Pfizer Inc: A behemoth in the making - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Pfizer Inc: A behemoth in the making

Jul 16, 2002

Call it a lesson in how sheer size can make a strategic difference in the pharma industry. In yet another display of company’s aggressiveness to stay on top, Pfizer Inc has declared a mega buyout of Pharmacia for US$ 60 bn in an all-stock deal. It was only in early 2000 that the company bought over Warner Lambert for US$ 90 bn, to snatch the top position in the global pharma industry. No wonder, the industry is in for another round of consolidation with patent expirations and severe generic competition giving a tough time to Big Boys. “We have never been in a better position”, was a recent statement by Pfizer’s CEO, Mr. McKinnell. While most of the global pharma giants like Merck, Schering and Bristol had warned investors of low or flat growth, Pfizer went ahead and promised a 20% or more growth for FY02.

Globally, Pfizer, which is the biggest US drug marketing company, will now have a tremendous marketing clout with more than 13,000 representatives in the US. This would make Pfizer possibly the strongest pharma company on all major counts viz, research strength, marketing capabilities and a strong multi-billion dollar products portfolio. The combined entity would have a whopping US$ 7 bn research budget (this is approximately twice the size of Indian pharma industry). The combined entity would have sales of almost US$ 47 bn, almost twice the sales of its nearest competitor GlaxoSmithKline.

Most importantly, Pfizer Inc would gain control over Pharmacia’s multi-billion arthritis pain drugs namely Celebrex and Bextra, each with sales of more US$ 3 bn. Post the acquisition, Pfizer Inc. would have 8 multi-billion dollar products in its portfolio, the biggest and most enviable in the global pharma industry.

Pfizer Inc’s- Multi-billion dollar products
Product Indication 2000 Revenues
(US$ bn)
Year of
Patent Expiry
Diflucan Fungal Infections 1 2004
Zoloft Depression 2.1 2005
Zithromax Bacterial Infections 1.4 2005
Lipitor High Cholesterol 5 2006
Norvasc Hyper tension, Angina 3.4 2007
Viagra Erectile dysfunction 1.3 2011
Celebrex Arthritis 3 2013
Bextra Arthritis 3 NA

In India, the acquisition is likely to push Pfizer India to the fourth largest position in the domestic pharma industry. Pharmacia’s Indian operations consist of two entities viz; Pharmacia India Pvt. Ltd and Pharmacia Healthcare Ltd. Pharmacia Healthcare is erstwhile Abbott Laboratories, which Pharmacia acquired in Jan’02. The following conclusions can be drawn of the global merger for India:

  • Pfizer India has recently completed integration of Parke Davis India into itself. Post the integration, the merged entity’s combined sales is expected to be Rs 5.7 bn. Pharmacia Healthcare Ltd has annual sales of Rs 896 m. However, the margins of Abbott Laboratories don’t compare favorably with that of Pfizer-Parke Davis and hence there is unlikely to be a substantial addition to its bottom line. It is likely that Pfizer may have to rework another restructuring exercise based on its brand portfolio. Pfizer’s Inc’s policy of product introductions is very conservative and there could be a case where the company might decide to withdraw some Pharmacia’s products.

    Year – FY02 (Rs m) Pfizer Parke Davis Pharmacia India
    (erstwhile Abbott India)
    Consolidated*
    Net Sales 3,206 2,134 896 6,236
    Operating Margins (%) 7.20% 14.00% 6.00% 9.40%
    Net Profit 475 250 12 737
    (*- Excl. Pharmacia India Pvt.Ltd)

  • The structure of Pfizer Inc’s operation in India is likely to become complex. While Pfizer and Warner Lambert already have a subsidiary each operating in India, Pharmacia would add another one to the bouquet.

  • Pfizer India will have to come out with an open offer for the minority shareholders of the erstwhile Abbott Laboratories, comprising 25% of the equity. Considering the last six-month average prices is considerably higher than the current market price, Abbott shareholders stand to gain.

Equitymaster requests your view! Post a comment on "Pfizer Inc: A behemoth in the making". Click here!

  

More Views on News

PFIZER Announces Quarterly Results (3QFY21); Net Profit Up 1.6% (Quarterly Result Update)

Feb 10, 2021 | Updated on Feb 10, 2021

For the quarter ended December 2020, PFIZER has posted a net profit of Rs 1 bn (up 1.6% YoY). Sales on the other hand came in at Rs 6 bn (up 10.3% YoY). Read on for a complete analysis of PFIZER's quarterly results.

PFIZER Announces Quarterly Results (2QFY21); Net Profit Down 14.8% (Quarterly Result Update)

Nov 4, 2020 | Updated on Nov 4, 2020

For the quarter ended September 2020, PFIZER has posted a net profit of Rs 1 bn (down 14.8% YoY). Sales on the other hand came in at Rs 6 bn (up 5.0% YoY). Read on for a complete analysis of PFIZER's quarterly results.

Demerger of Financial & Pharma Businesses puts Piramal Enterprises in Limelight (Views On News)

Oct 8, 2021

The company's shareholders will be issued 4 shares in the demerged entity for every 1 held in Piramal Enterprises.

Block Deal Disappoints Max Healthcare Shareholders. Stock Falls 6% (Views On News)

Sep 30, 2021

The divestment of 6.6% stake by the promoter is considered to be one of the largest block deals of the market.

5 Indian Pharma Companies Riding the Vaccination Wave (Views On News)

Sep 3, 2021

These companies are likely to benefit the most from Covid-19 vaccines.

More Views on News

Most Popular

Is it Time to Switch from Tata Power to NTPC? (Profit Hunter)

Oct 11, 2021

Given the huge run up in Tata Power, does it make sense to switch to NTPC?

This Proxy EV Stock Just got a Power Crisis Boost (Profit Hunter)

Oct 8, 2021

After months of research, I've come across few stocks that excite me far more than the mainstream electric vehicle companies.

Rs 1 Lakh Invested in These Cryptos at the Start of 2021 Became Rs... (Views On News)

Oct 8, 2021

These cryptos would have multiplied investors' wealth by as much as 10,000% in just nine months.

5 Exciting 'Unlisted' Companies and How to Play Them (Views On News)

Oct 7, 2021

Here's how you can invest in some of the most exciting start-ups of the decade.

Modi's Big Move Could Boost these 5 Defence Stocks (Views On News)

Oct 11, 2021

To corporatise the defence sector, the Ministry of Defence (MoD) has dissolved the 250-year-old Ordnance Factory Board (OFB).

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

PFIZER SHARE PRICE


Oct 20, 2021 09:28 AM

TRACK PFIZER

COMPARE PFIZER WITH

MARKET STATS