SUBMITTED BY:

Imran AkbarBBA-VIl 08-0144

SECURITY ANALYSIS & VALUATION

SUBMITTED TO:

MR BABAR ALI(Course Instructor)

FOUNDATION FOR ADVANCEMENT OF SCIENCE & TECHNOLOGY

INTRODUCTION

HISTORY OF COMPANY:

We are a global, broad-based health care company devoted to discovering new medicines, new technologies and new ways to manage health. Our products span the continuum of care, from nutritional products and laboratory diagnostics through medical devices and pharmaceutical therapies. Our comprehensive line of products encircles life itself – addressing important health needs from infancy to the golden years.

With over 70,000 employees worldwide and a global presence in more than 130 countries, Abbott is committed to improving people's lives by providing cost effective health care products and services that consistently meet the needs of our customers.

Abbott Pakistan is part of the global healthcare corporation of Abbott Laboratories, Chicago, USA.

A BRIEF OPERATING HISTORY OF THE BUSINESS.

Abbott started operations in Pakistan as a marketing affiliate in 1948; the company has steadily expanded to comprise a work force of over 1500 employees. Currently two manufacturing facilities located at Landhi and Korangi in Karachi continue to use innovative technology to produce top quality pharmaceutical products.

Abbott started operations in Pakistan as a marketing affiliate in 1948; the company has steadily expanded to comprise a work force of over 1500 employees

Abbott Pakistan has leadership in the field of Pain Management, Anesthesia, Medical Nutrition and Anti-Infectives. Our wide range of products is managed and marketed through three marketing arms.

On June 29, 2005 Abbott Pakistan Achieved Class 'A' accreditation against the Oliver Wight ABCD Check list. This was an outstanding achievement, which puts Abbott Pakistan amongst some of the best global companies in terms of operational excellence.

It achieve sales of 10 billion in the year of 2010

DESCRIPTION OF THE LOCATION OF THE FACILITIES OF THE BUSINESS.

Abbott Laboratories (Pakistan) Limited

Head Office : 

Abbott Laboratories (Pakistan) Limited, Diagnostics Division, Opposite Radio Pakistan Transmission, Hyderabad Road, Landhi, Karachi. Office: +92-21-5015045-49 (111 222 688) Ext:3500 Dir:       +92-21-5100422       Fax : 92-21-5042952 

Lahore : 

Abbott Laboratories (Pakistan) Limited, Diagnostics Division, House No: 123 - A, Ahmed Block, New Garden Town, Lahore. Telephone#:           042 5854141      , Fax#:          042 5844737       

Islamabad : 

Abbott Laboratories (Pakistan) Limited, Diagnostics Division, House #35,Street #39,I-8/2 Islamabad. Office   051-4445670       Fax 051-4445671 Peshawar : 

Abbott Laboratories (Pakistan) Limited, Diagnostics Division, House # 663/9, Old Bara Road, University Town, Karachi Market, Khyber Bazar, Peshawar. Office +92+91-5840252 Fax +92-51-5840252 

DESCRIPTION OF THE PRODUCT MIX.

ABBOTT NUTRITION PAKISTAN

Abbott in Pakistan has pioneered the nutritional care and support in health and disease. Abbott Nutrition Pakistan with its pediatric and medical nutrition ranges, is striving to fulfill the promise of life by providing nutrition support, with our wide range of products for infants, children, moms and adults.

Abbott Nutrition Pakistan's Nutrition range includes:

Similac Advance with IQ system of nutrients, an infant nutritional product. Isomil for babies who require lactose free soy based nutrition. Pediasure Complete a complete and balanced nutrition for children

who are picky eaters and have to catch up for growth. Formance a scientifically formulated nutritional supplement for

pregnant and nursing mothers. Ensure a leading source of complete, balanced nutrition to help adults

maintain an active, healthy lifestyle, and to recuperate from illness. Glucerna RTF and Glucerna SR to support the special needs of Diabetics and to help

optimize their glycemic control.

ABBOTT PHARMACEUTICAL PAKISTAN

Abbott in Pakistan has become the biggest Pharmaceutical Company in Pakistan. It provides lots of product which will serve against mostly all kinds of diseases. Abbott Pharmaceutical Pakistan provides variety of Product like syrup and tablets of weight.

These are the products of Abbott Pharmaceutical Pakistan:

AAbbutolAbocainAbocalAbozoleAcyclovirArinacArtifen

BBecefolBejectalBevidoxBrufenBurnol

CCalcijexCeconCofcolCitro SodaCremaffin

DDayaletsDaycorDijex Dopamine

EEnoxabidEntamizoleEpivalErybronErythrocinEryderm

FFlexinForaneFroben

GGanaton

HHytrin

IIberet

KKlaricid

LLucrinLincomycinLoftyl

MMoculatorMospel

NNeophageNicor

OOptilets-M

PPentothalPramet - FAProthaidenProtium

RRashnilRondec

SSavouraneSelsunSilliverSomogelSparaxinSurvantaSurbex

TTrividoxTronolane

UUrixin

VVancomycinVi-Daylin

ABBOTT DIABETES CARE:

In Abbot Diabetes Care, we find only one product that is Optium Xceed is a large display numbers for easy reading, fast and discreet testing, Test starts automatically, just insert strip, Optional Confirmation beep, Clear backlit display for poor lighting conditions, Recalls up to 450 results with time and date, Compact, light weight and durable design., 3 buttons make it easy to review your previous results or averages, Ideally shaped to fit comfortably in the palm of the hand and 7,14and 30 days test average.

Board Committees Attendance

AUDIT COMMITTEE

Shamim Ahmad Khan Chairman - Non Executive director

Munir A. Shaikh Member - Non Executive director

Kamran Y. Mirza Member - Non Executive director

Syed Anis Ahmed By invitation - Chief Financial Officer

Siraj Lawai By invitation - Chief Internal Auditor

Malik Saadatullah Secretary

HUMAN RESOURCE COMMITTEE

Munir A. Shaikh Chairman - Non Executive director

Asif Jooma Member- Chief Executive Officer

Shamim Ahmad Khan Member - Non Executive director

Hassham M. Malik Secretary

SHARE TRANSFER COMMITTEE

Asif Jooma Chairman - Chief Executive Officer

Sadi Syed Member - Alternate Director to Thomas C. Freyman

Syed Anis Ahmed Member - Chief Financial Officer

Malik Saadatullah Secretary

BANKING COMMITTEE

Munir A. Shaikh Chairman - Non Executive director

Asif Jooma Member - Chief Executive Officer

Sadi Syed Member - Alternate Director to Thomas C. Freyman

Syed Anis Ahmed Member - Chief Financial Officer

Malik Saadatullah Secretary

A BRIEF DESCRIPTION OF THE MAJOR COMPETITORS OF THE COMPANY.

These are the major competitors of the Abbott which are fighting for getting highest market share.

Feroz Ferozsons (Lab)

Glaxo GlaxoSmithKline Pak.

Hinoon Highnoon (Lab)

IBLHL IBL HealthCare Ltd

OTSU Otsuka Pak

SAPL Sanofi-Aventis

SEARL Searle Pakistan

WYETH Wyeth Pak Limited

FEROZSONS

Incorporated as a Private Limited Company in 1954, Ferozsons Laboratories Limited is one of the oldest and largest pharmaceutical companies serving the cause of health and wellbeing in Pakistan.

We were the first Pakistani Pharmaceutical Company to be listed on the Karachi Stock Exchange (KSE) in 1960, and are a five-time recipient of the KSE Top 25 Companies Award. 

With approximately over 200 health care representatives covering 100 territories across country, we take pride in our track record of manufacturing products to high levels of excellence, building brands, and providing one of the highest shareholder returns in the pharmaceutical sector.

The Company possesses strong brands in cardiology, gastroenterology, oncology and dermatology. We also have a long history of contract manufacture for Multinational Corporations, and a successful track record of in-licensing of products. Among other principals, Ferozsons currently represents the Boston Scientific Corporation, USA, for its range of interventional products and devices in the Pakistan market.

In joint venture with the Bago Group, our partners in oncology and hepatology, we have set up BF Biosciences Limited at Lahore. BF Biosciences is Pakistans first biotech pharmaceutical company set up to manufacture drugs for treating Cancer and Hepatitis C in full compliance with USFDA and EU standards.

Ferozsons also has a rich history of exports to the Middle East, Africa and Asia

GLAXOSMITHKLINE PAK

GlaxoSmithKline Pakistan Limited was created on January 1st 2002 through the merger of SmithKline and French of Pakistan Limited, Beecham Pakistan (Private) Limited and Glaxo Welcome (Pakistan) Limited- standing today as the largest pharmaceutical company in Pakistan

As a leading international pharmaceutical company we make a real difference to global healthcare and specifically to the developing world. We believe this is both an ethical imperative and key to business success. Companies that respond sensitively and with commitment by changing their business practices to address such challenges will be the leaders of the future. GSK Pakistan operates mainly in two industry segments: Pharmaceuticals (prescription drugs and vaccines) and consumer healthcare (over-the-counter- medicines, oral care and nutritional care).

GSK leads the industry in value, volume and prescription market shares. We are proud of our consistency and stability in sales, profits and growth. Some of our key brands include Augmentin, Panadol, Seretide, Betnovate, Zantac and Calpol in medicine and renowned consumer healthcare brands include Horlicks, Aquafresh, Macleans and ENO.

In addition, we are also deeply involved with our communities and undertake various Corporate Social Responsibility initiatives including working with the National Commission for Human Development (NCHD) for whom we were one of the largest corporate donors. We consider it our responsibility to nurture the environment we operate in and persevere to extend our support to our community in every possible way. GSK participates in year round charitable activities which include organizing medical camps, supporting welfare organizations and donating to/sponsoring various developmental concerns and hospitals. Furthermore, GSK maintains strong partnerships with non-government organizations such as Concern for Children, which is also extremely involved in the design, implementation and replication of models for the sustainable development of children with specific emphasis on primary healthcare and education.

A BRIEF DESCRIPTION OF THE MARKETS THE COMPANY SERVES.

PHARMACEUTICAL PRODUCT

The macroenvironment for the Pakistani pharmaceutical market is positive despite economic concerns. Economically, the Economist Intelligence Unit (EIU) projects that Pakistan will be the fourth smallest economy in the Asia Pacific region covered by Espicom in 2016. In per capita terms, Pakistan will rank the second lowest in the Asia Pacific region by 2016. Real GDP growth is projected to increase to 4.7% in 2016. According to the EIU, Pakistan will remain heavily dependent on multilateral institutions and bilateral donors for concessional loans and emergency aid. Demographically, the EIU projects that Pakistan will have the fourth largest population in the Asia Pacific region by 2016. The elderly population represents a very small proportion of the population; it will be the second lowest rate in the Asia Pacific region by 2016.

NUTRITION PRODUCTToday the sale of all types of nutritional Product is due to great demand by people has increased. In today’s market, a large growth of all dietary supplements have seen that includes specialty juices like acai, mangosteen and goji.

Most of the special nutritional supplements contain detailed analysis of sales and also market share trends. There are many types of food in the market segments that calcium, child, eye, energy, heart, men, women, the brains and digestion, but also includes cosmetics.

ECONOMIC ANALYSIS

Economic Analysis

This part will get you to see real situation of economy and also this part assist you to predict Pakistan’s economy for next five years through various indicators.

These all indicators will also capture the main theme of the economy. Following are the indicators which I will use to evaluate economy:

Trade Deficit Rupee Exchange Rate (USDPKR) Current Account Exports Imports GDP Growth Rate Government Budget Government Debt to GDP Inflation Rate Interest Rate Population Unemployment Rate Liquid liabilities (M3) as % of

GDP in Pakistan Foreign direct investment Pakistan Stock Market index

Following are the indicator which I will use to predict Pakistan economy:

GDP at constant prices GDP at current prices in US dollars GDP based on Purchasing Power Parity

(PPP) Consumer Prices Index average Inflation average Population Current account balance in US dollars Current account balance in percent of GDP

Current Condition of Pakistan Economy

The major exports of Pakistan are rice, furniture, cotton fiber, cement, tiles, marble, textiles, clothing, leather goods, carpets and rugs and food products. Pakistan imports mainly petroleum, petroleum products, machinery, plastics, transportation equipment, edible oils, paper and paperboard, iron and steel and tea.Now you can judge Pakistan economy through various indicators.

Trade Deficit Indicator Referenc

eScale Unit Actual Previou

sBalance of trade Jul/2011 Million USD -1486 -1980

It shows a trade deficit or trade gap of 1486. Its means that import of the country is more than its export. So due to several reason company wants to import. Like, low in cost, unavailable within country, and barriers to produce in country.

Rupee Exchange Rate Chart (USDPKR) Indicator Reference Actual Previous

Rupee Exchange Rate (USDPKR) Sep/2011 87.52 87.75

It shows that the power of 1 rupee increase from 0.011396 to 0.011425. The increasing percentage is 0.25% in 1 rupee.

Current Account

Indicator Reference

Scale Unit Actual Previous

Current Account Jun/2011 Million USD 604.00 52.00

It indicates the surplus of 604 in Pakistan current account. It impacts positive to economy of Pakistan. If the current account is in surplus, the country's net international asset position increases equally.

Exports

Indicator Reference

Scale Unit Actual Previous

Exports Jul/2011 Million USD 2203.00 2427.00

It specifies that the exports were decrease as compared to previous year. So it is not impact positive to Pakistan’s economy. Also that reflects many issues for the government.

GDP Growth Rate

Indicator Reference Scale Actual PreviousGDP Growth Rate Jun/2011 Percentag

e 2.39 3.76

GDP drops from 3.76 to 2.39. The negative change of 36.4%.it means that the decline in the value of product and services produced by an economy.

Government Budget

Indicator Reference Scale Actual PreviousGovernment Budget Dec/2010 Percentag

e -6.30 -5.20

It is a government budget deficit equivalent to 6.30 of the GDP in 2010. A budget deficit occurs when a government spends more money than it takes in. So government should look towards their expenditure.And try to control or less the expenses against revenues.

Government Debt to GDP

Indicator Reference Scale Actual PreviousDebt to GDP Dec/2010 Percentag

e 56.80 57.30

Government debt as a percent of GDP, also known as debt-to-GDP ratio, is the amount of national debt a country has in percentage of its Gross Domestic Product. Basically, Government debt is the money owed by the central government to its creditors.

The higher the debt-to-GDP ratio, the less likely the country will pay its debt back, and more likely the country is to default on its debt obligations.

Inflation Rate

Indicator Reference Scale Actual PreviousInflation Rate Jul/2011 Percentag

e 13.77 13.92

It indicates that inflation is slightly less. Due to which it impacts positively to economy of Pakistan. But overall if we can see that inflation is too much high. So it impacts on our economy like, price rises

Interest Rate

Indicator Reference Scale Actual PreviousInterest Rate Aug/2011 Percentag

e 13.50 14.00

For the investment point of view, lower the interest rate decrease foreign investment.But for public it is better to have a lower interest rate. So I think that it is not good for economy of Pakistan to have a lower interest rate.

Population

Indicator Reference Scale Actual PreviousPopulation Dec/2010 Million 175.00 169.71

High population is negatively impact to any economy. So 3.11% increasing change in population is not good for the economy of Pakistan. It impacts negative for growth of economy.

Import

Indicator Reference

Scale Unit Actual Previous

Import Jul/2011 Million USD 3689 3863

It indicates that the import drop from 3863 to 3689. It means that economy depends on its own product. To some extent its better for the economy and it sounds positively for economy.

Unemployment Rate

Indicator Reference Scale Actual PreviousUnemployment Rate Dec/2009 Percentag

e 5.50 5.20

This clearly shows that the government not working well. Thus the unemployment rate increases by the rate of 5.76%. So it impacts negative for Pakistan’s economy .Government should make plans to decrease the unemployment rate.

Liquid liabilities (M3) as % of GDP   in   Pakistan

M3 is 51% of GDP in Pakistan.

Foreign direct investment

Indicator Reference

Scale Unit Actual Previous

FDI Jul/2011

Million USD 0.112 1.573

It actually sounds bad for the Pakistan. FDI declines rapidly from several years. Due the lack trust and instable political conditions of our countries foreigners don’t want to invest here.

Pakistan Stock market Index

Indicator Reference Scale Actual Previous

Stock Market

Sep/2011 No. 11761.97 11606.86

It shows the overall performance of all the listed companies or in other words it shows the economy performance in terms of industry.

FORECAST CONDITION OF PAKISTAN ECONOMY

Indicator Scale unit 2010 2015GDP At Constant Prices Billions PKR 5859.58 7477.63GDP At Current Prices In US Dollars Billions U.S Dollars 177.9 246.23GDP Based On Purchasing Power Parity (PPP) Billions Dollars 451.97 630.25Consumer Prices Index Average Index 2000=100 221.18 300.18Inflation Average Percent 11.5 6Population Millions Persons 166.58 180.54Current Account Balance In US Dollars Billions U.S Dollars -6.8 -8.41Current Account Balance In Percent Of GDP % Of GDP -3.82 -3.42

INTERPRETATION:

Forecast condition is based on the adoption of a strong reform agenda, there is likely to be some return of investor confidence in the economy. Private investment starts picking up from 2012-13 onwards and the GDP growth rate begins to rise rapidly, approaching 6 percent by 2014-15. The fiscal deficit position improves significantly, primarily on the back of a significant increase in the tax-to-GDP ratio and some containment of public expenditures. There are some changes in the composition of public expenditure with the share of subsidies and debt servicing falling somewhat while that of development expenditure and social expenditure rising. The inflation moderates, at least up to 2013-14. The current account deficit remains manageable, although foreign exchange reserves could fall below safe levels by 2013-14. This, of course, depends upon the extent of support received from the international community by a newly elected government with an effective majority, which appears committed to a strong reform agenda. This hereby shows that the overall GDP is increased in 2015 but it will surely does not cover up the current account balance because of the development will do. It will surely impact the economy in the board way because it will create a new prospect for the economy of the country and it will booster the economy and industry as well.

INDUSTRY ANALYSIS

PHARMACEUTICAL INDUSTRY IN PAKISTAN

Introduction:

Pakistan has a very vibrant and forward looking Pharmaceutical Industry. At the time of independence in 1947, there was hardly any pharma industry in the country. Today Pakistan has about 400 pharmaceutical manufacturing units including those operated by 25 multinationals present in the country. The Pakistan Pharmaceutical Industry meets around 70% of the country's demand of Finished Medicine. The domestic pharma market, in term of share market is almost evenly divided between the Nationals and the Multinationals.

The National pharma industry has shown a progressive growth over the years, particularly over the last one decade. The industry has invested substantially to upgrade itself in the last few years and today the majority industry is following Good Manufacturing Practices (GMP), in accordance with the domestic as well as international Guidance. Currently the industry has the capacity to manufacture a variety of product ranging from simple pills to sophisticated Biotech, Oncology and Value Added Generic compounds.

Although Pakistan’s pharmaceutical and healthcare sectors are expanding and evolving rapidly, about half the population has no access to modern medicines. Clearly this presents an opportunity, but much more work needs to be done by the government and industry's stakeholders. The value of pharmaceuticals sold in 2007 exceeded US$1.4bn, which equates to per capita consumption of less than US$ 10 per year and value of medicines sold is expected to exceed US$2.3 B by 2012.

Pakistan is a developing pharmaceutical market, with a large population and economic progress evident, but per capita drug spending was rather low at around US$9.30 in 2007. Private spending accounts for 65% of total healthcare expenditure sourced through out-of pocket payments, international aid and religious or charitable institutions. Pharmaceutical spending accounts for less than 1% of the country's GDP, comparable to levels in some neighboring countries but above that in some of the South Asian countries. The forecast period is likely to witness the marginal strengthening of the generics sector, albeit more in terms of volumes than values. The share of generics is also likely to increase further as major drugs come off-patent in the near term, to the likely benefit of the generics-dominated local industry.

The Pakistan pharma industry is relatively young in the international markets with an export turnover of over US$ 100 Million as of 2007. Pakistan Pharma Industry boasts of quality producers and many units are approved by regulatory authorities all over the world. Like domestic market the sales in international market have gone almost double during last five years. The pharma industry is focusing to an Export Vision of USD 500 Million by 2013. In the meantime, exports are also likely to be boosted by new regional and global opportunities.

The Pakistan Pharmaceutical Industry is a success story, providing high quality essential drugs at affordable prices to Millions. Technologically, strong and self reliant National Pharmaceutical Industry is not only playing a key role in promoting and sustaining development in the vital field of medicine within the country, but is also well set to take on the international markets

SOME KEY STATISTICS OF THE INDUSTRYCompanies operating in the industry

600

Number of employees 100000Registered Drugs 47000Registered Molecules 1100R&D expenditure 1% of the profitAverage growth Rate 11%Market share of Multinationals companies

45%

Market share of Local companies

55%

Market Leader GlaxoSmithKline

Some key statistics of the industry

PRODUCTS

The demand of the product is very high and also the supply of the product is satisfying the local demand and also in foreign demand.

Communicable diseases 38.4%Rh disorders 12.5%Nutritional deficiencies 5.8%Accidents / Injuries 11.4%Diabetes / Cardiovascular diseases

10.6%

Neuro / Psychiatric diseases 2.6%Other non communicable Diseases

18.9%

The Pricing of the products varies the kind of diseases you have and what kind of tablet suggest by the doctor and also it varies with the power of the medicine.

The life cycles of the product are in the middle of growth and maturity stage.

Most of Products don’t have substitutes, because there are some of the diseases that are can’t cure by taking medicines.

The drugs like anti cancer drugs have to be imported because we don’t have the technology and expertise to produce these drugs, therefore its much cheaper to import.

Augmen

tin

Amoxil

Ponstan

Velosef

Unifero

n

Pegasy

sFla

gyl

Ampiclax

Brufen

Methyco

bal0

0.5

1

1.5

2

2.5

Share %

Share %

Biotechnology

Simple molecules are found through trial and error to treat the symptoms of a disease or illness. It offers promise in augmenting existing technologies in the pharmaceutical industry. The field shows immense importance.

Engineering Industry• The local demand is not currently fulfilled by our engineering sector. All of the critical equipment and machinery is imported from abroad such as China, Italy, Germany and India. Tablet Coating Machines, Capsule Manufacturing Machines

RAW MATERIAL

These raw materials are bought from India, China, U.K, Switzerland, Germany, and Japan.

The raw materials are mostly imported from China and India in the last 3‐4 years

The raw materials are mostly imported from China and India in the last 3‐4 years. These raw materials are very much expensive to develop. Pakistan does not have the technology to produce these chemicals. Raw materials for the purpose of packaging are purchased from the local market such as glass bottles, plastics and paper.

Solvents such as ethylene chloride, ethane, methanol etc are used for the production of medicines. Sugar and lactose which are produced in Pakistan are also a few of the ingredients needed for production of drugs. Other major materials used in the capsule manufacturing are dyes, dye aids, preservatives and glycerin.

Research shows that if a certain medicinal drug is imported, it would be priced around Rs. 8000 in Pakistan. If the required raw material is

imported, and the drug manufactured in Pakistan, its price would be Rs. 6000. If the medicine is completely produced locally, its price would be as low as Rs. 3500 to patients.

Our Government provides incentives to companies who manufacture raw materials such as• Duty free import of plant and equipment• Tax holidays for raw material manufacturers.

Raw materials are, mostly, kept in quarantine area after their arrival at the plant. After the testing in QC laboratory, approved and rejected materials are transferred and stored in separate sections.

After satisfy the local demand of the country, we export our products to Nepal, Afghanistan, Bangladesh, Srilanka, Iran and Africa.

EQUIPMENT

The pharmaceutical industry is highly capital intensive. The development expenditure on Health is around 14,272 billion rupees. The installation of a small manufacturing plant requires around 2 million rupees. Most of the manufacturing machines are imported from foreign countries.

Machines used for packaging and counting the number of medicines are locally produced. Locally manufactured machines constitute about 10‐15% of the overall machinery.

Mixing and blending vessels Granulating machines Drying chambers Autoclaves and ovens Tablets Compression Machines Tablets Coating Machines Capsule Manufacturing Machines Encapsulation Machines

The manufacturing machines are mostly imported from China. This kind of machinery is outdated and obsolete. Pharmaceutical plants are inspected by Federal, Provincial drug inspectors 2‐3 times in a year. The licensed Pharmaceutical plants are also subjected to detailed inspection by Federal Inspection team once in 2 years.

Quality control Laboratory: Most of the plants have their own laboratories to for quality control and quality assurance of the raw materials

Ventilation Systems: They maintain the quality of the working atmosphere by taking away the chemical fumes and vapors, released from processes to the occupational atmosphere and by supplying the fresh air to the process areas

Chillers and Cooling Towers: Chillers and cooling towers are provided, where centralized air conditioning systems are installed.

Counting the number of machinery

Packaging

Manufacturing

Water Distillation Unit: Distilled water is used in Injections and in a variety of other medicines. Distillation process is applied to produce such water.

Generators: In most of the plants, electric generators are provided as standby facility, in event of main power failure.

Hydraulic Press: Some plants have hydraulic presses, for damaging the empty raw materials drums, prior to their dispatch to the contractor

Shredder: Some plants have installed shredders to break the rejected bottles, prior to their dispatch to the contractor for recycling or disposal purposes. This process prevents the possible direct use of these contaminated bottles.

Incinerator: Few plants have incineration facilities for the safe disposal of their hazardous solid and liquid wastes.

HUMAN RESOURCES

The pharmaceutical industry provides employment to about one million skilled and semi‐skilled personnel. It directly employs about 162000 personnel with large number of science graduates. The manufacturing side requires its employees to have a minimum of a bachelor’s degree. It indirectly employees 1 billion people.

Sales Representatives are recruited by pharmaceutical companies. Training sessions are conducted on a monthly and quarterly basis by the multinational firms. Local companies usually conduct training sessions once a year for their employees. Employees are sent to Germany for their training sessions.

Companies ensure safe working conditions for their employees. They make sure that a safe working condition is given to the employees.

Dispensaries are set up to provide first aid to the employees in case of an accident.

Merck, one of the MNC’s has set up a separate department known as HSSE (health, safety, security and environment) department.

REGULATORY ENVIRONMENT

The strict government control over pricing under Essential Drug List (EDL) has made many drugs uneconomical

Our Government provides incentives to companies who manufacture raw materials such as• Duty free import of plant and equipment• Tax holidays for raw material manufacturers.

INDUSTRY CLASSIFICATION

LIFE CYCLE

The Pakistan pharma industry is relatively young in the international markets with an export turnover of over US$ 100 Million as of 2007. Pakistan Pharma Industry boasts of quality producers and many units are approved by regulatory authorities all over the world. The Pharmaceutical of Pakistan is in the middle of growth and maturity state.

BUSINESS CYCLE

Pharmaceutical companies are affected by competitive market shares, the pace of FDA approvals, patent lives and the strength of the R&D pipelines. Many biotechnology firms are still in the development stage with their fortunes largely determined by investor perceptions of the relative merits of their R&D pipelines. With future new financing likely to be more difficult to obtain than in the past, strategic alliances between major drug companies and biotech firms are expected to increase.

EXTERNAL FACTORS

TECHNOLOGY

The pharmaceutical industry is highly capital intensive. The development expenditure on Health is around 14,272 billion rupees. The installation of a small manufacturing plant requires around 2 million rupees. Most of the manufacturing machines are imported from foreign countries.

Machines used for packaging and counting the number of medicines are locally produced. Locally manufactured machines constitute about 10‐15% of the overall machinery.

GOVERNMENT

Our Government provides incentives to companies who manufacture raw materials such as• Duty free import of plant and equipment• Tax holidays for raw material manufacturers.

The strict government control over pricing under Essential Drug List (EDL) has made many drugs uneconomical

FOREIGN

Huge chunk of our local production is exported to Middle Eastern Countries, African countries, Canada, Singapore and some European countries. The exports of our medicines were $40 million in 2000 and now it is above $60 million. These are a great source to attract Foreign Direct Investment.

The drugs like anti cancer drugs have to be imported because we don’t have the technology and expertise to produce these drugs, therefore it’s much cheaper to import.

2003-04 2004-05 2005-06 2006-07 2007-080

5

10

15

20

25

30

35

40

45

50

FDI ($mn)

FDI ($mn)

DEMOGRAPHIC

Population

187,342,721

Age structure

0-14 years: 35.4% (male 34,093,853/female 32,278,462) 15-64 years: 60.4% (male 58,401,016/female 54,671,873) 65 years and over: 4.2% (male 3,739,647/female 4,157,870)

Median age

Total: 21.6 years male: 21.5 years female: 21.6 years (2011 est.)

Population growth rate

1.573%

Birth rate

24.81 births/1,000 population

Death rate

6.92 deaths/1,000 population

Literacy

Definition: age 15 and over can read and write total population: 49.9% male: 63% female: 36%

Health expenditures

2.6% of GDP (2009)

Physician’s density

0.813 physicians/1,000 population (2009)

Hospital bed density

0.6 beds/1,000 population (2009)

DEMAND ANALYSIS

The population of 160 million people is a basic demand driver. There is an annual growth of 2% in the population. The declining health conditions and the burden of diseases demand the local pharmaceutical industry to produce products that could cure them.

These are the disease in their respective share in Pakistan.

Communicable diseases 38.4%Rh disorders 12.5%Nutritional deficiencies 5.8%Accidents / Injuries 11.4%Diabetes / Cardiovascular diseases

10.6%

Neuro / Psychiatric diseases 2.6%Other non communicable Diseases

18.9%

The pharmaceutical companies assess demands of their products and what products to produce by looking at the age structure and gender ratio of the population.

14.08%Less than 5 year

30.45%Less than 10 years

43.40%Less than 15 year

53.9%15 -64 year

3.05%65 and above

On an average a household spends about 77% of their household health budget on purchasing medicines. 80‐85% of the local demand is met by our pharma industry, however, there are certain medicines that we import. The demand for these medicines is 5‐10%. Such medicines include hepatology (hepatitis vaccines) and oncology (drugs to cure cancer).

Creation of Demand

Sales Representatives of the pharmaceutical companies play an important role in creating demand for the product. These Representatives have a list of the products they have to promote to different doctors. Different techniques are used by these representatives for convincing the doctor.

These sales representatives either convince the doctor of the benefits of their products in comparison with other products of the same type. Or the company gives the doctor commission (for example 20%). The doctors are also given free gifts (silent reminders), lunches and dinners and paid vacation trips with their families.

Some companies also engage themselves in academic activities. They give doctors medical books and send them abroad to attend conferences. Promotional activities – Example: Elite Pharma gave warid USB worth Rs. 13000 to 50 doctors.

PROFITABILITY ANALYSIS

SUPPLY/DEMAND ANALYSIS

At present there are 17 Pharmaceutical companies on the list of Karachi Stock Exchange and they command more than 70 per cent of total pharmaceutical sales in the country. Total equity of these companies stood at Rs. 29.40 million. Total sales of these companies in 1993 stood at Rs. 11.704 billion as compared to Rs. 10.600 billion in the preceding year, showing a rise of 10.41 per cent. Pretax Profit has also increased from Rs. 752.32 million in 1992 to Rs. 1101.67 million in 1993 depicting a rise of 46.38 per cent. Increase may be attributed to higher price allowed by the government for pharmaceuticals and depreciation of rupee

PRICE

Pharmaceutical companies have to operate in a highly regulated environment; the degree of regulation to a significant extent depends on the country and type of the product.

One of the most important aspects of government regulation for pharmaceutical companies is price regulation, and different countries have different policies on this issue.

In the United States – the largest and the most attractive pharmaceutical market – currently there is no direct price control for non-government drug sales. At the same time, it is expected that Medicare Prescription Drug Improvement and Modernization Act will potentially increase downward price pressure.

INTERNATIONAL COMPETITION AND MARKETS

The pharmaceutical industry is characterized by a high level of concentration with fifteen multinational companies dominating the industry. Table 1.1 contains information about these major pharmaceutical companies that are sorted in the order of their 2004 revenues from the sales of pharmaceutical products. Numbers provided in this table include sales of all subsidiaries and affiliated companies that are consolidated in annual reports of the corresponding companies. In order to facilitate a comparison of different companies revenues of all of them are shown in US dollars.

Table 1.1. Major pharmaceutical companies.

CompanyHQ

location

Revenue of pharmaceutical

segment, mln USD

Total sales, mln USD

Share of pharmaceutical

segment, %

Pfizer NY, U.S. 46,133 52,516 87.85%

GlaxoSmithKline UK 31,434 37,324 84.22%

Johnson & Johnson NJ, U.S. 22,190 47,348 46.87%

Merck NJ, U.S. 21,494 22,939 93.70%

AstraZeneca UK 21,426 21,426 100.00%

NovartisSwitzerla

nd 18,497 28,247 65.48%

Sanofi-Aventis France 17,861 18,711 95.46%

RocheSwitzerla

nd 17,460 25,168 69.37%

Bristol-Myers Squibb NY, U.S. 15,482 19,380 79.89%

Wyeth NJ, U.S. 13,964 17,358 80.45%

Abbott IL, U.S. 13,600 19,680 69.11%

Eli Lilly IN, U.S. 13,059 13,858 94.23%

Takeda Japan 8,648 10,046 86.09%

Schering-Plough NJ, U.S. 6,417 8,272 77.57%

Bayer Germany 5,458 37,013 14.75%

CONCLUSION:

Collaborations with the Indian companies that are already looking to enter the market would be another opportunity that can be cashed by local pharmaceutical companies.

Pakistani exporters also need to focus on African regions, and develop markets in these regions.

A fast changing international market demands the setting up of exclusive export houses separate from the manufacturing. An aggressive promotional campaign identifying Pakistan with quality products in the international market is the need of the hour.

Pakistani manufacturers should keep themselves abreast of the expired patent medicines in order to manufacture drugs with lower cost. The local pharmaceutical companies need to shift their focus towards developing communication channels with multinationals, to form strategic alliances and also benefit from their technological advancements.

In Pakistan, a strong association and collaboration between the academic institutes and industry needs to be established. The govt. should take effective action against unethical marketing practices employed by some multinationals as well as local Pharma manufacturers.

The Government incentives on R&D and encouraging industrial policies, if adopted, will encourage companies to set up their own. R&D units and set up manufacturing units at tax free zone. The govt. should provide research infrastructure & laboratories to the domestic universities and other academic institutions.

COMPANY ANALYSIS

SWOT ANALYSIS: -

STRENGTHS:

Good company reputation. Strong distribution network. Strong brand positioning. Have deep roots in the Pharma business. Excellent professional management team.

WEAKNESSES:

Comparatively high price. Lacking of deep rural penetration. Employee reduction - High Field Force turnover.

OPPORTUNITIES:

Increase per capita income. High rate of population increase in Pakistan. Promotion intensive market. Increasing healthcare awareness.

THREATS:

High inflation rate. Foreign Exchange Rates Political conditions of Pakistan. Govt. restriction on price Low price local Pharma product.

Abbott Pakistan Limited

Balance Sheet Forcasted 2010 2011 2012 2013 2014

(Rupees

‘000)(Rupees

‘000)(Rupees

‘000)(Rupees

‘000)(Rupees

‘000)

SHARE CAPITAL AND RESERVES

Share capital 979,0

03 979,0

03 979,0

03 979,00

3 979,003

Reserves 2,933,5

36 5,832,00

5 6,822,8

45 7,982,12

9 9,338,491

3,912,5

39 6,811,00

8 7,801,8

48 8,961,13

2 10,317,494

NON CURRENT LIABILITIES

Deferred taxation 115,1

82 144494 150238 156210 162419

115,182

144,494

150,238

156,210 162,419

CURRENT LIABILITIES

Trade and other payables 1,762,7

00 1,639,22

6 1,704,3

85 1,772,13

5 1,842,577

Equity+Liabilities 5,790,4

21 8,594,72

8 8,936,3

68 9,291,58

9 9,660,929

Forcasted 2010 2011 2012 2013 2014

(Rupees

‘000)(Rupees

‘000)(Rupees

‘000)(Rupees

‘000)(Rupees

‘000)PROPERTY, PLANT AND EQUIPMENT Fixed assets - property, plant and equipment 1,877,596 2,011,375 2,154,685 2,308,206 2,472,666Long-term loans and advances 39,203 41,996 44,988 48,194 51,628Long-term deposit 2,801 3,001 3,214 3,443 3,689Long-term prepayments 14,148 15,156 16,236 17,393 18,632Total 1,933,748 2,071,528 2,219,124 2,377,236 2,546,615CURRENT ASSETS Stores, spares and loose tools 72,430 74,386 76,394 78,457 80,575Stock in trade 2,069,633 2,125,513 2,182,902 2,241,840 2,302,370Trade debts 263,267 270,375 277,675 285,173 292,872Loans and advances 130,868 134,401 138,030 141,757 145,585Trade deposits and short-term prepayments 134,170 137,793 141,513 145,334 149,258Accrued profit 705 724 744 764 784Other receivables 79,715 81,867 84,078 86,348 88,679Taxation recoverable 286,798 294,542 302,494 310,662 319,049Cash and bank balances 819,087 104,758 108,922 113,252 117,754 3,856,673 3224359 3312752 3403586 3496926

Assets 5,790,4

21 6,020,590 6,259,909 6,508,740 6,767,462

Forcasted 2010 2011 2012 2013 2014 (Rupees

‘000)(Rupees

‘000)(Rupees

‘000)(Rupees

‘000)(Rupees

‘000)Sales - net 10,995,701 12,864,9

70 15,052,0

15 17,610,8

58 20,604,

703 COST OF SALES 7308663 8500529 9945619 11636374 13614558

Gross Profit 3,687,038 4,364,441 5,106,396 5,974,483 6,990,146Selling and distribution expenses 1,601,101 1,801,0

96 2,107,28

2 2,465,5

20 2,884,

658 Administrative expenses 267,915

308,759 361,

248 422,

661 49

4,513 Other operating income 109,957 128,650 150,520 176,109 206,047Other operating expenses 186,927 218,704 255,884 299,385 350,280Finance cost 3,530 3,530 3,530 3,530 3,530Profit before taxation 1,737,522 6,516,421 7,623,613 8,919,027 10,434,661

Provision for taxation -560,781 -684,416 -800,767 -936,898 -1,096,170NET PROFIT AFTER TAXATION 1,176,741 5,832,005 6,822,845 7,982,129 9,338,491

CASH FLOWS FROM OPERATING ACTIVITIESNet Income 1,176,741,000NIC 256102,000Interest 2,446,00

fixed Capital investment 174,822,000Working capital 493,611,000 Free Cash Flow 766,857,000

Indicate the basis of estimation of different components of the projected cash flow statement.

The Sales is increasing due to increase in demand of the product They also need to import machinery in order to meet the demand They also need to make the new plant that’s why the Plant and Machinery

account is increasing They also need to patent their new product

VALUATION ANALYSIS

Beta An asset has a Beta of zero if its returns change independently of changes in the market's returns. A positive beta means that the asset's returns generally follow the market's returns, in the sense that they both tend to be above their respective averages together, or both tend to be below their respective averages together. A negative beta means that the asset's returns generally move opposite the market's returns: one will tend to be above its average when the other is below its average.

The beta coefficient is a key parameter in the capital asset pricing model (CAPM). It measures the part of the asset's statistical variance that cannot be removed by the diversification provided by the portfolio of many risky assets, because of the correlation of its returns with the returns of the other assets that are in the portfolio. Beta can be estimated for individual companies using regression analysis against a stock market index.

Calculation of beta of Abbott Pakistan

Closing Rate Closing Rate

Return of Abbott Return of KSE

1-Apr-11 85 11,887.00 0.009021842 0.0011791464-Apr-11 84.24 11,873.00 -0.000474608 -0.0023527435-Apr-11 84.28 11,901.00 -0.005076142 -0.0026816396-Apr-11 84.71 11,933.00 0.001655433 0.0071742077-Apr-11 84.57 11,848.00 0.000828402 -0.0047879048-Apr-11 84.5 11,905.00 -0.001536098 0.003117627

11-Apr-11 84.63 11,868.00 -0.004352941 0.00610376412-Apr-11 85 11,796.00 -0.014721224 0.00528379113-Apr-11 86.27 11,734.00 0.003022904 0.00703741814-Apr-11 86.01 11,652.00 -0.00058099 -0.00273878815-Apr-11 86.06 11,684.00 0.011162026 0.00085660418-Apr-11 85.11 11,674.00 -0.010923881 0.00646607519-Apr-11 86.05 11,599.00 -0.001044811 -0.01243082220-Apr-11 86.14 11,745.00 -0.020913844 -0.01492912921-Apr-11 87.98 11,923.00 -0.01698324 -0.00259327422-Apr-11 89.5 11,954.00 -0.023245662 0.0031889925-Apr-11 91.63 11,916.00 -0.004670867 -0.00142462126-Apr-11 92.06 11,933.00 -0.010213955 -0.00117184227-Apr-11 93.01 11,947.00 -0.006515702 -0.00158783228-Apr-11 93.62 11,966.00 0.012108108 -0.00754748329-Apr-11 92.5 12,057.00 0.003907098 0.0018280022-May-11 92.14 12,035.00 0.011416026 0.0066075613-May-11 91.1 11,956.00 0.013010119 0.0243317344-May-11 89.93 11,672.00 -0.019729671 -0.0198186095-May-11 91.74 11,908.00 -0.002717687 0.0024412836-May-11 91.99 11,879.00 0.005355191 -0.0044418379-May-11 91.5 11,932.00 0.009042788 -0.006660007

10-May-11 90.68 12,012.00 -0.006246575 -0.00199401811-May-11 91.25 12,036.00 -0.005124291 0.00618625612-May-11 91.72 11,962.00 0.007912088 -0.00041781613-May-11 91 11,967.00 0.024774775 0.00546126716-May-11 88.8 11,902.00 -0.024711697 -0.00234702417-May-11 91.05 11,930.00 -0.002301118 0.00387075118-May-11 91.26 11,884.00 -0.005665722 0.00050513619-May-11 91.78 11,878.00 0.001309186 -0.00793451920-May-11 91.66 11,973.00 -0.003153888 -0.00473815523-May-11 91.95 12,030.00 -0.011183998 -0.00824402324-May-11 92.99 12,130.00 -0.000107527 -0.00312294525-May-11 93 12,168.00 -0.008845785 -0.0024594226-May-11 93.83 12,198.00 0.009467456 -0.00220858927-May-11 92.95 12,225.00 0.001184834 0.00246002530-May-11 92.84 12,195.00 0.003458712 0.005939124

31-May-11 92.52 12,123.00 -0.001834071 -0.0114970651-Jun-11 92.69 12,264.00 0 0.0069792272-Jun-11 92.69 12,179.00 -0.000107875 -0.0127269783-Jun-11 92.7 12,336.00 -0.012674406 0.0102366726-Jun-11 93.89 12,211.00 0.009135856 -0.0083644637-Jun-11 93.04 12,314.00 -0.001180891 -0.0042855998-Jun-11 93.15 12,367.00 -0.002890173 0.0030008119-Jun-11 93.42 12,330.00 -0.012786643 -0.003797366

10-Jun-11 94.63 12,377.00 0.010572405 0.00194284813-Jun-11 93.64 12,353.00 -0.002768903 0.00129691214-Jun-11 93.9 12,337.00 0.011853448 0.00162377215-Jun-11 92.8 12,317.00 -0.002150538 -0.00420405916-Jun-11 93 12,369.00 0.007911564 0.00064719717-Jun-11 92.27 12,361.00 0.013956044 0.01577779620-Jun-11 91 12,169.00 0.005413766 -0.01273730321-Jun-11 90.51 12,326.00 -0.006149116 -0.00347643322-Jun-11 91.07 12,369.00 -0.02817202 -0.01111288823-Jun-11 93.71 12,508.00 0 0.00353016724-Jun-11 93.71 12,464.00 0.012862084 027-Jun-11 92.52 12,464.00 0.01436246 0.00825109228-Jun-11 91.21 12,362.00 -0.020511168 -0.00491024729-Jun-11 93.12 12,423.00 -0.003957643 -0.00584186930-Jun-11 93.49 12,496.00 -0.005319715 -0.005095541

4-Jul-11 93.99 12,560.00 -0.008021108 -0.0012722655-Jul-11 94.75 12,576.00 -0.002631579 0.0034309426-Jul-11 95 12,533.00 0.004440685 0.0073949047-Jul-11 94.58 12,441.00 0 0.0041162238-Jul-11 94.58 12,390.00 -0.003161889 0.008054674

11-Jul-11 94.88 12,291.00 0.00668435 0.00820277312-Jul-11 94.25 12,191.00 -0.013089005 -0.00579024613-Jul-11 95.5 12,262.00 0.008660752 -0.00040759814-Jul-11 94.68 12,267.00 -0.014673743 -0.00639883415-Jul-11 96.09 12,346.00 0.003865441 0.00227309618-Jul-11 95.72 12,318.00 0.003354298 -0.00924957819-Jul-11 95.4 12,433.00 -0.00104712 020-Jul-11 95.5 12,433.00 -0.006243496 -0.00328683721-Jul-11 96.1 12,474.00 0 -0.00016030822-Jul-11 96.1 12,476.00 -0.004145078 0.00661610525-Jul-11 96.5 12,394.00 0.0061516 0.00242639926-Jul-11 95.91 12,364.00 0.019343182 0.02198710528-Jul-11 94.09 12,098.00 0.00889985 -0.0075471729-Jul-11 93.26 12,190.00 -0.034675499 -0.0051415981-Aug-11 96.61 12,253.00 0.011623037 -0.001059842-Aug-11 95.5 12,266.00 0.006640666 0.0272171513-Aug-11 94.87 11,941.00 0 0.0080195854-Aug-11 94.87 11,846.00 0.052357182 0.041406593

5-Aug-11 90.15 11,375.00 -0.020108696 -0.0025429678-Aug-11 92 11,404.00 0 0.0335327179-Aug-11 92 11,034.00 0 -0.024489435

10-Aug-11 92 11,311.00 -0.029023747 0.00417258511-Aug-11 94.75 11,264.00 -0.003156234 0.00017758812-Aug-11 95.05 11,262.00 0.005820106 0.00859752815-Aug-11 94.5 11,166.00 -0.047571054 0.00386586416-Aug-11 99.22 11,123.00 0.023625297 -0.01295589717-Aug-11 96.93 11,269.00 0.000309598 0.0126707418-Aug-11 96.9 11,128.00 0.013704362 0.02288813319-Aug-11 95.59 10,879.00 -0.018583162 -0.00137690522-Aug-11 97.4 10,894.00 0.009326425 0.00479616323-Aug-11 96.5 10,842.00 -0.046442688 -0.00904853324-Aug-11 101.2 10,941.00 0.032547699 0.00366938825-Aug-11 98.01 10,901.00 0.010308216 -0.00018343629-Aug-11 97.01 10,903.00 -0.000103072 -0.01508581830-Aug-11 97.02 11,070.00 0.000206186 -0.007352941

5-Sep-11 97 11,152.00 0.01010101 -0.0147539546-Sep-11 96.03 11,319.00 -0.01 -0.000882697-Sep-11 97 11,329.00 0.000206228 -0.0016743048-Sep-11 96.98 11,348.00 -0.000206186 0.0054935329-Sep-11 97 11,286.00 -0.042542691 0.009481216

12-Sep-11 101.31 11,180.00 -0.017361785 -0.00745738613-Sep-11 103.1 11,264.00 0.012471767 -0.0029211314-Sep-11 101.83 11,297.00 -0.011359223 -0.000442415-Sep-11 103 11,302.00 9.70968E-05 -0.00449220516-Sep-11 102.99 11,353.00 0.018694362 -0.00017613419-Sep-11 101.1 11,355.00 -0.005117103 -0.01449401120-Sep-11 101.62 11,522.00 -0.015405484 -0.0277613721-Sep-11 103.21 11,851.00 0.011763553 0.01377245522-Sep-11 102.01 11,690.00 0.009200633 0.00723763623-Sep-11 101.08 11,606.00 0.046810273 0.0302707526-Sep-11 96.56 11,265.00 -0.024646465 -0.02306825127-Sep-11 99 11,531.00 0.01010101 -0.00259493128-Sep-11 98.01 11,561.00 -0.009599838 -0.00695756729-Sep-11 98.96 11,642.00 -0.01237525 -0.01011818730-Sep-11 100.2 11,761.00 0.012121212 -0.01441381

4-Oct-11 99 11,933.00 -0.029221416 -0.01003816211-Oct-11 101.98 12,054.00 -0.020647268 0.03157894720-Oct-11 104.13 11,685.00 0.010872731 0.01388286321-Oct-11 103.01 11,525.00 -0.018672002 -0.0238841373-Nov-11 101.92 11,807.00 -0.01990576 -0.0125449534-Nov-11 104.97 11,957.00 0.00981241 -0.00100259

10-Nov-11 103.95 11,969.00 0.019917582 -0.00573184911-Nov-11 103.99 12,038.00 0.019010289 0.00245826314-Nov-11 102.05 12,008.48 0 0.001206436

15-Nov-11 102.05 11,994.01 -0.016669879 0.00010339616-Nov-11 103.78 11,992.77 0.007572816 0.00666055617-Nov-11 103 11,913.42 0.004780021 -0.00204308818-Nov-11 102.51 11,937.81 -0.002238661 0.0036167121-Nov-11 102.74 11,894.79 0.007254902 0.01086003222-Nov-11 102 11,767.00 0.007506914 0.01143461823-Nov-11 101.24 11,633.97 0.009271259 -0.00813681224-Nov-11 100.31 11,729.41 -0.000597788 0.00697708

25-Nov-11 100.37 11,648.14

1 9 17 25 33 41 49 57 65 73 81 89 97 105 113 121 129 137

-0.04

-0.03

-0.02

-0.01

0

0.01

0.02

0.03

0.04

0.05

Return on KSE

Series1

Time

Axis Title

1 9 17 25 33 41 49 57 65 73 81 89 97 105 113 121 129 137

-0.06

-0.04

-0.02

0

0.02

0.04

0.06

Return on Abbott

Series1

Time

Axis Title

The beta is 0.50537

Interpretation:The beta 0.5053 shows that the closing price of Abbott and closing price of Karachi Stock Exchange is positivity correlated that is the price of the Karachi Stock Exchange increase it cause 50% increase in the Abbott Pakistan prices.

KE = RF + βE(RM − RF)

Ke = 12% + 0.505(2.25)

Ke = 13.13%

Interpretation:

It shows that the Abbott Stock is giving the return of 13.13 on their stock.

CASH FLOWS FROM OPERATING ACTIVITIESNet Income 1,176,741,000NIC 256102,000Interest 2,446,00

fixed Capital investment 174,822,000Working capital 493,611,000 Free Cash Flow 766,857,000

Value of the Firm = 766,857,000/ 5,832,196

= 131.486

Interpretation:

The Value of the Firm if we compared to the current value of the stock is 100, then the stock value is undervalued and it will be useful to hold the stock because it will increases as the time passes and it will give the higher return.