Pharmaceutical Industry Assignment

Topic: To analyze the factors that impact profitability aspect or position of different
Pharmaceutical Companies: A study on HIKMA, Oxford Biomedica, Shire, GSK
and Astra Zeneca.

ABSTRACT
Profit maximization is one of the motives of business organizations including
pharmaceutical sector. This dissertation is based on five pharmaceutical companies
namely HIKMA, Oxford Biomedica, Shire, GSK and Astra Zenec, HIKMA, Oxford
Biomedica (OB), Shire, GSK and Astra Zeneca. The aim of the present study is to
analyze the factors that have significant impact on the profitability aspect of companies
positively or negatively. In this, deductive approach and positivism philosophy has been
selected by the scholar.In this, to ascertain the impact of different factors on the
profitability aspect of pharmaceutical sector quantitative investigation type has been
selected. In this, data has been gathered by the researcher from annual reports, books
journals and scholarly articles related to the profitability factors. By applying the tool of
ratio analysis and doing correlation analysis scholar has presented the extent to which
varied factors influence profitability aspect or position of the firm.
Along with this, it can be depicted from the evaluation of such five companies is
that ROE increases, when sales growth and assets turnover ratio moves in upward
direction. It can be seen in both literature review and discussion section that by when
sales increases then profit margin also enhances if business unit has good control over
expenses. Along with this, by making effective use of assets firms performing in
pharmaceutical sector can enhance its both productivity and profitability. High ATO
represents that business unit have made use of both fixed and current assets to a great
extent in relation to generating sales.Hence, from overall discussion, it can be presented
that incline in current ratio, direct and operating expenses are the main factors that
negatively influence profit margin of firm. Further, to improve margin companies of
pharmaceutical; sector needs to make focus on increasing sales log and total assets
turnover ratio.

ACKNOWLEDGEMENT
I am thankful to my tutor, friends and relatives who gave me guidance and
support for this project. In completing my dissertation pertaining to investigating factors
that have an impact on theprofitability ofpharmaceutical companies such as HIKMA, OB,
Shire, GSK and AZ. they always encouraged me to do it in the best possible way. In
addition to this, I also appreciate my mentor for giving me guidance in preparing
dissertation. From his support and experience I was in the position to complete
dissertation in a right manner.

TABLE OF CONTENTS
CHAPTER 1: INTRODUCTION......................................................................................1
Background of the study................................................................................................1
Research aims and objectives........................................................................................1
Research questions.........................................................................................................2
Rationale of the study....................................................................................................2
Significance of thestudy.................................................................................................2
Dissertation structure.....................................................................................................3
CHAPTER 2: LITERATURE REVIEW...........................................................................5
Theme 1: Overview of UK pharmaceutical sector........................................................5
Theme 2: Tools & techniques that help in measuring profitability aspect and monetary
performance...................................................................................................................6
Theme 3: Factors that impact profitability aspect........................................................10
Theme 4: Impact of financial sources and working capital elements affects company's
profitability..................................................................................................................13
Literature Gap..............................................................................................................16
CHAPTER 3: DESCRIPTION OF UK PHARMACEUTICAL SECTOR.....................18
CHAPTER 4: METHODOLOGY...................................................................................20
Problem statement........................................................................................................20
Research question........................................................................................................20
Research approach and philosophy..............................................................................21
Research type or strategy.............................................................................................21
Data sources.................................................................................................................22
Data analysis methods..................................................................................................23

Ethical considerations..................................................................................................23
Reliability and validity.................................................................................................24
Research limitations.....................................................................................................24
CHAPTER 5: ANALYSIS AND FINDINGS.................................................................26
5.1 Data display and description..................................................................................26
Return on equity...........................................................................................................26
Current ratio.................................................................................................................27
Log of sales..................................................................................................................29
Assets turnover ratio....................................................................................................29
Gearing ratio................................................................................................................30
5.2 Data analysis..........................................................................................................34
Profitability Model.......................................................................................................35
CHAPTER 6: DISCUSSIONS........................................................................................36
CHAPTER 7: CONCLUSION AND RECOMMENDATIONS.....................................39
7.1 Conclusion.............................................................................................................39
7.2 Recommendations..................................................................................................40
REFERENCES................................................................................................................42
APPENDIX......................................................................................................................47
Correlation analysis.....................................................................................................47
List of figures
Figure 1: Return on equity...............................................................................................27
Figure 2: Current ratio.....................................................................................................28
Figure 3: Log of sales......................................................................................................29
Figure 4: Assets turnover ratio.........................................................................................30
Figure 5: Gearing ratio.....................................................................................................31
Figure 6: Gross margin....................................................................................................32

Figure 7: Efficiency ratio.................................................................................................33

CHAPTER 1: INTRODUCTION
Background of the study
In the present era, firm carry out business operations and functions with the
motive to achieve several goals such as enhancement of customer base, sales as well as
profit maximization. In this regard, business organization is required to make monitoring
of profitability aspect or performance which in turn helps in assessing reasons behind the
growth or declination. Moreover, business unit can attain high margin only when it exerts
control on expenses.For this purpose, business organizations need to have information
about the areas that account for high cost or expenditures because without having
information about the same firm would notbecome able to take action for improvement
(Smith, Bagchi-Sen and Edmunds, 2016).For this dissertation, HIKMA, Oxford
Biomedica, Shire, GSK and Astra Zeneca havebeen selected that recognized as a leading
companies of pharmaceutical sector. In this, dissertation will provide deeper insight about
the factors or elements that have an impact on the profitability of firms. Besides this, it
will also shed light on the extent to which different variables such as return on capital
employed, gross profit, current, gearing and efficiency ratios are highly related to each
other. Further, it also provide stakeholders with the suitable framework that can be
undertaken to enhance or maximize profitability aspect,
Research aims and objectives
Aim
The aim of the present study is to analyze the factors that have significant impact
on the profitability aspect of companies positively or negatively.
Objectives: Considering the above aim following objectives have been drafted by the
researcher such as:
 To evaluate the growth of UK pharmaceutical sector in monetary terms.
 To investigate the factorsthat has aninfluence on the profit margin of HIKMA,
Oxford Biomedica, Shire, GSK and Astra Zeneca.

 To recommend strategic measures to pharmaceutical companies that contributes
in the profitability of pharmaceutical firms.
Research questions
For carry out research in a structured and appropriate manner scholar is required
to develop suitable questions on the basis ofaim and objectives of the study. Hence, main
research questions associated with the present study are enumerated below:
Q.1 What is the current financial trend of UK pharmaceutical sector?
Q.2 Which kind of factors hasgreater influence on the financial position and profit margin
of 5 selected companies?
Rationale of the study
Therationale behind undertaking such study is to analyze the factors that have an
impact on the profitability aspect of pharmaceuticalcompanies. It is considered as issue
because pharmaceutical companies require more fund for the purpose of research and
development activity. In the dynamic business environment, pharmaceutical companies
can attain success only when they provide customers or patients with suitable medicine
that helps in dealing with both chronic as well as non-chronic disease. Further,
pharmaceutical companies also do research on several projects in one time for gaining
competitive edge over others. In this regard, firms can fulfill their motive only when they
earn enough margins. It is considered as an issue now because there are several firms
which are facing problems in managing funds. This in turn places direct impact on the
profitability and overall functioning of firm. In addition to this, profit attainment and
enhancement is highly required to survive in the strategic business arena.Thus, present
researcher will shed light on the factors that contribute in the profit margin of firm
positively.This study entails the factors that positively contribute in the margin of firm
and vice versa.
Significance of thestudy
Outcome and results of the study are highly significant for HIKMA, Oxford
Biomedica, Shire, GSK and Astra Zeneca. Hence, by assessing the main factors that
negatively influence the profit margin firms would become able to develop highly