Salix

SalixCapabilities and Efficiencies

Agenda→ Executive Summary

→ Link Chart

→ Capacities

→ Third Party Manufacturers

→ Efficiencies

→ Questions

→ Contact Information

Executive Summary

→ Only as capable as their ability is to attract third party manufactures

→ Focuses on a niche market

→ Efficient, but room for improvement

Capacities

Capacities

Salix has no manufacturing capabilities, due to the fact that all their

manufacturing is contracted out to third parties.

Is this Good or Bad?

The benefit of this practice is that Salix is

not constrained by internal manufacturing

limitations.

The downside is that they are dependent on

third party companies to work with them and manufacture their

products

Salix focuses on a niche market inside the pharmaceutical industryThe Gastroenterology Industry

This allows Salix to compete with larger pharmaceutical companies

that focus on broader markets within the pharmaceutical industry

All the research and development done at Salix is focused solely on

gastroenterology

Gastroenterology Industry

Pharmaceutical Industry

Salix has approximately 280 full time employees

150 dedicated to

sales

100 call on roughly 16,000

health care professionals

10 sales managers who focus on

major drug wholesalers

MorrisvilleNorth Carolina

RaleighNorth Carolina

MorrisvilleNorth Carolina

Headquarters

77,000 SQFT

RaleighNorth Carolina

26,000 SQFT

Lease expires in 2015

Lease expires in 2011

Salix also maintains a small amount of space in Palo Alto, California.

Third Party Manufacturers

All of products that Salix Produces

All of Salix’s third party producers

Overall, Salix has 20 Third Party Producers

`Efficiencies

The Analysts used four different ratios to determine Salix’s Efficiency

These ratios are as listed as follows;

Inventory to Sales Ratio

Average Inventory

Investment PeriodRatio

Asset Turnover

Ratio

Accounts Receivable

Ratio

The Inventory to Sales Ratio determines how much inventory is sold in a month

This ratio can be calculated by

Inventory

Sales for the Month

= Inventory to Sales Ratio

1999 2000 2001 2002 2003 2004 2005 2006 2007 20080

0.5

1

1.5

2

2.5

3

3.5

4

1.54838709677419

1.54838709677419

2.31724137931034

3.375

3.65373134328358

3.46236559139785

3.03696682464455

1.79728857327308

1.44460431654676

0.900763358778626

1.16107382550336

Inventory to Sales Ratio

years

Inve

ntor

y to

Sal

es R

atio

Trending Down = EFFICIENT

A higher investment in

inventory means less cash available for other cash flows

(i.e. paying bills, overhead, ext.)

The Average Inventory Investment Period Ratio determines how long it

takes to convert a dollar of cash outflow into a dollar of sales/ accounts

receivable from the sale of the inventory

Average Inventory

Investment PeriodRatio

This ratio can be calculated by

A longer average inventory period requires a higher

investment in inventory

The higher the Average Inventory Investment Period is, the less efficient the

company is

Current Inventory Balance

Average Daily Cost of Goods Sold (COGS)

=

Trending Up = INEFFICIENT

2000 2001 2002 2003 2004 2005 2006 2007 20080

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

0.173913043478261

0.8

0.76829268292683

0.772727272727273

0.738532110091743

0.780701754385965

0.560386473429952

0.456363636363636

0.482288828337875

Average Inventory Investment Period

Years

Aver

age

inve

ntor

y in

vest

men

t Per

iod

The Asset Turnover Ratio determines how well a business is using it’s assets

to generate sales

This ratio can be calculated by

Revenue

Assets=

Asset Turnover

Ratio

Trending Up = EFFICIENT

1999 2000 2001 2002 2003 2004 2005 2006 2007 20080

0.2

0.4

0.6

0.8

1

1.2

1.4

0.885714285714286

0.570866141732283

0.600536193029491

0.5

0.647331786542923

1.15806805708013

1.13230994152047

1.22574955908289

1.20675537359263

0.960257787325457

Asset Turnover Ratio

Year

Asse

t Tur

nove

r Rati

o

The Accounts Receivable RatioRepresents the number of sales for which payments have not yet been

collected

This ratio can be calculated by

Accounts Receivable

Sales=

Accounts Receivable

Ratio

Trending Up = INEFFICIENT

1999 2000 2001 2002 2003 2004 2005 2006 2007 20080

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.0967741935483872

0.427586206896552

0.107142857142857

0.17910447761194

0.0645161290322581

0.0995260663507111

0.251129761136217

0.295923261390888

0.221374045801527

0.226510067114094

Accounts Receivable Ratio

year

Acou

nts R

ecei

vabl

e Ra

tio

Questions

Contact Information