SHANGHAI PHARMACEUTICALS Harvard Case Solution & Analysis


Shanghai Pharmaceutical (SPH) produced different pharmaceutical ingredients (APIs), Chemical and biological drugs and different traditional Chinese medicines (TCMs) distributed to different hospitals, retail pharmacies, and also directly to the customers. The company is the merger of the several state owned enterprises (SOEs), and enhances the global competitive edge on the other companies in the pharmaceutical industry. The shareholders of the company are both private equity holder as well as the government equity holder.

Shanghai Pharmaceutical (SPH) made its initial public offering (IPO) in the Hong Kong Exchange in 2011, which is the key step for the Shanghai Pharmaceutical (SPH) to make the company market oriented, which earlier is the traditional state owned enterprise. Being a market oriented company, Shanghai Pharmaceutical (SPH) is also looking forward for the acquisition of the United States and European pharmaceutical companies. Shanghai Pharmaceuticals (SPH) looking forward for the United States and European market for its expansion to learn the western research and development (R&D) and market practices applicable in their states. China is spending more GDP to its hospitals and health care center, as compared to other states of the United States (U.S) and in different European states.

Problem and Decisions:

Chinese law enforcement agencies dealing with the pharmaceutical industry, restricted the small companies for direct supply and manufacturing of drugs, rather than direct supply and manufacturing, small companies should consolidate with the large firms like Shanghai Pharmaceuticals (SPH) and others. The decision of the regulatory authorities of the pharmaceutical industry tightens their policies, regards the pricing and distribution and other pharmaceutical activities. It is not affordable by the small pharma companies, only large firms like Shanghai Pharmaceutical (SPH) can afford these type of rule and regulation which are implemented by the government regulatory authorities. Multinational companies normally look towards the local companies for research and development, selling and distribution of their health care products, to grow rapidly and gain the market share in the industry. China’s global market has been restricted due to the lack of quality drugs, but China is exporting its drugs to the emerging economies and developing countries.

Furthermore, the China pharmaceutical industry needs to be developed more. China’s most the global distribution of the pharmaceutical products is in the APIs. Shanghai Pharmaceuticals (SPH) decided to expand nationwide, especially in Eastern China, where the competition is tense as compared to the rest of the China. The certain problem faced by the Shanghai Pharmaceuticals (SPH) is the changing economic environment in different region of China. The affecting problem for the Shanghai Pharmaceutical (SPH) is the non-communicable disease, high number of patients of cholesterol, blood pressure and smoking habits. The Chinese government is expanding more in the pharmaceutical industry to overcome these problems. Expenditure of China’s government in the pharmaceutical industry will reach up to the level of 7 percent by 2015. Most of the Chinese hospitals run by the public sector or state run hospitals. Private hospitals are in small numbers, but these hospitals are growing faster than the state owned hospitals. Private Hospitals have more qualified and experienced staff as compared to the public hospitals.

Shanghai Pharmaceutical (SPH) was the second largest pharmaceutical company in the China, having its own selling, distribution, research and development (R&D), excess to retail store and marketing force. Shanghai Pharmaceutical (SPH) is a conglomerate of the government plan of consolidating different small industries with large organizations. Shanghai Pharmaceutical (SPH) offers its shares to the general public of China and some international investor, through an initial public offering (IPO) and looking forward to enlist with the Hong Kong Stock exchange. Shanghai Pharmaceutical (SPH) decision of initial public offering (IPO) might go in the favor of the company, as the company is performing well in the recent years with positive growth and the target of expansion to acquire the distribution network through Initial public offering (IPO) can generate positive returns for the Shanghai Pharmaceutical (SPH). The expansion will also have a major impact on the market share of the company in the industry, and company can enjoy the position of market leader through the expansion policy of the company. Shanghai Pharmaceuticals (SPH) global investor includes Temasek Holdings, Singapore investment fund, Hong Leong group, Malaysian conglomerate and some other potential investors are interested to invest in the company...............

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