Page 12 - CIMA SCS Workbook November 2018 - Day 2 Tasks

CIMA NOVEMBER 2018 – STRATEGIC CASE STUDY

Reference Materials – extract from the Cronland Times

Novak shareholders looking for a cure?

Shareholders in the pharmaceuticals giant Novak are likely to be feeling a little off-colour after
seeing the value of their investment fall by roughly one third over the last 5 years. Whilst other
pharma companies have been able to produce good returns for their owners, Novak has under-
performed in the sector, and directors are sure to be under the spotlight as to how they are going
to turn the company around.

One industry analyst commented this week that Novak has suffered in 2 ways over recent years.
He told us: “Novak’s ability to earn revenues was seriously dented at the end of 2016 when 2 of
its most successful drugs went off-patent. Competitors were quick to launch their own versions of
these drugs, and market share was lost in 2017.

There has been much chat about exciting new products being brought to market, but this has
been going on for some time without any actual launch. Indeed, most news has been bad, with
disappointing research updates and projects being discontinued. So the prospects of restoring
sales to growth look slim.

Secondly, Novak has a high cost base, with 3 factories in Cronland out of a total of 12 worldwide.
Most of its rivals recognised some time ago that manufacturing for a global company does not
have to happen in its own backyard; it is easy in these tech-driven days to produce goods in
cheaper parts of the world without any threat to quality. The Board of Novak does not appear to
have grasped this, and so operating margins are likely to be lower than average for the industry
for the foreseeable future.”

28 KAPLAN PUBLISHING