Galaxy Pharma by Vibrant Ltd - Case Study Example

Business report on the Acquisition of a Company Name Unit Instructor Date Executive Summary The move to purchase the rights of the Galaxy Pharma by Vibrant Ltd seems like a long shot by Vibrant Ltd. In business setting, considering the fast out border growth of Vibrant Ltd –a pharmaceutical multinational, the purchase of the well established Galaxy Pharma will boost its sales in the Japanese and Asian markets. Galaxy Pharma is a well established pharmaceutical company based in Japan and largely operates in the Asian market. With a Japanese Yen 102,000 million deal at hand, the time is ripe for this purchase. This is because Galaxy Pharma is not only well established in the market but its financial record is also an assuring factor as well with an operating income of Japanese Yen 4,551 million, current assets of Japanese Yen 30,250 million-with 40% of it in cash and fixed assets of Japanese Yen 8,337 million. The drug and pharmaceutical manufacturing and distribution companies play a big role in the society today in ensuring the overall health and of the community and that of the global sphere as well. With vibrant limited move to acquire the rights of the Galaxy Pharma based in Japan to expand its borders and global market reach, Vibrant Ltd will see itself channel new products to outside markets with a recognized trademark in the region making it not only establish its roots in Japan but the larger Asia and close regions like Australia as well. This will also see this company offer new and better products that are seemingly locked in the Canadian market to the Japanese market, extend its revenue opportunities in the this new market and at the same time satisfy the desire and demands of million of consumers in the new target market. On the other hand, the copyrighted brands from Vibrant Ltd will bear the seal of the Galaxy Pharma making it easy to sell their brands that are rather considered import in this new market as they will now be locally produced by Galaxy Pharma under the rights of the mother company-Vibrant Ltd. This move will provide numerous solutions to various issues faced by the market and the consumers as well besides giving Vibrant Ltd a better means to enforce its presence in this market and offer better and competitive and legitimate products to the consumers at their market and at prices that seem standard to their market. This purchase will further the research of better drugs and couple the findings from Canadian and Japanese scientists leading to the development of better pharmaceutical products. With such a system, consumers and the host nation will benefit more; the host nation will receive revenue while consumers will have access to better drugs while the population of the target market will be empowered and have job opportunities also. Other advantages are like: 1. Introduction of new products to the home market from Galaxy Pharma 2. Shedding of the tax costs imposed on the export/ import goods 3. Sharing technologies that will better the future of the company and give it a better market share. Overview of Vibrant Ltd and its products Vibrant Ltd is a leading, speciality and fully integrated pharmaceutical company that has been largely focused on the Canadian and northern American market. Vibrant makes and markets a portfolio of –branded pharmaceutical products besides researching on new drugs as well as developing them. This is in a bid to cater for the needs of the patients who’re suffering from emerging illnesses and those that seem hardy to the available drugs (Bloomberg, 2014). Vibrant strategy of acquiring the rights to pharmaceutical products’ research, development and their commercialization is mainly through licencing, target mergers and collaborative partnerships (Protectionism & Barriers to Trade, 2012). These forms of acquisitions allow vibrant to exploit the attractiveness of the late stage of development and the commercial opportunities present. With this the company the company is able to curb the inevitable risks during drug development (Bloomberg, 2014). With the acquisition of Galaxy Pharma in cash, this give vibrant the complete rights to their branded drug brands that treat various illnesses. With such a trade agreement announced whereby vibrant buys off Galaxy Pharma completely in cash and also stock will be a great move for both companies. This purchase move is also contingent upon the regulatory approvals and shareholders approvals (Forest Laboratories, 2014). Overview of Galaxy Pharma Galaxy Pharma is a fast growing drug development and manufacturing company which applies innovative –clinical development methods that accelerate and boost the value of the drug developing programs. This is done by advancing them fast through the discovery and development stage in a cost efficient method (Galaxy Pharma (Pvt), 2014). Galaxy’s core mission is to ensure the development of innovative medicines in a faster way and at a lower cost. This improves profitability and accelerates the marketing time while at the same time provides consumers (patients) with life improving medicine products (Galaxy Pharma (Pvt), 2014). Market position in Japan and Asia at large The change experienced in the foreigner –exchange affects companies in major ways. Foreign exchange change not only affects the individual transactions but also the firms value as well (Eiteman, 2012, p.2). Changes in the foreign exchange rates can alter the competitiveness of a firm and may have an impact whether positive or negative in the survival of a company. This is regarded as the operating exposure. It is difficult to measure the operating exposure since it is also hard to estimate how a company’s sales –input prices may be affected due to the fluctuating foreign exchange rate. Further, quantifying the competitive scenario of a company will face alterations which may affect the cash flow in the near future (Prof. Gordon Bodnar, 2004, p: 14). Possible risks to be faced in this purchase It is undoubtedly anticipated that there may be several risks faced in this kind of a purchase. These risks may be in the micro or macro economic sense or through the employee attitude. Micro-economic setting Variables and the Unknown Factors These include the consumer’s desire for something new that will have a positive impact on their lives (investopedia.com, 2014).. Vibrant Ltd will offer consumers in the Japanese and larger Asian market new pharmaceutical products that will satisfy this need. This comes as a result of consumers having been worn out but the numerous anti-response medication provided by the market or galaxy under Vibrant will be able to develop drugs that work faster and are efficient with only small doses. Opportunity Cost and the Accounting Concerns Both economists and accountants have their methods when it comes to calculating costs. In accounts, deal with actual money which is paid out as-costs. This include the fixed costs like rent, which over a long period of time will remain fixed, variable cost like labour and the used raw materials ((investopedia.com, 2014). Macro-economic setting Inflation & Deflation Inflation is the rise in prices of goods and services over a period of time. A unit of currency will buy less with each price increase. Inflation rate is measured in percentage is also calculated monthly or annually and is the rate of changing price (Christophe Bernard , 2013). Vibrant Ltd is highly advised to watch the inflation rates in the new market to avoid the risk of having their less valued foreign currency in the new market. Deflation on the other hand is the decrease of the price of goods and services in a particular market over time. It occurs when interest rates fall to 0% and below. This increases currency value and gives consumes the power to buy more with each unit of currency (Christophe Bernard , 2013). It may sound like an ideal situation but to an investing/ expanding company like Vibrant Ltd, this should sound the alarm of a market that’s about to go on recession which spells doom for major businesses. (GDP) Gross Domestic Product This is the total value of the goods and services produced in a given country cumulatively i a specific period. It presents the size of a company which is why it’s a vital aspect to consider and is usually given in terms of USD (Christophe Bernard , 2013). It is usually assessed quarterly, whereby one quarter is compared to other quarters and it is used to give the performance of a country economically. If it is greater then the economy is growing, else if it is negative of lessening, then that country is in an economic crisis (Christophe Bernard , 2013). Vibrant Ltd should carefully examine this aspect so that they are sure they are investing in a healthy economy and shall be sure to experience a better trading environment. Consumer Confidence This is the extent to which consumers trust your products and are positive about the economic performance and their individual finances as well. When an economy is well performing, the consumer confidence is high which translates to them having a greater buying power. Conversely, when poor performance by the economy is experienced, the consumer confidence recedes, translating to them purchasing less as their buying power has been reduced (Christophe Bernard , 2013). Benefits realized from this purchase Net benefit Impacts on Vibrant Ltd When a foreign company acquires the rights of a smaller company in a particular country like the purchase of Galaxy Pharma by Vibrant Ltd, the foreign investment greatly benefits the smaller company’s country. When such an acquisition happens, innovativeness and new technology and the new management ideas will be implemented by the foreign investor which majorly leads to superior competitiveness and higher productivity (Frigon, 2011). This will lead to higher and increased profit rates and acquiring a larger market share. This is accredited to the reduced taxation to the foreign investor leading to increased exports. Conclusion With such an offer, vibrant should first access all the issues at hand and see if all will balance off which is a direct indication of a healthy Japanese economy. If it does, they should buy off the company as it will open up further their outside border expansion ability and shall allow them to exploit the markets that were once dominated by Galaxy Pharma. They have access to better scientific discoveries from the Japanese scientists which may help them further their drug brand portfolio. The move will not only help vibrant to expand but also to exploit the resources and newer Asian markets. Works cited Bloomberg Businessweek. 2014: http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=78891233 Christophe Bernard: April 2013 in Assurance: How changes in the macro-economic environment affect you, your family and your business. http://www.kpmgfamilybusiness.com/how-changes-in-the-macro-economic-environment-affect-you-your-family-and-your-business/ Forest Laboratories, 2014: 2014 Forest Laboratories, Inc. http://investor.frx.com/press-release/business-development-news/forest-laboratories-acquire-furiex-pharmaceuticals-11-billio Frigon, Mathieu. The Foreign Direct Investment Review Process in Canada. Publication no. 2011-42-E. Parliamentary Information and Research Service, Library of Parliament, Ottawa, 2011. http://www.parl.gc.ca/content/lop/researchpublications/cei-22-e.htm Galaxy Pharma(PV) Limited: http://www.galaxypharma.org/ Geoff Riley, 2012. Protectionism & Barriers to Trade. http://tutor2u.net/economics/revision-notes/a2-macro-protectionism.html Operating Exposure, Multinational Business Finance, Eiteman, Moffett, Stonehill and Pandey, 10th Edition, Pearson Education, ISBN, 81-7758-449-9. http://nptel.ac.in/courses/110105031/pr_pdf/Module27.pdf Marc Davis: Microeconomics: Factors Of Business Decision-Making http://www.investopedia.com/university/microeconomics/microeconomics4.asp Techniques for managing economic exposure, class note by Prof. Gordon Bodnar, http://finance.wharton.upenn.edu/~bodnarg/courses/readings/hedging.pdf Vibrant Ltd: http://www.vibrantgastro.com/ Read More