For this assignment, you will select a publicly held company listed on either th

ID: 328754 • Letter: F

Question

For this assignment, you will select a publicly held company listed on either the NYSE or Nasdaq. The objective is to research the company, identify 3 key strategic issues for the company, and the provide a clear set of recommendations for each strategic issue. The focus of your recommendations should be on building on existing strengths, addressing weaknesses, capitalizing on opportunities, and/or mitigating threats that a firm might be confronted with per your SWOT analysis.

The project outline is below:

Introduction (1 pg.)

- Description of company including mission, vision, and key objectives

- Major products and target markets served

- Financial performance over the past 1-2 years

- Number of employees and general structure of company

- Any other pertinent information, events, or trends impacting the company

Environmental Analysis (3 pgs.)

- Macro-Environmental Trends (use PESTEL as main tool to analyze)

- Industry Environment (use the Five Forces Framework as main analytical

tool)

- Competitor Analysis (Use strategic group analysis and mapping as key

analytical tool)

- Internal Analysis (identify key strengths and weaknesses of company)

- SWOT Analysis (Summarize key strengths and weaknesses internal to the

company as well as key external environmental opportunities and threats)

The SWOT should be presented in a 2x2 graph with 3-4 items in each category.

III. Identification and brief description of the 3 most important issues for

the company to address. (1 pg.)

Your proposed strategies to address each issue identified in part III.

(2-3 pgs.)

-Please be as specific as possible with your recommendations

- Provide information regarding implementation plans as well

Conclusion (1/2 pg.)

VIII. References (APA style with both in-text citations and reference sheet)

Appendices (if any)

Explanation / Answer

Indian pharmaceutical sector accounts for about 2.4 per cent of the global pharmaceutical industry in value terms and 10 per cent in volume terms

India accounts for 20 per cent of global exports in generics. India’s pharmaceutical exports stood at US$ 16.4 billion in 2016-17 and are expected to grow by 30 per cent over the next three years to reach US$ 20 billion by 2020

The country’s pharmaceutical industry is expected to expand at a CAGR of 12.89 per cent over 2015–20 to reach US$ 55 billion

Indian healthcare sector, one of the fastest growing sectors, is expected to advance at a CAGR of 17 per cent to reach US$ 250 billion over 2008–20

The generics market stood at US$ 26.1 billion in 2016 from US$ 21 billion in 2015. India’s generics market has immense potential for growth

Crop insurance market in India is the largest in the world and covers around 32 million farmers; which accounted for nearly 19 per cent of the total farmers in the country

Strong growth in the automotive industry over the next decade to be a key driver of motor insurance

The Indian pharmaceuticals market witnessed growth at a CAGR of 5.64 per cent, during 2011-16, with the market increasing from US$ 20.95 billion in 2011 to US$ 27.57 billion in 2016.

By 2020, India is likely to be among the top three pharmaceutical markets by incremental growth and 6th largest market globally in absolute size

India’s cost of production is significantly lower than that of the US and almost half of that of Europe. It gives a competitive edge to India over others.

Increase in the size of middle class households coupled with the improvement in medical infrastructure and increase in the penetration of health insurance in the country will also influence in the growth of pharmaceuticals sector.

Indian pharma companies are capitalising on export opportunities in regulated and semi-regulated markets

In FY16, India exported pharmaceutical products worth US$ 16.89 billion, with the number expected to reach US$ 40 billion by 2020

Indian drugs are exported to more than 200 countries in the world, with the US as the key market

India is the world’s largest provider of generic medicines; the country’s generic drugs account for 20 per cent of global generic drug exports (in terms of volumes)

Accessibility

Over US$ 200 billion to be spent on medical infrastructure in the next decade

New business models expected to penetrate tier-2 and 3 cities

Over 160,000 hospital beds expected to be added each year in the next decade

India’s generic drugs account for 20 per cent of global exports in terms of volume, making the country the largest provider of generic medicines globally

Acceptability

Rising levels of education to increase acceptability of pharmaceuticals

Patients to show greater propensity to self-medicate, boosting the OTC market

Acceptance of biologics and preventive medicines to rise

A skilled workforce as well as high managerial and technical competence

Surge in medical tourism due to increased patient inflow from other countries

Affordability

Rising income could drive 73 million households to the middle class over the next 10 years

Over 650 million people expected to be covered by health insurance by 2020

Government-sponsored programme set to provide health benefits to over 380 million BPL people by the end of 2017

The government plans to provide free generic medicines to half the population at an estimated cost of US$ 5.4 billion

Epidemiological factors

Patient pool expected to increase over 20 per cent in the next 10 years, mainly due to rise in population New diseases and lifestyle changes to boost demand

Increasing prevalence of lifestyle diseases

LUPIN: ON A HIGH GROWTH PATH

§ Lupin is a renowned pharma player producing a wide range of quality, affordable generic and branded formulations and APIs § Lupin is the seventh largest generic pharmaceutical company globally in terms of market capitalisation § Its revenues increased from US$ 822.5 million in FY09 to US$ 2.1 billion in FY16, at a CAGR of 14.3 per cent during FY09-16 § Advanced market formulations comprised nearly 46 per cent of its revenues in FY16 § Lupin is 3rd largest drug manufacturer in India by sales § In 2016, Lupin received USFDA nod for its generic version of Diclofenac capsules that are used for treating acute pain and osteoarthritis § In February 2017, Lupin has received the final approval from USFDA to market potassium sulfate, sodium sulfate and magnesium sulfate oral solutions, which are used to treat a form of cancer. § In March 2017, Lupin received an approval from United States Food and Drug Administration (US FDA) to market generic version of tobramycin inhalation solution ‘Tobi’, which is useful to treat cystic fibrosis patients along with P. aeruginosa.

Porter’s Five Forces Framework Analysis

Threat of Substitutes

Threat to substitute products is low; however, homeopathy and Ayurvedic medicines can act as substitute

Bargaining Power of Suppliers

Difficult-to-manufacture APIs such as steroids, sex hormones and peptides give bargaining power to suppliers. However, generic APIs do not have much of that power

Competitive Rivalry

Growth opportunities for pharma companies are expected to grow in next few years, with many drugs going off-patent in the US and other countries, thus increasing competition § Indian pharma companies will face competition from big companies, backed by huge financial muscle

Bargaining Power of Buyers

§ Generic drugs offer a cost-effective alternative to drugs innovators and significant savings to customers § Biosimilars offer significant cost saving for insurance companies in India

Threat of New Entrants

Strict government regulations thwart entry of new players § Difficult to survive because of high gestation period.

SWOT Analysis

Strength

1. Worldwide leader in Cephalosporin and Anti TB drugs
2. Considerable presence in market for drugs against Asthma, Pediatrics, Diabetes, and CNS boosts the sales
3. In the US and Japanese market it is the largest generic player
4. Acquisition of I’rom pharma helped to increase its product list and in turn sales

5. Wide global footprint as it is present in over 70 countries

Weakness

1. High dependence on global formulation business with 84% revenue coming from US market
3. Forecasting done on technological level is less

4. It operates in low growth segments such CNS, respiratory diseases

Opportunity

1.Increased health awareness

2. Emerging technological trends in drug delivery

3. Increasing prevalence of TB in developing countries

Threats

1.Unsuccessful assimilation of questions

2.Rigid opposition both from locals and global company

3. Soaring cost of discovering novel products

Competition

Competitors

1. Sun pharmaceuticals

2. Ranbaxy pharmaceuticals

3. Dr. Reddy’s lab

4. Cipla

Key Financial Ratios of Lupin

Mar '17

Mar '16

Mar '15

Mar '14

Mar '13

Investment Valuation Ratios

Face Value

Dividend Per Share

7.5

Operating Profit Per Share (Rs)

99.34

89.67

75.05

64.95

42.1

Net Operating Profit Per Share (Rs)

282.41

250.34

216.97

199.37

159.15

Free Reserves Per Share (Rs)

Bonus in Equity Capital

44.45

44.55

44.66

44.77

44.85

Profitability Ratios

Operating Profit Margin(%)

35.17

35.81

34.58

32.57

26.45

Profit Before Interest And Tax Margin(%)

32.08

32.57

30.56

29.34

24.26

Gross Profit Margin(%)

32.3

33.1

31.13

30.7

24.34

Cash Profit Margin(%)

27.31

27.82

27.52

26.63

19.73

Adjusted Cash Margin(%)

27.31

27.82

27.52

26.63

19.73

Net Profit Margin(%)

24.63

25.57

24.58

25.99

17.69

Adjusted Net Profit Margin(%)

24.46

25.16

24.13

24.84

17.63

Return On Capital Employed(%)

27.38

32.72

35.47

44.39

32.52

Return On Net Worth(%)

21.25

24.88

26.55

33.3

Adjusted Return on Net Worth(%)

21.25

24.88

26.55

33.3

Return on Assets Excluding Revaluations

327.3

257.28

200.84

155.65

108.3

Return on Assets Including Revaluations

327.3

257.28

200.84

155.65

108.3

Return on Long Term Funds(%)

28.45

33.77

35.56

45.12

36.03

Liquidity And Solvency Ratios

Current Ratio

2.36

2.65

2.54

2.81

1.59

Quick Ratio

2.14

2.5

1.7

2.27

1.69

Debt Equity Ratio

0.04

0.03

0.02

0.11

Long Term Debt Equity Ratio

0.01

Debt Coverage Ratios

Interest Cover

143.05

265.25

656.55

150.55

52.8

Total Debt to Owners Fund

0.04

0.03

0.02

0.11

Financial Charges Coverage Ratio

155.49

285.92

725.28

158.54

57.31

Financial Charges Coverage Ratio Post Tax

120.22

216.88

558.99

119.72

43.38

Management Efficiency Ratios

Inventory Turnover Ratio

5.95

5.66

6.57

5.4

Debtors Turnover Ratio

3.02

3.19

3.63

3.78

4.23

Investments Turnover Ratio

5.95

5.66

6.57

5.4

Fixed Assets Turnover Ratio

3.51

2.93

2.99

2.93

2.59

Total Assets Turnover Ratio

0.83

0.94

1.08

1.26

1.32

Asset Turnover Ratio

0.93

1.07

1.21

1.43

1.41

Average Raw Material Holding

Average Finished Goods Held

Number of Days In Working Capital

114.5

162.5

115.81

143.92

126.07

Profit & Loss Account Ratios

Material Cost Composition

31.34

34.22

36.01

36.05

41.05

Imported Composition of Raw Materials Consumed

40.09

40.58

38.3

38.35

Selling Distribution Cost Composition

Expenses as Composition of Total Sales

63.3

64.18

70.55

62.82

Cash Flow Indicator Ratios

Dividend Payout Ratio Net Profit

10.76

11.71

14.06

11.57

14.2

Dividend Payout Ratio Cash Profit

9.64

10.59

12.33

10.79

12.69

Earning Retention Ratio

89.24

88.29

85.94

88.43

85.8

Cash Earning Retention Ratio

90.36

89.41

87.67

89.21

87.31

Adjusted Cash Flow Times

0.17

0.12