I need help to figure out the Situation Analysis External and Internal for the Pfizer Case

Return on Assets '16 I 4.13 I Financial Leverage (Average) I 2.59 I Return on Equity% I 10.24 I Return on Invested Capital 96 I 7.11 I Interest Coverage I 8.48 I Source Mummgstar.com specialty drugs used in the treatment of autoimmune diseases, prostate cancer, and HIVIAIDS.B5 Major Acquisitions\": 2006: Acquired consumer healthcare business of Pfizer ($16.6B) 2013: Acquired Aragon Pharma ($13) 2014: Alios BioPharma,]nc (31.7513) External Environment The pharmaceutical industry is heavily inuenced by legal, political, and technological forces. Societal views on issues such as drug pricing and tax eva- sion have created demand for increased government regulation. 4.44 | 13.84 | 4.73 | 11.55 2.23 I 1.71 I 2.23 I 1.38 9.52 I 24.06 I 10.75 I 21.117 5.74 I 19.25 I 7.83 I 17155 9.04 I 13.16 I 12.29 I 35.78 Regulation In the U.S.,pharmaceutical companies are under the reg, ulation granted to the Food and Drug Administration. The FDA has primarily provided oversight over pharmae ceutical product quality through two actions: reviewing drug applications and inspecting factories for compli ance with good manufacturing practices. In an effort to reduce recognized shortcomings, such as high levels of product recalls, shortages of critical drugs, and lime ited inspection efforts, the FDA created an Office of Pharmaceutical Quality (OPQ) in Ianuary 2015. The OPQ was created to enhance oversight of drug quality for all pharmaceuticals.\" Its mission is to assure supply of quality drugs to the American market, use enhanced science and riskebased methods, leverage quantitative I sesamcasuapxgmjndd 171 C-172 and expert assessments for product oversight, encourage development and adoption of new technologies, and \"provide seamless integration of review inspection, sure veillance, policy, and research across the product life cycle.m FDA oversight impacts several areas of the value chain. For example, the FDA increased the importance of audit trails of information in manufacturing when 21 CFR part 11 came into effect. The update requires anyone designing, manufacturing, or testing pharmae ceuticals to follow the guidelines. This encouraged man- ufacturers to keep better electronic records to include timestamps, validation, and signatures. 21 CFR part 11 was built unto the National Drug Code (NDC), which was passed in 2007. The NDC required manufacturers to use a serialized code on the product to improve trace, ability throughout the supply chain postemanufacturer.\" Affordable Care Act In 2014, the Internal Revenue Service issued final regulations for the Branded Prescription Drug Fee (BPD), an annual nonrtax deductible fee imposed on branded prescription drug manufacturers, which was included in the Patient Protection and Affordable Care Act (ACA). The new legislation requires government, funded drug programs to report yearly prescription drug sales data to the Department of Treasury. The reporting programs include: Medicare, Medicaid, TRICARE, and the Department of Veterans Affairs. The branded prescription drug fee is allocated to man ufacturers based on their relative percentage of total reported prescription drug sales.\"J The total 2014 BPD fee, according to the IRS fee schedule, was $3 billion Pfizer's portion was approximately $220 million, which was paid in 2015.\" The ACA also amended the Public Health Service (PHS) Act to expedite FDA approval of biosimilarsi drugs that are generic versions of FDAeapproved biologic products. A manufacturer must show clinical evidence that a new product is \"highly similar" in effectiveness to an FDAeapproved reference biologic. Once the FDA receives the trial data for a biosimilar, the ACA allows the FDA to pursue a fastetrack approval process. Prior to 2010, no biosimilar products had been approved by the FDA.72 As ofAugust 2016, three biosimilar products had been approved.\" Drug Pricing Concerns Public outrage over increasing drug prices came to a head recently, with many scandals receiving national Part 4: Case Studles headline attention. One such incident occurred when Turing Pharmaceuticals raised the price of Daraprima drug used predominantly by AIDS patients and pregnant womenfrom $13.50 to $750 per pill, over a 5,000% increase.\" Another such incident involved Mylan, the company that manufacturers the injector EpiPen, which contains a drug used to treat lifeethreatening allergy attacks (a drug Pzer manufacturers). Mylan increased the price of EpiPen from $265 to over $600 in less than three years.75 Many believe the increase was in response to a settlement agreement in 2012 under which Mylan agreed to allow a generic competitor to enter the market in 2015. The rising cost of healthcare in the United States is a growing concern among voters, and societal pres, sures are seeing health care reform and regulation on drug prices reaching political platforms and ballots across the country. Political lobbyists on both sides are spending millions of dollars to inuence the outcome of such initiatives. One such initiative, Proposition 61 in California, would limit the amount that state agencies pay for prescription drugs to that of the US. Department of Veterans Affairs, which normally receives a 20 to 25% discount on its prescription drug prices. Pfizer donated more than $9.4 million to politi- cal action groups in opposition to Prop 61, and in total pharmaceutical companies contributed $109 million (Merck & Co. $9.4 million and Johnson SK Iohnson $9.3 million)?\" Looking Forward [an Read has been at Pfizer's helm for the past six years. With the patent expiration for Lipitor behind him, the bestselling drug in history is no longer contributing as much to Pfizer's bottom line. Is the firm still capae ble of delivering a sustainable pipeline of profitable drugs, or are major changes to strategy and operations necessary? And is Pfizer's opportunity for significant inversions over with the failed takeover attempts of both AstraZeneca and Allergan? To add to these issues, drug pricing scandals and healthcare reform have cre- ated an environment of active political reform. How can Pzer navigate the upcoming challenges that grow, ing societal discontent with mbig pharma\" and the ris- ing cost of healthcare present? Do these threats also provide opportunities? How can Pfizer best be posi- tioned for growth and profitability in this challenging business environment? 4/3115 5:52 PM I Case 12: Pfizer C-173 NOTES 1. Herper, M. 2015. Innovation's Accountant. 16. Pfizer. 2014. Annual Review 2014. New York, 34. Pfizer. 2016. Pfizer Expands R&D Equity Forbes, November 2: 58. NY: Pfizer, Inc. Investment Strategy to Access Early 2. Pfizer. 2015. Pfizer Inc: Exploring Our History 17. Ibid. Stage Scientific Innovations. News & 1849-1899. Pfizer.com 18. Ibid. Media. Press Releases. New York, NY: 3. Pfizer Inc. 2015. 2015 Financial Report. New 9. Herper, M. 2015. Innovation's Accountant. Pfizer, Inc. York, NY: Pfizer Inc. Forbes, November 2:58-62. 35. Pfizer. 2016. Proxy Statement for 2016 4. FDA. Significant Dates in U.S. Food and 20. Keister, Kim. 2013. Does a Top Drugmaker's Annual Meeting of Shareholders. 2015 Drug Law History. http://www.fda.gov Playbook Stifle Competition? AARP Finanical Report. SEC 2016 From DEF 14A /AboutFDA/WhatWeDo/History/Milestones (Online). http://blog.aarp.org/2013/06/17 New York, NY: Pfizer Inc. /ucm128305.htm /how-pfizer-protected-lipitor-profits-as 36. Pfizer. 2015. Pfizer Inc: Leadership and Ibid. -patent-expired-pay-for-delay/, Accessed Structure. Meet Executive Leaders. Pfizer. 6. Adams, Christopher and Brantner, Van V. October 2016 com 2006. Estimating the Cost of New Drug 21. Herper, M. 2015. Innovation's Accountant. 37. Langley, Allison. 2003. Pfizer to Sell Drug to Development: Is it Really $802 Million? Forbes, November 2: 58-62. Rival to Soothe Regulators. New York Times Health Affairs, 25(2): 420-428. 22. Pfizer. 2015. Pfizer Inc: Exploring Our History (Online). March 19. http://www 7. Harper, M. 2013. The Cost of Creating a New 2000-Present. Pfizer.com nytimes.com/2003/03/19/business/pfizer-to Drug Now $5 Billion, Pushing Big Pharma 23, Pfizer. 2015. Pfizer to Acquire Hospira. News -sell-drug-to-rival-to-soothe-regulators. to Change. Forbes (Online). August 11. & Media. Press Releases. New York, NY: html, Accessed October 2016. http://www.forbes.com/sites/matthewherper Pfizer, Inc. 38. Pfizer. 2015. Pfizer Inc: Leadership and /2013/08/11/ how-the-staggering-cost 24. Pfizer. 2016. Pfizer to Acquire Anacor. Structure. Meet Executive Leaders. Pfizer.com. -of-inventing-new-drugs-is-shaping News & Media. Press Releases. New York, NY: 89. Ibid. -the-future-of-medicine/#2fe419416bfc, Pfizer, Inc. 40. Pfizer Inc. 2015. 2015 Financial Report. Accessed October 20, 2016. 25. Pfizer. 2016. Pfizer to Acquire Medivation. New York, NY: Pfizer Inc. 8. Herper, M. 2015. Innovation's Accountant. News & Media. Press Releases. New York, 41. Pfizer Inc. 2015. 2015 Financial Report. Forbes, November 2: 58-62. NY: Pfizer, Inc. New York, NY: Pfizer Inc. 9. Rockoff, Jonathan D. 2010. Pfizer Plans to 26. Herper, M. 2015. Innovation's Accountant. 42. Pfizer Global manufacturing finds the Cut Research Spending By Up To $3B. Wall Forbes, November 2: 58-62. formula for success. 2007. Human Street Journal (Online). February 4. http:// 27. U.S. Department of the Treasury. 2016. Resources Management International www.wsj.com/articles/SB10001424052748 Treasury Announces Additional Action Digest, 15(1), 8-10. 704259304575042863590302630, Accessed to Curb Inversions, Addresses Earnings Pfizer. 2015. Pfizer Inc: Working at October 15, 2016. Stripping. Treasury.gov. Press Center. Press Pfizer. Career Growth and Colleague 10. Cohen, Jeff, Gangi, William, Lineen, Releases. April 4. Development. Pfizer.com Jason, and Manard, Alice. 2005. Strategic 28. AstraZeneca. 2014. Statement Regarding 14. Herper, M. 2015. Innovation's Accountant. Alternatives in the Pharmaceutical Industry Pfizer Withdrawal. Media Centre. Press Forbes, November 2: 58-62. Unpublished Research Paper from the Releases. London, United Kingdom: 45. Stallard, Michael. 2015. Pfizer's Straight Talk Center for Biotechnology Management, AstraZeneca plc. on Culture. Helping Leaders Create Cultures Kellogg School of Management. 29. Mccoy, Kevin. 2015. Pfizer and Allergan that Connect (Online). September 16 Northwestern University, IL. merge in $160B tax inversion deal. USA http://www.michaelleestallard.com 11. Blanckley, Alex, Boldon, Helen, Scannell, Today (Online) November 23. http://www /pfizers-straight-talk-on-culture, Accessed Jack W., and Warrington, Brian. 2012. .usatoday.com/story/money/2015/11/23 Oct 10, 2016. Diagnosing the Decline in Pharmaceutical /pfizer-allergan-merger/76248478/, 46. Pfizer. 2015. Pfizer Inc: About Us. Mission, R&D. Nature Reviews Drug Discovery. Accessed October 20, 2016. Vision and Purpose. Pfizer.com March, Vol. 11: 191-200. 30. U.S. Department of the Treasury. 2016. 47. Pfizer Inc. 2015. 2015 Financial Report. New 12. Jackie, Hunter and Stephens, Susie. 2010 Treasury Announces Additional Action York, NY: Pfizer Inc. Is Open Innovation the Way Forward for o Curb Inversions, Addresses Earnings 18. Pfizer. 2015. Annual Review 2015. New York, Big Pharma? Nature Reviews Drug Discovery. Stripping. Treasury.gov. Press Center. Press NY: Pfizer, Inc February, Vol 9: 87-88. Releases. April 4. 19. Ibid. 13. Gilbert, Jim, Henske, Preston and Sigh, 31. Mccoy, Kevin. 2015. Pfizer and Allergan 50. Pfizer Inc. 2015. 2015 Financial Report. New Anshish. 2003. Rebuilding Big Pharma's merge in $160B tax inversion deal. USA York, NY: Pfizer Inc. Business Model. The Business & Medicine Today (Online) November 23. http://www 51. Pfizer Inc. 2015. 2015 Financial Report. New Report, 21(10). .usatoday.com/story/money/2015/11/23 York, NY: Pfizer Inc. Pfizer to reorganize business units. New /pfizer-allergan-merger/76248478/, 52. Ibid. York Business Journal (Online). July 29, 2013. Accessed October 20, 2016 53. Ibid http://www.bizjournals.comewyork 32. Carroll, Stuart. 2009. Goodbye blockbuster 54 Big pharma placed in malpractice spotlight. ews/2013/07/29/pfizer-to-reorganize medicines; hello new pharmace 2012. Pharmaceutical Technology Europe, -business-units.html business models. The Pharmaceutical Journal 24(9), 8. 15. Armstrong, Drew. Pfizer Splits Up Online). http://www.pharmaceutical 55. Pfizer Inc. 2015. 2015 Financial Report. New Operations Ahead of Possible Breakup. journal.com/opinion/comment/goodbye York, NY: Pfizer Inc. Bloomberg (Online). http://www -blockbuster-medicines-hello-new 56. Ibid. .bloomberg.comews/articles/2013-07-29 -pharmaceutical-business-models/10966185 57. Ibid /pfizer-to-split-internal-operations-ahead .fullarticle, Accessed November 10, 2016. 58. Ibid. of-possible-breakup. Accessed November 33. Pfizer. 2015. Pfizer Inc: Venture Investments. 59. Merck & Co. 2015. 2015 Annual Report. 4, 2016. Pfizer.com Whitestation, NJ: Merck & Co. Inc. 33838_case12_ptg01.indd 173 4/5/19 5:54 PM C-174 Part 4: Case Studies 60. Vij, Ravi. 2016. Pharma industry Merger merger-and-acquisition-analysis 73. Hawana, Joanne and Kuyers, Sarah and Acquisition Analysis 1995 to 2015. -1995-2015/, Accessed October 20, 2016. Beth S. 2016. Biosimilar FDA Approvals on the Revenues and Profits (Online). http:// 67. FDA. FDA Pharmaceutical Quality Horizon As More States Enact Substitution revenuesandprofits.com/pharma-industry Oversight. One Quality Voice. http://www Laws. Healthlawpolicymatters.com. -merger-and-acquisition-analysis-1995 .fda.gov/downloads/AboutFDA/CentersOffices August 31. https://www.healthlawpolicymatters -2015/, Accessed October 20, 2016. OfficeofMedicalProductsandTobacco/CDER com/2016/08/30/biosimilar-fda-approvals . Novartis. 2015. 2015 Annual Report. Basel, /UCM442666.pdf -on-the-horizon/, Accessed November 5, Switzerland: Novartis International AG. 68. Yu, Lawrence X., and Janet Woodcock. 2016. 62. Vij, Ravi. 2016. Pharma industry Merger FDA Pharmaceutical Quality Oversight 74. Why the drug price scandal won't be and Acquisition Analysis 1995 to 2015. International Journal of Pharmaceuticals, enough to keep down prices. 2016. Fortune Revenues and Profits (Online). http:// 491(1-2):2-7. (Online). http://fortune.com/2015/10/26 revenuesandprofits.com/pharma-industry 69. European Automation. 2014. How FDA /drug-prices-daraprim-turing-scandal/, merger-and-acquisition-analysis-1995-2015/, regulations are shaping the pharmaceutical Accessed November 4, 2016. Accessed October 20, 2016. manufacturing sector. PACE. http:/ewman 75. Tuttle, Brad. 2016. Why the Epipen Price 63. Bristol-Myers Squibb. 2015 Annual Report. richmond.edu:2048/login?url=http:// Scandal Sums Up Everything We Hate New York, NY: Bristol-Myers Squibb Co. search.proquest.com.newman About Big Business & Politics. Yahoo Finance 64. Vij, Ravi. 2016. Pharma industry Merger .richmond.edu:2048/docview (Online). September 21. http://finance. and Acquisition Analysis 1995 to 2015 /1628839996?accountid=14731 yahoo.comews/why-epipen Revenues and Profits (Online). http:// 70. IRS. Annual Fee on Branded prescription price-scandal-sums-162803743.html, revenuesandprofits.com/pharma-industry Drug Manufacturers and Importers. https:// Accessed Nov. 4, 2016. merger-and-acquisition-analysis www.irs.gov/businesses/corporations 76. Rowan, Harriett Blair. 2016. Drug Companies -1995-2015/, Accessed October 20, 2016. annual-fee-on-branded-prescription-drug spend $109 million to blaock vote to 65. Johnson & Johnson. 2015 Annual Report. -manufacturers-and-importers lower drug prices. MarketWatch (Online) New Brunswick, NJ: Johnson & Johnson Inc. 71. Pfizer Inc. 2015. 2015 Financial Report. New November 6. http://www.marketwatch. 66. Vij, Ravi. 2016. Pharma industry Merger York, NY: Pfizer Inc. com/story/drug-companies-spend and Acquisition Analysis 1995 to 2015 72. PWC. 2015. 2015 Health Research Institute -109-million-to-block-vote-to-lower Revenues and Profits (Online). http:// Annual Report. London, United Kingdom: -drug-prices-2016-11-06, Accessed revenuesandprofits.com/pharma-industry PricewaterhouseCoopers. November 10, 2016.year long and covered team dynamics that included pur- pose, leadership, motivation, meetings, and the environ, ment, among other topics. For each of the four training segments, there were pre-workshop activities, two-day workshops, posteworkshop assignments, and a followup workshop.u Pzer also uses traditional techniques to develop their personnel. Employees are expected to collaborate with their direct leaders to create individual develop, ment plans. They have also implemented a tool called Mentor Match. It is designed to allow employees to volunteer as a mentor or search for mentors with cer tain characteristics. Managers are encouraged to give frequent and inedepth performance appraisals in lieu of the standard annual review process. Pfizer also uses short-and medium-term job rotations or projects to help further the development of their employees.\" Organizational Culture Upon taking charge of Pzer in 2010, Read soon discov- ered that many of the processes in place at Pzer were broken. The process for FDA drug applications was so bad that the FDA sometimes refused to even review submitted applications. Read demanded answers, and the only answer he received was that everyone knew the application didn't meet the required quality standards, but nobody was willing to speak out about it. Reads response was to hand every employee a gold coin with the words \"Straight Talk\" on one side and \"OWNIT!\" on the other side. It was Read's way of empowering his employees to speak up to their boss when they believe they are wrong, but above all, to create accountability.\" Since then, OVVNIT! has become ingrained in Pzer's culture."3 Mission, Purpose, and Values\" Pzer's mission is: \"To be the premier, innovative bio, pharmaceutical company." Pzer's purpose is: \"Innovate to bring therapies to patients that signicantly improve their lives." Pzer's core values are:\"Customer focus; Community; Respect for people; Performance; Collaboration; Leadership; Integrity; Quality; Innovation." acy brands that have lost or will lose market exclusivity in the short term. Both businesses have geographic foot, prints that span developed and emerging markets.'7 Pzer has a truly global supply chain network with 64 internal manufacturing facilities, over 200 supply chain partners, and 134 logistics centers in 2015. Pzer claims to have over 850 major product groups. Due to the high demands for traceability, Pzer employs a serif alization program across its supply chain. Pzer also uses their Highly Orchestrated Supply Network (HOSuN) to connect inventory, transportation, logistics and its assoe ciated security, compliance, environmental health and safety, and other functions into a truly integrated system. They also use HoSuN for business continuity risk assess- ment and resolution.\" Manufacturing pharmaceuticals can be extremely complex. For example, the vaccine known as Prevenar 13 was produced for the oneebillionthetime in 2015. According to Pzer, manufacturing Prevenar 13 includes the participation of 1700 employees, 678 quality tests, 400 different raw materials, and 530 steps in manuface turing, over 2 years." Pzer earned 56% of its 2015 revenue from oper- ations outside the United States, which represented $27.1 billion. Iapan is the second largest market, behind the United States.\" Marketing and Distribution Pzer promotes its products within the global hiophare maceutical business to healthcare providers and patients. Pzer's marketing organization is responsible for educating a wealth of stakeholders regarding product approved uses, benets, and risks. Pzer employs a direct-to-consumer advertising campaign in the U.S.; this provides similar information and suggests that interested customers have discussions with their doctor. Pzer's \"Global Consumer Healthcare business uses its own sales and marketing orga nizations to promote its products and occasionally uses dis, tributors in smaller markets." Television, digital, print, and inestore media are all used to advertise to consumers.5| In the (1.5., all products must be approved by the FDA prior to any marketing campaigns. The FDA oversight I Emicnsetziplgmjndd 167 413119 5-52PMI (-168 includes \"regulations that govern the testing, manu7 facturing, safety, efcacy, labeling and storage of our products, record keeping, advertising, and promotion."53 There are also several federal and state laws that were enacted to prevent fraud and abuse,including false claim and antiekickback laws. Pzer encounters \"similar reg, ulatory and legislative issues in most other countries."SJ Pzer has been criticized in the past regarding some of its foreign marketing practices. In August 2012, the 1.1.5. Securities and Exchange Commission ned Pfizer $45 million dollars for violating the US Foreign Corrupt Practices Act. In order to secure regulatory approval, sales, and increased prescriptions, several subsidiaries of Pzer had been bribing foreign ofcials. The bribes had been concealed under marketing and promotion expenses in the accounting records. Pzer reported the violations voluntarily in 2004 and subsequently imple- mented antiecorruption training.54 From a distribution perspective, prescription pharmae ceutical products primarily are sold primarily to wholesal- ers. In 2015, the \"top three biopharmaceutical wholesalers accounted for approximately 34% of our total revenues (and 74% of total US. revenues)?ii Pzer also does some Exhibit 2 Pzer Income Statements Consolidated Statements of Income Part 4. Case Studles direct shipments to retailers, hospitals, pharmacies, and clinics. For its vaccines, Pzer \"primarily sell[s] directly to individual provider offices, the Centers for Disease Control and Prevention and wholesalers?\" Financial Condition Over the past ve years, Pfizer's revenues have been steadily decreasing, reducing net income to a fiveeyear low of $6.96 billion. A decrease in revenue from cone tinuing operations is the primary cause of the decrease in revenues. The spineoff of Zoetis had a compound, ing effect on both the decrease in revenues and cost of sales post 2013. Current assets were steady over the past three years; however, there was a recent dip in short, term investments. Goodwill is increasing, reecting the premiums paid for acquisitions in recent years. Pzer's shorteterm borrowing has increased almost twofold in the past ve years. Overall, Pfizer's balance sheet has been fairly steady the past two years, but Pfizer's total liabilities are slightly higher and its total equity slightly lower in 2015 compared to 2014. Both of these years are lower compared to prePZoetis spineoff levels?" Exhibits 2 and 3 contain detailed Pzer nancial information. slsharesinM' 'ons, S in Millions 2015 2014 2013 2012 2011 Income Statement [Abstract] Revenues I $45,551 I $49,605 I 5 51,584 I 5 58,986 I 5 65,259 Costs and expenses: Cost: at sales I 9,648 I 9.577 I 9,586 I 11,334 I 14,075 Selling, informational, and administrative expenses I 14,009 I 14,097 I 14,355 I 16,616 I 111,832 Research and development expenses I 7,690 3,393 I 6,678 I 7,370 I 9,074 Amortization of intangible assets I 3,723 4.039 I 4.599 I 5.175 I 5,544 Case 12: Pfizer --163 CASE 12 ROBINS School of Business" Pfizer January 2017 reforms was significant increases in the time and cost for drug manufacturers to bring new drugs to market. 'When Ian Read, an accountant and company lifer, took In 2006, a study estimated the cost of bringing a new over as Pfizer's chief executive in December 2010, the drug drug to market was between $802 million and $2 billion, firm was facing the impending patent expiration of Lipitor, depending on the type of drug being developed and the the best-selling drug ever made, and the utter failure of one number of drugs being developed simultaneously." The of the most lavishly funded research laboratories on the study found that approximately 60% of the total cost of planet to develop much of anything. The stock was suffering, drugs was related to pre-market clinical trials required and Read's predecessor-Jeffrey Kindler, a bearlike lawyer by the FDA. As inflation, increased regulation, and other hired from Mcdonald's-had just spent $68 billion to buy factors have affected the pharmaceutical industry, a 2012 rival drug maker Wyeth in a Hail Mary strategy shift. Now study indicated that the cost per drug for the largest Read had to make it work." manufacturers has increased to over $5.5 billion.' For Pfizer, the total Research & Development (R&D) cost Company and Industry for each drug that received FDA approval was $7.7 billion Background between 1997 and 2011. The steep rise in development costs has forced many large drug manufacturers- Pfizer was established in 1849 in Brooklyn, New York, by including Pfizer-to cut R&D budgets in an attempt to cousins Charles Pfizer and Charles Erhart with a loan of control rising costs." $2,500 from Pfizer's father. Today, 167 years later, Pfizer The reduction in R&D funding in reaction to expand- Inc. has international revenues of $49 billion, which ing costs has led to stifled innovation and revealed a cri- makes it the second-largest pharmaceutical manufac is looming ahead for many large drug manufacturers turer in the world.' Despite Pfizer's success, the company in the industry. Not only have many drug companies' has faced many challenges over the last few decades. The blockbuster drugs gone off patent in recent years, but the pharmaceutical industry is heavily influenced by legal, reductions in R&D spending have resulted in drug pipe- political, and technological forces, and all indications are lines that have failed to produce anything of significant that the industry will continue to experience dramatic value." The number of new drugs approved by the FDA changes. per billion dollars of R&D expenditures has halved every Since the passing of the Food and Drug Act in 1906, nine years since 1950." The rapid increase in the cost of the Food and Drug Administration (FDA) has had reg- drug development and the reduction in the approval fre- ulatory authority over drugs in the United States. The quency of blockbuster-level drugs has led many industry scope of its initial authority was limited and in 1938 experts to largely consider the current, fully integrated President Roosevelt signed the Food, Drug and Cosmetic business model of large pharmaceutical companies to be Act (FD&C) into law, which significantly expanded fed- unsustainable.12 eral oversight of drug manufacturing and marketing.* In addition to granting the FDA authority to mandate pre-market review of drugs, the FD&C also allowed the Business and Strategies FDA to regulate drug labeling and advertising. Then, in Like most large pharmaceutical manufacturers, Pfizer 1992, Congress passed the Prescription Drug User Fee pursues a "blockbuster" business model that is heavily Act, which enables the FDA to collect fees from drug reliant on its R&D pipeline to consistently develop and manufacturers to aid in funding the pre-market review launch high volume drugs-drugs with expected annual process for new drug approvals.' The effect of these revenues of $1 billion or greater." In 2012, Pfizer began Written by Jeffrey S. Harrison, Ryan McGowan, Kevin O'Neill, Lauren Shotwell, and Joshua Torres at the Robins School of Business, University of Richmond. Copyright @ Jeffrey S. Harrison. This case was written for the purpose of classroom discussion. It is not to be duplicated or cited in any form without the copyright holder's express permission. For permission to reproduce or cite this case, contact Jeff Harrison at RCNcases@richmond.edu. In your message, state your name, affiliation and the intended use of the case. Permission for classroom use will be granted free of charge. Other cases are available at: http://robins.richmond.edu/centers/case-network.html 33838_case12_ptg01.indd 163 4/3/19 5:52 PM C-164 Part 4: Case Studies Exhibit 1 Pfizer Business Segment Comparisons Business Segment Financials Innovative vs Established Segments 2015 2014 2013 Innovative Established Innovative Established Innovative Established Revenues $26,758 $21,587 $24,005 $25,149 $23,602 $27,619 Cost of Sales 3,650 4,486 3,848 ,570 3,675 , 732 % of revenue 13.60% 20.80% 16.00% 18.20% 15.60% 17.10% Selling, informational, and 6,807 3,572 6,162 3,903 5,520 4,714 administrative expenses R&D Expenses 3,030 758 2,549 657 2,154 737 Amortization of intangible assets 94 36 69 85 58 100 Restructuring charges and certain acquisition-related costs Other (income)/deductions-net (1.087) (150) 1.096) (265) (576) (216) Income from continuing $14,264 $12,885 $12,472 $16,199 $12,765 $17,552 operations before provision for taxes on income Source: 2015 Pfizer Annual Report.Instructions RUB Read this case study on Pfizer and make suggestions to improve the company's strategy and competitive position. When analyzing cases, be sure that you fully answer any questions your professor asks about the case. Consider covering the following areas: . Strategic Profile and Case Analysis Purpose. Identify the key facts of the case, and show how they lead to a particular focus for your case analysis. List the key elements of the situation: people, places, activities, and contexts, and discuss the level of uncertainty associated with the information about the case. . Situation Analysis - External. Review all seven of the general environmental categories (technological, demographic, economic, political/legal, sociocultural, global, and physical environment trends), looking for opportunities and threats that could impact the organization. Use Porter's Five Forces model to analyze the company's industry. Identify key competitors and analyze their strategies, core competencies, and competitive response. . Situation Analysis - Internal. Review factors within the company that are critical to the strategy of the firm, and classify them as strengths or weaknesses. Use a value chain analysis to determine which parts of the company's operations add value, and which do not. . SWOT Analysis - Compare strengths, weaknesses, opportunities, and threats for the company, and show how they are related. What actions should the company take to maximize the strengths and opportunities, while minimizing the weaknesses and the threats? . Strategy Formulation - Identify at least three or four business-level or corporate strategies that will help the company to develop a competitive advantage in the future. Explain the advantages and disadvantages of each strategy, select the strategy that you feel is most likely to benefit the company, and explain the reason for your decision using facts from the case, outside research, and theoretical information. . Strategic Alternative Implementation - Provide a complete and detailed analysis of the steps that must be taken to put the strategy into practice, including structural, leadership, control, incentive, and other changes. Alternatives and recommendations should flow from SWOT analysis and be explained in light of it.Restructuring charges and certain acquisition-related costs 1,152 250 1,182 1,880 2,930 Other (income)/deductions-net 2,860 1,009 (532) 4,031 2,499 Income from continuing operations before provision 8,965 12,240 15,716 12,080 12,304 for taxes on income Provision for taxes on income 1,990 3,120 4,306 2,562 3,909 Income from continuing operations 6,975 9,119 11,410 9,518 8,395 Discontinued operations: ncome from discontinued operations-net of tax 17 (6) 308 297 350 Gain/(loss) on disposal of discontinued operations-net of tax (6) 55 10,354 4,783 1,304 Discontinued operations-net of tax 11 48 10,662 5,080 1,654 Net income before allocation to noncontrolling interests 6,986 9,168 22,072 14,598 10,049 Less: Net income attributable to noncontrolling interests 26 32 69 28 40 Net income attributable to Pfizer Inc. $ 6,960 $9,135 $ 22,003 $ 14,570 $ 10,009 Source: Pfizer Annual Reports. 33838_case12_ptg01.indd 168 4/3/19 5:52 PM Case 12: Pfizer C-169 Exhibit 3 Pfizer Balance Sheets Consolidated Balance Sheets-USD ($) $ in Millions 2015 2014 2013 2012 2011 Assets Cash and cash equivalents $ 3,641 $ 3,343 $ 2, 183 $ 10,081 $ 3,182 Short-term investments 19,649 $2,779 10,225 22,318 23,270 Trade accounts receivable, less allowance 8,176 8,401 9,357 10,675 13,058 for doubtful account Inventories 7,513 5,663 6,166 6,076 6,610 Current tax assets 2,662 2,56 4,624 6,170 9,380 Other current assets 2,163 2,843 3,613 3.567 5 , 317 Assets of discontinued operations and other 76 5,944 assets held for sale Total current assets 43,804 55,595 56,244 64,831 60,817 Long-term investments 15,999 17,518 16,406 14,149 9,814 Property, plant and equipment, less accumulated 13,766 11,762 12,397 13,213 15,921 depreciation Identifiable intangible assets, less accumulated 40,356 35,166 39,385 45,146 51,184 amortization Goodwill 48,242 42,069 42,519 43,661 44,569 Noncurrent deferred tax assets and other 1,794 1,944 1,554 1,565 5,697 noncurrent tax assets Other noncurrent assets 3,499 3,513 3,596 3,233 Total assets $167,460 $167,566 $172,101 $185,798 $188,002 Liabilities and Equity Short-term borrowings, including current portion $10,160 $5,141 $6,027 $6,424 $4,016 of long-term debt Trade accounts payable 3,620 3,210 3,234 2,921 3,678 Dividends payable 1,852 1,711 1,663 1,733 1,796 Income taxes payable 418 531 678 979 1.009 Accrued compensation and related items 2,359 1.841 1,792 1,875 2,120 Other current liabilities 10,990 9,153 9,951 13,812 15,066 Liabilities of discontinued operations 21 1,442 1,224 Total current liabilities 29,399 21,587 23, 366 29,186 28,909 Long-term debt 28,818 31,541 30,462 31,036 34,926 Pension benefit obligations, net 6,310 7,885 4,635 7,782 6,355 Postretirement benefit obligations, net 1,809 2,379 2,668 3,491 3,344 Noncurrent deferred tax liabilities 26,877 23,317 25,590 21,193 18,861 Other taxes payable 3,992 4,353 3,993 6,581 6,886 Other noncurrent liabilities 5, 257 4,883 4,767 4,851 6,100 Total liabilities 102,463 95,944 95,481 104,120 105,381 Commitments and contingencies Preferred stock, no par value, at stated value $ 26 $ 29 $ 33 $ 39 $ 45 Common stock 459 455 453 448 445 Additional paid-in capital 81,016 78,977 77,283 72,608 71,423 continued 33838_case12_ptg01.indd 169 4/3/19 5:52 PMrestructuring its operations into a new commercial oper- Global Vaccines, Oncology, and Consumer Healthcare ating model. Pfizer divested its infant nutrition business Business. This segment consists of three businesses with for $11.9 billion and spun-off its animal health unit, Zoetis. the following key elements: (1) poised for high, organic Additionally, Pfizer restructured its operations into two growth; (2) distinct specialization and operating models primary business segments: Innovative Products and in science, talent, and market approach; and (3) struc Established Products. Pfizer's Innovative Products busi- tured to ideally position Pfizer to be a market leader ness is further divided into the Global Innovative Pharma on a global basis." Consumer products include Advil", GIP) and Global Vaccines, Oncology, and Consumer Centrum", Robitussin", Nexium", and ChapStick". Healthcare (VOC) businesses." Ian Read commented regarding the restructuring: "This represents the next Established Products Business steps in Pfizer's journey to further revitalize our innova- Global Established Pharma (GEP) Business. This area con- tive core. Our new commercial model will provide each sists of three primary product segments: (1) Peri-LOE business with an enhanced ability to respond to market products which are losing or approaching a losing dynamics, greater visibility and focus, and distinctive position in market exclusivity; (2) legacy established capabilities."15 Exhibit 1 contains some useful financial products in developed markets that have lost market comparisons between Pfizer's Innovative Products and exclusivity and those with growth opportunities; and its Established Products. 3) emerging market products with growth opportunities such as organic initiatives, partnerships, product enhance- Innovative Products Business ments, sterile injectables, and biosimilars." Examples of Global Innovative Pharma (GIP) Business. This busi- established products include Celebrex", Epipen", Zoloft", ness focuses on developing, registering and commer- and Lypitor". cializing novel, value-creating medicines that improve patients' lives. Therapeutic areas include inflamma Pricing Strategy tion, cardiovascular/metabolic, neuroscience and Pfizer's and other large drug companies' revenue growth pain, rare diseases and women's/men's health, and has been largely dependent on raising the price of older include leading brands, such as Xeljanz", Eliquis", drugs, particularly those nearing patent expirations. and Lyrica". GIP has a robust pipeline of medicines in Approximately 34% of Pfizer's revenue growth over the inflammation, cardiovascular/metabolic disease, pain, past three years has come from increasing prices on and rare diseases. 16 existing drugs." Over this period, Pfizer has increased 33838_case12_ptg01.indd 164 4/3/19 5:52 PM Case 12: Pfizer C-165 the price of Viagra by 57%, of Lyrica by 51%, and of 2016: Pfizer acquires Anacor Pharmaceuticals for Premarin by 41%. A 2013 study by the AARP found that $5.1 billion for their topical anti-inflammatory the price of Lipitor rose by 9.3% in the year preceding drugs and acquires the rights to Crisaborole.24 patent expiration, and by 17.5% in 2011, the year of expi- 2016: Pfizer acquires Medivation for $14 billion for ration.20 Pfizer is not alone in these practices. AbbVie ts prostate cancer drug Xtandi. 25 and Bristol-Myers Squibb have both been reported as generating a very significant amount of their revenue Pfizer has attempted unsuccessfully to acquire a growth from price increases. Drug pricing scandals and foreign drug company and relocate its headquarters increased media and societal attention on drug pricing overseas. CEO Ian Read has said numerous times that in general makes Pfizer's reliance on pricing strategy the company faces a competitive disadvantage with to drive top-line revenue growth unsustainable. This is foreign rivals that have significantly lower tax bills. 26 evident in the drug industry's flat net pricing in 2015.21 These sorts of deals are called corporate inversions- transactions undergone by a U.S. company that moves Growth Strategy its tax residence to a foreign country in order to reduce Pfizer has become one of the largest pharmaceutical com- U.S. taxes.27 In 2014, Pfizer attempted a merger with panies in the world primarily as a result of aggressive rival AstraZeneca, which faced fierce opposition from mergers and acquisitions (M&A). Pfizer's acquisitions lawmakers on either side. In the end, Pfizer walked have been focused on two main strategies: expanding away from the $118 billion deal after rejection by its capabilities and acquiring brands with strong rev- AstraZeneca's board. 28 enues. Many of Pfizer's acquisitions have provided In 2016 Pfizer entered into an agreement to merge new capabilities for the organization, such as biolog- with Allergan. The $160 billion deal would have created ics with the acquisition of Warner-Lambert in 2000 the largest pharmaceutical company in the world and and biosimilar drugs with the acquisition of Hospira would have allowed Pfizer to relocate its headquarters in 2015. Additionally, Pfizer acquired the rights to to Allergan's home country of Ireland in order to take the best-selling drug Lipitor in its 2000 acquisition of advantage of their lower corporate tax rate." However, Warner-Lambert and the rights to Celebrex and Bextra on April 4, 2016, the U.S. Department of Treasury took in its 2003 acquisition of Pharmacia Corporation. From measures to limit corporate inversions. Previously, a Pfizer's press releases and company history, a brief time- company realized tax benefits for inversions only when line of Pfizer's major acquisitions (and divestitures) is the foreign company would contribute 20% or greater outlined below22: of the combined company's assets. The new ruling dis- regards the last three years of U.S. acquisitions by the 2000: Pfizer acquires Warner-Lambert for $90 bil- foreign entity when determining the foreign company's lion for their biologics and consumer prod- relative size under the combined entity. The new rule ucts portfolio, along with the rights to Lipitor. was the predominant factor that caused Pfizer to pay 2003: Pfizer acquires Pharmacia Corporation for $150 million to walk away the Allergan deal." Pfizer $60 billion and acquires the rights to Celebrex, would not have realized the full tax benefit of the inver- Bextra, Detrol, and Xalatan. sion because Allergan's relative size would have fallen 2005: Pfizer acquires Vicuron Pharmaceuticals for below the 20% threshold under the new tax rules. $1.9 billion for their antibiotic research and development. Innovation Strategy 2006: Pfizer sells its consumer products division to Pfizer has a long history of investing in R&D for the Johnson & Johnson for $16.6 billion. development of blockbuster drugs. However, many 2007: Pfizer acquires Coley Pharmaceutical for $164 industry experts believe the age of blockbuster drugs million for their portfolio of biotechnology, has come to an end and that new blockbusters will be cancer, and vaccine drugs. rare."? They argue that the opportunities for revolution- 2009: Pfizer acquires Wyeth for $68 billion for their ary drugs have been mostly exploited, with very few portfolio of biotech drugs. areas of medicine in which breakthrough drugs can 2010: Pfizer acquires King Pharmaceuticals for have a huge impact. In light of industry trends, Pfizer $3.6 billion and acquires the rights to EpiPen. has shifted its strategy of maintaining an industry-2015: Pfizer Acquires Hospira for $16 billion for leading drug pipeline from in-house development to their biosimilar and injectable drugs portfolio, being more reliant on strategic partnerships and mergers as well as infusion technologies. 23 and acquisitions. 33838_case12_ptg01.indd 165 4/3/19 5:52 PM C-166 Part 4: Case Studies To support its interest in strategic partnerships, in and Analytics, and within that role she was part of the 2004 Pfizer founded Pfizer Venture Investments (PVI). task force that "redesigned Pfizer's R&D organization to Its goal is to identify and invest in strategic areas and strengthen its pipeline and improve efficiency."36 businesses at the leading edge of healthcare science and echnologies. PVI started with a $50 million annual Executive VP Chief Development Officer, Rod budget and was Pfizer's way of staying ahead of industry Mackenzie, PhD. Rod Mackenzie received his PhD trends and investing in companies which are developing from Imperial College, London, after getting his chem- compounds and technologies that will enhance Pfizer's istry degree from the University of Glasgow. As the co- drug pipeline and help drive the future of the pharma- inventor of Darifenacin, which was sold in 2003 due ceuticalsndustry." In January 2016, Pfizer announced to regulatory issues, Mackenzie held various positions that it would be expanding its investment strategy to within Pfizer before assuming his current position.37 include investments in early-stage scientific innova- His role oversees "the development and advancement tions in immuno-oncology, gene therapy, and other of Pfizer's pipeline of medicines in several therapeutic cutting-edge fields. Pfizer invested nearly $46 million areas." He serves on the Portfolio Strategy and Investment n four companies in these fields: BioAtla, NextCure Committee and sits on the Board of Directors for ViiV Inc., Cortexyme Inc., and 4D Molecular Therapists, Inc. Healthcare.38 Pfizer's strategic partnership with these and other firms provides a world-class resource in start-up organizations Executive VP Business Operations and CFO, to accelerate the pace of scientific innovation and to help Frank D'Amelio. Frank D'Amelio joined the company develop their pipeline of drugs." in September 2007 and oversees finance, business devel- opment, and business operations. He has been ranked Inside Pfizer as a top CFO for various years by Institutional Investor magazine. He has led the organization in many mergers, Management Team spin-offs, and sales, such as: Pfizer and Wyeth merger, CEO, lan C. Read. Ian C. Read was elected CEO of sale of their nutrition business, and the spin-off of Zoetis. Pfizer in December of 2010 and Chairman of the Board His experience comes from his many leadership roles at in 2011, taking over from Jeffrey Kindler. Read has spent Alcatel-Lucent, including Senior Executive Vice President his entire career at Pfizer, starting as an operational audi- of Integration and Chief Administrative Officer, and his tor. Read's B.S. in chemical engineering and accounting experience as COO of Lucent Technologies. Frank earned experience set the groundwork for a successful career his MBA in Finance from St. John's University and his in pharmaceuticals. Some of his previous roles included bachelor's degree in Accounting from St. Peter's College. CFO of Pfizer Mexico, Country Manager of Pfizer Brazil, Representing Pfizer, he currently serves on the Board of President of Pfizer's International Pharmaceuticals Group, Directors for many organizations. They include, Humana, Executive Vice President of Europe, and Corporate Vice Inc., Zoetis, Inc., the Independent College Fund of New President. Read also serves on the boards of Pharmaceutical Jersey, and the Gillen-Brewer School. 39 Research Manufacturers of America (PhRMA), which represents the leading innovative biopharmaceutical Major Shareholders research companies. 35 Pfizer is a publicly traded company with approximately 6.2 billion shares outstanding at December 31, 2015.40 Executive VP Strategy Portfolio and Commercial According to Yahoo Finance, among Pfizer's primary Operations, Laurie J. Olso. Laurie Oslo oversees shareholders are institutional investment companies long-term strategy, execution of commercial object Vanguard Group, Inc., BlackRock Institutional Trust tives, and advises portfolio functions for R&D invest- Company, and JPMorgan Chase & Co., who own 6.32%, ment strategies. She started working for Pfizer in 1987 4.95%, and 1.89% of total outstanding shares, respec- in Marketing Research. As an economics graduate from tively. Additionally, Pfizer's only major non-institutional the State University of New York at Stony Brook and shareholders are all executive-level leadership within the with a MBA from Hofstra University, her experiences organization. span across domestic and global leadership positions in marketing, commercial development, strategy, analytics Human Resources corporate responsibility, and operations. Her most recent Human resource efforts are led by Charles H. Hill III, role was Senior Vice President of Portfolio Management who has been the Executive Vice President of Worldwide 33838_case12_ptg01.indd 166 4/3/19 5:52 PM Case 12: Pfizer C-167 Human Resources since December 2010. Prior to that Operations & Supply Chain assignment, Hill was Senior Vice President of Human Each of the Innovative Products and Established Resources for the Worldwide Biopharmaceuticals Products businesses is led by a single manager respon Businesses from 2008 through December 2010. On sible for both commercial productivity and research December 31, 2015, Pfizer employed approximately and development activities that meet proof-of-concept 97,900 employees across the globe." requirements. The Innovative Products Business is In 2007, Pfizer Global Manufacturing, a global man- tasked with development and commercialization of ufacturing site in the U.K., was recognized for their new medicines and vaccines. The Established Products Explorer training program. The Explorer program was a Business focuses on branded generic medicines and leg-Exhibit 3 (cont.) Pfizer Balance Sheets Consolidated Balance Sheets-USD ($) $ in Millions 2015 2014 2013 2012 2011 Employee benefit trusts (3) Treasury stock, shares at cost (79,252) (73,021) (67,923) (40,122) (31,801) Retained earnings 71,993 72,176 59,732 $4,240 16,210 Accumulated other comprehensive loss (9,522) (7,316) (3,271) (5,953) (4,129) Total Pfizer Inc. shareholders' equity 64,720 71,301 76,307 81,260 82, 190 Equity attributable to noncontrolling interests 278 321 313 418 431 Total equity 64,998 71,622 76,620 81,678 82.621 Total liabilities and equity $ 167,460 $167,566 $ 172,101 $ 185,798 $188,002 Source: Pfizer Annual Reports. Competitive Landscape pipeline that will directly compete with Pfizer phar- maceuticals. Currently its best sellers are prescription Major Competitors treatments for cancer, multiple sclerosis, and macular The pharmaceutical industry invests heavily in degeneration. " research and clinical trials and relies on obtaining Major Acquisitions62: FDA approval and patent protection for its products to ensure prolonged profits while the next "miracle" 1999: Formed by merger with Ciba-Geigy and drug is under research. There are high payoffs when Sandoz Laboratories a drug is successfully brought to market; but there 2005: Acquired Hexal and Eon Labs ($8.29B) also great costs, in the form of massive time and 2006: Acquired Chiron Corp. ($5.1B) monetary investments for failures, if it is not. Among 2010: Acquired Alcon ($39.3B) Pfizer's largest competitors are Merck, Novartis, 2012: Acquired Fougera Pharmaceuticals ($1.5B) Bristol-Myers, and Johnson & Johnson. 5 Exhibit 4 contains some comparative financial ratios for these Bristol-Myers Squibb (BMY). Bristol-Myers Squibb competitors. was founded in New York in 1887 and had $18.8B in 2015 revenues. They produce the market-leading Merck & Co. (MRK). Merck & Co. was founded in 1891 antipsychotic drug, Abilify, which is widely used for and had $39.5B in 2015 revenues, making it one of the treating schizophrenia. Bristol-Myers Squibb, like the largest pharmaceuticals companies in the world today. majority of pharmaceuticals companies, derives the The cholesterol-lowering drug branded Zetia, which is bulk of its profits from a limited number of expen- Merck's 2nd largest revenue generator, is a direct com- sive specialty drugs or much wider market spread of petitor to Pfizer's drug Lipitor (patent expired in 2011). cheaper drugs. 63 Zetia is selling at a rate of nearly $3 billion a year, whereas Major Acquisitions64: Lipitor is generating $1.86B.59 2009: Acquired Medarex Major Acquisitions60: 2010: Acquired ZymoGenetics 1993: Merck acquired Medco Containment Services, 2015: Acquired Flexus Biosciences ($1.25B) and Inc. ($6B) Cardioxyl ($2B) 2009: Schering-Plough merged with Merck & Co. 2016: Acquired Padlock Therapeutics ($600M) & ($41B merger Cormorant Pharmaceuticals ($520M) 2014: Merck acquired Cubist Pharmaceuticals ($8.4B) Johnson & Johnson (JNJ). Founded in 1886, Johnson & Johnson is an American multinational med- Novartis AG (NVS). Founded in 1996 in Switzerland, ical devices, pharmaceutical (40% by revenues) and Novartis AG is the pharmaceutical industry's world consumer packaged goods manufacturer. Besides over- leader in sales, generating $50.4B in 2015 reve- the-counter products for self-treatment and at-home nues. Novartis has several oncology products in the medication, Johnson & Johnson produces high-priced 83838_case12_ptg01.indd 170 4/3/19 5:52 PM Case 12: Pfizer C-171 Exhibit 4 Comparative Financial Ratios Bristol-Myers Johnson & Pfizer Merck Novartis Squibb Johnson Research over Revenue % 15.74 16.97 17.73 35.79 12.91 Revenue INR Mil 48,85 39,498 50,387 16,560 70,074 Gross Margin % 80.3 62.2 65.5 76.4 69.3 Operating Income INR Mil 11,824 6,928 8,977 1,890 18,065 Operating Margin % 24.2 17.5 17.8 11.4 25.8 Net Income INR Mil 5,960 4,442 17,783 1,565 15,409 Earnings Per Share INR 1.11 1.56 7.29 0.93 5.48 Dividends INR 1.12 1.81 2.67 1.49 2.95 Payout Ratio % * 82.7 48.4 77.7 139.6 55.6 Shares Mil 6,257 2,841 2,403 1,679 2.813 Book Value Per Share * INR 10.82 16.39 32.31 9.08 25.86 Operating Cash Flow INR Mil 14,512 12,421 11,897 1.832 19,279 Cap Spending INR Mil -1,496 -1,283 -3,505 820 - 3,46 Free Cash Flow INR Mil 13, 016 11,138 8,392 1.012 15,81 Free Cash Flow Per Share * INR 2.22 1.65 3.97 0.64 5.3 Working Capital INR Mil 14,405 10,561 863 2, 398 32,463 Tax Rate % 22.2 17.44 13.6 21.47 19.73 Net Margin % 14.25 11.25 35.29 9.45 21.99 Asset Turnover (Average) 0.29 0.39 0.39 0.51 0.53