devi ahiliya vishwa vidhyalaya final report

( Devi Ahiliya Vishwa Vidhyalaya (DAVV), Indore)

Major Research Project

On

“STUDY OF PROFITABILITY OF PHARMA UNITS

LOCATED IN SPECIAL ECONOMIC ZONE”

(PITHAMPUR INDORE)

Submitted in partial fulfilment for the award of the degree of Master of

Business Administration (MS) 2 years

Session 2009-11

Under the guidance of: Submitted by:

Dr. S.C.Patidar Praveen kumar namdeo

IIPS, Indore FT-2k9-38

MBA(MS)2yr, IV sem

DECLARATION

I, hereby declare that this research project which is being presented on the topic “Study of Profitability of Pharma Units Located in special economic zone .” Pithampur indore submitted as major project for partial fulfilment of Masters in Business Administration is an authentic record of our own work carried under the guidance of Dr. S.C. patidar .

All the endeavors put in the fulfillment of the task are genuine and original to

the best of my knowledge.

Praveen kumar namdeo

Date: FT-2k9-38

MBA(MS)-2year, IV sem

CERTIFICATE

This is to certify that the work embodied in this project has been carried out by

Mr. Praveen kumar namdeo , student of MBA(MS)-2years(2009-11) IVth

sem. of International Institute of Professional Studies, DAVV Indore,

under my guidance and supervision. He has completed major research project

on “Study of Profitability of Pharma Units Located in special economic zone ”

Pithampur indore. The mode of work and the result obtained have been

checked by me from time to time. They were found genuine to the best of my

knowledge of the subject.

Date: Dr. S.C.Patidar

Project guide

ACKNOWLEDGEMENT

The project has come to a successful completion all thanks to my project guide

Dr. S.C.Patidar Her patience, guidance and encouragement helped me to

finish this project with thriving results.

A special thanks to the program in-charge of the MBA (MS)-2years Dr.Yamini

Karmarkar and the batch facilitator Dr. Kapil Jain for their guidance,

motivation and support, which helps me in completing the project. Also I am

thankful to the faculty team of my college who helped guide with the

procedures, cleared doubts and corrected mistakes wherever created. Their

intervention was a much needed one and it motivated me to work effectively

with minimal mistakes.

The final mention veers towards my family and friends. Without their perpetual

support, them providing a tranquil environment for me, this report wouldn’t

have been completed on time.

Praveen Kumar Namdeo

FT-2k9-38

MBA(MS)-2years, IVsem

A

“STUDY OF PROFITABILITY OF PHARMA UNITS LOCATED IN SPECIAL ECONOMIC ZONE ”

PITHAMPUR INDORE

Introduction

India was one of the first in Asia to recognize the effectiveness of the Export Processing Zone (EPZ) model in promoting exports, with Asia's first EPZ set up in Kandla in 1965. With a view to overcome the shortcomings experienced on account of the multiplicity of controls and clearances; absence of world-class infrastructure, and an unstable fiscal regime and with a view to attract larger foreign investments in India, the Special Economic Zones (SEZs) Policy was announced in April 2000.

This policy intended to make SEZs an engine for economic growth supported by quality infrastructure complemented by an attractive fiscal package, both at the Centre and the State level, with the minimum possible regulations. SEZs in India functioned from 1.11.2000 to 09.02.2006 under the provisions of the Foreign Trade Policy and fiscal incentives were made effective through the provisions of relevant statutes.

To instill confidence in investors and signal the Government's commitment to a stable SEZ policy regime and with a view to impart stability to the SEZ regime thereby generating greater economic activity and employment through the establishment of SEZs, a comprehensive draft SEZ Bill prepared after extensive discussions with the stakeholders. A number of meetings were held in various parts of the country both by the Minister for Commerce and Industry as well as senior officials for this purpose. The Special Economic Zones Act, 2005, was passed by Parliament in May, 2005 which received Presidential assent on the 23rd of June, 2005. The draft SEZ Rules were widely discussed and put on the website of the Department of Commerce offering suggestions/comments. Around 800 suggestions were received on the draft rules. After extensive consultations, the SEZ Act, 2005, supported by SEZ Rules, came into effect on 10th February, 2006, providing for drastic simplification of procedures and for single window clearance on matters relating to central as well as state governments. The main objectives of the SEZ Act are:(a) generation of additional economic activity (b) promotion of exports of goods and services(c) promotion of investment from domestic and foreign sources(d) creation of employment opportunities(e) development of infrastructure facilities

It is expected that this will trigger a large flow of foreign and domestic investment in SEZs, in infrastructure and productive capacity, leading to generation of additional economic activity and creation of employment opportunities.

The SEZ Act 2005 key role for the State Governments in Export Promotion and creation of related infrastructure. A Single Window SEZ approval mechanism has been provided through a 19 member inter-ministerial SEZ Board of Approval . The applications duly recommended by the respective State Governments/UT Administration are considered by this BoA periodically. All decisions of the Board of approvals are with consensus.

The SEZ Rules provide for different minimum land requirement for different class of SEZs. Every SEZ is divided into a processing area where alone the SEZ units would come up and the non-processing area where the supporting infrastructure is to be created.

THE SEZ RULE PROVIDE FOR:

" Simplified procedures for development, operation, and maintenance of the Special Economic Zones and for setting up units and conducting business in SEZs.

Single window clearance for setting up of an SEZ. Single window clearance for setting up a unit in a Special

Economic Zone. Single Window clearance on matters relating to Central as

well as State Governments. Simplified compliance procedures and documentation with

an emphasis on self certification

An Evaluation of SEZ’s inIndia

Since the year 2005, when Special Economic Zones Act was

announced, a mushroom growth of SEZs has been observed. The idea behind promoting SEZs as a special growth engine was to stimulate the economical growth by creating an investment friendly environment in the country. The question now arises is: are these SEZs successful in achieving the said objectives? Whether the policy framed really contributing in their growth or is it proving futile? What are the hurdles that SEZ units are facing in their operations? Is it all enough to create investment friendly policies? Was it the right time to offer such a policy or there could be better policy initiatives? Coming to the units, which model is doing better: private SEZs or Govt. owned? What would happen when these benefits will evade? Are these SEZs stimulating uniform and balanced growth throughout the country? How is it affecting weaker sections of the society.A need therefore arises to investigate into the cost and benefit analysis of SEZs? And working further, to come up with the improvement models both at the policy level and at an organization’s level which can help to mutually grow and contribute to the economy. The Research focuses on both, micro level where the entity could be a unit in SEZ as well at macro level where the policy matters concerned and overall economic and social contribution can be evaluated at various parameters.

The methodology requires need of not only secondary data on performances of various SEZs, govt. policies, economic contribution etc. but would require primary data too where in qualitative research at micro level can be accomplished. The outcomes thereof generated could be of immense help to the Govt. of India in executing the objectives in the most favorable and friendly manners as well as for the SEZs and units in SEZs to get best benefited by the incentives offered, thereby creating a synergic impact in the economic growth of the count

1. Economic Development Projects-SEZ (Special economic Zone) :The Special Economic Zones (SEZs) Policy was announced in "April 2000" with a view to attract larger foreign investments in India so as to bring economic growth in the country. The business done here would help vastly in the infrastructure development of the country. Therefore, this

policy is supported by quality infrastructure complemented by an attractive fiscal package, both at the Centre and the State level, with the minimum possible regulations.

MADHYA PRADESH SPECIAL ECONOMIC ZONE

The establishment of Special Economic Zone at Indore has already been approved in principle by the Government of India. Therefore, it has been decided that the SEZ policy will apply to Indore SEZ and other SEZs to be developed in the State in future, subject to the framework for SEZs determined by Government of India from time to time. The State Government shall make available land required for the zone. Private land shall be acquired under Land Acquisition Act for the purpose. The State Government shall request the Government of India to declare Indore Airport as International Airport to provide direct Air links to facilitate export of goods from SEZ. To provide single agency clearance, powers to grant permissions, NOCs, etc. of the concerned departments, corporations, boards etc. shall be delegated to the designated Development Commissioner of the SEZ or to an empowered officer working under the administrative supervision and control of the Development Commissioner.

Madhya Pradesh State Industrial Development Corporation has been declared as nodal agency for development of Special Economic Zone proposed near Indore. Madhya Pradesh State Industrial Development Corporation shall be declared the nodal agency also for Special Economic Zones to be established in the State in future. The Development Commissioner will be deemed as competent authority for the Industrial Development Area for the notified SEZ. The Development Commissioner will provide sanctionss under various statutes and regulations of the Government of India and the State Government. The Development Commissioner will advise the Government on issues requiring amendments or clarifications to facilitate sanctions to units in SEZ. The Madhya Pradesh Special Economic Zone Policy is being formulated by the State Government for the establishment, implementation, and management of SEZ in the State in the light of Special

Economic Zone Policy 2000 of the Government of India. This Policy will be the governing policy for issues connected with SEZ.

THE OBJECTIVES OF SEZ INDORE :

(a) generation of additional economic activity

(b) promotion of exports of goods and services

(c) promotion of investment from domestic and foreign sources

(d) creation of employment opportunities

(e) development of infrastructure facilities

Thus, The Madhya Pradesh Government to implement the Central Government's policy of providing an internationally competitive environment for exports has come up withcreation a Special Economic Zone scheme in Indore with the Madhya Pradesh Audyogik Kendra Vikas Nigam Ltd.

M.P. AKVN is developing SEZ in INDORE over 1038.57 hectares (2500 acres) of land near Pithampur which is the the most advanced and developed industrial center in central India. The sector is developing in two phases amounting Rs.3674 crores (700 million dollars). It has five functional units, of which four are production-based, while the fifth is trade-based

A Special Economic Zone is coming soon to boost software exports. Some big Indian companies, like TCS, are expected to start there operations once the SEZ is in place. Developers like K Raheja and Unitech have already been allotted land in the proposed IT SEZ. With lots of industries to be set up under the scheme, it would generate a large number of employment, subsequently increasing the purchasing power of the people, and ultimately resulting in human, cultural and infrastructure development besides industrial development of the state & country.

- Asia's Largest Testing Track :The development of mini auto cluster in Pithampur is being promoted by the Government of India. The government has declared a budget of Rs. 5000 crores for building the Asia's largest testing track for ground breaking research and development

- Crystal IT Park :A noteworthy development is the Crystal IT Park on 24 acres of land at Khandwa Road. Prospective growth of the IT sector has fuelled the growth of residential real estate in the city. Indore is on the radar of a number of IT companies

Facilities and Incentives offered by sez indore

Incentives and facilities offered to the SEZs

The incentives and facilities offered to the units in SEZs for attracting investments into the SEZs, including foreign investment include:-

Duty free import/domestic procurement of goods for development, operation and maintenance of SEZ units

100% Income Tax exemption on export income for SEZ units under Section 10AA of the Income Tax Act for first 5 years, 50% for next 5 years thereafter and 50% of the ploughed back export profit for next 5 years. Exemption from minimum alternate tax under section

115JB of the Income Tax Act. External commercial borrowing by SEZ units upto US $

500 million in a year without any maturity restriction through recognized banking channels.

Exemption from Central Sales Tax. Exemption from Service Tax.

Single window clearance for Central and State level approvals.

Exemption from State sales tax and other levies as extended by the respective State Governments.

The major incentives and facilities available to SEZ developers include:-

Exemption from customs/excise duties for development of SEZs for authorized operations approved by the BOA.

Income Tax exemption on income derived from the business of development of the SEZ in a block of 10 years in 15 years under Section 80-IAB of the Income TaxAct.

Exemption from minimum alternate tax under Sec. 115JB of the Income Tax Act.

Exemption from dividend distribution tax under Sec. 115O of the Income Tax Act.

Exemption from Central Sales Tax (CST).

Exemption from Service Tax (Section 7, 26 and Second Schedule of the SEZ Ac

PHARMACEUTICAL INDUSTRIES IN INDORE

In the map of Asia Indore is known as one of the largest producer of pharmaceuticals like basic drug formulations, tableting, Capsulling etc. There are numerous small and big pharmaceutical units like, Plethico, Penjon, Ranbaxi, Syncom Formulations and Parental Drugs etc., located in and around Indore. Indore is an industrial city, where a big number of large medium and small-scale industries are located. Industrial Areas of Indore are:• Pologround Industrial Estate.• Laxmibai Nagar Industrial Area.

• Sanwer Road Industrial Area.• Industrial Area, Pardesipura.• Industrial Area Rau.Other than these Industrial areas, Indore is surrounded by Ujjain, Dewas, Dhar, which are also having their Industrial areas. Pithampur Industrial area of Dhar district is nearer to Indore. Most of the firms having their works at Pithampur own their main Administrative offices at Indore. Main concentration of Pharmaceutical Industries is in Indore. However, some units are situated innearby districts such as Dewas, Ujjain, Pithampur, District Dhar, etc. Major percentage of pharmaceutical units of Indore is in residential areas, only 32% units are working in Industrial areas. Pharmaceutical units in Indore can be divided into two groups:

Allopathic formulations. Ayurvedic FormulatioN

Madhya Pradesh Pharmaceutical Manufacturers Organization (MPPMO)

The MPPMO was formed and registered under the Societies Act during 1977 with the prime objective of regulatory affairs presentation with various Government organizations like FDA, MPLUN, PCB, etc. Normally the members of the association meet as and when there is a specific problem. Otherwise the Executive Body meeting is held once in a month to discuss general issues. This association publishes fortnightly newsletter that focuses mainly on Government related matters. During the year 2000,MPPMO organized a National Level Exposition “Pharma 2000” for the benefit of the Pharma units of Madhya Pradesh. MPPMO under the threat of WHO – GMP norms has proposed an Analytical and Research centre, a limited firm to be established as per the WHO – GMP norms. This centre would work as Common Testing Facility and R & D Centre on commercial Basis for the benefit of cluster firms. Presently 55 members are registered with MPPMO.

Madhya Pradesh Small Scale Drugs Manufacturers Association (MPSSDMA)

Due to the differences among the members, MPPMO paved for a split and this association came into existence in 1992. Association also deals with the common problems related to Government departments for members only. At presently 25 members are registered with MPSSDMA.

Madhya Pradesh Ayurvedic Manufacturing Association (MPAMA)

Ayurvedic medicine manufacturers have their own Association with same the objectives and works in the was as MPPMO MPSSDMA. Recently due to the threat of WHO – GMP norms, this association has approached State Government for providing suitable land and infrastructure facilities for Ayurvedic Medicine Manufacturers working in residential area. Government of M.P. has identified an area of 167 acres near ‘Betma’ at NH12, Indore Ahmedabad Road. The area is to be developed as ‘Herbal Park’ in indore.

OBJECTIVES OF THE RESEARCH

To analyze the profitability of pharma companies under sez indore

To understand the recent trends in sez indore.

LITRATURE REVIEW

According to PRO Report, ”The Indian Pharmaceutical Industry today is in the front rank of India’s science-based industries with wide ranging capabilities in the complex field of drug manufacture and technology segmented markets, and alternative configurations of value chain for various dosage forms. The pharmaceutical industry in Madhya pradesh is expected to grow between 6 and 8 per cent per annum during this decade or so. While price increases are responsible for nearly 60 per cent of this growth, while volume increases explain 25 per cent and sale of new drugs (sold at higher prices) result in 15 per cent of the growth. The generic component of the mp Pharma market is expected to experience a boom in the current decade, which could substantially increase the export prospects of developing countries like India. The Indian pharmaceutical industry is highly fragmented, but has grown rapidly due to the friendly\ patent regime and low cost manufacturing structure. Intense competition, high volumes and low prices characterize the Indian domestic market. Exports have been rising at around 30% compounded Annual Growth Rate (CAGR) over last five years. There is a shift in export profile towards value added formulations from low value bulk drugs. In financial year 2009 the total output of the Madhya Pradesh pharmaceutical industry was Rs.25 bn, which grew by 16% per year. In financial year 2010, it was above Rs.27 bn, of which bulk drugs accounted for Rs.5 bn (21%) and formulations Rs.25 bn (79%). The demand for the industry is mainly from urban areas (74%). Urban areas witnessed a 15%

increase in sales in financial year 2010 as against 13% in financial year 09. The industry grew at 4.6% per year during October 2009 and 9% during January to October 2010. In financial year 2011, the industry would have grown by 10-15% increase in sales,production and exports, despite adverse global conditions.

Mr Srikant Kumar JenaAccording to, Union Minister of State for Chemicals and Fertilisers, India tops the world in exporting generic medicines worth US$ 11 billion and currently, the Indian pharmaceutical industry is one of the world's largest and most developed.Moreover, as per a press release by research firm RNCOS in May 2010, the report titled ‘Booming Generics Drug Market in India' projects the Indian generic drug market to grow at a CAGR of around 17 per cent between 2010-11 and 2012-13. Mr Anand Sharma, Union Minister of Commerce and Industry and Lim Hng Kiang, Minister for Trade and Industry, Singapore , have signed a 'Special Scheme for Registration of Generic Medicinal Products from India' in May 2010, which seeks to fast-track the registration process for Indian generic medicines in Singapore.According to Lim Hng Kiang, "What we have agreed is that if your (Indian) generics have already cleared the regulations of one of the five countries/ regions - US, Canada, the European Union, UK or Australia - Singapore will take that as 'already cleared' and we will import it (the generic medicines) without any additional clearances."

Bianca Piachaud THE pharmaceutical industry is faced with the challenge of surviving and succeeding in an environment that has become more complicated and uncertain, and one that is characterised by rapid developments in science and technology, and organisational change. From the standpoint of the pharmaceutical industry, the impetus for change is the result of a combination of political, economic, technological and social factors; all of which have helped redefine the dynamics of this particular industry.

Over the past number of years, the growth of the worldwide pharmaceutical industry has been slower than the increases in Research (R) and Development (D) costs, and this has led to a cost-earnings differential that cannot be sustained indefinitely. Firms have found it increasingly difficult to sustain historical levels of growth principally because of two converging factors. First, the earnings of the pharmaceutical industry are being increasingly squeezed between pricing constraints due to government policies and generic competition; and second, through the rising costs of R and D due to increasing legislative requirements and growing technological sophistication. As a consequence of these pressures on pharmaceutical earnings, combined with that of rising R and D costs, pharmaceutical firms have been forced to adopt a number of cost containment measures in addition to those pertaining to the safety and efficacy of drugs. The need to demonstrate 'value' to the consumer has now become imperative. Traditionally, the pricing methods adopted in the former producer-driven environment for pharmaceuticals was essentially based on what was considered to be 'fair returns' for the high costs and risks associated with innovation. Today however, much of that has changed. The deregulation of generic products has helped to bring about a much greater acceptance of product substitution, which in turn has led to changes in consumer choice an event that has acted as a catalyst for change within the marketplace. Therefore rather than being producer-driven, the market for pharmaceuticals today is essentially customer-led. Price has become the key indicator of how the marketplace truly values the products that are discovered, marketed and sold. Consequently the price that a company charges for a product is the culmination of every decision made along the chain of discovery from discovery through to marketing. Therefore in order to be able to survive this challenging environment, pharmaceutical companies can no longer permit their internal processes to determine price levels, as this has now become the privilege of the customer.

Rajshekhar G. Javalgi , Timothy H. Reisenwitz Marketers in multinational corporations (MNCs) realize that global markets mean intense competition and that logistics is the key to making and keeping customers. Exploratory

research was conducted using telephone interviews with l6 pharmaceutical companies. Logistics techniques are compared across companies with negligible international sales to those with 100 percent international sales. Businesses are experiencing increasing pressure as the globalization of markets intensifies competition . Leading U.S. companies are responding by making changes in their organizations' operations. Logistics - managing the flow of materials from the raw material to ultimate consumer state - has emerged as an important element in this corporate renewal as it becomes a greater percentage of total costs. Logistics costs currently comprise between 10 and 25 percent of the total cost of an international sale , and these costs are rising. This increase occurs with the pursuit of more global market opportunities. Many companies have expanded their domestic operations and are now considered multinational corporations (MNCs), with operations in several countries outside the U.S. Neglecting distribution and logistics issues will not only yield higher costs but also eventual non-competitiveness, resulting in a loss of market share, more expensive supplies or lower profits. Logistics problems can prevent the marketer from fully exploring the potentially profitable global market. Logistics strategies must reflect that fewer and fewer companies are simply domestic operations. The efficiencyor effectiveness balance - minimization of costs and increased customer satisfaction - has traditionally involved cost tradeoffs in the area of physical distribution. Improving customer service is a goal in dealing with increased competition, with logistics costs often increasing as well . However, it has been noted that logistics can help a company attain a sustained competitive advantage through the combined benefits of improved customer service and lower costs Customer retention may result from building long-term relationships with customers.

Saurabh Kumar Saxena

The current shift in the marketing strategy is work by multinational pharmaceutical Companies .It is now high-end (rather than adaptive) development that is being carried out by leading companies. And increasingly, other companies are

finding themselves competing against, or working with, new innovation-based companies. My study focuses on the processes and outcomes of globally distributed pharmaceutical companies. This article will present the changing marketing strategies when a pharma company shifts from Acute base to Chronic therapy base. This research paper will also give an insight about shift in supply chain process and customer and end-customer perception which is the base of formulation of different marketing strategies What’s the secret behind successes? For one, the company operates in niche formulations (chronic) segments such as psychiatry cardiovascular, gastroenterology and neurology. While most of the top Indian companies have focused on antibiotics and anti–invectives (acute), Sun Pharma focused on therapeutic areas such as depression, hypertension and cancer. The company has introduced the entire range of products and has gained leadership position in each of these areas. Being a specialty company insulates Sun Pharma from the industry growth. The first quarter results for FY02 explain this to some extent. While the industry was affected to a large extent by a slowdown in the domestic formulations market, Sun Pharma logged a growth of 26% in revenues. Over the years Sun has also used the strategy of acquisitions and mergers to grow quickly. It acquired Knoll Pharma’s bulk drug facility, Gujarat Lyka Organics, 51.5% in M. J. Pharma, merged TamilNadu Dadha Pharma & Milmet Labs and acquired Natco’s brands. Post Merger with TamilNadu Dadha Pharma the company gained presence in gynecology and oncology segments.

From organizational perspective the most prominent performance related issues are enlisted below:

a). Increased competition and unethical practices adopted by some of the propaganda base companies.

b). Low level of customer knowledge (Doctors, Retailers, Wholesalers).

c). Poor customer (both external & internal) acquisition, development and retention strategies

d). Varying customer perception.

e). The number and the quality of medical representatives

d). Very high territory development costs.

f). High training and re-training costs of sales personnel.

g). Very high attrition rate of the sales personnel.

h). Busy doctors giving less time for sales calls.

i). Poor territory knowledge in terms of business value at medical representative level .

j). Unclear value of prescription from each doctor in the list of each sales.

Harold E. Glass

In the next few years, pharmaceutical executives worldwide will face a number of difficult issues ranging from a changing political environment, to drug safety, to the industry’s image and the viability of the current business model (Patterson, 2008; Rajama¨ki, 2008; Klein, 2008; Lopert and Moon, 2007). To ensure the pharmaceutical industry’s continued prosperity and to deliver improved health care, executives must consider these individual issues as highly interrelated pressure points requiring their immediate attention (Jarvis, 2007a, b; Zhong and Moseley, 2007; Yager and Starrett, 2006). This study summarizes the issues that pharmaceutical executives think their industry will face in the near future.

This two-phase study involved more than 70 senior industry executives from commercial operations and research and development (R&D). The participants included company operational and R&D chiefs, top managers in marketing and clinical development, and important line and staff personnel.

The study involved participants from many countries, but primarily North America and Europe. In the initial phase, executives were asked to rank important industry issues; in the second phase, the study applied statistical techniques to discover links between the identified issues. This paper presents the study results, which offer an overview of how executives envision the pharmaceutical industry’s future and the important challenges that lie ahead Prescription drugs represent around 10-12 percent of health care expenditures in most countries. Private and public spending on drugs slowed down in 2007 to its lowest growth rate since 1977, even though total prescription drug revenues have received a significant boost due to Medicare Part D. No matter the rate of spending increase though, the growing use of prescription drugs will bring even more attention to their use (Catlin et al., 2008). Drug development continues to become more expensive, manifested by a lower number of new drug applications (NDA) submitted by pharmaceutical companies (US Government Accountability Office, 2006). Moreover, the recent experiences with the safety of new drugs has slowed the rate of new drug development and concentrated public attention on the issue .

Yosuke Okada Akihiro Kawar

According to the report they examine the relationship between firm size and research productivity in the Japanese top ten pharmaceutical firms for the years 1981-1994. By using the number of successful patents as research performance measure, we find significant returns to scope in drug discovery research. We also find nearly constant returns to scale at the individual therapeutic level. These findings suggest that Japanese pharmaceutical firms are relatively small in terms of research scope, regardless of firm size per se. The Japanese firms may be able to enlarge the scope of research without suffering from marginal productivity decline at the firm level. Concerning knowledge spillovers, we find positive correlation between domestic competitors’ research spending and

individual firm’s patenting. But we detect negative correlation between research expenditures of large western pharmaceutical firms and the Japanese firms’ patenting. This suggests that appropriation mechanism of patent may be very effective in drug discovery research, and may predominate over probable knowledge spillovers among pharmaceutical firms especially in globally patented drug discovery research

Christopher T. Taylor

According to this research The economic profitability of the pharmaceutical industry is a recurrent policy question. A central issue in answering this question is how to measure economic profit. The problems with commonly used accounting profit rates are well documented. The cash recovery method of estimating economic profitability is investigated and modified as a means to estimate profitability in the pharmaceutical industry on a firm level. The profitability estimates give a similar rank order to the accounting profitability rate, but have different magnitudes. Results using this method suggest little or no economic profits in the industry

The pharmaceutical industry is a recurring area for profitability analysis. Three out of every four years since 1960, the pharmaceutical industry has ranked first or second in after tax return on stockholders' equity in the United States This profitability has attracted much attention, including that of Congress. Beginning with the 1959-1962 Kefauver committee hearings, Congress has repeatedly investigated the pharmaceutical industry.

One of the main Congressional concerns has been the profitability of an industry with so much impact on health and quality of life. "Increases in real drug prices and perceived high prices for new drugs have been a concern of Congressional committees for more than thirty years." (OTA 1993, p. 3) What fuels these continuing investigations is the difficulties with

accounting measures to determine profitability in the industry. There is a large literature concerning bias in accounting profitability measures which culminates in Fisher and McGowan (1983). In synthesizing and extending the previous work on the subject, they allow the problems with accounting measures to be reduced to two main concerns: (1) measuring firm assets and (2) the timing of cash flows generated by those assets. While researchers such as Long and Ravenscraft (1984) have challenged Fisher and McGowan's sweeping conclusion, "There is no way in which one can look at accounting rates of return and infer anything about relative economic profitability"(p. 90), the need to recognize and adjust for accounting bias is now an accepted fact (Schmalensee, 1989). The theoretically correct measure of the profit rate is the internal rate of return (IRR) which is the discount rate that equates the investment and the cash flows (Fisher and McGowan 1983).

Paul Sergius Koku

According to This paper explores the relationship between R & D expenditure and profitability in the pharmaceutical industry. This subject is relevant because many firms in the pharmaceutical industry in the United States currently spend heavily on R & D in order to remain competitive, however some commentators in the recent debates on healthcare cost and healthcare reform contend that the high R & D expenditure in the industry is part of the high healthcare cost problems (see McClatchy Tribune Business News, 2008; Worldwide Biotech, 2008) Product obsolescence is inevitable no matter how useful and relevant the product may currently be. This inevitable product demise becomes more certain as the product progresses through the various stages of its life cycle (see Kotler and Keller, 2005). Replacing products which were once successful but are now in the mature or declining stages with new products that have a promising future is necessary for a firm that wants to continue to be successful. Studies

have shown that many firms have realized this fact and use R & D as the key to remaining competitive or to becoming competitive (see Acs and Audretsch, 1991; O’Regan et al 2008; Wind and Mahajan, 1997). By investing in research and development, many firms hope to discover new products, find new uses for existing products, or find improved versions of existing products. Thus, an argument could be made that one of the primary end products of a successful R & D process is the discovery of a new product.

“Growth and Profitability in Small Privately Held pharma Firms: Preliminary Findings”

Larry Davidson and Gennadiy Greblov

According to This paper summarizes the results of our global pharmaceutical industry analysis and is intended to increase awareness of the general public – investors, policy makers, managers, employees of the companies – about its current developments. The paper has the following major goals:

1) To analyze the current situation, major challenges and the prospects of the pharmaceutical industry;

2) To identify major players of the global pharmaceutical industry and make a comparative analysis of their business practices and financial results;

3) To determine the relative position of the U.S. pharmaceutical companies in the global pharmaceutical industry, as well as to reveal opportunities for further strengthening of their positions.

The paper consists of three major parts. In the first part we present an overview of the pharmaceutical industry as a whole – its major players, current trends and challenges. The second part focuses on a more detailed analysis of major pharmaceutical companies. These major companies are divided into two major groups: a) companies with headquarters in the U.S., b) foreign pharmaceutical companies with headquarters outside of the U.S. Pharmaceutical companies are compared

with other companies in the same group; and major trends within each group are analyzed. Part 3 sums up our findings.

Maija RenkoMany have considered biotechnology a high growth industry with enormous profit potential (Pisano, 1997, 2006; DeCarolis & Deeds, 1999; Robbins-Roth, 1999; Wolff, 2001). New product development is extremely expensive and time consuming. Whileit is highly uncertain that success is the ultimate result of that process, the conventional wisdom in the industry has been that high growth will eventually turn into high profits once the firm succeeds in commercializing their products/services.This assumption was the basis for the initial rather stunning events in the early 1980s (Robbins-Roth, 1999). Genentech went public in October 1980. The stock price was listed at $35 each and went to $89 in 20 minutes, only to close at $70 the very firstday. Market value grew at a remarkable rate and it was four years before a product was commercialized on the market. A number of other companies followed suit. While the emergence of modern biotechnology initiated a paradigmatic shift in pharmaceutical research and development (R&D), many seemed to believe that a new business model was also emerging. While these are remarkable accounts of firm growth these are not examples of profitable growth. In fact in most of these studies growth is rarely operationally defined. These are examples of what financial markets demand from firms’ executives – growth imperatives – growth rates in valuation that exceed shareholder expectations, and even at rates, which exceed consensus forecastrates (Christensen & Raynor, 2003). That is, these are valuations based on future expectations, not on actual earnings.

METHODOLOGY

The methodology for preparing the Profitability of pharma companies under sez indore has been prepared in a step-by-step process as is given

1. Collection of Secondary Data

2. Data Compilation and Analysis

Collection of Secondary Data

The secondary data was collected through related pharma companies and pharma Institutions and departments like DTIC, MSME-DI, Food & Drug Administration, MPAKVN, Associations etc. Some data was also collected through related web sites.

Data Compilation & Analysis

The primary and secondary data collected was complied a comprehensive analysis

regarding status of the pharma companies , key issues and required interventions were conducted.

DATA ANALYSIS

Financial Results of different pharma companies under sez indore

IPCAYear Ended Profit & Loss Account of ipca labs indore.

Value (Rs in mn.s.in.mn) FY09

Fy 08 Fy 09 Fy 10

Net sales 12733.60 15527.40 18503.36

Other income 22.10 62.10 21.00

Total income 12755.70 15589.50 18524.36

Expenditure -10812.50 -12150.60 -14345.00

Operating profit

1943.20 3438.90 4179.35

Intrest -303.90 -227.29 -236.38

Gross profit 1639.30 3952.06 4490.15

depriciation -392.80 -559.33 -626.45

Profit before tax

1246.50 3392.73 3863.70

Tax -232.40 -842.18 -965.92

PAT 1014.10 2550.55 2897.77EX. ORD. ITEM -101.90 0.00 0.00Net profit 912.20 2550.55 2897.77Equity capital 249.90 251.20 251.20reserve 6135.20 11048.75 13946.52Value 10.00 2.00 2.00EPS 36.50 16.71 20.31

PROFITABILITY RATIO OF IPCA

Particulars FY09 FY10 FY11E

Fy 08 Fy 09 Fy 10

Eps 36.50 16.71 20.31EBIT 15.26 22.15 22.59PAT 7.16 13.47 13.78ROCE 27.73 14.71 25.92

ROE IN % 15.88 23.91 22.57DEBT EQ. RATIO 0.71 0.52 0.42

Return on Equity = Net Income Equity

Gross Profit Margin = Gross Profit Net Sales

Debt Equity RATIO = Total Debt Total Equity

Book Value per Common Share

Total Stockholders' Eq. - Liquidation Value of Pref. Stocks – Pref. Divi. in Arrears) Common Shares

PROFIT EARNING RATIO

P/E RATIO = Price per share/annual earning per share

RETURN ON EQUITY

ROE = Net income after tax/shareholders equity

Gross capital employed

= Fixed assets + Investments + Current assets

DEBT EQUITY RATIO

Total Liabilities/shareholder equity

FINANCIAL RESULTS OF SYNCOM HEALTH CARE LIMITED for the year under review along with the figures for the previous year are as follows:

Particulars Mar 2008Mar 2009Mar 2010 SOURCES OF FUNDS Share Capital 81.00 100.00 175.00 Share warrants & Outstandings

0.00 0.00 0.00

Total Reserve 79.20 117.39 588.82 Shareholder's Funds 160.20 217.39 763.82 Secured Loans 208.64 199.59 171.27 Unsecured Loans 95.28 110.47 72.31 Total Debts 303.91 310.06 243.58 Total Liabilities 464.12 527.45 1007.40 APPLICATION OF FUNDS :

Gross Block 195.93 198.72 206.25 Less: Accumulated Depreciation

32.61 52.43 71.12

Less: Impairment of Assets

0 0 0

Net Block 163.32 146.29 135.13 Lease Adjustment A/c 0 0 0 Capital Work in Progress

0 0 34.52

Pre-operative Expenses pending

0 0 0

Assets in transit 0 0 0 Investments 0.04 0.04 40.21 Current Assets, Loans & Advances

Inventories 85.50 96.28 107.07 Sundry Debtors 244.87 284.89 477.61 Cash and Bank 1.58 1.45 159.67 Other Current Assets 0 0 0 Loans and Advances 4.89 54.18 219.60 Total Current Assets 336.84 436.80 963.96 Less : Current

Liabilities and Provisions Current Liabilities 37.98 45.73 150.41 Provisions 0 14.39 16.66 Total Current Liabilities

37.98 60.13 167.06

Net Current Assets 298.86 376.68 796.90 Miscellaneous Expenses not written off

1.90 4.45 0.63

Deferred Tax Assets / Liabilities

0 0 0

Total Assets 464.12 527.45 1007.40 Contingent Liabilities 0 1.84 1.84

Important profitability key ratio ( rs in mn.)

Particulars FY09 FY10 FY11E

Fy 08 Fy 09 Fy 10

Eps 4.56 3.78 2.12

EBIT % 62.45 11.54 -1.86

PAT 7.14 6.24 5.54

ROE 29.19 20.37 7.59

ROCE IN % 29.19 20.37 7.59

DEBT EQ. RATIO

1.92 1.46 -2.76

CIPLA

FINANCIAL RESULTS OF CIPLA UNDER SEZ INDORE PITHAMPUR

Particulars Mar 2008 Mar 2009 Mar 2010 SOURCES OF FUNDS

Share Capital

1554.60 1554.60 1605.80

Share warrants & Outstandings

0.00 0.00 0.00

Total Reserve

36003.60 41952.90 57535.10

Shareholder's Funds

37558.20 43507.50 59140.90

Secured Loans

140.90 27.90 4.10

Unsecured Loans

5263.60 9374.50 46.60

Total Debts 5404.50 9402.40 50.70 Total Liabilities

42962.70 52909.9

0 59191.60

APPLICATION OF FUNDS :


5404.30 7008.00 8842.70


0 0 0

Net Block 16613.60 19924.90 20111.70Lease Adjustment A/c

0 0 0

Capital Work in Progress

2331.20 3663.20 6842.40


0 0 0

Assets in transit

0 0 0

Investments 947.50 813.20 2651.00 Current Assets, Loans & Advances

Inventories 11204.90 13983.20 15125.80 Sundry Debtors

13939.10 18371.50 15527.10

Cash and Bank

792.80 530.00 608.40

Other Current Assets

344.90 239.10 582.80

Loans and Advances

11158.10 18149.80 22990.10

Total Current Assets

37439.80 51273.60 54834.20

Less : Current Liabilities and Provisions

Current Liabilities

8709.80 10128.50 9979.60

Provisions 4168.10 10995.00 13476.60 Total Current Liabilities

12877.90 21123.50 23456.20

Net Current Assets

24561.90 30150.10 31378.00

Miscellaneous Exp. not written off

0 0 0


-1491.50 -1641.50 -1791.50

Total Assets 42962.70 52909.90 59191.60 Contingent Liabilities

2230.40 1640.80 2898.20

Important profitability key ratio of CIPLA Company

Particulars 2008 2009 2010

Earnings Per Share (Rs)

9.02 9.99 13.47

EBIT Growth% 4.48 11.41 41.92

PAT Growth% 5.00 10.75 39.22

ROE 20.12 19.21 21.11

ROCE in % 22.41 19.93 24.18

Total Debt/Equity 0.14 0.22 0.00

LUPIN

FINANCIAL RESULTS OF LUPIN UNDER SEZ INDORE

Particulars Mar 2008 Mar 2009 Mar 2010 SOURCES OF FUNDS

Share Capital

820.80 828.20 889.40

Share warrants & Outstandings

0.00 0.70 5.40

Total 12349.70 12924.10 24410.70

Reserve Shareholder's Funds

13170.50 13753.00 25305.50

Secured Loans

5608.80 5651.20 7040.00

Unsecured Loans

4046.70 3797.90 2028.10

Total Debts 9655.50 9449.10 9068.10 Total Liabilities

22826.00

23202.10 34373.60

APPLICATION OF FUNDS :


2919.80 3557.50 4251.30


0 0 0

Net Block 8630.70 9756.20 11913.90 Lease Adjustment A/c

0 0 0

Capital Work in Progress

689.50 1163.10 1408.30


0 0 0

Assets in transit

0 0 0

Investments 2924.90 4738.70 7240.70 Current Assets, Loans & Advances

Inventories 6258.50 7158.80 7137.00 Sundry 6322.60 7090.60 9165.90

Debtors Cash and Bank

2150.80 121.30 374.20

Other Current Assets

0 0 0

Loans and Advances

2547.60 3666.40 6466.00

Total Current Assets

17279.50 18037.10 23143.10

Less : Current Liabilities and Provisions

Current Liabilities

4383.70 7721.80 6081.80

Provisions 1082.80 1423.90 1668.10 Total Current Liabilities

5466.50 9145.70 7749.90

Net Current Assets

11813.00 8891.40 15393.20

Miscellaneous Expenses not written off

0 0 0


-1232.10 -1347.30 -1582.50

Total Assets 22826.00 23202.10 34373.60 Contingent Liabilities

577.60 882.60 1137.20

Profitability key ratio of lupin

Particulars 2008 2009 2010

Earnings Per Share (Rs)

54.2 50.35 72.96

EBIT Margin 22.68 17.43 20.10

PAT Margin 16.99 14.17 17.70

ROE 40.21 30.98 33.23

ROCE 29.34 22.29 25.60

Debt equity ratio

0.730.69 0.36

Total analysis of all companies

IPCA CIPLA SYNCOM LUPIN

08 09 10 08 09 10 08 09 10 08 09 10

EPS 36.50 16.71 20.31 9.029.99 13.47

4.56 3.78 2.12 54.2 50.35 72.96

EBIT 15.26 22.15 22.59 4.48 11.14

41.9262.45 11.54 -

1.8622.68

17.43 20.10

PAT 7.16 13.47 13.78 5.0010.75

39.227.14 6.24 5.54 16.99

14.17 17.70

ROE 15.88 23.91 22.57 40.2130.98 33.23

ROC 22.41

19.93 24.18 29.19 20.37 7.59 29.34 22.29 25.60

ED/E 0.71 0.52 0.42 0.14

0.22 0.00

1.92 1.46 -2.76

0.730.69 0.36

Finding and discussion

After analyzing the ipca I find these key words

the earning per share decreses to year 08 to 10 respectively .

EBIT increases to year 08 to 09 and 9to 10 with respect to 15.26 to 22.16 and 22.69 as well

Profit after tax is straightly increases to 08 to 10 Debt equity ratio is decrese by year 08 to 2009 as well as

2010 with 071to .52 and .42 Ipca Laboratories disclosed a small rise in standalone net

profit for the quarter ended December 2010. During the quarter, the profit of the company rose 9.79%

to Rs 639.50 million from Rs 582.50 million in the same quarter previous year.

Discussion on cipla company.

Net Sales and PAT of the company are expected to grow at a CAGR of 18 and 42 over 2009 to 2011 respectively

We expect that the company will keep its growth story in the coming quarters also

EBITDA declined by 21 PAT de-grew by 19% High growth in revenues Gross sales of the company were at Rs 20,mn in FY10

recording an impressive growth of 28% .

Finding about syncom

EBIT Incresed 9.4% to year 09 to 10 respectively PBT decresed 35% to08 to 09 and 10 PAT decresed by 4.51to 3.7 P/E ratio increased by 13% to 09 to 10 Return on capital employed decresed by 16.1 to 12.71 Debt equity ratio is decresed 0.56

Finding about lupin ltd

After the analyse our profitability ratio I find these key factor which is affect the profitability of lupin ltd.

Earning per share increased 22 rs 09 to 10 respectively

Ebit margin increased with 2.34. PAT increased by 3.53 Return on equity increased by 3 Return on capital employed 3.31

Conclusion

After the analysis of all pharma chief companies under sez indore as cipla ,lupin ,ipca and syncom the profitability of the companies are growing year to year and tax and facilities are effecting the production as well as export these are the head companies of special economic zone indore Board (sez ) the subjects of exports, quality control, energy conversations and such other related subjects is and also does buyer seller meets and disseminated weekly information as well as maintain database of members with their supply capacity, these association do not provide any such services for the companies under the special economic zone indore these companies are fast growing companies because the exemption from tax is a major factor to improving the profit or revenues . Every company which are under the sez follow certain condition according to the state government as well as government of india .

There are six special economic zones are india but very fastly growing one zone is indore pithampur because the availability of raw material and environment of indore is very friendly within 10 years there are greater than 300 companies are registered and working properly . It is situated at central india and the transportation medium is too good and link of different states and the ports of sea. In the upcoming years there are thousand of companies are established there plants and started to production because every company want to grow or increase the profit as well . Finally i can say about the all pharma companies which are coming underspecial economic zone indore doing business and touching a new milestone day by day .these companies are multinational companies which are the source and part of Indian economy there are manufacturing many generics medicines which are demanded by different countries of the world.

SCOPE FOR FURTHER RESEARCH

Helpful for students to analyse the data of various pharma companies .

Helpful for another researchers who are working with pharma companies within the india .

Helpful for pharma companies for comparative analysis of profitability .

Helping to analyse of profitability of any companies .

LIMITATION

Time constraint It is based on secondry data it may be error or

mistakes in any part of the research report . Availability of data was not easy because most of

companies can not share data. Lack of websites of local companies the data

collection was difficult.

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devi ahiliya vishwa vidhyalaya final report

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