table 1).

ELDER OVER THE YEARS:

1989 Factory commissioned in June.

1991 R&D recognition from the government of India.

1994 Export house recognition.

Tie up with Haw Par, Singapore.

1998 Tie up with Fujisawa.

2000 IPO in February.

Tie up with Paul Hartmann.

2003

7

Patalganga Bulk Drug plant commissioned

2007 I Forbes Asia Best Under Million Company Award

2008 One of India’s fastest growing pharmaceutical

companies currently ranked 29th as per ORG IMS for June 2008.

Frost & Sullivan Market Leadership Award for Shelcal

4. Profile Of the Products

With a global sales turnover of Rs.5 Bn, Elder Pharma offers bulk drugs and pharmaceuticals. It also offers medical devices and instrumentation; OTC/consumer products, cardiac therapy products and wound care products. Elder Pharma has approximate 260-275 formulation products in the market, addressing the growing needs in women healthcare, nutraceuticals (niche segments), cardiovascular, cerebro-vascular, pain management and anti-bacterial segments.

Product Profile- Therapeutic Segments

1) Women Healthcare: The total women healthcare market is estimated to be roughly around Rs. 3,500 crs. Most drug companies concentrate on reproductive illnesses with no special focus on women’s health in general. Elder Pharma offers a plethora of products addressing ‘Complete Women’s Healthcare’. Elder Pharma enjoys a wide therapeutic presence, with products addressing PMS to infertility to menopause to osteoporosis to hormonal imbalance. The range focuses on multifold indications in pregnancy, lactation, vitamin supplements and hormones. The women’s healthcare range of products accounted for about 30% of the Company’s revenue in 2007-2008. This segment includes SHELCAL, DEVIRY, B-LONG, and CARNITOR.

SHELCAL- It is the No.1 Calcium Supplement for the last 12years. Positioned for prevention of Osteoporosis, this was a new segment created by Elder. This is the No.1 pharmaceutical product in Mumbai and Bangalore. It is expected to double current sales in 5 years because of the increasing awareness of the importance of calcium in women as well as in men and growth in rural market. Shelcal Family comprises of Shelcal-250,

8

Shelcal-500, Shelcal-OS, Shelcal Syrup Megashelcal, and Shelcal-CT.

2) Anti-Bacterials and Anti-Infectives: The Company’s portfolio comprises of cephalosporins, aminoglycosides and amoxicillin. These help in the treatment of range of infections, including several bacterial infections, UTI and RTI. This segment includes FORMIC, WIDCEF, KEFBACTUM and CEFTIZOXIME.

FORMIC RANGE- It is the third generation anti-biotic, Ceftriaxone and Sulfbactum. It is used for the treatment of respiratory tract infections (RTI), urinary tract infections (UTI), pelvic inflammatory disease, skin infections, bacterial septicemia, bone and joint infections and meningitis. It also supplements wound and pain management portfolio of Elder, addressing acute therapy areas offering post-operative infection.

3) Wound Care And Incontinence Segment: The range comprises Hartmann products addressing a range of wound applications and patients with weak urinary bladder. As the products are mainly hospital segment in nature, Elder Pharma focuses on product awareness among doctors in urban and semi-urban hospitals. This segment includes CHYMORAL FORTE, SALUTYL OINTMENT, OXOFERIN SOLUTION, BANDAGES and INCONTINENCE and BURNAID GEL.

CHYMORAL- This product provides Elder with a strong presence in wound care management. It is the leading anti-rheumatic proteolytic enzyme. Its combination with NSAID will result in growth in new segments.

4) Nutraceuticals: Elder Pharma’s range in this segment comprises vitamin-to-vitamin combination specialized products for diabetes, cardiac aliments, arthritis, chronic renal failure and neurological problems. Nutraceuticals products contributed about 12-14% of the Company’s revenue during the year under review. This segment includes ELDERVIT, I-VIT, IMBRAN, and SAMPURE.

ELDERVIT- It is a combination of Omega-3 fatty acids,

anti-oxidant, Vitamin B6, B12 and folic acid and is prescribed in diabetes, cardiovascular complications, degenerative diseased conditions, post surgery, stress and ageing. It provides Elder with a strong presence in Combination vitamins segment of Neutraceuticals.

9

5) Cardiovascular and Diabetology: Elder Pharma’s products address growth in the fastest growing global therapeutic segments. Elder Pharma has products addressing therapeutic categories like anti-histamine, anti-spasmodic, nicotine replacement therapy, respiratory and incontinence. This segment includes CARNITOR, TANATRIL, HIBOR and PHYTOMEGA.

CARNITOR- It is a “Metabolic Therapy” product for the

treatment of many fatal disorders like cardiovascular disorders, post-dialysis complication, primary and secondary deficiency of carnitine. There is an increasing awareness and acceptance of the ‘metabolic therapy’ for cardiovascular diseases amongst cardiologists and physicians.

HIBOR- It is an anti-thrombotic LMW Heparin, in licensed from Laboratories Farmaceuticos Rovi S.A. of Spain. It is prescribed in the prevention and treatment of thrombo-embolic venous diseases like deep vein thrombosis and pulmonary embolism.

PHYTOMEGA- It is a comprehensive cholesterol reducing, lipid management product and was introduced through an alliance with Enzymotec, Israel. This product has strengthened Elder’s presence in CVD therapeutic segment.

6) Wound and Pain management: Elder Pharma’s portfolio comprises Chymoral range, gastro-intestinal range and anti-bacterial products, which address acute therapy areas offering surgeons a complete post operative treatment portfolio. This portfolio is supplemented by infection control products during surgeries, targeted at hospital acquired infection prevention. This segment includes TANTUM-Gel, Oral Rinse, ARTODAR, and DICLOFENAC ORAL RINSE.

7) Neuro Drugs: includes SOMAZINA.

8) Urology, Diuretics: includes AMIFRU.

9) Consumer Products: includes BLISTEX LIP CARE PRODUCTS, TIGER PRODUCT RANGE, FOLTENE and SINOMARIN.

10) Medical Equipments: includes products like OXYGEN CONCENTRATOR, CPAP, BIPAP, NEBULISERS, SPIROMETER, PFT LAB, CAPNOGRAPH, POLYSOMNOGRAPHY SYSTEM, NON INVASIVE VENTILATOR, and PLUSE OXIMETER.

10

MAIN BRANDS MKT SHARE CURRENT SALES COMMENTS

SHELCAL 33% Rs 808 m No.1 Calcium Supplement

CHYMORAL 80% Rs 296 m No.1 Wound Healing Enzyme

ELDERVIT 41% Rs 170 m No.1 Vit B12 injectable

SOMAZINA 26% Rs 126 m Leading Neuroprotective

AMIFRU 59% Rs 97 m Leading Anti Hypertension Product

CARNITOR 40% Rs101 m Leading Cardiovascular Product

FORMIC 3% Rs 79 m Anti Bacterial

B-LONG 65% Rs 65 m Nutritional Supplement

ENZAR 7% Rs 74 m Enzyme Solid

DEVIRY 37% Rs 54 m Leading MedroxyprogesteroneAcetate (Progestin) Product

11

5. Mission, Objectives and Strategies of Elder Pharmaceuticals Limited

Mission

To occupy a prominent place in National and International Health Care arena, with focus on research and global collaborations.

Vision

To play a front ranking role in curing patients through processes and partnerships that result in the right product for consumers at the right price and to become Rs 10,000 Mn Company by year 2010.

Values Respect for people Empowerment Team Spirit Commitment to the organizational goals Quality Performance

Strategic objectives

Elder has been a pioneer in developing and building its own brands with the objective of achieving market leadership in various niche therapeutic segments. The Company has today established many strong brands. Some of them are AMIFRU, I-VIT, B-LONG, DEVIRY, SHELCAL, ELDERVIT, ENZAR FORTE and CARNITOR and life style therapy market. The Company’s main objectives are:

i) Domestic Markets

To maintain it’s dominant market position for its leading brands.

12

To expand these leading brands with new products within these therapeutic segments.

To expand the Company’s bulk drug/formulation production capacity in readiness to capitalize on an anticipated increase in demand for API and Intermediates from overseas pharmaceutical companies.

To develop products for focused segments like women’s health care, dermatology, wound care and pain management, nutraceuticals and antibiotics.

To develop product portfolios through introduction of new licensed molecules from international alliance partners.

To get new facilities commissioned at the earliest.

ii) Exports:

Focus on exports to semi-regulated markets Focus on contract manufacturing, primarily through

alliance partners.

Business Strategy

Elder Pharmaceuticals business strategies are as follows:

To continue to manufacture and market products, which require long-term prescriptions and have prolonged recalls.

To introduce and market new molecules and APIs, which complement each other and generate high value business.

To expand marketing and sales team to cover the growing semi-urban, smaller towns and rural areas.

To improve distributions and logistics for better market penetration and reach, establishing new export markets, regulated and unregulated, through new product registration.

To focus on brand building To enter into newer segments with products such as:

Somazina- neurology drug Tobraneg- an anti bacterial drug Formic Range of products- Formic and Formic O Tanatril- anti hypertensive drug Ontac Plus- Muscle Relaxant

International partnership from marketing to contract manufacturing.

To have strong domestic presence- prudent combination of manufacturing distribution network and brands.

To continue to improve quality, standards and making manufacturing facilities of international standards and increasing

13

foreign collaborations and licensing agreements by offering additional outsourcing research and manufacturing capabilities.

6. SWOT Analysis

Strengths

o New focus on self-developed drugs and contract research and/or production for Western drug companies, following changes in India’s drug patents legislation.

o Expansion of capacities by Indian companies, making the country by and large self-sufficient.

o Growing population: According to UN estimates, the population total looks set to rise from 1.1 Bn at present to 1.4 Bn in 2020. By 2025, India will probably have overtaken China as the world’s most populous country. Already today, nearly 60 Mn people in India’s middle class, with disposable incomes of 3,500 Euros to 17,000 Euros p.a., can afford Western produced medicines. Until 2025 their number looks set to rise to approx.580 m (+12%p.a), according to McKinsey estimates.

o Highly skilled work force that enables the Pharma industry to offer quality products at competitive prices.

o Competitive advantages, such as low wages costs, over traditional drugs manufacturers in Western industrial countries.

o Patent non-infringing strategy- Elder strictly follows non-infringement strategy, which will help to leverage established relationships and enter into in-licensing alliances.

o Widening distribution network- Elder has over 3000 stockists, which make it a preferred choice in marketing alliances.

o Focus on Growth Segments- Women’s Health Care Wound Care Nutraceuticals

o Focus on high growth lifestyle segments Pharmaceuticals products FMHG segments.

14

Weakness

o With total sector sales of roughly 10 Bn Euros, India commands less than 2% share in the world’s pharmaceuticals market. This puts the country in 12th place internationally, even behind Korea, Spain and Ireland and before Brazil, Belgium and Mexico.

o Indian companies’ strategic reorientation away from generics to original preparation is still in its infancy, resulting in lower sales growth and volume.

o Shortcomings in infrastructure and insufficient energy supply.

Opportunities

o Profitable business opportunities in contract production for international Pharma groups, as a result of availability of sufficient production capacities following the massive expansion of plants for generic manufacture.

o Existence of strong incentive to move production for Western firms as building a pharmaceutical plant in India is about 40% cheaper than in Europe or the US, and manufacturing costs for pharmaceuticals are markedly lower.

o In the coming years, Indian drug markers will likely continue to look to foreign countries to expand their operations. According to PWC, about half of all larger Indian drug makers are looking to expand abroad through take-overs, whereas less than 20% of their Chinese competitors pursue that strategy. Targeted markets are still the US and Europe.

Threats

o Competition from western pharmaceutical companies in the field of patent protected drugs.

o In the course of increasing contract production and low-cost manufacture of proprietary medicines, exports are expected to receive a major boost in future. However, competition between Indian firms and Western drug makers will probably be much fiercer as the companies from Asia are increasingly seeking to tap the global markets.

15

7. Significant Factors For Success

The significant factors for success adopted by Elder Pharmaceuticals Ltd are as follows:

# NURTURING HEALTHY GROWTH:1) Through Strategic Acquisitions

- 51% Acquisition in Biomeda Group of Bulgaria Negotiated a 51% stake in Bulgaria’s Biomeda Group for

3.12 Mn Euros in an all cash deal. Biomeda is amongst Bulgaria’s top 10pharmaceuticals

distributors and has a formulation plant for tablets, and the activities presently generate revenues of 7-10 Mn Euros p.a.

-21% Strategic stake in Neutra Health PLC of UK Finalized a 21% strategic stake in Neutra Health PLC, an AIM

listed company in the United Kingdom. This entails an investment of Sterling Pounds 5.63 Mn (apporx. Rs46-47crs) in respect of 351,97,026 equity shares having a face value of 10 pence at 16 pence per share.

Neutra Health PLC has three subsidiaries which market and distribute a range of neutraceuticals products, such as vitamins, specialized health supplements, over the counter medicines and ‘ detox in a box’ health treatments, as well as Travel Guard range of travel related health products.

Neutra Health has a turnover of 23 Mn Sterling Pounds and a market capitalization of close to 16.8 Mn Sterling Pounds as at 31st December 2007.

2) Through In-licensing Arrangements-With Cymbiotics Inc, USA

Entered into an agreement with Cymbiotics, California, U based bio pharma company for in-licensing arrangement for marketing six of their patented pharmaceuticals formulations for diabetes, chronic pain, skin care, etc.

Under the arrangements, the Company will market six patented of this California based bio pharma company.

16

-With Gnosis, Italy Entered into licensing arrangements with an Italy based

research oriented biotech company by the name Gnosis S.p.a, for marketing and distribution of an anti-arthritic product, S-Adenosyl-L-Methionine Disulphatep-Toluensulfonate (SAMe) in India. Additionally Gnosis has the following products in their portfolio, which have been included in the licensing arrangements:

o Anti- osteoporotico Anti- oxidanto Cardiac care.

3) Through Launch Of New Products/ Brands

-Launch of Phytomega, a soft gelatin capsule, in the domestic market to reduce the lipid levels in the body as well as triglycerides.

A patented conjugation of Phytosterols, Eicoicosapentaenoic Acid, Docosahexaenoic Acid, is marketed under license from leading Biotech firm Enzymotec, Israel, with the brand name “Phytomega”.

Launched in India in February 2008, it has an existing market size is Rs700+ crs, which is primarily covered by Elder Pharma’s indirect competitors.

This product has been given a new ingredient status by USFDA and also won the Excellence Award for its efficacy, safety, innovativeness, and scientific merit.

o As a part of therapeutic lifestyle changes in cases with risk factors for coronary heart disease, diabetes, hypertension, obesity, metabolic syndrome and symptomatic carotid artery disease.

o As an adjunct to statin or fibrate therapy

-Launch of Shelcal CT for patients with severe established osteoporosis with a pre-existing fracturez.

Launched in January 2008, it is indicated for patients with severe established osteoporosis with a pre-existing fracture. Such a condition is widely seen in elderly or menopausal women, where the concern is the decreased levels of Calcitriol.

Calcitriol is the active form of Vitamin D, which is required absorption of calcium and there is sufficient evidence to prove that in old age, Calcitriol levels decreased; hence the need to supplement.

17

The total anti-osteoporotic market is Rs 180 crs, growing at 27%, while the Calcitriol segment is worth Rs 114 crs, growing at 36%.

-Launch of Hibor (Bemiparin Sodium) thromboembolic diseases, deep vein thrombosis, prevention of clotting during hemodialysis

Launched in January 2008, it is a second generation low-molecular weight heparin which is indicated for:

o Prophylaxis of venous thromboembolic diseaseso Treatment of deep vein thrombosiso Prevention of clotting during hemodialysis

It is a research product of M/s. Rovi Pharmaceuticals Laboratories, Spain and has been licensed to Elder Pharma to be marketed in India.

Hibor has a global acceptance:o Bemiparin Sodium is available in 32 countries worldwideo 2.5 Mn patients exposed to Bemiparin Sodium worldwideo More than 10,000 patients worldwide, enrolled in

Bemiparin Sodium clinical stidies The total market for Hibor is Rs 120 crs growing at 27%,

excluding the hospital segment.

4) Through Geographical Expansion

Elder Pharma currently exports its products to countries like Nigeria, Vietnam, Mexico, Mauritius, Sri Lanka and Brazil.

With investment in Neutra Health (UK), Biomeda (Bulgaria), Vincom Pharmaceuticals (Ghana), and Elder Universal (Nepal), the Company aims to enter the semi-regulated markets.

Besides domestic formulation business, Elder Pharma exports bulk drugs and formulations to CIS, African and SAARC

Elder has become a preferred manufacturing and marketing partner for foreign firms, given its strong sales force of over 1,600 people spread across the country, and wide network of 31 C and F agents and over 3,000 stockists.

The Company has plans to strengthen its presence in major regulated markets with a focus on Europe, Asia Pacific and Latin America, for which it is in talks with various

18

pharmaceutical firms for possible joint marketing tie-ups across various geographies.

It further plans to enter newer therapies and ramping up of marketing operations.

5) Through Awards and Accolades

- Elder received numerous awards during 2007-08 fir its excellent performance in various spheres. These includes:

2007- IMM Award for Excellence as Top Organization 2007- Forbes Asia Best Under Pillion Company Award 2008- Amity Corporate Excellence Award 2008- Frost and Sullivan Market Leadership Award for “Shelcal”

Elder Pharma has been named in the most recent Forbes list of ‘Asia’s 200 Best under a billion’, having been honoured in this list for its consistent profitability and growth over a period of three years.

6) Elder Pharmaceuticals not only focuses on the customer relationship but also gives equal importance to the employee needs and wants. Elder pharma provides it’s employees with various facilities and benefits like Leave Travel Allowance/ Reimbursements, Medical Reimbursements, bonus, annual health check up, Elder Information Center (library) etc. This encourages the employee to be loyal to the Company, which results in the progress of the company.

# NURTURING HEALTHY PRODUCT PORTFOLIO

With a global sales turnover of Rs.5 Bn, Elder Pharma offers bulk drugs and pharmaceuticals. It also offers medical devices and instrumentation; OTC/consumer products, cardiac therapy products and wound care products. Elder Pharma has approximate 260-275 formulation products in the market, addressing the growing needs in women healthcare, nutraceuticals (niche segments), cardiovascular, cerebro-vascular, pain management and anti-bacterial segments.

# NURTURING HEALTHY SEGMENT-WISE PRESENCE Elder Pharmaceuticals Ltd has a sizeable focused portfolio of ethical brands and growth driving brands in FMHG segment. This has helped Elder Pharma to create a strong presence in the market and also in brand building. The various segments and the products it covers are given in the appendix (Table 2).

19

8. Manpower Planning

Policy Administration Human Resources

Purpose:

The purpose of this policy is to ensure transparency in the recruitment and joining process. It also tries to ensure that the right person selected for the right job. This policy covers all the procedures of recruitment and joining at all levels.

Procedure:

Recruitment procedure starts at beginning of the financial year with manpower budgeting for all levels across the country.

Recruitment:

A duly approved manpower Requisition form is submitted along with Role Profile (Refer Appendix) to the H.R. department (the role profile is a detailed description of the job position). This detailed job description helps H.R. to hunt the right person for the right job.

HR has a data bank of resumes for all levels. After exhausting all the resumes from the data bank, HR Shares the job opening to outside agencies like:

Job Sites Placement Consultants Advertisements

The New profiles received are then short listed and sent to the user department.

The profiles are then thoroughly screened by the hiring department and sent back to HR for scheduling.

HR schedules the candidates, and an interview panel consisting of Hiring Manager, HR and HOD (if the level requires) meets the candidates, and selects the right person.

20

The short listed candidate needs to provide a copy of his/her pay slip, so as to match the existing salary.

An offer letter is exchanged with the candidate and date of joining is requested not later than one month from the date of offer letter issued.

9. Policies and Procedures Followed

i) Dress Code Policy

Objective To portray an image of PROFESSIONALISM To maintain decorum in the office

Applicability This policy is applicable to all employees.

Guidelines All employees are expected to dress professionally in:Business Formals from Monday to Friday and Smart Casuals (Denims/T-shirts) on Saturday.

General Information Employees who have to interact with clients/vendors/consultants

will be required to wear formal attire even outside the office premises irrespective of their level and day of the week.

Slippers, chappals and floaters are not allowed.

MALE EMPLOYEES- DO’s

A light coloured shirt (full sleeves recommended), and trousers. Need to shave daily. Need to wear Tie irrespective of their level.

-DON’Ts Floral prints/gaudy coloured shirts/sweat shirts/jogging pants are

not allowed. Clothing with inappropriate slogans or artwork is not allowed.

LADY EMPLOYEES-DO’s

21

Formal Indian outfits/saris/salwar kameezes or Formal Western outfits/trousers/skirts (knee length)/blouses

(need to be of appropriate length).

-DON’Ts Mini skirts, jogging pants, capris/ three-forth, leggings, spaghetti

straps, tube and tank tops are not allowed at all. All the employees in the Company are expected to adhere to the dress code policy. The management will take corrective actions if the above code is not adhered to. This dress code policy is applicable only to those employees who work in the office. There is a separate dress code policy for the factory workers as the management provides the workers with uniforms.

ii) Travel Policy

Employees are required to get all business travel within and outside Mumbai pre-authorized by the Department head. All travel Reports are required to be approved by the respective Department Heads. Employees are required to route all their bookings of business air tickets. Through the company approved travel agent via the call coordinator. All travel expenses are required to be accounted for the Travel Report, which would then be forwarded to the Accounts Department for reimbursement. Department heads are responsible for reviewing employee travel expenses and ensuring compliance with the company’s policy. The purpose of travel and/ or entertainment is required to be fully described. Description such as “office visit”, “soliciting business”, “calls and meeting”, “prospecting” and the like are not sufficient. Travel reports duly approved must be received by the Accounts Department not later than ten working days after returning from the trip and/or incurring the expenditure. Travel reports received after the expiry of the period will not be reimbursed, unless valid reasons for the delay are provided. Travel Report form can be obtained from each department secretary. The executive committee must approve extraordinary expenses. Gifts to be given on behalf of the company must be authorized by the Department head. Expenses incurred on account of alcohol will not be entertained. In case of unavoidable circumstances and approval from the Department head/ Head Human Resources is essential.

iii) Recruitment Policy

Policy Administration Human Resources

Purpose:

22

The purpose of this policy is to ensure transparency in the recruitment and joining process. It also tries to ensure that the right person selected for the right job. This policy covers all the procedures of recruitment and joining at all levels.

Procedure:Recruitment procedure starts at beginning of the financial year with manpower budgeting for all levels across the country.

Recruitment:

A duly approved manpower Requisition form is submitted along with Role Profile (Refer Appendix) to the H.R. department (the role profile is a detailed description of the job position). This detailed job description helps H.R. to hunt the right person for the right job.

HR has a data bank of resumes for all levels. After exhausting all the resumes from the data bank, HR Shares the job opening to outside agencies like:

Job Sites Placement Consultants Advertisements

The New profiles received are then short listed and sent to the user department.

The profiles are then thoroughly screened by the hiring department and sent back to HR for scheduling.

HR schedules the candidates, and an interview panel consisting of Hiring Manager, HR and HOD (if the level requires) meets the candidates, and selects the right person.

The short listed candidate needs to provide a copy of his/her pay slip, so as to match the existing salary.

An offer letter is exchanged with the candidate and date of joining is requested not later than one month from the date of offer letter issued.

iv) Quality Policy

It is the vision at Elder Pharmaceuticals Ltd to strive to achieve complete customer satisfaction at all times. As a manufacturer of pharmaceuticals products the Company needs to remain amongst the market leaders with respect to the quality of products and services. The endeavor to provide quality products can only come through continuous technological development and improvements in products, processes and services, constant upgradation in techniques and a trained, motivated and committed workforce. This in turn requires

23

management and employees to work together as a team, define objectives to support this quality initiative and continually review the performance to ensure achievement of all the objectives. The Company has reiterate their strong commitment to adhere to the requirement of various regulatory norms and standards including ISO 9001:2000 both in letter and in spirit.

v) Accounting Policy

The Company’s accounts are prepared as per the Generally Accepted Accounting Principles in India and in accordance with the applicable accounting standards and the requirements of the Companies Act, 1956. The Company follows the accrual system of accounting, recognizing income as soon as it earns irrespective of its time of receipt. The Company is conservative in its interpretation and application of accounting policies.

vi) Leave Policy

9/10 holidays in a year will be selected out of the list of holidays declared by the State Government and will be displayed on the Notice board. The management reserves the right to change the pre-declared holidays. Depending upon the exigencies of work, the management also reserves the right to change the working hours/ weekly holidays. Elder Pharmaceuticals Ltd have a 5-day work culture and grants leave for 52 days a year.

10. Training Measures of Elder Pharmaceuticals Ltd

Pharmaceutical industry is dynamic in nature. Therefore, Elder Pharma focuses on training, as it considers it to be knowledge providing platform required for the smooth functioning of the organization. The three major segments covered in a training module are:

# Product Knowledge- product is non-reactive or inert in nature. Product knowledge covers:

i) Product Therapy and ii) Disease Management

# Customer Knowledge- customers are reactive in nature. Therefore specialized training is required to deal with them. Training is provided on the basis of:

i) Qualificationii) Knowledge

24

iii) Social behaviouriv) Specialization

# Market Knowledge- market is neither reactive nor non reactive. It responds through the behaviour of the economy. Therefore it is essential to provide information on market and it’s behaviour.

Training department of Elder Pharmaceuticals Ltd focuses on mainly on the Sales department. Training is provided for three levels of sales officers as given below:

i) New Recruits/ Employeesii) First line managersiii) Senior Sales Officers

Training for the first and second set of officers are already implemented in the organization whereas training for Senior sales officers is just a proposal which would be implemented by the current year end.

I) New/ Fresh Recruits – Sales Officers

Every year Elder Pharmaceuticals Ltd conducts training for atleast 14-15 batches with 30-35 employees per batch. The training session last for 10-12 days and is conducted out of the city limits. It is usually conducted in a hotel or resort in Lonavala, Panvel, and Khandala etc, which has a serene environment.

Objectives of training To give the new recruits a total perspective of the

pharmaceutical industry and that of Elder Pharmaceuticals Ltd. To make the employees identify the growth drivers and the

potential for growth in this industry. This will help to reduce the attrition level of the new employees in the company to an extent.

Product Knowledge- it is essential for new employees to have complete knowledge of all the company products and services. In a pharmaceutical company one needs to have an in-depth knowledge about the various drugs, tablets, capsules, dosage, and composition etc inorder to sell their products. The employees also need to possess soft skills including presentation skills, communication skills and teamwork etc inorder to convince their customers. This requires intensive training.

Competitors- it is important to have a clear idea about the competitors, their products, business strategies, area of

25

business etc. This will help the new employees to foresee and plan strategies accordingly.

Market- every employee must have thorough idea about the market and its behaviour. This will help the new employees to position their products in the right place at the right time in the right amount. It is necessary to know what product is in demand, in which market and in what amount.

Training helps in identifying the selling skills and needs of the employees and focus on the benefits. This will help in providing the right type of training required for the employees. This in turn leads to the organizational development.

How training is done?

Role-play- in role-playing the main focus is to create a realistic situation, as in case study, and then have the trainees assume the parts of specific personalities in the situation. For example, the trainer may assume the role of an orthopedist and the trainee may assume the role of a sales officer. Then, both are given a typical work situation and asked to respond as they expect others to do. This helps in making a better understanding among the individuals and also promotes interpersonal relations.

Detailing- trainees are given a detailed lecture on the different drugs and medicines using visual aids (See Appendix).

Test papers are conducted on daily basis. The employees are then rated on the basis of selling skills,

communication, product knowledge, enthusiasm and initiativeness, basic attitude and over all job clarity.

Then, they are rewarded on the basis of the rating and are provided with certificates for those who completed the training successfully.

II) Managerial Orientation Programme (MOP)

It is conducted for the first line managers. In this training module the Company focuses on discussing the role and responsibilities of the first line managers. They also provide the officers with case studies to solve, inorder to improve their analytical and identifying skills. In this training module, they also talk about the difference between a manager and leader, managerial behaviour, do’s and don’t’s of a manger etc. It is basically like a Workshop.

III) Refreshment Courses

26

This training module is just a proposal and would be implemented by the current year-end. This training module is conducted for the Senior Sales Officers. The objective of this training programme would be:- To identify the skills, attitudes and behaviours.- Product Refreshment- in the course of a year, the Company must have introduced a variety of new products and services. Therefore it is essential to update the employees about the same. Knowledge on technical aspects and new scientific data available are provided in this module. - It is also important to refresh their skills, attitude and behaviuor and develop the officers to take higher responsibilities.- It is necessary to motivate the old employees since many of them remain in the same position for a long period. It is very important to boost the employee morale inorder to increase their work efficiency.

Each training batch costs around Rs 4 – 5 Lakhs and the Company has a full-fledged training faculty. 80 – 90% of the training module is covered by the faculty members itself and the medical and marketing department covers the rest. The Company’s Divisional Heads also takes lecture for 2 hours per batch.

11. Product Promotional Measures

Elder Pharmaceuticals Ltd has different types of promotional materials as given below and the marketing expenditure of the Company is 14 -18% of the total costs.

1) Free Sampling- free samples of drugs and medicines are provided to doctors inorder to make them familiarize the company products. This method will help to reach out to the markets.

2) Literature- these are basically handouts with all drug information. These literatures are used by the Company sales representative to give out information on various drugs to the doctors. These handouts contains information on drug composition, dosage etc.

3) Continued Medical Education (CME)- it is basically a conference having authorities on the subject speaking to the doctors. There are in-house as well as outside speaker who conducts CMEs. In CME they share patient success reports etc.

4) Retail Campaign- free bonus of drugs and medicines are provided to the doctors and chemists who push Elder Pharmaceutical products. The doctors and chemists are

27

also gifted with the Company Diaries, prescription pads and other small gifts.

5) Patient Camps- it is basically an awareness programme where doctors, chemists and the Company comes together and provides the public with free check-ups, treatments and free sampling. This strategy is adopted to create awareness about the Company products. It is usually done in Societies, clubs, NGOs etc.

6) Medical Journals- these are company magazines that are issued monthly with all the details about the Company’s recent launches, products, Company news, healthy recipes etc. The Company also uses these journals to advertise their products and is given to the doctors and chemists. Refer Annexure.

12. Key Result Areas and Activities of the Organization

Research and Development Productivity- As a forward-looking company, Elder Pharmaceuticals Ltd strengthened its focus on the manufacture of molecules developed by its R&D center through the upgradation of its API facility. Elder’s investment in R&D is growing steadily. The result of this growing investment is reflected in the development of leading brands like Amifru, Shelcal range, Flavospas, Venex, B-long, and the Eldervit range. In 1991, Elder’s research and development facility in Nerul was recognized by the Department for Scientific and Industrial Research, New Delhi. The Company now specializes in modern technology and innovative chemistry-driven research, leading to the discovery of non-infringing API and drug intermediate routes leading to the creation of intellectual property. The R&D team comprises 40 scientists working towards following objective:

# Development of new products# Revision of existing products# Analytical method development

28

# Customer assistance# Documentation # Creation of intellectual property

Sales and Marketing- Global sales forecasting is usually done by using Country Forecasts, based on trend lines and input from Market Intelligence, Strategic Plans etc. The processes of forecasting are as follows: # Strategic Planning- 5years# Financial Planning# Marketing Plans# New Product Planning# Resource Allocation# Supply Planning

Sales Performance Evaluation- sales evaluation is done by comparing the budgeted sales with the actual sales. Then the performance% is found out:Performance% = Actual Sales /Target Sales x 100.Secondary sales are then evaluated and tabulated. The aim of sales performance evaluation is to achieve a balance between Sales, growth & Contribution Index. Marketing activities will facilitate product and brand acceptance. The right kind of strategic move is very important. Elder Pharmaceutical Ltd focuses on selecting newer key markets (countries) as their target markets. Then the focus is on strengthening the brand. The Company’s power brand strategy helps it to protect existing recall and create new brands. This makes it possible for the Company to create a number of successful extensions around its successful Shelcal, Eldervit and Chymoral brands, which reduces the time-to-market and related costs. The Company also focuses on strengthening brand equity and establishing brand names so as to gain easy access to doctors.

13. HRD Measures

1) Leave Travel Allowance/ Reimbursements All confirmed employees are entitled to one month’s basic salary

as leave travel assistance in a year subject to the rules applicable.

Minimum period of privilege leave qualifying for leave travel assistance claim shall be five continuous days.

Carry over travel assistance will be permissible to the extent of one year’s entitlement

This is subject to income tax applicability.

29

2) Medical Reimbursements All confirmed employees who are not covered under Employees

State Insurance Corporation (ESIC) would be entitled to reimbursement of actual medical expense for himself and family members up to a maximum equivalent to one month’s basic salary annually.

Unutilized amount will be carried forward and can be accumulated up to months basic salary.

This is subject to Income Tax applicability.

3) Bonus Bonus will be paid as per the payment of bonus act.

4) Provident Fund- As per the provisions of Provident Fund Act5) Gratuity- As per the provisions of Gratuity Act6) Annual Health Check Up- The objective is to ensure good health and well being of the employee. All employees can undergo medical check up (as prescribed) every year at approved Diagnostic Center by the company. The company will suggest the type of the test and the expenses incurred for this medical examination will be borne by the company.

14. Career Planning and Promotion Policy of Employees

Elder Pharmaceuticals Ltd do not have any career planning activities for their employees. The Company focuses on making the employees aware of the growth potentials of the pharma industry and that of Elder Pharmaceuticals Ltd.

The promotion policy followed by the Company is different for the factory/field and for that of the office. In factory, the workers are promoted on the basis of their fieldwork efficiency, speed, skills, basic knowledge etc whereas in the case of the office, the employees are promoted on the basis of their efficiency, attitude, skills, willingness to take responsibilities, behaviuor, potential etc. it is very important for the Company to choose the right kind of people because higher the position of the employee, higher the level of responsibilities. The HR department prepares a PRMOTION JUSTIFICATION FORM (Refer

30

Annexure), which is to be accompanied with Performance Appraisal forms that are duly filled. In the form various details of the employees are mentioned which would help to choose employees for promotion accordingly.

15. Performance Appraisal System

Performance appraisal is defined as the assessment of an employee’s performance in a systematic way, the performance being measured against factors such as job knowledge, quality and quantity of output, initiative, leadership abilities, judgment, versatility etc. Assessment should not be confined to past performance alone. Potentials of the employee for future performance must also be assessed. The process of Elder Pharmaceutical’s performance appraisal is as follows:

1) Objectives of performance appraisal are identified (Refer Annexure- Goal Setting).

2) Role Profile is defined in order to understand what is the primary purpose and overall objective of the job, context of the job, main responsibilities, major challenges, key accountabilities and key performance indicators etc. (Refer Annexure- Role Profile).

3) Parameters for the performance appraisal are established. (Refer Annexure- Parameters).

4) The HR department fills goal Setting and Quarterly Review form for the business year to assess the performance of the employees. (Refer Annexure- Goal Setting and Quarterly Review form for the business year)

5) Employees are given a form called Employee Self-Assessment form and the manager also adds his comments to this form. (Refer Annexure- Employee Self-Assessment form).

6) Then the collected data is used for appropriate purposes such as for promotion etc.

16. System of Accounting Followed

The Company’s accounts are prepared as per the Generally Accepted Accounting Principles in India and in accordance with the applicable accounting standards and the requirements of the Companies Act, 1956. The Company follows the accrual system of accounting, recognizing income as soon as it earns irrespective of its time of receipt. The Company is conservative in its interpretation and application of accounting policies.

31

17. Financial Highlights of the organization

Past Performance – Profit & Loss

Figures in INR Cr.

EBITDA margins consistently improving - Up over 650 basis points over the last 3 years.

Cutting edge new products set to offer margin enhancement.

Shifting to low cost and excise free locations expected to drive profit margins.

Balance Sheet perspective

Figures in INR Cr.

Debt of ~ Rs. 100 Crore raised towards setting up of facilities in Uttaranchal and Himachal.

Unit at Langa Road (Uttaranchal) set to be operational by Jan ‘09 and expected to

32

contribute about 10% to sales on an annual basis, which can be scaled up gradually.

Going forward, CAPEX expected to be largely funded by combination of internal accruals & debts.

Presently, debt on books is at Rs. 350 Crore.

Past Performance – Key Ratios

18. Organization Design

Strategic Planning

Gets Input

Ready with productResearch and Development

Sales and Marketing

Distribution

Inventory

Finance

Master Planning

Procurement

Production Assessment

QA/QC

33

Parameters 2007-08 2006-07 2005-06 2004-05 2003-04 EBIDTA Margin

(%)

20.6

18.9

18.74

16.97

15.46

PAT Margin (%)

12.45

11.75

10.34

7.14

6.4

Debt-Equity Ratio

0.68

0.74

0.73

0.93

1.40

Current Ratio

4.38

3.33

2.29

1.88

1.74

Inventory

Turnover Ratio

6.23

4.63

3.77

3.59

3.67

Return on Capital Employed

16.15

15.13

15.56

15.11

15.42

Return on Net worth

13.74

18.23

16.16

13.45

16.68

Rate of Growth-Net Sales (%)

22.70

26.61

24.35

10.68

16.60

Rate of Growth-EBIDTA (%)

33.20

28.45

37.37

21.44

29.69

Rate of Growth-PAT (%)

30.09

43.79

79.99

23.65

100.85

Organisation Design Factors

The factors that influence the organization design are: Business Strategies:To Enhance Awareness-

By focusing on brand building in India. By having a prudent combination of manufacturing

distribution network and brands. Using Scientific Promotion rather than Product

Promotion. Leverage international tie-ups and partnership.

a) Domestic Market Enlarge presence in therapeutic categories. Developing product portfolios: introduction of new

licensed molecules from international alliance partners.

Commissioning new facilities at the earliest In-licensing product raw materials bought from

parent company to maintain originality and effectiveness Sales Force Development

Comprehensive understanding of product and market.

Strong relationships with doctors and medical practitioners.

Introduction of international domain experts. Size of team: 1600.

b) In-Licensing Tie up with original manufacturer key differentiator Over 30 in licensing products at present Introducing novel medications at affordable prices Leveraging relationships to include further offerings

c) International Markets Focus on exports to semi-regulated markets where

presence is established

34

Contract manufacturing for alliance partners Cross-licensing agreements – offices in Kampuchea,

Myanmar, Kenya, Ghana and NigeriaForecasting Marketing Budgeting and Reviewing Auditing QA/QC Research and Development Supply Chain Management

19. Organisation Structure

Mr. Milind ThakurVP- Human Resource

Jagdish Saxena Chairman

Dr. RajanQuality

Assurance

Mr. Debanjan HazraCorporate Business StrategyCorporate affairs/ Legal Affairs

Dr. Anuj SaxenaInternational Business

Mr.Yusuf Karim Khan (Executive Director); Mr. M V Thomas (Director)Finance

35

Mr. Alok SaxenaWhole Time Director

Mr. Kishan Rao (Sr. VP)Finance

Mr. DalviAGM

Ms. AradhanaManager (HRD)

Mr. Kanhik DananiaManager

Domesti

Internatio

Bulgaria

Ghan

Nepal

Dubai

20. Outlook and Future Growth Drivers

Indian Pharmaceutical industry is poised to reach USD 20 billion by 2015 – the 10th largest market in the world. Elder Pharma with an array of acknowledged brands has established itself as a fast growing pharmaceutical company. While existing brands are contributing to its revenues, its three new launches- Shelcal CT, Phytomega and Hibor have also been a runaway success. Going ahead the company plans to introduce six-seven new products in the Indian market in FY09. The Company’s thrust on in-licensed products continues and deals for new in-licensed products are in the offering. Besides this the Company has plans to enter newer therapies and also ramp up their marketing operations. The Company’s vision is to consolidate its position in India. Going forward, the Company wants to launch brands that will become large players in the Indian market. Elder Pharma is also focusing to develop new product portfolios and new in-licensing agreements with international partners.Exports are gradually being ramped up. It is presently ~ 15% of revenues. Export emphasis and increased returns from Ghana are also expected to continue. The Company’s efforts in the field of CRAMS continue and the developments are expected to add to the revenues and profitability. The Company plans to commence CRAM activities at Paonta Sahib plant by the end of the current fiscal year. The Company is striving to meet market demand for its own products. They are also expanding the manufacturing capacities through Brownfield, Greenfield and inorganic expansions. Elder Pharma is in the process of commissioning a new plant in Uttaranchal, which is an excise free zone so as to enhance production capacities. The Company’s initiatives

36

Ms. Shalini Kumar (Director)Sales and Marketing

Dr. M.D. Khubchandani (Sr. VP)R&D- Formulations

Mr. P. Balagopal (Sr. VP)Projects

Dr. Bhavesh Kotak (VP)- CMEs; Dr. Amit Bhargava (VP)- Chemical TrialMedical Services

Mr. Naveen KhannaVice President.

Mr. Ajit KumarInternational Marketing

Mr. Tarun Kumar

Mr. S N Kureshi

would aid in emerging as one of the fastest growing companies in the India’s mid-cap pharmaceutical sector.

New Offerings - To be launched in FY09

New product in collaboration with a Japanese company for improving immunity in patients undergoing chemotherapy/radiotherapy, as well as in patients with low immunity levels like those suffering from HIV, Hepatitis, etc - enhances immunity levels to a considerable extent.

New product to supply nutritional requirements of elderly population & patients suffering from chronic disorders like T.B, Arthritis, etc & where amino acid levels are depleted.

New product in collaboration with an Italian company as the most potent antioxidant product. In addition, this product also offers hepatoprotective benefits.

A topical gel preparation in collaboration with a Switzerland based company for treatment of scars & keloids.

21. System followed for purchase of materials

The prices of input raw materials and final bulk drugs to be used for formulations are not tracked through a formal mechanism. Price tracking is important for:

Make-buy decisions, since typically bulk drug prices are high (when introduced) at the time of pharma development. Thereafter the prices fall within 6-7 months of introduction.

Feasibility of annual rate contracts for any RM purchased (at present, no product is under annual contracts).

Large proportion of materials used at Paonta Sahib comprises of purchased bulk drugs; the capacity and capability for these could potentially exist at Nerul plant. For example, Sodium Pantaprazole, which has reduced costs. There is a difference in tax structure of suppliers. In some cases the suppliers equate the overall prices by increasing the base price

2 suppliers for Lisinopril - Hetero Drug and Lupin Lupin increases the basic rate to equalise on the landed price

It is essential for the Company to evaluate feasibility of having annual rate contracts for selected items and also incorporate processes to evaluate in-house cost versus outsource cost for bulk drugs (Bulk Drug Manufacturing Strategy). Elder Pharma should also prepare supplier cost sheet to track changes in basic rates on an on-going basis.

37

22. Factory Layout

The steps involved in Elder Pharma’s manufacturing unit are as follows:

Receiving Bay: this is the place where raw materials and packing materials are received.

De-Dusting: in this stage, dust and dirt particles are removed from the raw materials and packing materials by vacuum cleaning.

Segregation: the raw materials are separated from packing materials inorder to continue the process smoothly.

Quality Approval: the materials are kept for the quality approval. The materials with required standard are given approval whereas the others are rejected. The rejected materials are moved to the Rejected materials stores. Materials that wait for quality approval are known as QUARANTINE. From this stage onwards, the raw materials and packing materials are handled separately.

Sampling Room (RAW MATERIALS): a sample of quarantine (raw material) is taken to the sampling room for testing. If the quality is approved then the raw material is moved to the Approved Raw Material Store. If rejected then it goes to the Rejected materials stores. The rejected materials room is completely isolated from the main building inorder to avoid any harm to the production facilities.

Dispensing Room: in this room, workers divide the approved raw materials into batches inorder to make the production easier. For example: calcium IP (100grms), fenofibrate BP (500grms) etc is kept in one batch.

38

Day Store Room: in this room, the number of batches required for a day’s production is kept safely. The production workers take the required batches from this room.

Production: the materials are then used for the production of the drugs and medicines. The stages involved in the production are: work-in-progress (WIP) and finished goods (FG). The finished goods are then taken for packaging.

Packaging Process: The packing materials are of two types- Primary Packing and Secondary Packing. ( See Annexure – Store Layout).

Kept as Quarantine for QA

The packed goods are kept as Quarantine for QA.

Finished Goods

(Dispatched to Central Warehouse)

39

Packing Material

Secondary Packing (Carton Packing for medicine bottles and strips.

Primary Packing(Foil strip packing for tablets)

The primary packing is handled in a clean and conditioned area.

Secondary Packing is then done. Eg: Bulk Packing.

23. Scope For MBA’s In The Organisation

Elder Pharmaceuticals Ltd has a number of MBA’s in the Company in various post and departments. The Scope for MBA students is wide in the Company as it has various departments like IT, Marketing, Human Resource, Finance, Operations etc. As Elder Pharma is a family run business, most of the top management executives are family members, friends, relatives etc. MBAs are employed as senior managers, AGM, and top line managers. Some of the MBAs in currently working in the organization are:Mr. Alok Saxena, Whole time DirectorMr. Debanjan Hazra, Asst. General Manager, Corporate Business StrategyMr. Rohan Arte, Business Development ManagerMrs. Aradhna Mathur, Manager, HR

Trade Union- there is no trade union activities practiced in the organization.

24. Conclusion

The pharmaceutical industry is expanding worldwide. Indian Pharmaceutical Industry is poised to touch US $20Bn by 2015, making it the 10th largest market in the world. Elder Pharmaceuticals Ltd was promoted by Mr. Jagdish Saxena and it was incorporated as a private limited company on 2nd April 1983. Elder is one of India’s leading and well established pharmaceutical company, engaged in the manufacturing and selling of bulk drugs, formulations, herbal healthcare, and consumer products together with the distribution of medical instruments and electronic devices. A majority of Elder’s products are prescription drugs targeted at the niche long-term chronic therapy and “lifestyle” disease care and treatment market segments. The Company’s primary market is the domestic urban market.Business Areas:The Company is primarily engaged in:

Manufacturing and marketing of a wide range of pharmaceutical products developed in-house.

Manufacturing and marketing of diverse products through in-licensing agreements with international pharmaceutical companies.

Manufacturing of active pharmaceutical ingredients (API).

40

The Company is headquartered in Mumbai, with zonal offices in Mumbai, Chennai, Kolkata and New Delhi and a strong sales field force spread all across the country. Elder Pharma has its shares listed on the Mumbai and National Stock Exchanges and enjoys a market capitalization of Rs. 750 crs (NSE) as on 31st March 2008. Elder Pharmaceuticals Ltd has a sizeable focused portfolio of ethical brands and growth driving brands in FMHG segment. This has helped Elder Pharma to create a strong presence in the market and also in brand building. The Company derives majority of its revenues through its domestic operations. However, it is important to emphasize that Elder’s key international alliances brought about through in-licensing arrangements have further enhanced growth and added value to the business. Elder’s successful alliances with several Italian Pharmaceuticals have led to the introduction of some of the most innovative products in crucial therapeutic markets. Some of these products are currently amongst the top recommended brands in their respective therapeutic segments in India.

ANNEXURE

Table 1: Principal Facilities

Elder HouseC-9, Dalia Industrial Estate,Off Veera Desai RoadAndheri west,Mumbai 400 053

D-219, D-220, TTC Industrial Area,Thane Belapur Road,Navi Mumbai 400 706

C-21/2, TTC Industrial Area, Pawne,Navi Mumbai 400 704

Head and registered Office

Formulation factory and R&D

Bulk drug and betalactum capsule factory

A-36, Patalganga Industrial Area,

41

Khaire, Taluka Khalapur,District Raigad,Maharashtra 410 220

C-11/1, Industrial Area, Selaqui,Near Dehradun,Uttaranchal

Plot No.103, Industrial Estate,Bh. District Industrial Estate, Phase-IIPaonta Sahib, H.P.- 173 025

Elder Pharmaceuticals Ltd,Oppo. Liberty Shoes Ltd, Langa Road,Dehradun- Paonta Sahib Road,Dehradun, Uttarakhand

Bulk drug factory and Formulations

Formulation Factory

Cosmetic Formulations

Formulation Factory

Table 2: Segment-Wise PresenceSEGMENT PRODUCTS

Wound Care OxoferinBandages and IncontinenceBurnaid Gel and Bandages

Pain Management Tantum- gel, oral rinseArtodarDiclofenac oral rinse

Cardiovascular CarnitorTanatrilHiborPhytomega

Anti-Infectives Ceftizoxime Nutraceuticals Imbran, NKCP

Sampure, GSH Neuro Drugs Somazina Consumer Products Blistex Lip Care Products

Tiger Product RangeFolteneSinomarin

Others Fluimucil

42

DermatologyZadaxinMacmirror, Polimod

Medical Equipments Oxygen ConcentratorCPAP Bipap Nebulisers Spirometer PFT Lab Capnograph Polysomnography SystemNon Invasive VentilatorPluse Oximeter

Promotional Material about the Company

Elder Pharmaceuticals Ltd. Lalit Doshi Memorial Award:(Source: Hindustan Times dated 22nd Sept, 2008.)

Elder Pharmaceuticals Ltd has been selected for the Lalit Doshi Memorial Award as the best SICOM assisted unit for the year 2007-08. The award is jointly given by Lalit Doshi Memorial Foundation and SICOM Limited, every year. This award was instituted thirteen years ago, in the memory of Late Shri Lalit Doshi who was then Secretary (Industries), Government of Maharashtra and the Managing Director of SICOM Limited, from June 1990 to August 1992.

The award is presented with an objective of encouraging first generation entrepreneurs. Elder Pharmaceuticals Ltd (EPL) incorporated in April, 1983, is engaged in the manufacture of Pharmaceutical Formulations, Bulk Drugs, Consumer Products and Medial devices like calcium supplementations, wound, neutraceuticals, dermatology, etc.              Elder Pharmaceuticals has set up six mfg. units in India of which two are in Maharashtra (Patalganga & Nerul, Navi Mumbai). EPL has strong brands –  Shell-Cal, Eldervit, Chymoral, etc. The company reported a turn over of about Rs. 551 Crs. with a net profit of about Rs. 69 Crs.

43

The award will be presented to Elder Pharmaceuticals Ltd, in a special function on 29th September, 2008 at 6.00 p.m. at Y.B. Chavan Centre Auditorium, General Jagannathrao Bhosle Marg, Near Sachivalaya Gymkhana, Mumbai – 400 021. On this occasion Dr Rajendra K. Pachauri Chairman, Intergovernmental Panel on Climate Change (IPCC) & Director General,  The Energy and Resources Institute (TERI) will deliver the fourteenth Lalit Doshi Memorial Lecture on “Implications of Climate Change for Indian Society”.Elder Pharma to market Cymbiotics drugs in India22 Jul, 2008, 0007 hrs IST,Rajesh Unnikrishnan, ET Bureau

MUMBAI: The California-based bio-pharmaceutical company, Cymbiotics, has signed an in-licensing deal with Elder Pharmaceuticals to market six of its patented products in India.

As per the agreement, Elder will market Cymbiotics products in pain management, diabetics, dermatology, besides OTC products. Cymbiotics develops disease-specific formulations in pain management, cardiovascular, urinary incontinence and other inflammation management-related conditions. Initially, Elder will market Cymbiotics’ arthritis drug Flexasur and diabetic drug Diaperin.

Cymbiotics CEO Raj Barathur said, “The deal will strengthen our presence in the Indian market.” Source:  http://economictimes.indiatimes.com/News

Elder Pharma to step up focus on genericsPriyanka Gollikeri : Friday, May 30, 2008  03:05 ISTMUMBAI: Elder Pharmaceuticals, the drugs division of the Mumbai-based Elder Group, is looking at doubling its presence in the active pharmaceutical ingredient (API) space.

API is the substance in the drug that makes it pharmaceutically active.

Currently, Elder’s formulation business accounts for as much as 90% of the company’s total turnover of Rs 580 crore while API contributes less than 5%, said Alok Saxena, director (international division). Elder Pharma is growing at 20% annually.

“The share of API would be more than doubled to 10-12% in the next three years with an investment of Rs 20-25 crore,” he said. To achieve this target, the company will expand capacity at its API units in Rabale, Patalganga and Vashi, on the outskirts of Mumbai, by over 70% in three years. At present, the total capacity stands at 350 metric tonne per annum.

44

Elder’s API basket covers anti-bacterial, anti-hypertension, anti-diabetic and anti-epileptic segments.The API market in India, estimated at Rs 11,500 crore now, is seeing a boom. It is expected to hit Rs 19,500 crore by 2010, say analysts. Players such as Ranbaxy, Dr Reddy’s Laboratory, Zydus Cadila and Dishman Pharmaceuticals are the key manufacturers of APIs.According to Saxena, it is the sheer scale of the API market that has led Elder to increase focus on this segment. “India is developing as a major hub for API sourcing, which is growing at 16%. It makes good business sense to increase our capacity. The international market also provides huge scope in terms of exports,” he said. The global API market is at Rs 304,000 crore and is expected to grow at 10% annually.Elder is looking at exporting 60% of its API. The remaining 40% would be used both for the domestic market and in—house products. Source: http://www.dnaindia.comIn-licensing deals will help sustain growthUjjval Jauharri: Monday, May 12, 2008  03:45 ISTElder Pharmaceutical Ltd (EPL), with an array of acknowledged brands such as Shelcal, Fairone and others, has established itself as a fast growing pharmaceutical company.

While existing brands are contributing to its revenues, its three new launches—Shelcal CP, Phyto Omega and Hibor—have also been a runaway success. EPL plans to introduce six-seven new products in the Indian market in FY09. Besides this, it is planning entry into newer therapies and ramping up of marketing operations. EPL’s business model envisages introduction of in-licensed products and new in-licensing deals. Its recent European acquisitions augur well for both domestic and export markets. An excellent growth momentum, coupled with a healthy operating margin, makes it an attractive buy.BusinessEPL has business interests in pharmaceuticals (both branded and generic) and manufacture of consumer healthcare products. It also has interests in active pharma ingredients (API). EPL’s successful brand basket has names like Chymoral Forte, Eldervit, Shelcal, and Amrifru, among others. As part of its expansion plans, it launched three new brands during the third quarter of FY08. These were Phyto Omega, Hibor, Shelcal CP and Fairone, all of which were received well in the market.With more than 140 products, the generics division has a lot of significance in the post patent arena. In this segment, EPL prefers in-licensed manufacture of generics of patented products and has around 30 in-licensing agreements in place.

45

The emphasis on in-licensed products over manufacture of generic versions of patented molecules increases the credibility of the company. Looking at the attractive margins in the generics segment and the India market’s potential, it had launched the Elenza division to market generics in 2004. As for the API business, EPL had set up a plant in Patalganga for the manufacture of APIs for both captive use and marketing. For surgical and hygiene products supplied to hospitals and nursing homes, EPL has a collaboration with Hartman (Germany). The company also has interests in industrial and medical electronics and equipment like nebulisers and oxygen concentrators. EPL’s Ellife division has products that address lifestyle-related disorders.EPL manufactures and markets all kinds of dosages. It has manufacturing facilities in Nerul, Pawane and Patalganga, all in Maharashtra. The company also has four topical cream injectibles and lotions manufacturing plants in Himachal Pradesh and Uttarakhand. These include the newly commissioned facility for semi-solid dosages in Himachal Pradesh. EPL is planning another injectibles plant in Uttarakhand by June.EPL exports bulk drugs and formulations to CIS, African and Saarc countries and has joint ventures in Ghana, where it is eyeing good growth. Elder has become a preferred manufacturing and marketing partner for foreign firms, given its strong sales force of over 1,600 spread across the country and a wide network of 31 C&F agents and 3,000 stockists.Investment rationaleEPL has shown strong revenue growth and had reported a growth of 22% in its topline in FY08. The growth momentum seems to continue with both existing and new products. It reported an impressive OPM of around 20% for both Q4FY08 and FY08. Elder has always been an India-centric company. Most of the business turnover has been from the Indian market. Therefore, the company has chalked its growth plans keeping the market in mind. EPL’s director Alok Saxena says that the company’s vision is to consolidate its position in India. “Going forward, we want to launch brands that will become large players in the Indian market,” he says.The increase in its OPM is mainly due to the fact that EPL’s Himachal Pradesh and Uttarakhand facilities are in excise-free zones. More than 40% of the company’s output is from these facilities. EPL wants these facilities to contribute as much as 70% to the total production. So the OPM is expected to remain firm in the coming years.According to Saxena, EPL has plans to launch six-seven new products in FY09. The company’s thrust on in-licensed products continues and deals for new in-licensed products are in the offing.

46

Export emphasis and increased returns from Ghana are also expected to continue. EPL entered the Europe market with the acquisition of UK- based Neutra Health and a 51% stake in Bulgaria-based Biomeda. The distribution and marketing network of Neutra Health will help EPL as will the planned production and marketing of some Neutrahealth products in India and other countries. EPL will also promote Biomeda products in CIS and other European countries.EPL’s efforts in the field of contract research and manufacturing services (CRAMS) continue and the developments are expected to add to the revenues and profitability.Valuation: At the current market price of Rs 362.5, the stock is available at 7.9x its FY09 earnings and 6.2x its FY10 earnings. Valuations seem attractive given its strong growth opportunities offered by in-licensing agreements, new launches and CRAMS. Financial estimates do not include the Biomeda acquisition and any future acquisitions. Export opportunities and tax advantage on account of shifted manufacturing facilities will benefit overall profitability. It is a good long-term bet. Source: http://www.dnaindia.com/report.Elder has a strong international growth strategy in place.Business Daily from THE HINDU group of publicationsSunday, Jan 13, 2008: Kumar Shankar Roy Elder Pharmaceuticals has charted out an aggressive scheme of acquisitions, in-licensing of products and selective forays into niche therapeutic areas such as woundcare, women’s healthcare and nutraceuticals. The mid-sized pharma company recently came into the spotlight after acquiring Biomeda in Bulgaria and a significant stake in Neutralhealth in the UK. For a company that derives over 95 per cent of revenues from India, it was as much a leap of strategy as faith. “We envision being a Rs 1,000-crore company by 2010. Organic growth alone cannot deliver these numbers. Inorganic growth will contribute to nearly 20-30 per cent of our turnover by 2010,” said Mr Alok Saxena, Director, International Operations, Elder Pharmaceuticals.

Bibliography

1) Annual Report, Elder Pharmaceuticals Ltd- 2006-08.

47

2) Human Resources- Elder Pharmaceuticals3) Human Resource Management, K Aswathappa4) http://www.dnaindia.com/report 5) http://economictimes.indiatimes.com/News 6) Datamonitor, KPMG, McKinsey

48