Introduction

Ferozsons Laboratories is one of the worlds leading pharmaceutical companies, producing a

powerful range of medicines designed to fight disease in important areas of medical need.
Ferozsons was formed in 1954 as one of the first pharmaceuticals manufacturing facilities in
the state of Pakistan and in 1960 become the first Pakistani Pharmaceuticals company to be
listed on the Karachi stock exchange and 6-times recipient of the Karachi stock exchanges
top 25 companies awards with the merger of the Boston Scientific Corporation (an
international medical device manufacturer, The Bag Group is Argentina's premier
pharmaceutical group, Kadmon is a global biopharmaceutical company based on US,
BioGaia is an innovative Swedish company and a world leader in probiotics and Biocon is a
research-driven, global healthcare company with a strong matrix of capabilities along the
biopharmaceutical value chain.) This merger brought together these companies with similar
research-based cultures and a shared vision of the future of the pharmaceutical industry.

Current Situation:
The company has achieved sales growth of over 16%, with Net Sales of Rs. 1.085 Billion in
year ended June2014. The Company achieved a Net Sales figure of Rs. 1.189 Billion against
the figure of Rs 1.029 Billion achieved last year.
In contrast, depreciation in the Rupee and a rise in the cost of inputs significantly eroded the
Gross Profit of the company, which grew by 8%, for the Year. Operating and Net Margins
were further reduced due to increased marketing spend.
The merger of the companies with feroasons brought some important benefits. With the
number of years of combined experience, Ferozsons has been able to concentrate skills and
resources to improve the performance of the business. There were also considerable savings
to be made in production, sales and marketing and administration.
These cost savings resulting from a merger are called economies of scale or synergies. The
range of products that the companies produced complemented each other and, although there
were areas in which these companies were working, the overlap was minimal. The result is
one of the broadest, strongest and most exciting product portfolios in the industry.

Ferozsons produces new products

Aurora (Rosuvastatin), in cardiology, for elevated cholesterol.

Orion (Olmesartan), also in cardiology for primary hypertension.

Centaurus (Entecavir) for Hepatitis B, in the companys Biotech division.

Dynetic (Itopride) in gastroenterology, for the treatment of Functional Dyspepsia.

Ferozsons aims to become the world leader in at least four of these categories within the next
ten years. In the Pakistan, Ferozsons is already leader in three - n cardiology, oncology, and
G.I. fields.
This case study examines the benefits of the merger, particularly in the field of research and
development, and the challenges of marketing pharmaceutical products in an Asia and Africa
market.

Research and Development of new treatments

One of the most important benefits of the merger was the opportunity of investment in
Ferozsons research and development programme.Ferozsons Laboratories Limited has entered
into an agreement with Gilead Sciences to be its exclusive branded medicines business
partner for Pakistan.
Under the agreement, Ferozsons will market and distribute certain Gilead medications for the
treatment of chronic Hepatitis-C; HIV and chronic Hepatitis-B virus (HBV) infection in
Pakistan. The agreement was a very important milestone for the company but more
significantly it also marks a paradigm shift in the treatment landscape for diseases such as
Hepatitis C, which affects over 10 million people in the country. We look forward to bringing
these new innovations to patients in Pakistan.
By bringing together the capabilities and facilities, Feroasons has been able to dramatically
increase the scale of the research and development, providing more manpower, improved,
shared technology and a larger number of laboratories. The combined expertise of some of

the worlds most talented scientists provides an exciting environment for discovery and
development.
The amounts spent are enormous. A total of 1.5bn was spent in 1999 alone. The merger has
enabled Ferozsons to increase investment in the discovery and development of new chemical
compounds the key building blocks of new medicines, which could become major brands of
the future. Owing to the highly complex nature of the products and the technology needed to
develop them, the pharmaceutical industry spends more on research and development than
other industries.

Product life cycle

As in many industries, Ferozsons develops and manufactures products that have a natural life
span. After a long period of development and testing, sales of the new medicine will
hopefully increase before reaching a period of stability. Eventually, sales will fall as patent
protection is lost and new advances in science lead to the discovery of more effective
products which will in their turn come onto the market. This is known as the product life
cycle.

Product portfolio
In the highly competitive pharmaceutical industry, it is essential for Ferozsons to maintain a
product portfolio at the cutting edge of modern medical science. Pharmaceutical companies
need to ensure that they always have new products coming through the research and
development process to replace older medicines and maintain a competitive, profitable
product portfolio.
A company that stays still will not survive for long. Developing a new medicine requires a
major commitment of time and resources. The path from discovery of a potentially effective
medicine to its launch on the market is a lengthy and complex process and can cost
some500m. At Ferozsons this is called The Development Pipeline.
Ferozsons has a significant number of products in the development stages. At any one time
the pipeline will have around 50 projects with many more to follow. At the start of 2000 there
were 159 research and development projects, including 57 brand new compounds in the
pipeline.

The ambitious targets for Ferozsons research and development teams are to deliver 12 new
compounds by the end of 2015 and thereafter 15 new ones every year by the year 2016. The
companys objective is to double the value of its pharmaceutical product portfolio every five
years.

Bringing a product to market

Phase I- involves the drug being given to 50-150 healthy volunteers to see how it

works in humans and help establish the correct dosage. This phase lasts for approximately
two years.

Phase II- also extends for two years and tests the drug on a small, probably 100 - 200,

number of patients with the condition that is being targeted. The medicine is assessed to
determine the dose at which it works and that is does not produce any unacceptable side
effects.

Phase III-the final period of trials extends this to between 500 and 5000 patients and

lasts for three years. These clinical trials are absolutely essential to guarantee that the
medicine works and that there are no potentially serious side effects.
Providing the safety and effectiveness of the drug can be established by the results of the
trials, Ferozsons has applied to the national licensing authorities for permission to market the
drug. Even then, close monitoring of the drugs performance will be necessary to ensure
there are no adverse effects.
The key to Ferozsons programme is the ability to select those compounds with the greatest
potential to become significant advances in healthcare in the future. Across the
pharmaceutical industry only one in ten candidate drugs will actually make it through the
process and on to the market.
No pharmaceutical company would invest 500m in research and development if, as soon as
the drug was released onto the market, all its competitors were able to analyse the compounds
in their own laboratories, copy them and release their own branded versions at a fraction of
the cost of development. It was essential that all the pharmaceutical companies are able to
recoup their investment in time and money over a period of time following the drugs release
onto the market. This protection will be achieved through the use of patents.

What is a patent?
Rather than try to keep a new compound secret, which is virtually impossible, Ferozsons
apply for a patent. This is a form of legal protection that prevents illegal copying. These
statutory rights will last for a set period, usually 20 years, after which other manufacturers are
free to produce their own, possibly cheaper versions of the drug called generics.
Ferozsons apply for patents of the molecules of the new compounds at a very early stage of
the research and development process to prevent new discoveries leaking out. Thereafter the
company also apply for further patents to protect the development process, the formulation
process and even the shape of the tablet or capsule.
Research into new medicines would be unthinkable in an environment without this protection
as the company would be unable to recover the original research and development costs. This
is an example of the legal system protecting and helping the manufacturer.
Marketing of new drugs
Having acquired a licence, Ferozsons has to market its new drug and attempt to earn a return
on the investment. This is by no means an easy or foregone conclusion. Most new products
face stiff competition from established medicines and doctors may need to be convinced to
prescribe a brand new product in place of a tried and tested medicine.
Although a patent may last 20 years, the new drug may have been ten years in development.
This drastically reduces the time available to recoup the cost of the research and
development. Further competition may come from other products, different in their make-up,
but launched in the same drug class to treat the same illnesses.
All these influences make the marketing of pharmaceutical products intensely competitive.
Consequently marketing expenditure are extremely high. However, the rewards for a
successful brand should be considerable.
The best way to ensure a financial success is to discover and market a drug substance that
treats an illness in a way that no existing medicine has done before.

Future Insight
Marketing a new medicine globally can often present particular challenges, as patent
restrictions can vary from one country to another. Systems of healthcare vary enormously and
different countries have different restrictions on the ways that medicines can be promoted.

For example, in Australia the National Health System means that patients have to pay a fee to
visit their doctor, whilst in the UK these visits are free.
Ferozsons plans to build on the position of strength that has been created by the merger, using
the best of each of the partners.