Presentation on Beximco Pharmaceuticals Ltd

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Presentation on

Beximco Pharma

the first US FDA approved company in Bangladesh

Presented by

Md. Hafiz-Al-AsadEMBA 18th BatchZR 1401003

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Sequence of Presentation

1 • About the Study

2 • Organizational Overview

3 • Strategy Overview

4 • Evaluating External Environment of Beximco Pharma

5 • Evaluating Resources, Capabilities and Competitiveness

6 • Generic Competitive Strategy of Beximco Pharma

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Sequence of Presentation

7 • Strengthening Company’s Competitive Position

8 • Strategies for Competing in International Market

9 • Diversification Strategies of Beximco

10 • CSR, Ethical Practices and Corporate Culture of BPL

11• Building of the Organization Capable of Good Strategy

Execution

12 • Recommendations

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About the Study6

Rationale of the Study

• Management practices as a strategic growth option isparticularly relevant in developing countries like Bangladesh,because of:• Insufficient strategic management knowledge• Lack of best practices• Less use of effective strategic management guides• Less priority in top managements mind set• Not achieving optimization in management processes

• As such, this study is highly significant to improve the efficiencyand effectiveness of strategic management practices inBeximco Pharmaceuticals Ltd. (BPL).

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Objectives of the Study

• Broad Objective

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To conceptualize the current strategicmanagement practices and problems ofBeximco Pharma

To identify and suggest scopes ofimprovement

To devise some recommendations toimprove the strategic manoeuvre of thecompany

Objectives of the Study• Specific Objectives

• To understand and analyze various concepts, tools and techniques ofstrategic management to evaluate BPL’s overall strategy.

• To present and analyze the vision and mission statement.• To analyze the objectives and core values.• To conduct situation analysis considering external and internal

environmental factors.• To identify the competitive business strategy of BPL.• To identify on the strategies for diversification of BPL.• To highlight BPL practices on ethics and CSR.• To present an overview of the corporate culture in BPL.• Offer some recommendations to improve the strategic management

practices of BPL.

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Methodology

Primary Source

• Current working experience• Discussion with different levels of mid and high ranking officials;

Sample size: 35 (Directors, Head of Department, SeniorManagers and Managers)

Secondary Source

• Annual reports, periodic reports, articles and brochures• Journals, research papers and articles from various online

sources and websites

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Organizational Overview11

Contribution of Pharma Industries in GDP of Bangladesh

Market Size13

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Top 10 Pharmaceutical Companies14

Ser Name of the Company Market Size (BDT) Market Share (%) Growth (%)

1 Square 19,722,066,693 19.50 12.55 2 Incepta Pharma 10,184,993,624 8.20 11.84 3 Beximco Pharma 8,967,999,031 7.70 8.04 4 Opsonin Pharma 5,302,711,389 4.80 4.77

9 Acme 3,954,249,448 4.80 5.76

6 Eskayef 4,547,963,290 4.60 4.28

5 Renata 5,056,968,911 4.50 8.75

8 ACI 4,263,630,198 4.50 8.69

7 Aristopharma 4,382,948,837 4.10 11.37

10 Drug International 3,924,562,931 3.90 10.51

Market Share of Top 10 Pharmaceuticals in Bangladesh

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SQUARE19.5%

INCEPTA8.2%

Beximco7.7%

ACME4.8%

OPSONIN4.8%

ESKAYEF4.6%

RENATA4.5%

A.C.I.4.5%

ARISTOPHARMA4.1%

DRUG INT3.9%

OTHERS33.4%

Source: Source: IMS Health Survey

Key Company Information16

Year of Establishment : 1976Country of Incorporation : BangladeshCommercial Production : 1980Status : Public Limited CompanyBusiness Lines : Manufacturing and Marketing of Pharmaceutical ProductsCountry of Operation : BangladeshAuthorized Cap (Taka) : 9,100 millionPaid-up Capital (Taka) : 3,862.4 millionNumber of Shareholders : Around 90,000Stock Exchange Listings : DSE, CSE and AIM of London Stock ExchangeNumber of Employees : 3,063

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CFO

ED, A&F

ED, SLS

MD

COO

ED, PRD

ED, Quality

Qua

TRACK I

TRACK II

Factory Wing

Head, R&D

Dir, Mfg

Dir, IMT

Dir, Commercial Mfg

MKT & COM

Organogram of Beximco Pharma

Dir, Mfg

Organizational Divisions of Beximco Pharma18

Factory Wing

Commercial/ Supply Chain Management

Marketing & Sales

Management

Financial Management

Human Resource

ManagementSource: Primary

Core Business Focus

Branded GenericsFormulation products for localand international markets300+ generics in 500+presentations

APIsLocal market share 70%ParacetamolPenicillinsHigh value APIs (pipeline)

Contract ManufacturingSuccessful track record ofcontract manufacturing forglobal MNCsBayer, Upjhon, GSK, Novartis

Company Operations

• One of the largest pharmaceuticalcompanies in Bangladesh.

• In local market, BPL operates inall over 64 districts.

• Largest exporter ofpharmaceutical products fromBangladesh.

• Received National ExportTrophy (Gold), the highestnational accolade for export, forthe record 04 times.

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Performance Analysis of 2014Launched 28 products (24 generics) in the domestic market

Introduced Oral Soluble Film (OSF) technology

Entered 02 new markets (Romania and Uganda)

A total of 55 new registrations done in 15 different countries

Net sales increased to BDT 11,206.9 million, registering a y-o-y growth rate of 6.8%

Net Profit after tax increased 8.8% to BDT 1,528.3 million

EPS rose by 8.64% to BDT 4.15

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Strategy Overview22

Vision Statement of Beximco Pharma23

“We will be one of the most trusted, admired and successfulpharmaceutical companies in the region with a focus onstrengthening research and developmentcapabilities, creating partnerships and buildingpresence across the globe”

Analysis of BPL’s Vision Statement

• Characteristics:• Easy to communicate• Graphic• Directional • Focused • Flexible • Feasible

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• Shortcomings:• Too generic• Too broad• Not easy to memorize

Mission Statement of BPL

“We are committed to enhancing human health andwell-being by providing contemporary and affordablemedicines, manufactured in full compliance with globalquality standards. We continually strive to improve ourcore capabilities to address the unmet medicalneeds of the patients and to deliver outstandingresults for our shareholders.”

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Analysis of BPL’s Mission Statement

1. Who we are? Does not clearly identify the company.

2. What we do? Enhancing human health and well-being byproviding contemporary and affordable medicines.

3. Why we are here? To address the unmet medical needs of thepatients.

4. Who is satisfied? Human health, patients and shareholders.

5. What is satisfied? Enhancing human health and well-being,address unmet medical needs of the patients and deliveroutstanding results for the shareholders.

6. How is satisfied? By providing contemporary and affordablemedicines, manufactured in full compliance with global qualitystandards; by continually striving to improve their core capabilities.

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5 Core Values of BPL27

Objectives

Financial Objective

Strategic Objective

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Financial Objectives

1. A 10% increase in annual revenues.

2. Annual increases in after-tax profits of 10%.

3. Annual increases in earnings per share of 10%.

4. Annual dividend increases of 15%.

5. Profit margins of 10%.

6. A 10% return on capital employed (ROCE).7. To ensure strong bond and credit ratings and larger cash flows.8. Increased shareholder value-in the form of an upward-trending

stock prices.

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Strategic Objectives

1. To achieve large volume of sales and increase marketcoverage.

2. To introduce wider product line and superior on time delivery.3. Improving innovation and flexibility through improved

knowledge creation and sharing .4. Continuous learning and developing a learning organization.5. Explore and keep on exploring new markets for products.6. Meet and exceed our customer requirements and expectation.7. Increase networking with partners.8. To contribute to the personal wellbeing of its employees.

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Balanced Scorecard

Financial Perspective

Customer Perspective

Business Process

Perspective

Learning and Growth Perspective

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Balanced Scorecard32

Perspective Strategic Theme: Smart, Profitable ExpansionObjective Measure Target Initiatives

Financial

Increase 10% of Revenue from Custom Products

% of Revenue from custom orders initiated in last 3 years

> 30% year 1Marketing to new target markets> 50% year 3

Avg. number of days to cost recovery

< 160 days year 1Operations review

< 130 days year 3 Project selection

Increase Sales Efficiency

Revenue per order delivery

> 30% more revenue year 1

Priority based project development

> 50% more revenue year 3



Customer Acquire New Customers

Avg. Number of local customers

> 30K in first 6 mos.

Local marketing/PR campaigns

> 50K in first year> 200K by year 3

Avg. Number of long term custom clients

> 10K in first 6 mos.

Value added service like optimization, auto bill

> 20K in first year> 80K by year 3

Avg. number of foreign development clients

> $ 3K year 1Free subscription for some existing customer

> $ 10K year 3Targeted marketing for start-ups



Process

Fact-based Project Selection

Market trends and new technology adaptation

< 90 days year 1Design & software Outsourcing

< 70 days year 3Research on existing projects

Streamline Development Process

Project duration, project acquisition to delivery

< 365 days year 1 Standardize design/build processes

< 300 days year 3

% of project delivered on schedule

> 93% year 1 Web-based project management

> 95% year 2



Learning and Growth

Use Business Intelligence Systems

% Eligible employees trained

>90% year 1In-house system training

>99% year 2

Integrated Knowledge Management

Online forms/surveys< 200 year 1

Corporate digital nervous system

< 100 year 2< 5 year 3

Strategic Intent

1. Strives to provide quality health care products, at the least costreaching the lowest rungs of the economic class of people.

2. Strives for the protection of shareholders’ capital, ensurehighest return and growth of their assets.

3. Strives for best compensation to all the employees.4. Strives for the best cooperation of the creditors and debtors;

the suppliers, utility service providers and the customers.5. Try to understand client’s needs and to fit in with the

competitive advantage.6. Try to face customers’ real-life issues through R&D.7. Strives for practicing good-governance in every sphere.

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Strategies at Different Levels37

Corporate StrategyMission & Vision

Long-Term Value Creation

Business Strategies

Functional StrategiesR&D, Marketing, Manufacturing, HR,

Finance, etc.

Operating Strategies Regions, Plants, Departments within

Functional Areas

Board of Directors10 member

Executive Committee4 member

Management Committee10 member

Departmental Heads

Source: Primary

Business Model

Profit Formulae

Value Proposition

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Value Proposition• One of the best quality drugs manufacturer in the country.• Benchmarked to the highest global regulatory standards, TGA,

Australia, AGES (EU), Health Canada (Canada), ANVISA(Brazil), TFDA (Taiwan) and finally the US FDA authority.

• Continually strive to provide access to safe, effective andaffordable medicines.

• Able to respond to the needs of physicians, patients, andhealth care providers, both therapeutically and economically.

• Continue to expand its product portfolio; strong differentiationin specialized dosage delivery systems.

• Strong research orientation in generic formulation development,which are very difficult to imitate.

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Profit Formulae40

Source: Annual Report of 2014

Evaluating External Environment of BPL41

Industry’s Development42

80%

20%

1980MNC Local

20%

80%

2008MNC Local

Source: Website of Ministry of Trade and Commerce

Industry Life Cycle of Pharma Industry

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Drivers of Change in Pharma Industry

Regulatory Influences and Government

Policy

Technological Change

Changes in the Long-term

Industry Growth Rate

Manufacturing Innovation

Marketing Innovation

Changes in Cost and Efficiency

The Internet and e-commerce Technologies

Socio-cultural Changes

Increasing Globalization of

the Industry

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PESTLE Analysis45

PESTLE Analysis46

• Political.• A troubled political history since

1971.• Political instability is blighting its

prospects for economic growth.• Political situation of Bangladesh

is calm and quite now.

• But very recent politicalinstability caused a greatharm to pharmaceuticalbusiness.

PESTLE Analysis47

• Economical.• Rapidly developing market-based economy.• Inflation pulled demand (GDP) growth is significantly

potential for growing market.• The economy has grown at the rate of 6-7% per annum

over the past few years.

• Buying power of Bangladeshi people is increasing.

• Health conscious buyer is increased too.• Pharmaceutical market size is around 12,000 Crore BDT.

PESTLE Analysis48

• Social.• Unplanned urbanization and the changing lifestyle, taking

of more and more fast foods and soft drinks by the urbanpeople is the main cause of diabetes in the country.

• The death rate of non-infectious diseases likediabetes or cardiac disease in Bangladesh is more thantwo times higher than infectious ones.

• As such, the social values and practices in Bangladesh isinfluencing the industry product requirements.

PESTLE Analysis49

• Technological.• Major companies are very

much aggressive to introduceany technological changethrough strategic alliance andjoint venture.

• Application of newtechnologies in planning,process, distribution andother activities have becomecommon in this industry.

PESTLE Analysis50

• Legal.• DGDA is the Drug Regulatory Authority of the country.• DGDA supervises and implements all prevailing Drug

Regulations in the country• Two pricing method for locally manufactured items;

controlled and decontrolled category.• In controlled category, govt. fixes the MRP and in

decontrolled category, company does the same.• At present, the legislation and regulation in pharmaceutical

industry is favourable to boost the industry.

PESTLE Analysis51

• Environment.• Have to handle different kinds

of drugs, chemicals etc. whichare very harmful for both thepeople, who are dealing withit, as well as for theenvironment, when it isexposed.

• Many of the pharmaceuticalscompanies have world class'Effluent Treatment Plant(ETP)'.

Porter’s Five Forces Model

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Source: https://saylordotorg.github.io/text_principles-of-marketing-v2.0/s05-02-components-of-the-strategic-pl.html

Porter’s Five Forces Model53

Source: Primary

Strategic Group Mapping54

Low Medium HighProduct Quality

Prod

uct L

ine

Nar

row

Med

ium

Wid

e SquareIncepta

Beximco PharmaRenata

OpsoninAcme

SK+FAristopharmaACIDrug InternationalSanofi Aventis

GacoNavanaRAKSomatecRangs

Evaluating Resources, Capabilities and Competitiveness

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SWOT AnalysisStrengths

• Strong Brand Image andfavourable corporate image

• Decentralized decision-makingstructure.

• An attractive loyal customerbase.

Weakness• Excessive overhead cost, and

hence low profit margin.• Fragile share market images to

customers.• Lack of proper integration

between functional units.

Opportunity• Faster market growth.• Government regulations are in

favour of local manufactures.• Opportunity to enter in the

biggest market like US market.

Threats• Intense competition.• Highly regulated market.• Strong competitors are

working on backward linkage for API production.

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Assessing Competencies57

• Competencies of Beximco Pharma

Quality Competent HR


• Competencies of Beximco Pharma

2008 2015

RegulatoryApprovals

Therapeutic Goods Administration (TGA), Australia AGES, Austria; for European Union TFDA, TaiwanANVISA, Brazil INVIMA, Colombia MCC, South Africa


• Core Competencies of Beximco Pharma

State of the Art Manufacturing Capability


• Distinctive Competencies of Beximco Pharma

Strong R&D Capabilities

Supply Chain Management in BPL62

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Value Chain Analysis

Key Success Factors (KSFs)Manufacturing Related KSFs

• Zero defect manufacturing.• High capacity utilization.• Availability of skilled labour.• Low cost product design and

engineering.

Marketing Related KSFs• Breadth of product line and

product selection.• In time filling of customer

orders.• Attractive style and packaging

design.

Skills Related KSFs• Expertise in R&D and

technology.• Ability to develop innovative

products.• Quality control know-how.

Technology Related KSFs• Technical capability to make

innovative improvements inproduction process.

• Product innovation capability.• Research expertise in

introducing new products.

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Generic Competitive Strategy of Beximco Pharma

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Broad Differentiation Strategy

R&D capabilities with successful development of difficult-to-make formulations

Created strong differentiation by offering technology-driven, specialized drug delivery systems

Focusing on innovation, differentiation and diversification of products for a broad cross section of customer segments including the global customers

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• Metered dose inhalers• Dry powder inhalers• Prefilled syringes• Lyophilized injectable etc.

• Multi-layer tablet• Sustained release formulation• Dispersible tablet etc.

Strengthening BPL’s Competitive Position67

Offensive Strategy

Key to the offensive strategy - Innovation and Differentiation.

Continuously developing its diversified manufacturing capabilities.

In 2014, Beximco Pharma expanded its portfolio with 24new generics in a total of 28 presentations across 09

different therapeutic categories; 03 products were launched for the first time in Bangladesh.

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Red Ocean Strategy

• Difficult for a technology driven pharmaceutical company to findor create a new uncontested market space.

• BPL competes in existing market place & beats the competition.• Exploits existing demand, makes the value cost trade-off and

align its activities with its strategic choice of broaddifferentiations.

• The domestic market is highly concentrated and competitive.• BPL continuously thrives its efforts to increase its existing

market share competing with Square and Incepta.• Offensively exploring the international market and trying to

enter in the regulated market.

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Merger of Beximco Pharma and Beximco Infusions (2005)

• Went for an 'amalgamation scheme' of merger on June 2, 2005.• Strategy to grow and lead in pharmaceuticals export at a

competitive price.• Benefits:

• Improved organisational capability• Combination of people having diverse skills, talent and vast

experience.• Rationalised overhead costs, use of raw-material and HR

ensuring ‘value for money’.• Reducing cost and improving efficiency.

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Strategic Alliance and Partnership71

Strategic Alliances with global MNCs

Textiles

Others

Partnerships with Leading International Corporations

Outsourcing Value Chain Activities

I&I Service is the distribution partner of BPL, which helpachieving excellence in product distribution to customers

Outsource the printing materials, their design, technicaltraining to the technical person (SMSRC, IMS, Chlorofil),Software to run the business

It does not create hollow out effect of company

It does not lose its touch to the value chin activities that arecritical for long term sustainability

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Integrating the Backward & Forward Linkage

Backward LinkageManufacturing API

like amoxicillin, paracetamol,

cloxacillin, flucloxacillin to meet

own demand and also supplying to

other local manufactures and

MNCs.

Forward LinkagePossessing Suktara

Printers and Packaging Unit that

is providing the secondary

packaging materials like packaging carton, leaflet,

brochures, annual reports etc.

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Strategies for Competing in International Market

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Export Strategies

• Aggressively pursuing the exportoperation as a strategy tocompete in international market.

• A global footprint in 45countries.

• Growing presence in differentcountries across Africa, LatinAmerica, Asia, Middle East andCentral America.

• Received National Export

Trophy "Gold" for a record 4times for its outstandingachievement in export.

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AsiaSingapore Hong KongCambodiaNepalSri LankaPhilippineThailandBhutanMacauMalaysiaAfghanistanAzerbaijanVietnam

Current Export Markets

Middle EastYemen Jordan

AfricaKenya Ghana SomaliaNigeriaBeninLiberiaSouth AfricaEthiopiaMauritiusMozambiqueSudanBurundiUgandaLesotho

Caribbean Jamaica Netherlands Antilles

Pacific IslandFijiPapua New GuineaSolomon IslandKiribatiTongaSamoa

Latin & Central AmericaChileBelizeEl SalvadorColombiaSurinamNicaragua

Europe Austria GermanyTurkey

Latin America &Central AmericaBrazil3

Mexico VenezuelaParaguayEcuadorUruguay BoliviaCubaPeruCosta RicaHondurasPanamaDominican RepublicGuatemala

AfricaTanzaniaCameroonBotswanaTogoNamibiaSwazilandMadagascarDR CongoGabonMauritaniaZimbabweTchadSierra Leone

AsiaIndonesiaTaiwan

MENASaudi Arabia2

Kuwait2

Bahrain2

Oman2

Qatar2

UAE2

IraqAlgeria LibyaTunisia

Australia1 &New Zealand1

USA4

1Received GMP clearance and product approvals from TGA Australia 4Subject to approval by USFDA2Received GMP approval from GCC 3 Received GMP approval from ANVISA, Brazil

Expanding Global Footprint Across all the Continents

Canada

North America

Europe

Licensing Strategies

• Beximco Pharma wasincorporated in the late 1970s,and began as a distributor,importing products from globalMNCs like Bayer, Germanyand Upjohn Inc., USA andselling them in the local market,which were later manufacturedand distributed underlicensing arrangements.

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Strategies NOT Adopted Yet80

Diversification Strategies of Beximco81

Product Diversification82

Product Categories

Regular (14) Specialized (8) Newly Developed (13)

Specialized ProductsMDI DPI Prefilled Syringes

IV Infusion Lyophilized Injectables Ophthalmics

Related Diversification

• Beximco Group is the largest private sector industrialconglomerate in Bangladesh.

• Beximco comprises of 05 publicly listed companies and 16private companies.

• The Group turnover in 2008 was BDT 18.5 billion.• Beximco employs 48,000 people and has 230,000

shareholders.

• Beximco’s shares constitute 4.34% of the marketcapitalization of DSE.

• No related diversification; diverse unrelated diversification.

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TEXTILES CERAMICSPHARMACEUTICALS

JUTE MEDIA HOSPITALITY

25 Companies, 4 are publicly listed48,000 employees, 250,000 shareholders

Unrelated Diversification

Unrelated Diversification“Yellow” “Shinepukur Ceramics Ltd.”

CSR, Ethical Practices and Corporate Culture of BPL

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Corporate Social Responsibility (CSR)88

Responsibility to the Community at Large

Responsibility to the Environment

Responsibility to the Stakeholders


• Mobile Alliance for Maternal Action(MAMA).

• Extending Support to JaagoFoundation.

• Support to Rana Plaza Victims.• Free Medicines for UN Health Camps.• Sponsoring to Promote Maternal and

New-born Health.• Sponsoring National Campaign on

Healthy Living.

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Support to Jaago Foundation

MAMA Campaign


• Support for Developing LowCost Mechanical ProstheticHand.

• Sponsoring ‘Spreading Care’.• Universal Children’s Day, 2014.• World Osteoporosis Day, 2014.• World Heart Day, 2014.

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Universal Children’s Day, 2014

Responsibility to the Environment

• World Environment Day, 2014.• Path to Protecting the Ozone

Layer.• CFC gases used in inhalers have

ozone-depleting properties.• In 2006, BPL were the first

Bangladeshi company to proactivelymake the shift to HFA inhalers.

• Beximco Pharma and BangladeshLung Foundation, designed aneffective awareness raising strategyfor CFC-free MDIs for asthma andCOPD patients.

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Ethical Practices in Beximco Pharma92

Promote ethical

business practice

Ensure equal opportunities

Provide a safe and

healthy work environment

Value diversity in

the workplace

Do business ethically

We Don’t Practice in Beximco Pharma93

Faulty oversight that implicitlyallows the overzealous pursuitof personal gain, wealth, andother self-interests

Heavy pressures on companymanagers to meet or beatperformance targets

A company culture that putsprofitability and "good"business performance aheadof ethical behaviour

A Strong and Healthy-Culture Company

The Managing Director (MD), established consistent and sensible values, principles, and practices

A sincere, long-standing company commitment to operating the business according to these established

traditions

A genuine concern for the well-being of the organization’s three biggest constituencies -customers, employees, and shareholders

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Building of Beximco Pharma; An Organization Capable of Good Strategy Execution

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10 Basic Tasks of Strategy Execution Process

1• Staffing the organization with the right people for executing the strategy

2• Build the organizational capabilities required for successful strategy

execution3

• Establish a strategy supportive organizational structure

4• Allocate sufficient resources to the strategy execution effort

5• Institute policies and procedures that facilitate strategy execution

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10 Basic Tasks of Strategy Execution Process

6• Adopt best practices and business processes that drive continuous

improvement7

• Install information and operating systems that support strategy execution activities

8• Tie rewards and incentives directly to the achievement of strategic and

financial targets 9

• Instill a corporate culture that promotes good strategy execution

10• Exercise strong leadership to propel strategy execution forward

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Recommendations1. A top level, highly empowered “Strategic Value Chain Optimization Team” may

be formed in Beximco Pharma, in order to coordination the entire value chain activitiesof the company to enhance cross-functional coordination in order to attain maximumsupply chain surplus.

2. Measures may be taken to form “Joint Venture” with foreign leadingpharmaceuticals companies and develop Active Pharmaceuticals Ingredients (APIs)manufacturing capability internally; thereby to improve the backward integration, inorder to reduce absolute dependency on input suppliers and external environment.

3. The company may strengthen their focus in “Differentiated PromotionalApproach” by providing medical representatives with more professional knowledgebased training and communication materials (beyond company’s traditional sales aids)to develop and increase the hoard of MR knowledge of Beximco Pharma.

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Corporate Video99

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