Corporate strategy of Hizon Laboratories, Inc.

• Main Author: Hertez, Niven N.
• Format: text
• Language: English
• Published: Animo Repository 1999
• Subjects: Pharmaceutical industry > Philippines; Hizon Laboratories; Inc.
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/3926
• Institution: De La Salle University

Hizon Laboratories, Inc. (HLI), a family-owned corporation, is a pioneer in the production of pharmaceuticals in the country. It has been in the business for over 100 years. It started as a mere drug store in 1898 in San Fernando, Pampanga, but has grown to a multimillion peso drug company, characterized by a marked increase in total assets from P.074 million in 1952 to P219.109 million as of December 31, 1998. HLI has been consistently included among the country's leading manufacturers of branded and generic ethical and over the counter pharmaceuticals products. To its pioneering operations of injectable medicine was added, in 1991, an extensive manufacturing facility capable of producing oral liquids, tablets, capsules, dry powders, creams and ointments in order to meet the growing business potential for contract manufacturing in the country. Its manufacturing facility is located in Antipolo, Rizal. Housed in a four-storey building, HLI's operations occupy fifteen thousand square meters of factory space and maintains efficient and precision production, testing and packaging equipment. Combined with a highly qualified and trained workforce, a comprehensive planning system, and ample storage facilities enable the company to meet the demanding requirements of its clients. The company has matured into one of the largest contract manufacturers in the Philippines, with about 5% of its output being marketed in other countries in Asia. The firm's production is either by job order or tolling. It provides the raw materials in job orders while in tolling, clients avail its services. HLI's major strength is that being in the business for over 100 years, it has established a strong regular business relationship with the Department of Health and most of the country's major government hospitals. It has likewise an existing licensing agreement with big foreign drug manufacturers which permit it to manufacture industrial drugs. Among its major weakness are - (a) HLI remains to be highly dependent on imported raw materials and (b) weak financial and sales management e.g. (1) expansion programs are not thoroughly planned or organized and (2) the company does not advertise nor promote itself. Sales generated as of December 31, 1998 amounted to P128.14 million, posting an 18.6% growth over the 1993 figure of P108.07 million. Since HLI does not advertise nor promote its products, sales registered a conservative average growth of 4% over the six-year period. On the other hand, cost of sales averaged at 79%. With the series of plant expansions undertaken by HLI financed through bank loans, it absorbed huge financial charges which have eaten much of its profits resulting to a minimal average return on sales of only 1% for the same period. In 1998, total assets of P219.1 million represents a 105% increase over the 1993 level of P108.1 million. Bulk of these assets or about 78% are in fixed assets consisting of buildings and laboratory apparatus. Current assets represent 22%, mostly in inventories. HLI's total liabilities accounted for about 92% of the combined liabilities and stockholder's equity. About 67% represents current liabilities, mostly in accounts payable as it enjoys maximum term of up to 305 days with its suppliers. While it has undertaken series of expansion programs reliance to large term loan was maintained at a minimal 25% as process of short-term borrowings were utilized for the said expansion program. To improve operations, HLI has, among its objectives for the next five years, increased sales by 20% in year 1 and 10% for the succeeding years, reduction of production cost by at least 9%, more aggressive advertising and promotional activities and infusion of fresh funds from its stockholders to have a stronger capital base. The move is properly timed in view of the recent pull-outs of some of the multinational corporations in the industry and their shift to Toll Manufacturing .