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Pfizer: Merger picture - Views on News from Equitymaster
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  • Jun 27, 2002

    Pfizer: Merger picture

    Pfizer Inc. emerged as the world's largest pharma company in early 2000, when it snatched Warner Lambert from the clutches of rival suitor American Home Products (AHP). A US$ 90 bn acquisition of Warner Lambert was the largest ever in the history of global pharma industry. The merged entity now has sales close to US$ 30 bn with highest R&D budget in the pharma industry.

    With Warner came cholesterol-fighter Lipitor, the drug market's No. 1 seller with $6 bn in annual revenues, apart from other major brands. Following the global merger, Pfizer India also decided to merge Warner Lambert subsidiary, Parke Davis with itself. The company is expected to announce the merger ratio today. We expect the ratio to be 1:3 (i.e. 3 shares of Parke Davis for every share of Pfizer).

    Pfizer-Parke Davis - A robust entity
    The merged entity in India would have robust financial numbers with sales expected around Rs 6 bn, leading to a position in the list of top five domestic pharma players and a combined market share of 3.2% in the domestic industry.

    Rs m Pfizer* Parke Davis** Merged Entity***
    Net Sales 3,206 2,134 5,755
    Operating Margins (%) 7.2% 14.0% 11.8%
    Net Profit 475 250 812
    EPS (Rs.) 20.3 20.8 29.5
    *- Latest available 12 month results **- Annualised 12 months results
    ***- Expected numbers for 12 months ending Nov'02
    Apart from financial consolidation, the merger with Parke Davis is expected to add significant brands to the company's already impressive product portfolio. Pfizer would inherit brands such as Benadryl, Gelusil and Listerine from Parke Davis.

    Particulars Pfizer Parke Davis Merged
    ORG Rank 11 23 5
    No. of Products 24 54 78
    Sales per brand (Rs m) 134 40 74
    As shown in the above table, while Pfizer brings on the table a small portfolio of mega brands, Parke Davis, brings a larger portfolio of products. While on one hand, the merger would help Pfizer create a strong hold in the OTC segment; the companyís aggressive marketing field force would have a large product portfolio to push. Pfizerís marketing team is considered to be the best in the industry. Barring Benadryl, there is little overlap in the product profiles of both the companies even in common therapeutic segments. Even after the merger, the sales value per brand for Pfizer is expected to be impressive, which clearly vouches for its strong brand portfolio.

    Both Pfizer and Parke Davis have introduced few new products due to weak patent laws and competition in the formulations market in the domestic market. Considering the parentís stand on new product introductions, the situation is not expected to improve. The company now seems to be tackling this by tying-up with local pharmaceutical companies. The tie -up with Shanta Biotech, to market the latterís hepatitis-B vaccine was a unique combination of innovative product and strong marketing. The company is also awaiting other products from the Shanta Biotech stable.

    Pfizer- Few but strong brands
    Company Ranking in
    terms of sales*
    No. of
    (Rs m)
    Aventis 6 55 94
    Pfizer 5 78 74
    GlaxoSmithKline 1 210 53
    Ranbaxy 2 237 35
    Nicholas Piramal 4 217 25
    Cipla 3 358 21
    *- Expected rankings post Pfizer- Parke Davis merger



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