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Working Capital Management in the North American and European Pharmaceutical Industry : Optimization is the Key to Working Capital Efficiency

  • April 2015
  • 52 pages
  • Frost & Sullivan
Report ID: 2841902

Summary

Table of Contents

Executive Summary

Need for Effective Working Capital Management
•Decreasing profitability
•Fizzling innovation model
•Access to new markets
•Price premium pressure

Key Trends

•The analysis of Year-on-year (YOY) revenue growth shows that the growth in both North American and European industries declined between 2009 and 2013.
•In big pharma, US companies successfully reduced the days inventory outstanding by x % between 2009 and 2013, while European companies were able to reduce it by only x % in the same period.
•In 2013, mid-size companies were not able to reduce their days sales outstanding compared to previous years. Days sales outstanding for US companies increased by x % between 2009 and 2013.
•In smaller companies, the analysis of days sales outstanding reveals that US companies have a better receivable performance compared to European companies.

Key Terms Used in the Study

M&A: Mergers and acquisitions is an aspect of corporate strategy, corporate finance, and management by which corporations legally unify ownership of assets formerly subject to separate controls. The term “deal” in the study refers to M&A transactions.
Pharmaceutical Industry: Companies engaged in the research, development, or production of pharmaceuticals.
Days Inventory Outstanding: A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory (including goods that are work in progress, if applicable) into sales.
Days Payable Outstanding: Days payable outstanding tells how long it takes a company to pay its invoices from trade creditors, such as suppliers.
Days Sales Outstanding: A measure of the average number of days that a company takes to collect revenue after a sale has been made.
Cash Conversion Cycle: A metric that expresses the length of time, in days, that it takes for a company to convert resource inputs into cash flows.

Objectives of the Study

Analyzing the working capital management trends in the North American and European pharma industry
Identifying the key trends in the industry based on geographies, across revenue segments
Conducting an analysis of various components of working capital management
To arrive at strategic conclusions based on the key trends observed

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