Application Exercise (Week 4)

Question 1

Sales data of Pfizer India

Year 1997 1998 1999
Rupees in lakhs 14160 23342.54 28732.57

Assumptions: Data for my own company (Actavis Pharma) was not available as this was recently set up in India and the data
relevant (since this data was from US and EU operations) if compared to Indian GDP. Hence, as suggested by Prof Mody, I ha
a company which had provided sales data of 10 years on its website. Most other Indian companies have posted 3 - 5 years da

Regress the sales volume on the GDP

The sales volume for last 10 years of Pfizer India has been regressed on the GDP of India. The output is shown below:

Pfizer India Sales

Year
Rs in crores
1997 141.6000
1998 233.4254
1999 287.3257
2000 327.1937
2001 362.0656
2002 651.2682
2003 558.956
2004 659.6584
2005 697.494
2006 765.858

SUMMARY OUTPUT

Regression Statistics
Multiple R 0.7622589517153
R Square 0.5810387094701
Adjusted R Square 0.5286685481539
Standard Error 152.69856554944
Observations 10

ANOVA
df SS MS
Regression 1 258696.80765714 258696.80765714
Residual 8 186534.81536686 23316.8519208575
Total 9 445231.623024

Coefficients Standard Error t Stat

Intercept -11.07132988065 151.854125445066 -0.072907666144758
X Variable 1 0.0003555566553 0.0001067451703579 3.33089219925742

RESIDUAL OUTPUT

Observation Predicted Y Residuals

1 308.77428158923 -167.174281589233
2 350.38578806687 -116.960388066871
3 373.90657192521 -86.5808719252068
4 397.23819964295 -70.0444996429474
5 415.09603265306 -53.0304326530591
6 439.75495336486 211.513246635139
7 457.68105325278 101.274946747218
8 497.56953217906 162.088867820939
9 532.71986311743 164.774136882569
10 911.71872420855 -145.860724208546

Relation between GDP data and sales volume of the company

Regression Analysis
The Y intercept is: -11.07133
The slope is: 0.00036
Hence, the equation of the line to depict the relation between the GDP of India & Pfizer India's sales volume is given by:
y = 0.00036 x GDP - 11.07133; wherein, y = sales of Pfizer India

Correlation analysis
Pfizer India Sales GDP at factor cost
Pfizer India Sales 1
GDP at factor cost 0.7622589517153 1

The above analysis a high positive correlation (0.76) between the GDp of India and the sales volume of Pfizer India.

Year - on - Year growth analysis

Year Pfizer India Sales Y-o-Y growth in sales GDP at factor cost
1997 141.6 - 899563
1998 233.4254 65% 1016595
1999 287.3257 23% 1082747
2000 327.1937 14% 1148367
2001 362.0656 11% 1198592
 2002 651.2682 80% 1267945
2003 558.956 -14% 1318362
2004 659.6584 18% 1430548
2005 697.494 6% 1529408
2006 765.858 10% 2595339

The year-on-year analysis shows that the growth in Pfizer India's sales volume has far outpaced the growth in the Indian GDP
in the years 1998 & 2002 being phenomenal. However in 2003 the growth in sales was negative meaning the sales volume de
still showed a modest 4% growth rate.The growth rate in sales from 2003 to 2006 has been quite erratic, however the GDP ha
2006. However, the point to note is that the sales of the company has increased at a healthy rate with the growth in the GDP o
be ignored as an one-off incident).

When the GDP of a country is growing at a fast pace like in India there is bound to be increase in consumption by the people,
expenditures. There is also bound to be changes in lifestyles and a general buyancy in all sectors. All these factors are bound
expenditure of the country as more people will be able to afford drugs and latest treatments, governement healthcare spending
for lifestyle diseases will increase. The pharmaceutical sector in India is witnessing all these phenomena now with the GDP sh

The average growth rate in recent years in the pharma sector in India has been close to 9 % and is expected to show a growt
years in line with the fantastic growth rate predicted for the GDP of the country. Also the implementation of the new IPR laws f
sector tremendously especially the global pharma giants like Pfizer, Novartis, Bayer, Sanofi-Aventis etc which are now looking
blockbusters in the Indian market. The top Indian pharma companies have also showed a tremendous growth in the recent ye
Infact due to tremedous cost advantages that the Indian pharma companies enjoy, they have been posting growth rates of mo
outpacing the growth rates of the Indian subsidiaries of the global MNCs. With 100% FDI allowed in the pharma sector in India
the capital investments in the pharma sector and this is what India is currently witnessing.

Thus by taking a close look at the business environment in which companies like Pfizer is operating in India we can observe th
tremendous growth shown by the Indian companies and the overall growth in the Indian economy.

Depict the relationship between the two variables in a graph

The relationship between the sales volume of Pfizer India and the GDP of India is depicted in the following graph

Data Table

Year Pfizer India Sales

1997 141.6
1998 233.4254
1999 287.3257
2000 327.1937
2001 362.0656
2002 651.2682
2003 558.956
2004 659.6584
2005 697.494
2006 765.858

GraphicalRelationship
representation
between Pfizer India's sales volume & GDP of India
900 3000000

800
2500000
700

600 2000000
crores)

crores)

500
1500000
 Relationship between Pfizer India's sales volume & GDP of India
900 3000000

800
2500000
700

600 2000000

Rupees (crores)

Rupees (crores)
500
1500000
400

300 1000000

200
500000
100

0 0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year
 2000 2001 2002 2003 2004 2005
32719.37 36206.56 65126.82 55895.6 65965.84 69749.4

his was recently set up in India and the data from the parent global company was not
DP. Hence, as suggested by Prof Mody, I have taken data from Pfizer India as this was
dian companies have posted 3 - 5 years data on their websites.

of India. The output is shown below:

GDP at factor cost

Rs in crores
899563
1016595
1082747
1148367
1198592
1267945
1318362
1430548
1529408
2595339

F Significance F
 11.0948428430739 0.010370633613542

P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%

0.943669490615283 -361.247570815498 339.104911054 -361.247571 339.1049111
0.0103706336135419 0.000109401851199 0.00060171146 0.0001094 0.000601711

fizer India's sales volume is given by:

d the sales volume of Pfizer India.

Y-o-Y growth in GDP

-
13%
7%
6%
4%
 6%
4%
9%
7%
70%

far outpaced the growth in the Indian GDP from 1997 to 2002 with the growth in sales
was negative meaning the sales volume decreased whereas the GDP
has been quite erratic, however the GDP has shown a steady growth with a huge surge in growth rate in
a healthy rate with the growth in the GDP of the country (except in 2003 which can

be increase in consumption by the people, more investments and governement

cy in all sectors. All these factors are bound to increase helathcare
eatments, governement healthcare spendings will increase, expenditure on treatment
all these phenomena now with the GDP showing a very good growth rate.

se to 9 % and is expected to show a growth rate of 9.5 - 10 % or more in the coming

o the implementation of the new IPR laws from 2005 has helped the pharma
r, Sanofi-Aventis etc which are now looking forward to launching their global
owed a tremendous growth in the recent years in line with the booming economy.
they have been posting growth rates of more than 25% in the recent years far
% FDI allowed in the pharma sector in India, there is also bound to be a huge surge in

fizer is operating in India we can observe that there is a huge scope for further growth in line with the
ndian economy.

depicted in the following graph

GDP at factor cost

899563
1016595
1082747
1148367
1198592
1267945
1318362
1430548
1529408
2595339

India's sales volume & GDP of India

3000000

2500000

2000000
crores)

1500000 Pfizer India Sales

India's sales volume & GDP of India
3000000

2500000

2000000

Rupees (crores)
1500000 Pfizer India Sales
GDP at factor cost
1000000

500000

0
2003 2004 2005 2006
 2006
76585.8
Application Exercise (Week 4)

Question 2

The growth rates of the Indian Pharmaceutical industry & Pfizer India for the last 5 years is given below:

Indian Pharma Industry: Source US Census Bureau; Economist Intelligence Unit; and World Trade Atlas
Figures in USD
Year Market size Growth Rate
2001 3260000000 -
2002 3735000000 15%
2003 4088000000 9%
2004 4662000000 14%
2005 5344000000 15%
2006 6205000000 16%

Pfizer India
Figures in USD
Year Market size Growth Rate
2001 90516400 -
2002 162817050 80%
2003 139739000 -14%
2004 164914600 18%
2005 174373500 6%
2006 191464500 10%

Comparison of Growth rates of Pfizer India and the Indian pharma industry over the last 5 years

Year Pfizer India Indian Pharma Industry

2002 80% 15%
2003 -14% 9%
2004 18% 14%
2005 6% 15%
2006 10% 16%

Correlation analysis of growth rates

Pfizer India Indian Pharma Industry

Pfizer India 1
Indian Pharma Market 0.496680580997184 1
Regression analysis of growth rates
X Variable 1 Line Fit
SUMMARY OUTPUT
100%
Regression Statistics 50%
Multiple R 0.496680580997185

Y
R Square 0.246691599539701 0%
Adjusted R Square -0.004411200613732 8% 9% 10% 11% 12% 13% 14%
-50%
Standard Error 0.356311066004939
X Variable 1
Observations 5

ANOVA
df SS MS F
Regression 1 0.124727272727273 0.124727 0.982433
Residual 3 0.380872727272727 0.126958
Total 4 0.5056

Coefficients Standard Error t Stat P-value

Intercept -0.68 0.900213888616351 -0.753356 0.505967
X Variable 1 6.36 6.42027975473679 0.991177 0.394666

The equation of the line depicting the relationship between the two growth rates is: y = 6.36 x growth rate of indian pharma ind

Graphical depiction of the relationship of the growth rates of the Indian pharma industry and Pfizer India

Comparison of growth rates of Indian pharma industry and Pfizer India

100% 18%
16%
80%
14%
60% 12%
Growth rate

Growth rate
10%
40%
8%
20% 6%
4%
0%
2002 2003 2004 2005 20062%
-20% 0%
Year

The above given correlation analysis shows that the growth rate of Pfizer India correlates only about 50% to the growth rate of
that the growth rate of Pfizer India has been erratic over the last 5 years while the pharma industry in India has shown a stead
Market Share

The market share of Pfizer India as against that of its major competitors in the Indian pharma industry like Ranbaxy Laboratori
Glaxosmithkline, Sun Pharmaceuticals, Lupin Loboratories, Cadilla Healthcare, Wockhardt etc are given in the table below. Th

Company Market Share (%) Sales (million USD)

Pfizer India 2.7 191.465
Ranbaxy Laboratories 19 1,176.00
Dr. Reddy's Laboratories 9 534.5
Cipla 12 719
Nicholas Piramal 6 344.7
Aurobindo Pharma 6 380.3
GlaxoSmithKline 6 342.9
Lupin 6 395.5
Sun Pharmaceuticals 6 375.2
Cadilla Healthcare 4 254.2
Wockhardt 4 217.5
Others 19.3 1179.348
Total 100 6110.613
is given below:

orld Trade Atlas

 X Variable 1 Line Fit Plot

Y
Predicted Y
% 10% 11% 12% 13% 14% 15% 16% 17%

X Variable 1

Significance F
0.394666439724206

Lower 95% Upper 95% Lower 95.0% Upper 95.0%

-3.54306418161678 2.18670054525314 -3.54306418 2.1867005453
-14.0685592181658 26.7958319454385 -14.0685592 26.795831945

36 x growth rate of indian pharma industry - 0.68; wherein y = growth rate of Pfizer India

and Pfizer India

arma industry and Pfizer India

18%
16%
14%
12%
Growth rate

10% Pfizer India

8% Indian Pharma Industry
6%
4%

005 20062%
0%

s only about 50% to the growth rate of the pharma industry. The regression analysis and the graphical depiction also show
a industry in India has shown a steady growth and a strong relation between the two growth rates is not evident.
arma industry like Ranbaxy Laboratories Ltd, Dr. Reddy's Laboratoeies Ltd, Cipla, Nicholas Piramal, Aurobindo Pharma,
dt etc are given in the table below. The data used is from the year 2005 - 06.

Pie Chart of Market Share of top pharma companies in India

Market Share (%)

Pfizer India
Ranbaxy Laboratories
Dr. Reddy's Laboratories
Cipla
Nicholas Piramal
Aurobindo Pharma
GlaxoSmithKline
Lupin
Sun Pharmaceuticals
Cadilla Healthcare
Wockhardt
Others
oratories
aboratories

mal
arma
ine

euticals
care
Application Exercise (Week 4)

Question 3

Before attempting to answer this question let us have a quick glance at the growth rate in sales of Pfizer India along with grow

Year Pfizer India Indian Pharma Industry GDP

2002 80% 15% 6%
2003 -14% 9% 4%
2004 18% 14% 9%
2005 6% 15% 7%
2006 10% 16% 70%

Background of Pfizer India

With revenues of US$ 46 billion in 2003, Pfizer Inc. USA is a leading healthcare company of the world, focusing on pharmaceu
20 top-selling medicines. Pfizer has a team of over 12,000 scientists for research and development who are engaged in more

In 1959, Pfizer acquired control of Dumex and Pfizer India Ltd. was formed. Pfizer India is a 40 per cent owned subsidiary of P
employee strength of over 2,000. It has a manufacturing unit in the state of Maharashtra. Pfizer in India has three business div

• Pharmaceutical Division: This division markets both prescription and OTC products. The key brands of Pfizer are Corex, Bec
• Animal Health Division: This division caters to animal pharmaceuticals and is amongst the top four players in the Indian mark
• Research and Development Division: This division includes Pfizer’s clinical research operations as well as the biometrics divi
and IV global trials and has contributed significantly to advancing standards and the research culture in India. The biometrics g
on behalf of Pfizer Global Research and Development centres in the United States, Europe and Japan.

Peculiarities of Pfizer India responsible for the strong growth in sales

Marketing Powerhouse

Pfizer India has demonstrated a strong growth over the last 5 years in line with the average growth of the pharma industry. Th
Infact Pfizer India is widely recognised as a marketing powerhouse. Pfizer was awarded the prestigious ‘Express Pharmaceuti
• Corex was the first brand in the Indian pharmaceutical industry, to cross the US$ 22 million mark
• Pfizer India has the unique distinction of having two of its brands, Corex and Becosules, ranked at the top among all industry

Factors for Success

The Indian pharmaceutical market is extremely competitive with a large number of domestic and MNC companies all competin
government-regulated price control in some areas. Pfizer India has overcome these by leveraging the following success factor
a) Brand-building through a well-trained field force and advertising
Pfizer is acclaimed for regularly creating successful brands. Corex and Becosules are leaders in their respective segments. W
in the competitive anti-hypertensive market. A key reason for Pfizer’s successful brand-building has been the strong training g
‘Leaders Academy’, a comprehensive management development programme.
In the OTC segment, brand-building has been supported by good advertisements. In fact, the advertising campaign for Gelusil
India Awards for Creative Excellence.

b) Rx to OTC transition strategy

Pfizer India was one of the early companies to adopt a successful ethical to OTC transition for some of its products that were e
generating prescriptions while simultaneously carrying out advertisements that targeted the end-consumer.

c) Leveraging technology
Pfizer is using technology to minimise sales force administration. A sales force automation tool ‘Optima’ was successfully impl
customer contacts and implement marketing programmes in an effective manner.

d) Mergers and alliances

In pursuance of its global strategy of growth through acquisitions, Pfizer India has acquired businesses, which has resulted in
• Parke-Davis Merger: Pfizer emerged with a strong portfolio in the therapeutic segments of the central nervous system, cough
• Pharmacia Merger: In addition to augmenting its portfolio, the Pfizer-Pharmacia merger resulted in enhancing the distribution
• Alliance with Bayer: To strengthen Pfizer’s presence in the cattle, poultry and companion animal business, Pfizer has an allia
previously there was a zero or negligible presence.

e) Leveraging the India Advantage

Pfizer is using the Indian facility for clinical studies. It has done trials worth US $ 12.5 million since 1995 in India - spending US
courses for pharmacists in various modules of clinical research with the Bombay College of Pharmacy. This will help increase
With the product-patent regime in place from Jan 1, 2005, Pfizer India has started to introduce the first of its 10 to 12 global ne
contribute immensely in increasing the sales of Pfizer India.
es of Pfizer India along with growth rates of the pharma industry and the GDP of the country for the last 5 years.

he world, focusing on pharmaceuticals and consumer products. Its portfolio includes 5 of the world’s
pment who are engaged in more than 300 projects for 19 major diseases.

0 per cent owned subsidiary of Pfizer Inc., USA. Pfizer India has revenues of US$ 216 million and
er in India has three business divisions:

y brands of Pfizer are Corex, Becosules, Gelusil and Benadryl

op four players in the Indian market with revenues of US$ 12 million
ons as well as the biometrics division. Over the years, Pfizer India has participated in Phase II, III
culture in India. The biometrics group also performs statistical and data management activities

rowth of the pharma industry. The key attribute for this trong performance of Pfizer India is its marketing strength.
restigious ‘Express Pharmaceutical Pulse 2002’ award for overall excellence in the Indian pharmaceutical industry.

ked at the top among all industry brands for three successive years

nd MNC companies all competing for share of voice, presence and market-share. In addition, there is
ging the following success factors:
 in their respective segments. Within a short span of its launch Minipress XL, is now ranked among the top ten brands
ng has been the strong training given to its field-force. To train its first line managers, Pfizer started the

advertising campaign for Gelusil tablets won an award for Creative Excellence at the 36th ABBY - The All

r some of its products that were earlier promoted as ethical drugs. It used a judicious mix of doctor detailing to continue
nd-consumer.

ol ‘Optima’ was successfully implemented across the entire sales organisation. This helps the sales force plan its

usinesses, which has resulted in growth and augmentation of its capabilities -

he central nervous system, cough and cold and consumer healthcare products after its merger with Parke-Davis.
lted in enhancing the distribution network.
imal business, Pfizer has an alliance with Bayer. This provides Pfizer with a presence in segments where

ince 1995 in India - spending US$ 3 million in 2002 alone. Pfizer is also investing US$ 0.1 million to run diploma
harmacy. This will help increase the number of quality professionals for Pfizer India.
e the first of its 10 to 12 global new drugs, all of which originate from its parent’s R&D and alliance efforts and will further