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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
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