FIN5FMA Financial Management Report: Star Pharma Case Study

This report provides a comprehensive financial analysis of Star Pharma, a pharmaceutical company operating in Australia. It examines the company's industry overview, competitive positioning, and business description, highlighting its leadership in dendrimer product development. The report delves into Star Pharma's corporate governance practices, emphasizing its commitment to ethical conduct and effective management oversight. It also assesses the company's corporate risk and environmental social performance, including political, economic, social, and technological factors. Furthermore, the analysis covers Star Pharma's capital structure, capital expenditure, and working capital management, revealing its financial strategies and performance. The report also discusses distribution decisions and provides relevant suggestions for improvement, offering a detailed overview of the company's financial health and management practices.

Firm Name: Star pharma
Exchange Name: SPL
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Contents
Firm Name: Star pharma.................................................................................................................1
Exchange Name: SPL......................................................................................................................1
Contents...........................................................................................................................................2
Executive summary.........................................................................................................................3
Main body........................................................................................................................................4
1. Industry overview and competitive positioning and business description..............................4
2. Corporate governance..............................................................................................................5
3. Corporate risk and environment social performance...............................................................6
4. Capital structure.......................................................................................................................7
5. Capital Expenditure.................................................................................................................7
6. Working capital management..................................................................................................7
7. Distribution decisions..............................................................................................................8
Conclusion.......................................................................................................................................9
References......................................................................................................................................10
Appendix........................................................................................................................................11
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Executive summary
Star Pharma holdings limited is a pharmaceutical company that is located in the country of
Australia. The company is world leader in its pharmaceutical product development. The
company is working the life science and other applications the health of the individuals. The
company is having one of the best corporate governance structure through which they are able to
generate the best in class performance. This has been made clear that the company is also having
financial economies on the basis of which they are able to maximize its production. The
company is having underlying technology which is built around the dendrimers. There are
various industrial functions and the competitors that are working in the industry of the
pharmaceutical industry. There are various corporate governance factors that are identified in the
company and on the basis of which they are able to generate high return. The industry in which
the company is working is having various environmental and social impact on the operations of
the company. Also the capital structure and the capital expenditure of the company are identified
in the current report.
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Main body
1. Industry overview and competitive positioning and business description
Star Pharma is one of the renounced pharmaceutical company that is working in the medical and
health care products manufacturing industry. The company was founded in the year 1996. The
company is having its shares listed in the Australian stock exchange and is ASX 300 Company
and is the world leader for the development of the dendrimer products. The company is making
high profits since the past years and is in high profits. There are various competitors which are
working in the industry with the company which includes the DorsaVi and various other
companies such as Abbot. The company main products includes the VivaGel and the Dendrimaer
Enhanced products which are industry leader in the country and are able to generate high return
for the company (Ashford, et. al., 2019). The company is making various strategic decision with
the help of the upper management the company and through which they are able attain the
objective of maximising the performance for the same. The company is positioned at the top
position among the competitors with the industry leading products which they provide to the
users of the company’s products. For the year 2019 the company is having best financial result
where the cash position for this year is $41.3M. Also the company is having the net receipt of
$40M in R&D as a tax incentive. As the star Pharma is working I the pharmaceutical industry an
hence they are regularly examining its strategies such as they are considering the use of the
porter five force model on the basis of which they are able to take great decisions for the
company’s performance. The company analysis its threats of new entrants through innovating
the new products and services, also working on the economies of scale and building capacities
for research and development. Also the company is having working in the manner to tackle the
bargaining power of the supplier. The company is able to build the best and efficient supply
chain with the multiple suppliers of the company, also they are considering to build the
experimental product design with the different users for the supplies that are made by them. They
are also having dedicated suppliers with them on which the business of the company is
depended. The company is also tackling the power of the buyers this can be made in the manner
which includes, the company has created large base for the customers, identified the need for
innovating new products (Dimopoulos and Wagner, 2016). The company is also having the
threat of the substitute products and services, here the company is tackling the same through
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providing services which are best in class, and also they are understanding the need of customers
at large and increasing the switching cost for the customers.
2. Corporate governance
The corporate governance practice are considered to be one of the most effective practice that
helps the company to attain the objective of working with the company rules and regulations that
are provided by the Australian stock exchange of the country. The company’s board is
committed to provide the best in class performance through which they are able to bring the
highest level of corporate governance. The company has made various principles on the basis of
which they are able to create principles related to maximizing the performance. The first
principles that is related to the corporate governance includes lay solid foundations for
management and oversight, through this they are able to understand the responsibility of the
board of the company where the board is responsible for oversight, accountability and providing
the approval for various activities (McCahery, et. al., 2016). The company is having very own
turnover for he directors of the company where they most of the directors of the company are
working with the company since last 8 years. The companies governance objective includes that
the company should pay the amount without having any difference for individuals that are in the
similar job roles and this should also not based on the gender. This is reported in the company’s
corporate governance practice that they are following the best in class corporate governance
practices that are set forth by the Australian regulators of the company. For the purpose of
paying the remuneration fairly and in the responsible manner the company has created a
remuneration and nomination committee that would provide the best salary by meeting all the
laws that are specified in the law. The company has also specified how the bonus payments
would be made to the executive and non- executive directors of the company. The company’s
non-executive director’s salary has increased at par due to the increase in the performance of the
company. There are various remuneration mix practices that are identified by the companies on
the basis of which they are able to provide the best remuneration to the users. The mix of
remuneration for the company include the giving salary in the form of fix for a period of 35%,
also the STI cash and the bonus is set at 25% with the LTI equity at 40%. The company is
providing a total remuneration to all the directors of the company of amount $4,360,140 which
include all the cash and cash bonus and various other flows. The company is providing the audit
and the risk committee a fee of $10,500 which is considered to be best for the company.
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3. Corporate risk and environment social performance
The company has identified the risk that is related to the environment analysis and social
performance. The company has made the tools on the basis if which they are able to make the
analysis where the PEST analysis has been done by the company. There are various factors that
are related to the same which includes the following,
 Political factors: there is a political stability which is one of the most important factor that
helps the company to carry on the operations. The company may have the risk that is
related to the risk of military invasion. Also the company is having high level of
corruption and the contract framework for the legal section. There is a risk that is related
to the pricing regulation which related to the company’s product.
 Economic factors: the economic system of the country is considered to be high on
performance through which they are able to attain high return. The exchange rate and the
stability affects the companies export sales. The need of rising the capital needs to be
attained in this manner.
 Social factor: the company is having the advantages of the demographic skills, also the
company is having the class structure and he hierarchy and power structure through
which they are able to maximize the production. Also the health of the people in the
country are increasing hence this increase the performance of the company. The culture
and the gender roles would lead to increase in roles and social conventions in the country.
 Technological factor: the technology is considered to be the fast and disrupting factor that
helps in attaining the objective in the most significant manner. There is a recent
technological development, also the technology impact on the products of that the
company makes, the company is also having the impact on cost structure where they are
having biotechnology and life sciences industry.
The company is having the high commitment towards the environmental and the society of the
country. The company is having the commitment to conducting the operations in the
environment and responsible manner (Muda and Hutapea, 2018). The company is ensuring this
in the manner where the appropriate system would be used so that this would lead to compliance
related to various regulations which are related to the federal, state and different local
government. The company is working in the CSR sector through which they are able to generate
high return for the several users of the country. The company is having the support where the
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company is having the objective to attain the opportunity of changing the lives for the better
performance.
4. Capital structure
The company is having the best in class capital structure on the basis of which they are able to
attain the objective of maximizing the performance. The company is having the share capital
contribution on the basis of which they are able to they are to attain the objectives in the most
respectful manner. The company is having a capital structure which is mire based on the equity
and the use of debt funds are limited. The company is having a long term financing source
through which they are able to generate high return. The company is having high and diversified
portfolio on the basis of which the capital structure of the company is based. The company has
not issues any sort of fresh share for the current year. The company for the current year has
around $ 193,621,000 as a contributed capital through which they are able to generate high
return. The company is also having the increase in the reserve that they have which includes
increase of $3300. The company is providing the best earning per share in the country where
they are having increase in the EPS from the last year. The company is providing $0.4 per share
earning which is calculated after the accumulation of the losses (Schwebke, et. al., 2019).
5. Capital Expenditure
The company is having significant level of assets and the investment that are made by the
company are helping them to attain the maximum return. The company in its previous year has
made the investment in the plant and equipment, also the leasehold property that the company is
having are invested on timely manner. The company in the recent year has made the additional
investment of the amount $ 468,000 through which they are able to increase its productions. The
leasehold premises of the company are not increased and no yearly additions are made on the
same. From the year 2018 till the present year there are no capital expenditure that are made by
the company.
6. Working capital management
The management of the company has identified and taken care of working capital management
where they have attained high liquidity. This helps the business organization to attain
receivables, payables and the inventory management as a tool through which they are able to
attain high impact. The company’s cash position for the year 2019 is at a good level where they
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are having $ 41.3M as a cash position reflecting that they are highly liquid. The company’s
current liquidity helps the shareholders of the company to take the decision which are best in
class. The company’s shares are easily traded in the stock market and are in high demand that
helps the shareholders to attain liquidity (StarPharma, 2020).
7. Distribution decisions
The company is having high interest and a great decision making policies through which they are
able to distribute the earnings among the users of the company. For the current year the company
has not paid any sort of dividends and also have not declared any sort of dividends to the users.
Also in the corresponding period the company has not paid any sort dividends. This has been
made clear that the participants are having dividends policy for the proceeds and on the winding
up of the company. The company has not made any dividend announcement for the development
and distribution of the dividends in the country. On the other hand the company is having high
demand without keeping in view the company’s performance without having the respect for
dividend distribution (Vartiainen, et. al., 2019).
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Conclusion
The current report is based on the analysis where StarPharma financial results and corporate
governance functions which the company performs so as to attain the objective of organization.
The company has made the payment and remuneration committee that is working in the manner
that they are able to generate a better result for the same. The company is having high
performance and high liquidity on the basis of which the stakeholders of the company are having
the confidence on the stock price of the company. Also the company capital expenditure for the
current year is nil and are considered to be having high impact on the performance of the
company. The company capital structure is more based on the equity and is less based on the
dent funding.
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References
Ashford, M.B., Grant, I., Hennessy, E.J., McCoull, W., Giannis, M., Kelly, B., Owen, D. and
Secrist, J.P., AstraZeneca AB, 2019. Therapeutic dendrimers. U.S. Patent 10,314,920.
Dimopoulos, T. and Wagner, H.F., 2016. Corporate governance and CEO turnover
decisions. Swiss Finance Institute Research Paper, (12-16).
McCahery, J.A., Sautner, Z. and Starks, L.T., 2016. Behind the scenes: The corporate
governance preferences of institutional investors. The Journal of Finance, 71(6), pp.2905-2932.
Muda, I. and Hutapea, A.A.F., 2018, March. Influence of capital expenditure and income
original region to the income per capita in Indonesia. In IOP Conference Series: Earth and
Environmental Science (Vol. 126, No. 1, p. 012065). IOP Publishing.
Schwebke, J., Carter, B., Waldbaum, A., Price, C., Castellarnau, A., Paull, J., McCloud, P. and
Kinghorn, G., 2019. Results of a phase 3, randomized, double-blind, placebo-controlled study to
evaluate the efficacy and safety of astodrimer gel for prevention of recurrent bacterial
vaginosis. American Journal of Obstetrics & Gynecology, 221(6), pp.672-673.
StarPharma, 2020. Annual financial report. Available at
https://starpharma.com/assets/asxannouncements/190828%20Starpharma%20annual%20report
%20and%20full%20year%20results.pdf. [Accessed on 06-04-2020]
Vartiainen, E., Masson, G., Breyer, C., Moser, D. and Román Medina, E., 2019. Impact of
weighted average cost of capital, capital expenditure, and other parameters on future utility‐scale
PV levelised cost of electricity. Progress in Photovoltaics: Research and Applications.
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Appendix
Figure 1: StarPharma financial results
Figure 2: Financial report
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Figure 3: Review of the Financials
Figure 4: Directors remuneration
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