ANALYSIS OF FINANCIAL STATEMENTSTERM REPORTSubmitted to: Sir Maqbool Ur RehmanSubmitted b: Lau!ina "ha!aaliI#: $%&'(Submi))ion #ate: Ma *+ %'$,TA-LE OF CONTENTSPREFACE EXECUTIVE SUMMARY PAKISTAN PHARMACEUTICAL INDUSTRYIntroductionFactors afctin! P"ar#acutica$ Industr%Pro&$#s associatd 'it" P"ar#acutica$ Industr%INTR(DUCTI(N T( SAN(FI AVENTIS S)(T ANALYSIS PEST ANALYSIS C(MM(N SI*EVERTICAL C(MM(N SI*EH(RI*(NTAL C(MM(NSI*EC(MM(NSI*E ANALYSIS Inco# Stat#nt Ana$%sis +a$anc S"t Ana$%sisRATI( ANALYSISLI,UIDITY RATI(S ACTIVITY RATI(SLEVERA-E RATI(SPR(FITA+ILITY RATI(SMARKET VALUE DU P(NT ANALYSIS C(NCLUSI(NPREFACET" r.ort "as &n .r.ard in ordr to ana$%/ t" 0nancia$ stat#nts o1 Sano0 A2ntis3 It incor.orats t" in1or#ation 1or t" .riod o1 tn%ars r!ardin! t" ."ar#acutica$ industr% a$on! 'it" t" co#.an%4s in1or#ation5 its S)(T and PEST ana$%sis5 co##on si/5 DuPont ana$%sis andratio ana$%sis3 T" r.ort 'i$$ "$. in ordr to &ttr undrstand t" 0nancia$ stat#nts o1 Sano0 and to a..$% t" conc.ts t"at "a2 &n $arnd in t"is cours6Ana$%sis o1 Financia$ Stat#nt73EXECUTIVE SUMMARYT" P"ar#acutica$ Industr% "as !ro'n o2r t" .ast 1' %ars and toda% Pa8istan "as a tota$ o1 9:: ."ar#acutica$ units inc$udin! t"os o.ratd&% ;< #u$tinationa$s .rsnt in t" countr%3 =:> o1 t" do#stic d#and o1 0nis"d #dicins is &in! #t 1ro# t" $oca$ .roduction '"ras ;:>t"rou!" t" i#.orts3 T" industr% #anu1acturs a 2arit% o1 .roducts ran!in! 1ro# .i$$s to insu$in5 (nco$o!% and Va$u addd -nric co#.ounds3F' o1 t" ."ar#acutica$ co#.anis in Pa8istan ar A&&ott5 Sano05 -SK5 Sando/5 Rc8itt +nc8isr tc3 In Pa8istan t" #ar8t 1or ."ar#acutica$"as &n ?.andin! at t" rat o1 @: to @ sinc t" $ast 1' %ars du to t" incrasin! d#and 1or t" #dicins3T"r ar #an% 1actors t"at "a2 afctd t" ."ar#acutica$ industr% suc" as .o.u$ation !ro't"5 cono#ic !ro't" rat5 ?c"an! rat5 intrstrat5 !o2rn#nt r!u$ationsandi#.ort dutis3 Ho'2r5 1'c"a$$n!st"at ar#ain$%1acd&%t"P"ar#aindustr%arnu#rous3 T".ro&$#s inc$ud uncrtaint% in Prics5 uncrtaint% o1 Auota a$$ocation5 r$ianc on t" t"ird .art%5 .roducti2it% o1 countr1it .roducts5 .roduct$ia&i$it% c$ai#s5 and ris8 o1 non.a%#nt3Sano0 is ran8d as t" s2nt" $ar!st ."ar#acutica$ co#.an% and 1ourt" $ar!st &% .rscri.tion in sa$s in ;:@9 'it" its "ad Auartrs $ocatd inParis5 Franc3 T"rou!" t"ir stron! .rsnc t"% #a8 sur t"at &n0ts ar d$i2rd to .o.$ t"rou!" t"ir Aua$it% #dicin t"at catrs todifrnt a! !rou.s3 Toda% Sano0 "as a #ar8t s"ar and !ro't" rat o1 9> and it ofrs a 'id ran! o1 trat#nt and .r2ntion so$utions to1u$0$$ t" .atints4 nds3 In ;:@B t" co#.an%4s .roduction 'as #ain$% o1 Consu#r "a$t"car .roducts and 2accins t"at r!istrd a sa$s!ro't" o1 @3=C> as co#.ard to t" .r2ious %ar3T"r 'r so# #aDor Euctuations in Sano04s nt .ro0t in tn %ars ti# &ut in ;::C as it 'as a&$ to s$$ #or o1 its 2accins and #ad a "u!.ro0t &1or ta?3 (n t" ot"r "and dcras in nt .ro0t in ;:@B indicats t"at it nds to curtai$ its ?.nss a$on! 'it" t" intrst .a%#nts'"ic" 'r #ain$% risin! o2r t" .riod o1 ti#3Sano04s $iAuidit% .osition 'as satis1actor% &ut its 'or8in! ca.ita$ #ana!#nt 'as &$o' .ar as o.ratin! c%c$ da%s incrasd3 T" co#.an%s"ou$d 1ocus on i#.ro2in! its 'or8in! ca.ita$ #ana!#nt &% strn!t"nin! crdit contro$ to ?.dit rco2ris 1ro# rtai$rs and distri&utors ands.din! u. stoc8 rotation F3!3 &% ofrin!discountsG to nsur t"at $ss cas" is tid in in2ntor%3 Moro2r5 t" rturn on Auit% in ;:@B ca# do'n du to t" 1act t"at Sano04s .ro0ts 'r dcrasin! and t" assts 'r not uti$i/d fcti2$%3T"is is su..ortd &% $o' sa$s !ro't" and 'orsnin! o1 tota$ asst turno2r3 In addition t" o.ratin! ?.nss 'r risin! indicatin! t"at t"co#.an% nds to #ana! its ?.nss Hcint$%3 As t" co#.an% is "i!"$% !ard du to t" d&t ratio o1 I in ;:@B it #i!"t 1ac .ro&$#s in .a%in! of its intrst ?.nss in 1utur i1 .ro0tsdcras in 1utur3Sano0 s"ou$d concntrat on 8.in! an a..ro.riat $2$ o1 d&t and Auit% to ac"i2 a '$$J&a$ancd ca.ita$ structur3Sano0 s"ou$d i#.ro2 its nt .ro0t #ar!ins &% contro$$in! its ?.nss and sti#u$atin! sa$s3 T"is5 co#&ind 'it" &ttr 'or8in! ca.ita$ #ana!#nt5 'i$$ "a2 a .ositi2 i#.act on t" .ro0ta&i$it% and cas" Eo' .osition o1 t" co#.an%K t"us trans$atin! into a stron!r #ar8t standin!3 PAKISTAN PHARMACEUTICAL INDUSTRYIntroductionT" P"ar#acutica$ Industr% "as !ro'n o2r t" .ast 1' %ars and toda% Pa8istan "as a tota$ o1 9:: ."ar#acutica$ units inc$udin! t"os o.ratd&% ;< #u$tinationa$s .rsnt in t" countr%3 =:> o1 t" do#stic d#and o1 0nis"d #dicins is &in! #t 1ro# t" $oca$ .roduction '"ras ;:>t"rou!" t" i#.orts3 Do#stica$$% t" P"ar#a #ar8t is di2idd Aua$$% &t'n t" Nationa$s and t" Mu$tinationa$s in tr#s o1 #ar8t s"ar3 T"r "as &n a !ro't" in Nationa$ P"ar#a o2r t" %ars and t"is industr% "as in2std considra&$% to u.!rad in accordanc to -MP F-oodManu1acturin!PracticsG3 T"industr%#anu1actursa2arit%o1 .roductsran!in!1ro#.i$$stoinsu$in5 (nco$o!%andVa$uaddd-nricco#.ounds3 Moro2r5 t" #ain 1ocus o1 t" industr% is to ?cd t" ?.ort o1 USD =:: Mi$$ion do$$ars &% ;:@; so as to crat n' !$o&a$ andr!iona$ o..ortunitis3 In Pa8istan t" #ar8t 1or ."ar#acutica$ "as &n ?.andin! at t" rat o1 @: to @ sinc t" $ast 1' %ars du to t" incrasin! d#and 1ort" #dicins3F' o1 t" ."ar#acutica$ co#.anis in Pa8istan arL A&&ott Pa8istan Sano0 A2ntis -SK A$$r!an -t/ P"ar#a Sando/ Rc8itt +nc8isr )%t" Ma.$ P"ar#a Hi$ton P"ar#aFactors afctin! P"ar#acutica$ Industr% Po.ulation "ro/thT"is is an i#.ortant 1actor t"at afcts t" .roduction o1 ."ar#acutica$ industr% &caus i1 t"r is a !ro't" in .o.u$ation du to "i!"r &irt"rats5 #or anti&iotic5 anti #a$aria or ot"r #dicins 'i$$ & consu#d in t" countr%3 E0onomi0 "ro/th RateT" 1utur !ro't" o1 ."ar#acutica$ industr% r$is "a2i$% on t" !ro't" o1 t" cono#%3 I1 t"r is a s$o'do'n o1 cono#ic !ro't" t"n t"isdc$in 'i$$ "a2 an ad2rs afct on t" ."ar#acutica$ industr%3 E10han2e Rate)Most o1 t" ."ar#acutica$ 0r#s i#.ort ra' #atria$ and ot"r in!rdints usd in #dicins3 T"r1or5 i1 t" ?c"an! rat d.rciats5t"n i#.orts 'ou$d &co# ?.nsi2 rsu$tin! in an incras in t" cost o1 &usinsss3 Intere)t Rate)Intrst rat is on o1 t" #ost i#.ortant cono#ic 1actors t"at inEunc t" ."ar#acutica$ industr%3 For a $2ra!d 0r#5 an incras in t"intrst rat 'ou$d add u. to t" cost o1 &orro'in! o1 t"at 0r# and 'i$$ ad2rs$% afct t" nt .ro0ts3 "o3ernment Re2ulation-i2n t" $in8 &t'n t" ."ar#acutica$ industr% and .u&$ic '$1ar and to .r2nt ?.$oitation o1 consu#rs &% unscru.u$ous &usinsssc"ar!in! un1air$% "i!" .rics5 t" ."ar#acutica$ industris in #ost countris ar "a2i$% r!u$atd &% !o2rn#nts t"rou!" 2arious .riccontro$ #asurs3 Suc" contro$s F3!3 #a?i#u# .ricsG "a2 r.rcussions 1or t" r2nu and &otto# $in o1 t" industr%3 Im.ort #utie)Man% 0r#s in ."ar#acutica$ industr% tnd to i#.ort 2arious ra' #atria$s a$on! 'it" ot"r in!rdints3 In cas '"r !o2rn#nt raiss t"i#.ort dutis5 t" i#.orts 'i$$ &co# ?.nsi2 '"ic" 'i$$ in turn incras t" cost o1 .roduction o1 t"s 0r#s rsu$tin! into $o'r .ro0ts3 Pro&$#s associatd 'it" P"ar#acutica$ Industr% Un0ertaint in Pri0e))it" .rics 0?d &% t" !o2rn#nt5 t" ."ar#acutica$ industr% 1acs uncrtaint% as to t" .ricin! o1 its .roducts3 T" !o2rn#nt i#.osda .ric 1r/ across a #aDorit% o1 t" .roduct cat!oris in Dc#&r ;::@3 A .ric incras 'as !rantd 1or on$% so# o1 t" .roductsrcnt$% ds.it t" cost .rssurs 1acd &% t" industr% on account o1 inEation and d.rciation o1 t" PKR3 Un0ertaint o4 5uota Allo0ationT"r ar crtain .roducts 1or '"ic" ra' #atria$s ar i#.ortd and t"s i#.orts ar contro$$d and r!u$atd &% t" -o2rn#nt FNarcoticsDi2isionG and in 1' instancs t"s ra' #atria$s 'r &annd 1or so# #ont"s rsu$tin! in t" s"orta! o1 .roducts t"at rAuird t"s#atria$s3 Relian0e on the third .artA #aDor .ortion o1 ra' #atria$5 acti2 in!rdints and #dica$ d2ics ar su..$id &% t"ird .art% su..$irs "o'2r5 i1 t"s su..$irs ar1acin! 0nancia$ diHcu$tis t"n t"r is a ris8 o1 su..$% intrru.tion and s.ci0c Aua$it% #atria$ 'i$$ not & su..$id3 Produ0ti3it o4 0ounter4eit .rodu0t)T"r ar instancs '"r countr1it .roducts ar distri&utd i$$!a$$% t"rou!" 2arious c"ann$s in t" #ar8t3 In cas o1 a n!ati2 ractiont"s .roducts can #atria$$% afct t" "a$t" o1 a .atint and t"ir con0dnc in an aut"ntic .roduct3 Produ0t liabilit 0laim)T"is is on o1 t" #ost si!ni0cant .ro&$#s t"at 0r#s in t"is industr% 1ac3 Man% c$ai#s 1or inDuris "a2 &n a$$!d a!ainst ."ar#acutica$0r#s 1or '"ic" t"% "a2 to .a% 1or t" da#a! causd &% t"ir #dicins3 Ri)6 o4 Non PamentMost o1 t" ."ar#acutica$ industr% is su&Dct to t" ris8 o1 non.a%#nt #ain$% 1ro# distri&utors5 !o2rn#nt institutions and "os.ita$s3 So asto #ini#i/ t"is ris85 #an% 0r#s s$$ t"ir .roducts on cas" &asis3INTR(DUCTI(N T( SAN(FI AVENTISSano0 is ran8d as t" s2nt" $ar!st ."ar#acutica$ co#.an% and 1ourt" $ar!st &% .rscri.tion in sa$s in ;:@9 'it" its "ad Auartrs $ocatd inParis5 Franc3 )it" stron! .rsnc in t" countr%5 t" co#.an% #.$o%s o2r @::: 'or8rs to i#.ro2 t" "a$t"car conditions across Pa8istan3T"%#a8surt"at &n0tsard$i2rdto.o.$t"rou!"t"ir Aua$it%#dicint"at catrstodifrnt a!!rou.s3 Its#anu1acturin!1aci$itats ar n2iron#nta$ 1rind$% and #ost #odrn accordin! to t" -ood Manu1acturin! Practics F-MPG3Toda% Sano0 "as a #ar8t s"ar and !ro't" rat o1 9> and it ofrs a 'id ran! o1 trat#nt and .r2ntion so$utions to 1u$0$$ t" .atints4nds3 In ;:@B t" co#.an%4s .roduction 'as #ain$% o1 Consu#r "a$t"car .roducts and 2accins t"at r!istrd a sa$s !ro't" o1 @3=C> asco#.ard to t" .r2ious %ar3 Rcnt$%5 Sano0 a$so .ntratd t" #ar8t o1 A1!"anistan P"ar#a and $aunc"d its n' .roduct and r!istrd asa$s !ro't" o1 9 &ac8d &% incrasd 2o$u# o1 sta&$is"d &rands3 Sano04s .roduct .ort1o$io inc$uds $i1 sa2in! #dicins in difrnt c$asssK t"s arL (ra$ anti dia&tic Insu$in (nco$o!% Pain #ana!#nt A$$r!% #ana!#nt Anti &iotic Diarr"a -astric disas Cou!" and co$d Anti #a$aria S$. disordr Cardio$o!% Ani#a$ car dru!sFor t" #anu1acturin! o1 t"s #dicins &ot" dirct and indirct ra' #atria$s ar usd3 So# i1 t"s inc$udL#ire0t Ra/ material)L C"#ica$s $i8 Lasi? su&stanc5 -$i&n C$a#id and -$atin3 Indire0t Ra/ material)L +ott$s5 2ia$s5 ca.s5 PVC 1oi$ .$u!s and a##oniu# 1oi$S)(T ANALYSISStren2th)@3 Sano0 is on o1 t" 'or$d4s $ar!st .roducrs o1 #dicins 'it" &st o1 t" $in5 cuttin! d! #anu1acturin! 1aci$itis3;3 Stron! !$o&a$ .rsnc is t" #aDor strn!t" o1 t" co#.an%3 T" co#.an% is '$$ 8no'n 1or its .rscri.tion sa$s as it is "o$din! t"1ourt" .osition t"rou!"out t" 'or$d3B3 +road .roduct .ort1o$io393 It "as acAuird US &iotc" co#.an% -n/%# '"ic" "as !i2n it considra&$ .rsnc o1 so$ution 1or unco##on disass37ea6ne))@3 T" .ro0ta&i$it% o1 Sano0 r$is "a2i$% on a 1' .roducts $i8 (2n? and P$a2i? and t"ir suddn sa$ dcras 'i$$"a2 ad2rsfcts3;3 Patnt o1 #ost o1 t" dru!s 'i$$ ?.ir in co#in! %ars3B3 -nric .roducts t"at ar t" #ain sourc o1 arnin! inco# ar not &in! .r.ard accordin! to t" d#and and t"ir co#.titorsnDo% t" 1ruit o1 t"ir sa$ &arin! $ss #anu1acturin! cost3O..ortunitie) @3 Stron! #r!in! #ar8ts in d2$o.d countris $i8 +ra/i$5 Russia5 and C"ina '"ic" can & $2ra!d &% u.datin! "a$t"car 1aci$itis3;3 T" co#.an% can us its !$o&a$i/ation .o'r to ta8 ad2anta! o1 t" ra.id$% a!in! .o.u$ation in so# countris and #r!in! #ar8ts3Threat)@3 -ro'in! !nric co#.tition #i!"t di$ut #ar8t s"ar and ti!"tn .ro0t #ar!ins3 ;3 -o2rn#nt r1or#s to cut !o2rn#nt s.ndin! on "a$t" car3B3 Pro&$# o1 countr1it #dicins in #r!in! countris393 Econo#ic s$o'do'n can "a#.r sa$s !ro't" and &otto# $in3PEST ANALYSISPoliti0al T" .o$itica$ insta&i$it% in so# o1 t" d2$o.in! countris crats uncrtaint% as to !o2rn#nt .o$icis suc" as .ric r!u$ation5 Auotaa$$ocation5 ?c"an! rat #ana!#nt tc3 -o2rn#nt .rssur to cut "a$t"car costs to nsur 'idr a2ai$a&i$it% o1 dru!s 'ou$d $o'r !ross s$$in! ratsE0onomi0 In Pa8istan consu#rs ar r$uctant to s.nd on "a$t"car du to cono#ic criss3 Ra.id cono#ic !ro't" in d2$o.in! countris "as o.nd u. n' a2nus 1or ?.ansion3 Incrasd .rssur 1ro# s"ar"o$drs "as causd a conso$idation o1 t" industr%3 Ana$%sts 1ors t"at #or #r!rs and acAuisitions 'i$$ta8 .$ac o2r t" co#in! %ars3So0io80ultural T" a!in! .o.u$ation and !ro'in! o&sit% in so# countris "as rsu$td in an incras in t" d#and 1or #dicins3 Patints ar &co#in! #or in1or#d3 T"ir ?.ctations "a2 c"an!d and t"% "a2 &co# #or d#andin!3 Pu&$ic acti2is# "as a$so incrasd t"rou!" t" "arnssin! o1 n' socia$ nt'or8in! tc"no$o!is3 -$o&a$ .id#ics suc" as 2arious disass suc" as S'in Eu "a2 &oostd Sano04s acti2itis3Te0hnolo2i0al Incras in Sano04s RMD cost 1or t" in2ntion o1 n' #dicins3 Dirct toJ.atint co##unication3 Socia$ #dia 1or .ro#otion o1 '$1ar .roDcts3 C(MM(N SI*EVERTICAL C(MM(N SI*EH(RI*(NTAL C(MM(NSI*EC(MM(NSI*E ANALYSISInco# Stat#nt Ana$%sisSano0 is on o1 t" $ar!st ."ar#acutica$ co#.anis in Pa8istan and currnt$% it is ran8d as t" 1ourt" $ar!st &% .rscri.tion in sa$s3(2r t" .riod o1 tn %ars Sano04s sa$s "a2 s"o'n an incrasin! trnd3 MaDor c"an! occurrd in ;::C '"n sa$s s.i8d &% du to t"sa$s o1 8% &rands o1 ."ar#acutica$ .roducts to SKU4s in t"at %ar3 )"r as in ;:@B t"r 'as a #inor ris in t" co#.an%4s sa$s t"at is o1 @3C>as it .ntratd in A1!"anistan P"ar#a and $aunc"d its n' .roducts t"r3 T" co#.an%4s cost o1 sa$s 'as !oin! u. ti$$ ;::C and rac"d Rs3 &caus t" fct o1 incrasd ?.nss 'as #iti!atd &% asi!ni0cant ris o1 sa$s FG and ot"r inco# FC93;>G3 (n t" ot"r "and in ;:@B t" o.ratin! .ro0t ca# do'n &% @@> #ain$% du to t"?c"an! rat $osss '"ic" soard si!ni0cant$% du to "i!" i#.orts durin! t" %ar cou.$d 'it" d.rcation o1 Pa8 Ru. 2rsus US Do$$ar andEuros3 Ho'2r5 t"r 'r so# #aDor Euctuations in Sano04s Nt Pro0ts in tn %ars ti# &ut its .ro0ts 'nt u. &% BBC3 in ;::C as it 'as a&$ to s$$#or o1 its 2accins and #ad a "u! .ro0t &1or ta?3 +ut on t" ot"r "and dcras in nt .ro0t in ;:@B indicats t"at it nds to curtai$ its?.nss a$on! 'it" t" intrst .a%#nts '"ic" 'r #ain$% risin! o2r t" .riod o1 ti#3+a$anc S"t Ana$%sis(2ra$$5 t" si/ o1 Sano04s &a$anc s"t is ?.andin! indicatin! t"at it "as &n in2stin! #ain$% in #ac"inr%5 &ui$din!s5 #otor 2"ic$s and0?turs and 0ttin!s '"ic" ar rEctd in t" risin! trnd o1 0?d assts o2r t" .riod o1 tn %ars3 (n t" ot"r "and its ot"r noncurrnt assts"o'd a #aDor incras o1 ;:> in ;:@@ as t" co#.an% &orro'd $on! tr# $oans3 (n t" ot"r "and t" co#.an%4s currnt assts incrasd &%9N3@> in ;:@@ and &% ;;3I> in ;:@B t"at 'as du to an incras in stoc8 in trad5 .r.a%#nt and trad d.osits and s"ort tr# $oans3+in! a $2ra!d 0r#5 Sano04s noncurrnt $ia&i$itis s"o'd a dcrasin! trnd ti$$ ;::I &ut in ;::N it ros &% B=I3N> du to an incras ind1rrd ta?3 Latr in ;:@: du to an introduction o1 $on! tr# 0nancin! o1 Rs3 BN; #i$$ion t"r 'as a s"ar. ris in its $on! tr# $ia&i$itis 1o$$o'd&% t" sa# trnd in ;:@B t"at is t" noncurrnt $ia&i$itis incrasd &% B:=3B> du to t" inDction o1 $on! tr# 0nancin! a#ountin! to Rs