Main partAnalysis of BEXIMCO PHARMACEUTICALS LTD.

Analysis of BEXIMCO PHARMACEUTICALS LTD.

Company Profile of BEXIMCO PHARMA Beximco Pharma is a leading edge pharmaceutical company established in 1976 and it started its production commercially from 1980. Bangladesh and is acclaimed for outstanding product quality, world-class manufacturing facilities, product development capabilities and outstanding service.

Beximco Pharma

produce and market 'branded generics' for almost all

diseases from AIDS to cancer, from infection to asthma, from hypertension to diabetes, for both national and international markets. It also manufacture active pharmaceutical ingredients and intravenous fluids and contract manufacture for major international brands of leading multinational companies and it partner our activities to the humanities quest for longer, healthier, and happier life.

They are the largest exporter of medicines from Bangladesh and received Export (Gold) trophy for record three times and also helping to protect our environment the only pharmaceutical company in Bangladesh and among the few in the world producing CFC free inhalers for asthma patients.

They employ more than 2,400 staff, including over 300 qualified professionals such as pharmacists, chemists, microbiologists, engineers, doctors etc. And for

employees, Beximco Pharma is not just a great workplace, but is a great way of life As a publicly listed company, Beximco Pharma’s shares are traded on AIM (London Stock Exchange), Dhaka and Chittagong Stock Exchanges.

Vision of Beximco Pharma Building a healthier tomorrow where our fellow citizens will live longer, healthier and happier.

Mission of Beximco Pharma The mission of Beximco Pharma is each of their activities must benefit and add value to the common wealth of the society.

They believe that in the final analysis they are accountable to each of the constituents with whom they interact, namely; their employees, their customers, their business associates, their fellow citizens and their shareholders.

Facilities of Beximco Pharma Our manufacturing facilities are spread across a 20 acres site located in and around Dhaka, Bangladesh. They comprise of a number of purpose built plants, including the new Oral Solid Dosage (OSD) plant. The land and buildings are wholly owned by the company and approximately 13 of the 20 acres of land are currently in use.

The site includes facilities for manufacturing intravenous fluids, liquids, creams,

ointments,

suppositories,

metered

dose

inhalers,

active

pharmaceutical ingredients as well as the existing and new OSD plants for tablets and capsules, the research laboratory and a number of warehouses.

The plant and machinery throughout the site has been designed, procured and installed by partners from Germany, Switzerland, Sweden, Italy and the United Kingdom, amongst others.

The site has its own utility infrastructure to ensure the adequate generation and distribution of pure water at all times. The current installed electrical capacity is 4 MW and this will be increased to 8 MW soon. There are also water purifying and liquid nitrogen generation facilities on site. The entire site is at least 10 meters above sea level and is approximately 250 kilometres from the nearest sea - the Bay of Bengal.

Core Values & Social Responsibilities At Beximco Pharma, they are in the business which deals with human health and this makes us more responsible to keep the highest standards of their products. Through their products they try to deliver clear benefits to the patients. They believe their responsibility lies even more in ensuring that our society gets benefited while we continue to grow.

Corporate social responsibility is an integral part of our business strategy which is reflected in our mission statement. Every employee of our company knows that the company does not view its success and achievements in financial terms only, but also in terms of its deep relationship with the society.

More importantly the company's contribution extends beyond one-time donation to ongoing participation as reflected in their partnership with NGOs working for AIDS patients, in supporting sports, and in raising disease awareness among the people.

They donated medicines worth millions of taka to victims in national and international calamities. Donation of medicines to victims of earthquake in Pakistan and victims of tsunami in Sri Lanka are worth mentioning.

Product Range Allergic Disorders Analgesics Anti-Infectives Cardiovascular Central Nervous System Cough & Cold Products Diabetes Gastro Intestinal Intravenous Fluids Musculoskeletal

Oncology OTHER PRODUCTS Respiratory Skin Care Vitamins & Minerals Supplement Company Analysis Qualitative analysis Beximco Pharma has long enjoyed the reputation of being the leader in setting the trends in Bangladesh Pharmaceutical Industry. 25 years have passed since it started its own operation. In the last 25 years it has led the domestic pharmaceutical market in several dimensions. Now it has undertaken further strategic expansions to position Beximco Pharma among the top players in the global pharmaceutical industry.

We have acknowledged some factors which have a great impact on ‘Beximco Pharma’ from the SWOT analysis of this company.

S for Strength • Distinguished operational capability • Consistently delivering high quality products • Professional management capability • Adopting innovation in manufacturing process. For liquid manufacturing Beximco uses automatic filling machine & sealing machine and for tablet manufacturing it uses automatic sciving, mixing and compression machine • R & D capability in both formulation and API • Sales and marketing capability focused on brand building

• Experience in foreign markets • Well established partnership with world’s leading pharmaceutical companies • Beximco is the first and only company to offer anti-AIDS medicines in Bangladesh • It Launched CFC-free HFA inhalers as the first company in Bangladesh W for Weakness • There are some essential products which are not available in Beximco Pharma, for example- Small Volume Parentaral Drug (SVP) and different hormonal drug and herbal products.

• Beximco pharma pays less concentration on its promotional activities.

• It has less awareness about its social responsibility.

• Beximco pharma has temperate skilled labors.

• Beximco pharma has less coverage on capital market, international market including Least Developed Countries (LDCs), developing and developed countries like USA and UK and foreign investment.

O for Opportunities • Domestic and existing export markets • New export markets • Contract manufacturing • Strategic merger of Beximco Infusions Ltd • Listing in AIM of London Stock Exchange • Entered into 4 new overseas markets, namely Ghana, Botswana, Belize, and Papua New Guinea • Registered 79 new products in existing overseas markets

• Signed agreement for product registration, distribution and marketing in 10 new countries T for Threats • There are many available existing pharmaceutical companies in our country, everyday which brings new thoughts as threats to Beximco pharma.

• There are also new potential entrants who are the most vital threat to the Beximco pharma.

• In the pharmaceutical world, everyday there are coming new technologies. These new technologies are bringing new threats to the Beximco pharma.

Quantitative analysis Ratio Analysis 1. Net Working Capital = Current Asset − Current Liability Year

Current Assets 2006 3,357,393,266 2007 2,923,775,458 Graphical Presentation:

Current Liabilities 2,527,420,798 1,627,972,936

Net Working Capital 829,972,468 1,295,802,522

Interpretation: Net working capital of BEXIMCO PHARMACEUTICALS LTD. had been increased gradually in the preceding 2 years (2006-2007). So, the company’s net working capital is fair. It means the company is able to meet up its current obligations.

Current Asset Current Liability

2. Current Ratio = Year

Current Asset

2006 3,357,393,266 2007 2,923,775,458 Graphical Presentation:

Current Liability

Current Ratio

2,527,420,798 1,627,972,936

1.33 1.80

Current Ratio

2

1.8

1.33 1

0 year

2006

Current Ratio

2007

Interpretation: The company’s current ratio deviates between 1.33-1.80 proceeding from the last 2 years. As a manufacturing company, current ratio 2 is generally acceptable. So, according to our evaluation the company is able to meet up its current obligation but not satisfactory.

Sales Net Fixed Assets

3. Fixed Asset Turnover = Year

Sales

2006 3,702,317,159 2007 3,597,024,812 Graphical Presentation:

Net Fixed Assets 8,555,119,221 9,029,643,482

Fixed Asset Turnover Ratio 0.43 0.40

Interpretation: The company’s fixed asset turnover ratio fluctuates from 0.430.40.We know, the greater the fixed asset turn over, it is more efficient. So, the company should try to overcome this trend.

Total Liabilities

4. Debt Ratio =

Total Assets

Year

Total Liabilities

Total Assets

Debt Ratio

2006 2007

3,962,692,062 3,702,479,293

11,912,512487 11,953,418,940

0.33 0.31

Graphical Presentation:

Interpretation: The debt ratio of the firm’s fluctuates between 0.33-0.31. We know, debt ratio indicates how much portion of total assets is financed by the debt. The lower, it is less risky. So, the BEXIMCO PHARMA’s debt ratio is satisfactory. The company should keep it up.

Long term Debt Holders Equity 5. Debt-Equity Ratio Shares =

Year

Long-term Debt

2006 1,435,171,264 2007 2,074,506,357 Graphical Presentation:

Stockholders’ Equity 7,949,920,425 8,250,939,647

Debt-Equity Ratio 0.18 0.25

Interpretation: The debt equity ratio of the firm’s fluctuates between 0.18-0.25. We know, the lower, it is less risky. So, the BEXIMCO PHARMA’s debt equity ratio is not satisfactory. The company should minimize it.

Earning Before Interest & Tax

6. Time Interest Earned Ratio =

Year

EBIT

2006 776,562,453 2007 654,420,059 Graphical Presentation:

Interest

Interest 253,318,784 254,742,392

Time Interest Earned Ratio 3.07 2.57

Time Interest Earned Ratio

3.5

3.07

3

2.57

2.5 2 Year

2006Time Interest Earned Ratio 2007

Interpretation: The company’s time interest earned ratio fluctuates from 3.07-2.57. As we know, if this ratio is equal to 1 or more than 1, the firm is able to meet up the interest payment. Therefore, the company is able to meet up the interest payment successfully in the preceding 2 years (2006-2007).

Earning Before Interest & Tax + {(Principal Payments + Preferred 7. Fixed Payment Coverage [Interest = Stock Dividends) Ă—1/ (1-T)}]

8.

Year

EBIT

Interest

2006 776,562,453 253,318,784 2007 654,420,059 254,742,392 Graphical Presentation:

Principal Payments

Tax

1,435,171,264 2,074,506,357

0.30 0.30

Fixed 0.34Payment Coverage

0.4 0.3

0.21

0.2 0.1 0 Year

Interpretation:

2006 Fixed Payment Coverage2007

Fixed Payment Coverage 0.34 0.21

The company’s fixed payment coverage ratio fluctuates from 0.34-0.21. The firm is able to meet up the interest payment but in 2007 the capability to meet up interest payment is decreases. Therefore, the company should try to increase this ratio in future.

Net Profit After Tax

9. Net Profit Margin =

Sales

Year

Net Profit after Sales Taxes 2006 470,658,563 3,702,317,159 2007 353,067,878 3,597,024,812 Graphical Presentation: 0.2

Net Profit Margin 0.13 0.10

Net Profit Margin 0.1

0.13 0 Year

2006

Net Profit Margin

2007

Interpretation: The firm’s net profit margin fluctuates from 0.13 to 0.10 in the preceding 2 years (2006-2007). The company has a decreasing net profit margin, which is not desirable. Therefore, the company should increase this trend.

Net Profit After Tax Total Assets

10.Return on Investment = Year 2006 2007

Net Profit after Total Assets Taxes 470,658,563 11,912,512,487 353,067,878 11,953,418,940

Return on Investment 0.04 0.03

Graphical Presentation:

Return on Investment

0.06 0.04

0.04

0.03

0.02 0

Year

2006

Return on Investment2007

Interpretation: The firm’s return on investment deviates from 0.04 to 0.03 in the preceding 2 years (2006-2007). The company’s return on investment has a very low decreasing trend which is not desirable. So, the management should work hard to increase the return associated with investment.

Net Profit After Tax

11.Return on Equity =Share Holders Equity Year

Net Profit after Taxes 2006 470,658,563 2007 353,067,878 Graphical Presentation:

Stockholders’ Equity 7,949,920,425 8,250,939,647

Return Equity 0.06 0.04

on

Interpretation: The firm’s return on investment deviates from 0.06 to 0.04 in the preceding 2 years (2006-2007). The company’s return on equity has a decreasing trend, which is not desirable. So, the management should work hard to provide greater dividends to the stockholders.

Market Price per Share of Common Stock

12.Price Earnings Ratio =

Earning per Share

Year

Market Price per share of Common Stock 2006 53.70 2007 58.90 Graphical Presentation:

per Price Earnings Ratio

4.67 3.08

11.50 19.12

Price Earnings Ratio

30

19.12

20 10 0

Earnings Share

11.5

Year

2006

Price Earnings Ratio 2007

Earnings Available for Common stockholders

Interpretation:

Number of Shares Outstanding

The firm’s price earnings ratio deviates from 11.5 to 19.12 in the preceding 2 years (2006-2007). The company’s price earnings ratio had an increasing trend from 2006 to 2007. So, the company should work hard to maintain this trend.

13.Earnings Per Share (EPS) =

Year

Earnings per Share (EPS)

2006

4.67

2007

3.08

Graphical Presentation:

Earning Per Share

6

4.67

4

3.08

2 0 Year

Earning Per Share

2006

2007

Interpretation: The firm’s earning per share decreases from 4.67 to 3.08 in the preceding 2 years (2006-2007). The company’s earnings per share have a decreasing trend since last year. Therefore earning per share should be increased to attract investors.

Z-Score Analysis Edward Altman has developed a model using financial statement ratios and multiple discriminate analyses to predict bankruptcy for publicly traded manufacturing firms. The resultant model is of the form where Z is an index of bankruptcy.

The formula is, EBIT

Z= 3.3 Total Assets

Net Working Capital

+ 1.2

Market Value of Equity

0.6

Book Value of Debt

Total Assets

Sales

+ 1.0 Total Assets

Accumulated Retained Earnings

+ 1.4

Total Assets

+

Altman shows that bankrupt firms and non-bankrupt firms have very different financial profiles before bankruptcy. These different financial profiles are the key intuition behind the Z-score model and these are – Financial Data

2006

2007

776,562,453

654,420,059

Total Assets

11,912,512,487

11,953,418,940

Net Working Capital

829,972,468

1,295,802,522

Sales

3,702,317,159

3,597,024,812

Market value of Equity

5,409,599,186

6,744,464,833

Book Value of Debt

1,159,409,947

1,776,449,778

Accumulated Retained 3,039,774,569 Earnings Calculation of Z-score value:

3,189,176,356

EBIT

Calculation EBIT Total Assets Net Working Capital Total Assets Sales Total Assets Market Value of Equity Book Value of Debt Accumulated Retained Earnings Total Assets

Z-Score Value Graphical Presentation:

Year 2006

2007

0.0652

0.0547

0.0697

0.1084

0.3108

0.3009

4.6658

3.7966

0.2552

0.2668

3.77

3.26

4

3.77

Z-Score

3.5

3.26

3 Year

2006

Z-Score

2007

Findings: We know, Z < 1.81 indicates a bankruptcy prediction, Z=1.81 to 2.99 indicates a gray area, Z > 2.99 indicates no bankruptcy.

And we have found that Beximco Pharama has a score, Z= 3.77 (2006) and Z= 3.26 (2007). It indicates that BEXIMCO PHARMACEUTICALS LTD. is in no bankruptcy situation within 2006-2007. The Beximco Pharama is creditworthy.

Recommendation: We have found that the position of Beximco pharma is nor in bankruptcy neither in gray area. Its overall situation is quite satisfactory. So Beximco pharma should try to keep its journey like this also in future. But at present the ranking of local pharmaceutical companies are: 1. Square pharmaceuticals 2. Beximco pharmaceuticals 3. Incepta pharmaceuticals 4. Renata pharmaceuticals

5. Acme pharmaceuticals So we can see, now the leading company of our country is Square pharmaceuticals with Z- score= approximately 12 and 18 in 2006 and 2007 respectively and Beximco pharmaceutical is in second position. So it seems Square pharmaceuticals is the major competitor of Beximco pharmaceuticals.

As it is good to be the second but it’s better to be the first, so Beximco pharma should hold the current better position and try to be the best among all the pharmaceutical companies of Bangladesh in near future.

Justification As Beximco pharma is in no bankruptcy position, we have recommended to hold this position and to be the best in pharmaceutical business further in future. We have already shown some weaknesses of Beximco pharma in our SWOT analysis, so at first we will justify our recommendation by getting out of those weaknesses in the following ways: • Beximco pharma should identify those pharmaceutical products (already mentioned) which are unavailable here and try to develop those as soon as possible to get a better position in this business.

• Beximco pharma should pay more concentration on its promotional activities like pasting poster or advertisement in television, radio, newspaper, and magazine etc.

• Beacon pharma and Renata are the first and only companies who bring the high-tech lyophilized Anti-Cancer Drug in Bangladesh which is not adopted by Beximco pharma yet. So Beximco Pharma should also

manufacture these products to be vital pharmaceutical company who works for the sallow citizen and to generate more revenue.

• Beximco pharma should recruit or hire highly skilled labors, expertise, scientists, and chemists and should arrange different training programs for the existing employees so that they can manufacture qualified pharmaceutical products for the customers.

• Beximco pharma should pay more attention to perform different kind of social responsibility like environment protection, sports sponsorship etc to make people more conscious about their health.

• Beximco pharma should involve more in foreign investment, because if there is recession in local country then it can generate revenue by increasing its investment more in foreign country if there is booming situation and vice versa. This will enable Beximco pharma to continue its business always as a running one.

• Beximco pharma should adopt new strategies and technologies which are unemployed by and absent to its competitors to be the best in the pharmaceutical business in our country.

Conclusion Beximco Pharma is built with the aim to be a world-class manufacturer of pharmaceutical products for operating in domestic and international markets, including Least Developed Countries (LDCs), developing and developed countries like USA and UK. And we believe our justification may show it a new path to enter into developed markets in particular and will lead to a significant sales and profit growth.