This case will enable you to practice conducting planning and substantive analytical procedures for accounts in the revenue cycle. When analyzing the financial data, you may assume that the 2015 information is unaudited, while prior year data is audited. As you complete this case, consider the following features of and trends in the pharmaceutical industry and for PharmaCorp specifically: After a long period of industry dominance by companies in the United States, the United Kingdom, and Europe, these companies are facing increasing competition from companies domiciled in emerging economies, such as Brazil, India, and China. There exists significant uncertainty in the market because of recent regulation covering health-care and government payouts for certain procedures and related pharmaceuticals. Health-care policy makers and the government are increasingly mandating what physicians can prescribe to patients. Health-care policy makers and the government are increasingly focusing on prevention regimes rather than treatment regimes, thereby leading to shifts in the demand for various pharmaceuticals The global pharmaceutical market is anticipated to grow by 5% to 7% in 2016 compared with a 4% to 5% growth rate in 2015, according to a leading industry analyst publication. Beginning in 2014, PharmaCorp initiated and executed a significant company-wide cost reduction initiative aimed at improving manufacturing efficiency, cutting back on research and develop- ment expenses and eliminating unnecessary corporate overhead. PharmaCorp's policies for extending credit to customers has remained stable over the last three years. PharmaCorp's credit- granting policies are considered stringent within the industry, and analysts have sometimes criticized the company for this contending that such policies have hindered the company's revenue growth relative to industry peers. PharmaCorp's policies for extending credit to customers have remained stable over the last three years PharmaCorp's credit granting policies are considered stringent within the industry, and analysts have sometimes criticized the company for this contend- ing that such policies have hindered the company's revenue growth relative to industry peers. Two of PharmaCorp's popular pharmaceuticals, Selebrax and Vyvox, came off patent during the fourth quarter of FYE 2015. These pharmaceuticals now face competition in the generic drug portion of the overall industry market PharmaCorp Operating Segments We manage our operations through five operating segments Primary Care Specialty Care and Oncology, Established Products and Emerging Markets; Animal Health; and Consumer Healthcare. As of the third quarter of 2012, the Animal Health and Consumer Healthcare business units are no longer managed as a single operating segment. Each operating segment has responsibility for its commercial activities and for certain research and development activities related to in-line products and in-process research and development (IPR&D) projects that generally have achieved proof-of-concept. on November 30, 2015, we completed the sale of our Nutrition business to Choco and recognized a gain on the sale of this business in Gain/loss) on sale of discontinued operationsnet of tax in the consolidated statement of income for the year ended December 31, 2015. The operating results of this business are reported as Income/floss) from discontinued operations-net of tax in the consolidated statements of income for all periods presented. We regularly review our segments and the approach used by management to evaluate performance and allocate resources. Generally, products are transferred to the Established Products business unit in the beginning of the fiscal year following loss of patent protection or marketing exclusivity A description of each of our five operating segments follows: Primary Care operating segment -indudes revenues from human prescription pharmaceutical products primarly prescribed by primary care physicians, and may include products in the folowing therapeutic and disease areas: Alzheimer's disease, cardiovascular (excluding pulmonary arterial hypertension. erectile dysfunction, genitourinary, major depressive disorder, pain, respiratory and smoking cessation. All revenues for these products are allocated to the Primary Care business unit, except those generated in emerging markets and those that are managed by the Established Products business unit Specialty Care and Oncology operating segment comprises the Specialty Care business unit and the Oncology business unit. Specialty Care-includes revenues from human prescription pharmaceutical products primarily prescribed by physicians who are specialists, and may include products in the following therapeutic and disease areas, anti-infectives, endocrine disorders, hemophilia, inflammation, ophthalmology, pulmonary arterial hypertension specialty neuroscience and vaccines. All revenues for these products are albcated to the Specialty Care business unit, except those generated in emerging markets and those that are managed by the Established Products business unit. Oncology-includes revenues from human prescription pharmaceutical products addressing oncology and oncology-related illnesses. All revenues for these products are allocated to the Oncology business unit, except those generated in emerging markets and those that are managed by the Established Products business unit. Established Products and Emerging Markets operating segment --comprises the Established Products business unit and the Emerging Markets business unit. Established Products includes revenues from human prescription pharmaceutical products that have lost patent protection or marketing exclusivity in certain countries and/or regions. Typically, products are transferred to this business unit in the beginning of the fiscal year following loss of patent protection or marketing exclusivity. However, in certain situations, products may be transferred to this business unitat a different point than the beginning of the fiscal year following loss of patent protection or marketing exclusivity in order to maximize their value. This business unit also excludes revenues generated in emerging markets. Emerging Markets -includes revenues from all human prescription pharmaceutical products sold in emerging markets, induding Asia (excluding Japan and South Korea), Latin America, the Middle East, Eastern Europe, Africa, Turkey and Central Europe PharmaCorp PharmaCorp Segment Info PharmaCorp Geographic Info PharmaCorp Other Rev Info E H M N PharmaCorp Geographic Information Revenues exceeded $500 million in each of 16 countries outside the U.S. in 2015 and 2014, and in each of 17 countries outside the U.S. in 2013. The U.S. and Japan were the only countries to contribute more than 10% of total revenue in 2015. The U.S. was the only country to contribute more than 10% of total revenue in 2014 and 2013 The following table provides revenues by geographic area: Year Ended December 31, 2015 2014 2013 (MILLIONS OF DOLLARS) Revenues United States $ 23,086 $ 26,933 $ 28,855 Developed Europe 13,375 16,099 16,156 Developed Rest of World 10,554 10,975 9,891 Emerging Markets 11,971 11,252 10,263 Revenues $ 58,986 $ 65,259 $ 65,165 Pharmacorp PharmaCorp Segment Info PharmaCorp Geographic Info PharmaCorp Other Rev Info PharmaCorp Long Term Debt Novartell PharmaCorp Other Revenue Information Significent customers: We sell our products primarily to customers in the wholesale sector. In 2015, sales to our three largest U.S. wholesaler customers represented approximately 12%, 9% and 7% of total revenues and, collectively, represented approximately 16% of total accounts receivable as of December 31, 2015. In 2014, sales to our three largest U.S. wholesaler customers represented approximately 13%, 11% and 9% of total revenues and collectively, represented approximately 14% of total accounts receivable as of December 31, 2014. For both years, these sales and related accounts receivable were concentrated in our three biopharmaceutical operating segments. Significant Product Revenues The following table provides revenues by product: Year Ended December 31, (MILLIONS OF DOLLARS) Total revenues from biopharmaceutical products 51,214 57,747 58,523 2015 2014 2013 Revenues from other products: Animal Health 4,299 4.184 3.575 Consumer Healthcare 3,212 3,028 2,748 Other 261 300 319 Revenues 58,986 $ 65,259 S 65,165 Top Five Products in Terms of Revenue fal biopharmaceutical products) Year Ended December 31, (MILLIONS OF DOLLARS) 2015 2014 2013 Lyran $ 4,158 5 3.693 S 3,063 Lipco 3,948 9,577 10733 Enbing (Outside the US and Canada) 3,737 3.666 3,274 Prevnent 3,718 3,657 2,416 Selebrax 2,719 2,523 2,374 PharmaCorp PharmaCorp Segment Info PharmaCorp Geographic Info PharmaCorp Other Rev Info Pharmacorp Long Term Part II: Substantive Analytical Procedures F. At the Excel file, you will see three tabs that you should review: PharmaCorp Segment Information, PharmaCorp Geographic Information, and PharmaCorp Other Revenue Info These tabs provide excerpts from PharmaCorp's footnote disclosures regarding segment, geographic, and other revenue information. Read these disclosures and describe the various operating segments and geographic regions in which the company operates
