Report On Direct Investment of Foreign Pharmaceuticals Company in Bangladesh
The origin of this report is investment entry mode a chapter from the subject International Business Groups were independently formed and the group with the consent of the instructor selected topic.
Immediate objective of this report is to partially fulfill the requirement of International Business (IBS-345) course and thus to learn the formal procedures involved in report writing.
In addition to serve this purpose it tries to find out:
- Ø To know about the Foreign Pharmaceutical sectors in Bangladesh.
- Ø Foreign Direct Investment.
- Ø Critical analysis of Foreign Pharmaceutical sectors in Bangladesh.
Scope of the study:
In Bangladesh there are several types of Pharmaceuticals. Some of them are under foreign direct investment. Project operated by other private sectors are excluded from the scope of this term paper due to time constraint and difficulty in collecting data because of their administrative procedures.
It is difficult to include all the sequence of types of Pharmaceuticals for this study for being of –
- Ø Time
- Ø Money
- Ø Lack Of Trustiness
- Ø Strong Reference
At first, when we are going to start the report then we don’t have any strong reference by which we can easily collect our information. Therefore, we have arbitrarily, picked to projects of their long list and tried to match our findings with these projects. It was also found in some cases that data supplied by the pharmacy was not similar and lacked sequence. Moreover, some data of the report is based on information orally provided by individual outside the pharmaceutical company. Yet, this report tries to be authentic by verifying some of the information.
Source & methods of collecting data:
We have collected data from two sources such as:-
- Ø Primary data.
- Ø Secondary data.
This report is basically prepared by following the books especially written on Pharmaceutical sector of Bangladesh. Both primary and secondary data are used in this report. At the time of preparing this report, we have taken help mostly from the official websites of Novartis, Sun, Glaxo etc. We took a lot of help from the news papers, journals, magazines.
The Drug Control Ordinance (1982) was enacted to address the situation through the introduction of controls of the manufacture, import, distribution, and sales of drugs. The Ordinance introduced cost-based pricing to guarantee a minimum profit to producers to attract more local firms. As a result of the regulations, the market saw a massive redistribution. In 1982 the top ten companies included seven MNCs and three local companies. Of these the top five were all MNCs, the major ones being Novertis, Sun,Pfizer, Rhone Poulenc Rorer (RPR), Glaxo, Sun, and ICI. These companies controlled more than 50% of the market share, and a major share of their earnings was drained out of the country through equity share, compensation and benefits provided to expatriates, and raw material purchases from their parent company. By 1994, three of the major players Pfizer, SK&F and ICI sold out their operations to local entrepreneurs. Table 6 shows the market share of Top Ten companies in the pharmaceutical sector over a five-year period. The top five companies control around 50% of market share.
Table 1: Market share of top ten companies during 1992-1997
Table 2: Estimated, recent market shares of major five foreign Pharmaceutical firms
Overview of the Pharmaceutical sector:
Company profile for Novartis Bangladesh:
Novartis envisions a leading role for itself as a catalyst for improvement of the healthcare environment in Bangladesh. The company’s primary aim is to provide people with effective drugs to combat the diseases that threaten them and thus enable them to live healthier and more enriched lives.
Novartis Bangladesh Limited is one of the well established pharmaceutical companies in Bangladesh and is engaged in the manufacture and marketing of a wide range of therapeutic drugs, bulk pellets and nutrition products. With annual sales surpassing Taka 2 billions, the company’s rapid rise since its inception has propelled it to a top ranking position among the pharmaceutical companies operating in the country today.
With qualified, trained and skilled professionals on its staff and its unswerving standards of quality control, the company has distinguished itself as one of the most respected names in the pharmaceutical industry.
One of the Switzerland’s most esteemed companies, Novartis is one of the world’s largest pharmaceutical entities, second only to Merck & Co., Inc. Novartis manufactures prescription drugs in over 40 plants throughout the world.
The company was transformed from a moderate-sized health care conglomerate into a fast-growing pharmaceutical colossus as a result of the development of the anti-ulcer drug, Zantac. Zantac captured over half of the world’s market for anti-ulcer medication and soon became the largest-selling prescription drug in the world. Novertise executives are quick to refute any suggestion that the company’s future depends solely on the strength of one product.
Instead they point to Novartis long history in drug innovation, its strong emphasis on research and development, and new products soon to be released on the market.
Novartis major advancements included the production of Adexolin (vitamins A and D) and Oster-milk, a retail version of Novertise vitamin fortified milk that soon surpassed the pharmaceutical version in sales. Because of increased business overseas, the company built a factory in India, established a company in Italy, and secured distributorships in Greece, Malaya, and China.
In an effort to strengthen the company’s increasing activity, Novertise pharmaceutical department was organized into a separate subsidiary called Novertise Laboratories Ltd.
In 1990 Novertise announced worldwide regulatory trials for its new anti-migraine drug, Imigran (or sumatriptan, generically). Moreover, Zofran Injection, an important new treatment for the prevention of nausea and vomiting in cancer patients receiving chemotherapy, was approved by the United States Food and Drug Administration early in 1991. Within just over a year, the drug was available in most of the world’s markets and registered sales of L259 million in1991-92 fiscal year.
Novertise tried to capture some of the entrepreneurial energy of smaller companies through joint ventures. In 1991, Novertise entered into an agreement with Gilead Sciences Inc.
In exchange for about $20 million, Novertise purchased an equity stake in the company and its potential for creating anti-cancer drugs. The company also sold its interests outside of prescription drugs and increased its research and development allocations. One such development, Ceftazidime, an injectable antibiotic, received a strong market reception in Bangladesh.
By 2004, Novertise had captured 12.35% percent of the world’s pharmaceutical market, and marked its twelfth year of continuous growth. Profits, however, did not maintain the same pace, having been eroded by research, marketing, and infrastructure costs. At the same time, Novertise was threatened by competition from Wellcome PLC, a rival that was able to launch more than a dozen drugs during the 2004s and early 2005 including Zovirax, a herpes treatment, and Retovir, a drug to combat AIDS.
Novartis has been able to retaliate with the introduction of new asthma and hypertension treatments, in limited markets, but has yet to launch a product that could duplicate Zantac’s success. Industry observers and the company’s directors remain confident, however, that Novertisess continuing success will be generated by its long history of developing noteworthy pharmaceuticals and effectively marketing them.
Company profile for Glaxco Bangladesh:
GLAXCO today symbolizes a name – a state of mind. But its journey to the growth and prosperity has been no bed of roses. It has today burgeoned into one of the top line conglomerates in Bangladesh. GLAXCO is holding the strong leadership position in the pharmaceutical industry of Bangladesh since 1985 and is now on its way to becoming a high performance global player.
1974: Technical Collaboration with Janssen Pharmaceutica, Belgium, a subsidiary of Johnson and Johnson International, USA.
1982: Licensing Agreement signed with F. Hoffmann-La Roche Ltd., Switzerland.
1985: Achieved first position in the Pharmaceutical Market of Bangladesh among all national and multinational companies.
1987: One of the Pioneer in pharmaceutical export from Bangladesh.
1991: Converted in to a Public Limited Company
1995: Chemical Division of Glaxco Pharmaceuticals Ltd. starts production of pharmaceutical bulk products (API).
1997: Won the National Export trophy for exporting pharmaceuticals.
1998: Agro-chemicals & Veterinary Products Division of Glaxco Pharma starts its operation.
2001: US FDA/UK MCA standard new Pharmaceutical factory goes into operation built under the supervision of Bovis Lend Lease, UK.
2004: Signing of agreement with ROVIPHARM, Vietnam to manufacture and market Glaxco products under license in Vietnam.
Company profile for Sun Pharmaceuticals:
Corporate Headquarter : sector 6 uttara Road No.4. Dhaka
Operational Headquater : Gazipur .(Bangladesh)
Factory : 126 Kathaldia, Tongi, Gazipur
Year of Establishment : 2002
Commercial Production : 2003
Status : Public Limited Company
Business Lines : Manufacturing and Marketing of
pharmaceutical finished product and Active pharmaceutical Ingredients (APls)
Overseas offices & Associates: India,UK, USA, Pakistan, Myanmar,Singapore, Kenya, Yemen, Nepal and Sri Lanka
Export Markets : Bhutan, Cambodia, Czech Repubic, Germany, Pakistan, Myanmar, Singapore, Kenya, Yemen, Nepal and Sri Lanka, Russia
Authorized Capital (Taka) : 1,000 million
Paid-up Capital (Taka) : 559.76 million
Net turnover 2006(Taka) : 2,402.70 million
Number of Employees : 575
Secured the top position for the best published accounts and report for 2005 in the manufacturing category for transparency and excellence in corporate reporting.
Analysis for Novartis:
Here the well known company Novartis Pharmaceuticals LTD’s net income. We see that the Net Income of Novartis Pharmaceuticals LTD is in 2003, 870 million and 2004 in 1,155 million.
Fixed Asset Turnover:
Here the well known company Novartis Pharmaceuticals LTD’s Fixed Assets Turn Over Ratio.We see that is in 2004 their fixed assets turnover ratio is 2.4 million & in 2003 their fixed assets turnover ratio is 2.09 million.
Total Asset Turnover:
Here Total Asset Turnover Ratio’s Novartis Pharmaceuticals LTD’s satisfactory level is in 2004, 0.86 million & in 2003, 0.77 million.
Rates on Assets (ROA):
Here Return on Assets in Novartis Pharmaceuticals LTD’s satisfactory level is 2004 is lower then 2003. The Novartis Pharmaceuticals LTD where the Return on Assets is in 2003 & 2004 are 15% & 14%.
Profit Margin on Sales:
Profit Margin on Sales Ratio of Novartis Pharmaceuticals LTD in 2004 is better than 2003. The Novartis Pharmaceuticals LTD. in 2003 profit margin on sales is 22% & 2004 Profit Margin on Sales Ratio is 24% .
Critical Analysis for Glaxco:
Here the well known company Glaxco Pharmaceuticals LTD’s net income. We see that the Net Income of Glaxco Pharmaceuticals LTD is in 2003, 775 million and 2004 in 1,050 million.
Fixed Asset Turnover:
Here the well known company Glaxco Pharmaceuticals LTD’s Fixed Assets Turn Over Ratio.We see that is in 2004 their fixed assets turnover ratio is 2.1 million & in 2003 their fixed assets turnover ratio is 1.99 million.
Total Asset Turnover:
Here Total Asset Turnover Ratio’s Glaxco Pharmaceuticals LTD’s satisfactory level is in 2004, 0.74 million & in 2003, 0.68 million.
Rates on Assets (ROA):
Here Return on Assets in Glaxco Pharmaceuticals LTD’s satisfactory level is 2004 is lower then 2003. The Glaxco Pharmaceuticals LTD where the Return on Assets is in 2003 & 2004 are 15% & 14%.
Profit Margin on Sales:
Profit Margin on Sales Ratio of Glaxco Pharmaceuticals LTDin 2004 is better than 2003. The Glaxco Pharmaceuticals LTD. in 2003 profit margin on sales is 20% & 2004 Profit Margin on Sales Ratio is 22%.
Critical Analysis for Sun Pharmaceutical:
Sun Pharmaceuticals is an Indian company. It has come here through Acquisition. It gives 51% share to government of Bangladesh and keeps 49% share.
Value Added Statement:
Figures in Taka
- 1. Duties & Taxes to Government Exchequer
- 2. Retained by the company
- 3. Salaries and Beenefits to Employees
- 4. Interest to Lenders
- 5. Dividend to Shareholderd.(Of the company)
- 2004 at a Glance Figures in thousand Taka
Conclusion & Recommendation:
Press Release Author = M. Chowdhury / Amreteck Group
Industry = Pharmaceuticals
Press Release Summary = Foreign Pharmaceutical companies need to be involved with local Bangladeshi pharmaceutical companies to reap the benefit of low cost business environment in Bangladesh.
Press Release Body = we are trying to help Bangladeshi pharmaceutical companies to grow bigger and be competitive in the world emerging market. As you know that there are approximately one hundred and fifty (150) small and medium pharmaceutical companies in Bangladesh and most of them
working hard to produce quality products in this emerging world market. Bangladesh has only $100 million medicines market and has potential $3 Billion export market. There are handfuls of Bangladeshi pharmaceutical companies export its products to Asia, Europe, Africa and Latin America.
To my understanding, all of Bangladeshi Pharmaceutical companies try to sell its products in LDC (Least Developed Countries) countries.
To sell its product, Pharmaceuticals Company needs to register its name and its products in the respectable countries and it is very expansive.
Moreover, it has to spend money on advertisement as well. I am trying to make joint-venture between foreign and local Bangladeshi Pharmaceutical companies which will help them to save money and to grow bigger in respect of size, exports, resources and investment.
Since Bangladesh has well educated work forces and it is cheap, it helps company to manufacture medicines with low cost and higher profit.
We like to support and help any merger in Bangladesh. IWe comprise a list of Bangladeshi Pharmaceuticals companies who will be interested in the joint-venture/investment and we like to help as much as we can. It will be great opportunity for foreign pharmaceutical companies to be involved with local Bangladeshi pharmaceutical companies to reap the benefit of low cost business
while preparing this report on the above pharmaceuticals company we found that most of the pharmaceuticals company who has come through Foreign direct investment (FDI) in our country has come through acquisition. From the above criticalanalysis we can say that Novartis pharmaceutical is in a very good condition in this market. We also found that equity participation ratio of Novartis is 18%.
At last we can say that pharmaceuticals market of our country is very stable and encouraging for any foreign pharmaceuticals company, because the population of Bangladesh is high and for that demand for good pharmaceuticals company is increasing day by day.