8002 Strategic Management Pharmaceuticals Case Study

Home pharmaceuticals (HP) are a pharmaceutical private company1 headquartered in Malaysia and
owned by the Osman family. The chairman of the Board is Mr Haji Mohd. B. Osman. Mr Mohammad
was a highly respected chemist who began to design new products from the back of his chemist shop in
Subang Jaya. From these humble beginnings, he began to sell his products through suppliers to local
Doctors and hospitals. This was the forerunner to an innovative culture inherited by the present company.
In 1995, Mr Mohammad employed a dynamic CEO, PK Hong Lee (known as PK) who has progressively
grown the business. While the Chairman and his daughter, Siti Bt. Osman sit on the Board, they leave all
the running of the business to PK. Miss Siti however is increasingly scrutinising Home’s financial
returns and is increasingly pressing PK for more profit as her father allows her to play a more prominent
role in the business to protect the family’s interests. This comes on the back of Miss Siti’s graduation
from an Australian university with an accounting degree.

From its early beginnings in 1985, the company has progressively established a culture of research with a
largely focused strategy of producing over-the-counter (OTC) drugs. During the last decade however, the
company has progressed its research into new products including bio-medical and health food
supplements (HFS) including more recently radical innovations in hearing devices (HD). Approximately
80% of its products are locally researched by scientists in Malaysia with some product licenses recently
acquired from Australian manufacturers to produce and market OTC drugs and health food supplements.
However this is only at an early stage. Earlier growth patterns belie more recent trends of slow growth in
OTC; in future years, the company envisages much stronger growth in its new innovations spurred on by
capital injections of US$30million in OTC and US$40million in 2015/16. From 2017 on, HP has
reworked their strategic plan to grow market share. This is particularly relevant given that the market in
the Malaysian region has witnessed slow to medium growth with many large global pharmaceutical
companies already establishing strong market presence. The Malaysian market however is expected to
continue to grow. While HP relies on a highly innovative approach, this has mostly been within the
Malaysian context. While much of the company’s staff is highly trained and skilled, general management
staff are not globally experienced. Similarly, while HP has enjoyed much success in OTC, larger
competitors are gaining market traction and the industry is highly competitive. Global competitive firms
for instance appear to dictate key success factors even though smaller firms such as HP are well
entrenched. While staff appears to be loyal and dedicated given the high level of staff buy-in to
innovation, there is increasing concern that the company will continue to lose market share unless
something can be done. More recently, the local Minister for Health was starting to enforce stricter drug
approval procedures following entry into the World Trade Organisation and tighten laws related to
intellectual property rights following recent patent infringements between and across Asian countries.

Global Pharmaceutical Industry Factors
The pharmaceutical industry across countries is technology intensive with research and development
activities at the vanguard of most industries. Governments from highly developed countries openly
support the national industry given its potential for new innovations and exports and contribution to
national health. The industry in generally dominated by OTC medicines and the production of innovative
drugs with a worldwide industry growth of 7.5% per annum expected between 2014 and 2019.
Central/Eastern Europe is expected to grow by 9.7 per cent, the Americas (7.3%), Middle East and Africa

1 This is a close representation of an actual company however for the most part, it is entirely fictional. The case is
specifically designed for the purposes of students studying the MBA & Masters programs in Strategic or Corporate
Strategy. Similar names, places or events described are purely coincidental. The background to the case has been
researched based on publically available research data however third party reports and accuracy of the data
cannot be guaranteed. Permission to use this case is required with the copyright, Peter A. Murray, USQ Business
(8.6%), Asia-Pacific (4.9%) and Western Europe (6.8%).2
With a high global growth rate expected,
global annual sales of pharmaceuticals is expected to reach US$1,158.5 billion in 2014; given forecasted
annual growth at 7.5%, this translates into one of the highest global growth rates for any industry from
2015 through to 2020. A number of global industry attributes define the key success factors (KSFs).
These include – but are not limited to – global funding partnerships for research, a high proportion of
innovative biotechnology companies, high rates of R & D, strong rates of commercialisation,
Government support nationally including funding mechanisms, national pharmaceutical industry strategy
groups, capacity to work with industry stakeholders, capacity to develop a strong innovation culture and
strong regulatory environment.

3 The global market for drugs is large and growing with half of all sales
made by the top 10 global companies. However, across countries, international competition at an
industry level is quite pronounced however there appears to be room for low cost generic products and
niche high-end quality products.

Asia-Pacific Region & National Pharmaceuticals
The Malaysian economy in 2014 and beyond reflects many years of economic and political
transformation that aims to transform Malaysia into a high-income nation by 2020;4 with the country
ideally located at the heart of the ASEAN nations that when combined, extend the broader regional
population to over 600 million people.5 This is a significant market reach. Major economic sectors
appear to be relatively strong such as the banking sector and in recent years, the country has liberalised
the education sector with the population becoming more qualified with tertiary graduates. The banking
and finance sector in particular have strong credit policies and this comes on the back of a strong
domestic economy which contributes up to 60% of GDP. The employment rate is steady at around 3.5%
and the country has enjoyed a current account surplus and a low inflation rate of around 2%. This
compares favourably with many leading economies in the region such as Australia and Japan. However,
Malaysia is heavily dependent on major trading partners because of a relatively small domestic economy
in GDP terms resulting in Government debt ballooning to over US$165 billion leaving some economists
to ponder that the debt-to-revenue ratio of 250% is similar to that of Italy.6 The country is too dependent
on palm oil and gas as an export and this became more apparent after the amendment to the ASEAN China

Framework Agreement (22 November 2015) enhancing economic cooperation with a free trade
agreement with China. This resulted in a flood of both cheap and expensive imports. Similarly tax
reforms are needed. The government is searching for new industries into the future to carry the load since
government revenue has not increased in tandem with GDP.7 Politically the country has a democratically
elected government and a vibrant opposition which sends an important signal to global countries wishing
to invest in global ventures. Global MNEs increasingly favour strong politically stable domestic
environments. Also, businesses are attracted to Malaysia because of the low standard corporate tax rate
(24% in 2017) and ease of commencing a business with less bureaucracy than new business start-ups in
other countries. The latter for instance confirms recent investment reports by the World Bank ranking
(2016) the country the 23th best in which to do business.8 Similarly, foreign direct investment is a strong
sign of a countries political, economic and social outlook and according the World Investment Report of
2013, the country is the third largest recipient of FDI (Foreign Direct Investment) in the ASEAN nations.
Malaysia also ranks third largest in GDP of all ten ASEAN countries. Following a surge in foreign
investment in 2015, global FDI fell by 2 percent in 2016 and a moderate rise of FDI flows is expected to
continue into 2018, according to the World Investment Report of 2016.9

Malaysia, notwithstanding its growing reputation, is losing high quality workers to other countries such
as Australia and Singapore according to some reports.10 The country has not moved to a high income
society reflective of the country’s passion for global investment. That is, the Government has not
invested in local high value added businesses to any great extent with most of this growth attributable to
MNEs. This has translated into a low wage income model, the abandonment of productivity growth and
poor technology know-how industries more generally. This view can be contrasted however by recent
reports that suggest the pay-to-productivity ratio is ranked 3rd globally outranking countries such as
China, the US and Australia.11 Generally however, high pay-to-productivity ratios could be the result of
lower overall wages and salaries, not necessarily higher productivity output per worker, suggesting that
socially at least, the standard of living may be lower than close trading partners. Malaysia is a success
multi-culturally though in the same way Australia relies on a diversity mix of ethnic backgrounds. This is
a strong feature and testimony to country factor conditions and access to a strong pool of workers for
global investors. The country also boasts one of the world’s great vibrant cities (Kuala Lumpur).
Together with a number of neighbouring cities, Malaysia offers a wide choice of cultural entertainment,
fine food restaurants, educational and housing options and is continuing to develop the country’s road
network by building a convenient transportation system.

There are twenty three countries within the Asia Pacific region with China having the largest GDP
(US$11,392 billion), Japan second (US$4,730 billion) and Australia third (US$1,257 billion) (2016
ranking). Malaysia is ranked below these countries with a GDP of US$303 billion.

13 Within the AsiaPacific
region, the three countries of China, Australia and Malaysia are large players in the
pharmaceutical industry but for different reasons and broadly represent the region. Out of a population of
approximately 28 million in Malaysia, 63.4% is aged between 15 and 64 with a large young population
(32.2%) with 4.4% of people aged over 65 years. The population nonetheless is ageing spurring demand
for pharmaceuticals; health care in the region is expected to grow at 13 per cent per annum 14 and there is
a large demand for prescription drugs and increasing.

15 Products manufactured in Malaysia can be
categorised into four areas including prescription medicines, over-the-counter products, traditional
medicines and health/food supplements.16 There are also imported proprietary drugs, generics
manufactured locally (such as those by Home Pharmaceuticals) and imported generics.17 Proprietary
drugs that are increasingly based on new innovations allow local companies to establish a stronger
presence in the Malaysian market. Home pharmaceuticals demand schedule and breakdown by product
(Figure 1) is represented by one or more of the above areas.

According to Hassali et al. (2009), new possibilities are available for national firms including major drug
companies searching for outsourcing. Local companies such as Home are capable of producing licensed
manufacturing given that many global firms seek to concentrate more on time consuming ‘gene hunting’
R&D methods for discovering new drugs.18 For instance, the current estimates of bringing a new
chemical or biological entity to market are around US$1.3 billion generally in large global firms and
drug development requires a combination of longer development and approval times, larger and more
complex clinical trials and increased expenditures on new technologies.19
Similarly, imported

pharmaceuticals for generic products are establishing a foothold in Malaysia and a lack of entry barriers

10 Op cit 5
11 Op cit 4
12 Op cit 4
13 For the purposes of this case, we will focus on China, Australia and Malaysia broadly representing the wider
region. See also

14 Hassali, Yuen, Ibrahim, Wong, Ng, Ho (2009), Malaysian Pharmaceutical Industry: Opportunities and challenges.
Journal of Generic Medicines, 6:246.
15 Ibid 13
16 ITALIA, Istituto nazionale per il Commercio Estero, December, 2012.
17 Yu , C . P . , Whynes , D . K . and Sach , T . H . ( 2008 ) Equity in health care financing: The case of
Malaysia . International Journal of Equity Health 9 (7): 1 – 15 .
18 Op cit 15
19 Op cit 2
has not helped. For instance, the Malaysian Government have only recently instituted procedures to
inspect foreign manufacturing facilities compared with regular inspection of local firms.
For its part, the pharmaceutical industry in China is rapidly expanding although much of the industry is
fragmented and inefficient 20 when compared to Malaysia and Australia. The industry for instance is
extending basic health insurance so that the population has greater access to health products but this is
not as advanced for instance as the Australian pharmaceutical benefits scheme which is a government
mechanism to provide family access to a range of medicines for all Australians.21 According to
Wikipedia, China accounts for only 1.5% of the global drug market yet is predicted to become the
world’s third largest prescription drug market going forward.22 Beyond 2014, and given the country’s
entry into the World Trade Organisation, China is expected to tighten regulations related to the industry.
At present, the industry is geographically scattered, has many outdated technologies, has weak
international trading competitiveness and lacks patented pharmaceuticals that are developed nationally.23
Similarly, average annual growth rates of 16.72% point to China as a frontier for future market prospects
evidenced by the recent expansion of a global pharmaceutical (Novartis) establishing a stronger R&D
centre for drug development.

24 While regulations in China have been tightened, strong prospects have to
be balanced however with poor evidence of KSFs generally including differences in the treatment of
local versus foreign firms, a lack of government incentives, poor drug approval methods and poor
intellectual property rights laws.

Australia’s pharmaceutical industry by comparison is highly regulated in terms of the pharmaceutical
benefits scheme (PBS) with the Australian Government contributing over $9 million dollars to the
scheme by 2014/5. As at 30 June 2016, government expenditure on the PBS totalled approximately
$7,964.9 million.25 The industry consists of mainly bio-medical research and biotechnology firms,
originator and generic medicines companies and service related segments including wholesaling and
distribution. By 2009-10, the industry employed over 40,000 people with a turnover in excess of $22
billion; while Australia’s population is relatively small to global standards, it consumes over 1% of total
global sales26 and is expected to export over $5 billion from 2014 given forward projections. To place the
Australian industry in context, the drug market ranks 12th largest by Sales in the world while
simultaneously ranking 55th on population. This compares with China for instance with a drug market
ranking approximately 8th but with the largest population in the world of 1,360 billion people.27 Much of
the success in the Australian industry is its spending on research and development and its investment in
bio-technology research intensive industries. Figure 2 graphs total turnover reached in the years 2011-13
with growth patterns expected to increase in the years ahead despite the relatively small Australian
market overall.
Home Pharmaceuticals & Competitive Trends
The current CEO for Home pharmaceuticals is PK Lee while Mary Chua is the chief operating officer.
Dr Paul Greenwood, an Australian, together with a team of thirty highly qualified specialist technical and
science staff, are responsible for research and development. The three divisional managers comprising Dr
Winnie Tan Khoo, Dr Ahmed Kumar and CT Ramgopal, are in charge of OTC, Hearing Devices and the
Health Food supplements strategic business units (SBUs) respectively. Each SBU has a separate
manufacturing manager, product manager, and approximately 200 workers in the factory. Home has a
relatively flat structure with a small SBU staff enabling quick responses to competitive attacks, at least
on paper, but this theory is currently being stretched by global firms and generics invading the home

21 Op cit 2
22 Op cit 19
23 Op cit 19
26 Op cit 2
market. Marketing and sales up until now has been located with PK in the Head Office along with
centralised accounting and computing systems. There is only one major manufacturing facility near Kota
Damansara situated in Sungoi Buloh Industrial Park in Kuala Lumpur and this centre facilitates all
manufacturing for each division and product distribution. The centralised Head Office is also located
here. The company has its own fleet of transport. The manufacturing hub is relatively easy accessed by
Damansara-Puchong Expressway however traffic jams often restrict the easy flow of products to
suppliers and retailers. The distance travelled between the factory and the airport in recent times has
become problematic and PK has been concerned about compromising product-to-market services by air.
PK has also been concerned with the lack of global management experience by senior managers as most
of these have strong technical backgrounds. While the small marketing team consisting of a brand
manager and three product managers have performed well in the local market, PK is unsure how they
will respond to much more intense global pressure and the increasing need to manage products
strategically. While Figure 1 forecasts indicate reasonably strong growth in future years, specifically
2018, this depends on borrowed capital to inject new innovation and technology. Future market growth is
a concern for the company even though they have done well in previous years in growing the company in
existing markets. Much of the concern by PK is knowledge of global markets and international strategy.
Similarly, he is concerned about the strong capitalisation needs of US$70million in 2016 alone in order
to remain competitive. Although capital injections will significantly increase new innovations, debt to
equity may increase with possible negative return on investments. He is also worried about the Osman
family’s response to such large capital injections at a time of increasing competitive pressures. He has
also discussed in detail with the marketing team the dynamics between strictly SBU strategies versus
corporate strategy priorities going forward.

Recently, Mary supplied PK with forecasted growth for each SBU by unit and price (Figure 1). After
reviewing Figure 1, PK was concerned about SBU 1 and 3 marginal rates of growth going forward even
though these SBUs in the past have carved off 5% market share for Home. While OTC represents the
largest turnover, this is offset by the need for large capital investments just to remain competitive. In
comparison to major competitors however, turnover by size is small 28 although PK is excited about the
spur in growth expectations in 2018 in some SBUs. The company has tended to carve out small niche
products in the past with high margins. Mary has advised however that SBU1 and 3 forecasts are mostly
based on small increment increases or decreases based on current competitive attacks while SBU 2 is
reliant mostly on a 50% split between national and export sales going forward. For instance, future
pricing of hearing devices 29 is of some concern for Home products together with increasing competition
by some of leading brands such as Sonova, William Demant, Siemens, and GN ReSound in the hearing
industry. Future potential is being driven however by a low penetration rate and reimbursements of
hearing aids by national Governments. The creation of wireless, bluetooth and FM technology are major
innovations in the industry driven by an ageing population where 1 in 6 people suffer from hearing
impairment and higher in developing countries. Other challenges for Home are common to most
businesses such as a social stigma related to hearing loss and rising prices but innovation for PK is the
key to hearing aids going forward. He believes that with retailers charging upwards of US$2000 or
higher for a unit and newer low-cost firms entering the business from China, Home’s wholesale price
will come under threat and he remains uncertain how to position the devices. He notes that an increasing
reliance on retail sellers places the spotlight on the quality of current audiologists in Malaysia and the
services they provide.

The high margins of the past may in fact be very difficult going forward. Apart from SBU2 where
growth expectations reflect market development, Mary explained to PK that the forecasts across the
SBUs do not take into account retaliatory business strategies by Home or possible diversification
strategies going forward to any great extent. Mary admitted that much of the forecast was based on
Home sales staff actively engaged in selling the products to suppliers such as medical doctors and

28 In the absence of perfect information & available data, students may make assumptions on the total sales
achieved by competitors.

retailers and their assessments going forward about how units will trend. For instance, sales staff has
advised that many medical doctors, chemist chains and local hospitals are starting to favour global
generics administered by some very large pharmaceutical MNEs who have established a manufacturing
presence in the country. This feedback has at least placed in PKs mind the attraction of a no-frills
national brand.

The prospect of increasing MNE presence as well as the increasing cost of medicines and drugs available
to consumers is a concern for Home. PK has noted that the Government does not have the same level of
expenditure on public health compared to some countries such as Australia. The CEO together with his
division SBU managers have realised that balancing both proprietary and generics, however conceived
and managed, are necessary going forward. For instance, Home currently has patented over thirty local
drugs and more recently new designs in hearing aids and hearing technological devices. Similarly, the
company name is quite well known throughout the Malaysian region because of its research profile and
is quite possibly one of the most research intensive firms although much smaller than some research
intensive competitors. A strong distribution system despite Home’s location has been useful in the past
with the company owning all of its trucks and vans. Similarly, people are loyal and dedicated and PK is a
popular yet somewhat charismatic individual who is well known in the industry for engaging high profile
politicians and lobbying important committees. Together with global experiences, distribution costs
however have been increasing together with the high cost of technical services and research. Home
currently receives no assistance from the current government for research and development nor
substantial tax write-offs. PKs best estimates, based on current and forecasted demand, is that market
share could fall by 0.5% in Home sales with an increasing heavy reliance on Hearing Devices going
forward. He has also been concerned about rising manufacturing costs in technology processes and an
over reliance on older technological processes to develop and test new products.

The Malaysian pharmaceutical industry’s Ministry of Health oversees the Drug Control Authority with
the latter licensing up to 234 pharmaceutical companies. Out of these, there are 167 traditional medicine
and 67 modern medicine firms.30 Moreover, there are six major local companies which comprise Home’s
major competitors including healthcare groups. They include Pharmaniaga Manufacturing Berhad, Kotra
Pharma (M) Sdn Bhd, Hovid Berhad and CCM Duopharma Biotech Sdn Bhd.

31As noted earlier, large
MNEs are making inroads with companies such as Pfizer, Novartis and Astra Zeneca setting up licensing
arrangements with local incorporated companies with more to follow. Interestingly, Pfizer and Novartis
are ranked 1 and 2 in the world in terms of revenue with Astra Zeneca ranked 6th

Pharmaniaga Berhad is an investment holding company. Through its subsidiaries, the company
manufactures, markets, and distributes pharmaceutical drugs and medical products to government
hospitals and private institutions. Pharmaniaga also provides web portal services for online trading of
health care products. Kotra pharma by comparison boasts state-of-the-art research facilities mainly
focusing on healthcare solutions in therapeutic areas. Kotra is one of Malaysia’s most trusted brands
under the Vitamin / Health Supplements Category according to Reader’s Digest Trusted Brands Awards
and exports to five countries in the South East Asian region (30 countries in total) which represents 10%
of Kotra Pharma’s turnover.

33 Hovid Berhad is one of Malaysia’s leading pharmaceutical manufacturers
of high quality and innovative medicinal preparations and health supplements with more than 400
products distributed over 50 countries globally. CCM Duopharma from its opening in 1979 has
developed and manufactured tablets, capsules, injectables, haemodialysis and irrigation solutions. In
more recent years, Duopharma have signed exclusive distributorships for international products and joint

30 Op cit 15
ventures in bio-similar products. 34 In a greater effort to provide health services for all Malaysians, more
recently the Malaysian Government increased the national health budget by 14.5% which appears to
amount to a similar PBS scheme in Australia. The Government is arguably motivated by key growth
areas for the country such as biotechnology, new drug discoveries, technology acquisition and licensing,
generic drug production and new opportunities in the halal pharmaceuticals area. A new European free
trade agreement will be beneficial for the country going forward as well. Similarly, the Government is
concerned about rising communicable and non-communicable diseases such as diabetes with at least 4.5
million sufferers predicted by 2020.35 It is also useful to note that private healthcare providers such as BP
Healthcare group and Ramsay Sime Darby Health Care are expanding their services with the latter group
expanding its hospital network.

While national pharmaceutical companies appear to hold substantial market share, global MNEs have a
powerful presence because of the transfer of economies of scale to local importers in what appears to be
an industry with reasonably low entry barriers. Switching costs are expected to be high though because
of the cost of technology and long-term investments. Local importers and distributors are increasing
quite possibly posing an increasing threat to local proprietary products despite significant innovation.
Lobbying by some pharmaceuticals is significant pointing to the increasing role to be played by the
Malaysian Government going forward. While the Government no doubt sees significant benefits for the
industry and the country, there are concerns that regulations, such as the good manufacturing practice
(GMP) certification may not be implemented correctly. 37 There are also concerns that the Drug and
Cosmetics Regulations have not been effective in preventing non-certified products from entering the
country. After arriving home after another 12 hour day, PK was pondering the company’s next stage of
growth amidst the pressures of competition, of regulatory bodies, of current market share, of comparative
capabilities and increasing demands from the family. He decides to have a second look at Home’s Profit
and Loss (Figure 3) and Balance Sheet (Figure 4) while simultaneously enlisting your services as a
strategy consultant to advise the business.38 He is very much searching for advice that matches financial
reality with novel and careful strategies going forward. He is wondering whether he is making full use of
his assets.39

8002 Strategic Management Pharmaceuticals Case Study

Figure 1: Forecasted Growth by Units and Price for Home Pharmaceuticals
in US dollars 2016 2017 2018 2019 2020





Avg price per unit 13.20 12.87 13.21 13.21 13.26





Capital Required 30,000,000 30,000,000
Rate of Interest 8 8
Interest 2,400,000 2,400,000
SBU 2: Hearing Devices
in US dollars 2016 2017 2018 2019 2020
Units 20,000 20,000 22,000 23,000 23,000
Avg price per unit 1375.00 1491.75 1431.82 1493.48 1513.04





Capital Required 40,000,000 12,000,000
Rate of Interest 8 8
Interest 3,200,000 960,000
SBU 3: Bio HFS
in US dollars 2016 2017 2018 2019 2020
Units 300,000 280,000 290,000 300,000 320,000
Avg price per unit 55.00 51.30 46.55 38.17 36.25





Capital Required
Rate of Interest
Total Forecasted





% growth rate 0.45 1.77 1.75 1.29
Figure 2: Total Turnover for Australian Pharmaceuticals
Source: Australian Pharmaceuticals Industry Data Card 2014
Figure 3: Forecasted Income Statement for Home Pharmaceuticals (in US$)
REVENUE 2016 2017 2018 2019
Gross sales 110,000,000 110,500,000 112,500,000 114,500,000
Less sales returns and allowances 200,000 230,000 280,000 320,000
NET SALES 109,800,000 110,270,000 112,220,000 114,180,000
Beginning inventory 8,100,000 1,000,000 920,000 1,125,000
Plus goods purchased/manufactured 15,000,000 15,700,000 15,200,000 14,100,000
TOTAL GOODS AVAILABLE 23,100,000 16,700,000 16,120,000 15,225,000
Less ending inventory 1,000,000 920,000 1,125,000 950,000
TOTAL COST OF GOODS SOLD 22,100,000 15,780,000 14,995,000 14,275,000
GROSS PROFIT (LOSS) 87,700,000 94,490,000 97,225,000 99,905,000
Advertising & Commissions 6,000,000 6,500,000 7,000,000 6,500,000
Other 100,000 120,000 200,000 200,000
TOTAL SELLING EXPENSES 6,100,000 6,620,000 7,200,000 6,700,000
Salaries and wages 49,410,000 49,622,000 50,499,000 51,381,000
Electricity and heating 8,000,000 8,800,000 9,600,000 9,700,000
Interest on loans 5,600,000 5,600,000 5,600,000 5,600,000
All other 19,764,000 19,849,000 20,200,000 20,552,000
TOTAL OPERATING EXPENSES 82,774,000 83,870,000 85,899,000 88,193,000
TOTAL GENERAL/ADMIN EXPENSES 88,874,000 90,490,000 93,099,000 94,893,000
Net income before taxes (1,174,000) 4,000,000 4,126,000 5,012,000
Taxes on income -282,000 960,000 990,000 1,203,000
NET INCOME AFTER TAXES (892,000) 3,040,000 3,136,000 3,809,000
Extraordinary gain or loss 0 0 43,000 0
Income tax on extraordinary gain 0 0 12,000 0
NET INCOME (LOSS) (892,000) 3,040,000 3,167,000 3,809,000
Figure 4: Home Pharmaceuticals Balance Sheet (in US$)
2016 2017 2018 2019
Current assets:
Cash 11,000,000 11,000,000 10,500,000 11,000,000
Investments 1,200,000 1,050,000 1,150,000 800,000
Inventories 1,000,000 920,000 1,125,000 950,000
Accounts receivable 3,000,000 2,500,000 2,000,000 2,000,000
Pre-paid expenses 100,000 120,000 120,000 140,000
Other 450,000 450,000 450,000 450,000
TOTAL CURRENT ASSETS 16,750,000 16,040,000 15,345,000 15,340,000
Fixed assets:
Property and equipment 90,000,000 81,000,000 72,900,000 77,610,000
Leasehold improvements 5,000,000 5,000,000 5,000,000 5,000,000
Equity and other investments 5,000,000 10,000,000 10,000,000 10,000,000
Less accumulated depreciation 22,000,000 22,000,000 22,000,000 22,000,000
TOTAL FIXED ASSETS 122,000,000 118,000,000 109,900,000 114,610,000
Other assets:
Goodwill 8,000,000 8,000,000 8,000,000 8,000,000
Other assets 10,000,000 10,000,000 10,000,000 10,000,000
TOTAL OTHER ASSETS 18,000,000 18,000,000 18,000,000 18,000,000
TOTAL ASSETS 156,750,000 152,040,000 143,245,000 147,950,000
Current liabilities:
Accounts payable 6,300,000 6,100,000 5,900,000 5,800,000
Accrued wages 2,360,000 2,400,000 2,500,000 2,600,000
Accrued compensation 500,000 520,000 540,000 560,000
Income taxes payable 171,000,000 1,762,000 2,037,000 1,873,000
Unearned revenue – – – –
Other – – – –
TOTAL CURRENT LIABILITIES 9,331,000 10,782,000 10,977,000 10,833,00
Long-term liabilities:
Long-term loans 70,000,000 69,000,000 68,000,000 79,000,000
Mortgage payable 4,500,000 2,500,000 2,500,000 2,500,000
TOTAL LONG-TERM LIABILITIES 74,500,000 71,500,000 70,500,000 81,500,000
Owner’s equity:
General reserves 42,553,000 35,136,000 23,722,000 16,929,000
Investment capital Osman family 31,258,000 31,582,000 34,879,000 34,879,000
Accumulated retained earnings (892,000) 3,040,000 3,167,000 3,809,000
TOTAL OWNER’S EQUITY 72,919,000 69,758,000 61,768,000 55,617,000
156,750,000 152,040,000 143,245,000 147,950,000

David Marks

Dear sir/Ma'am

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