The proposed merger of Parke Davis with Pfizer would further tighten the latter’s hold in the OTC segment. With Warner Lambert also coming into the Pfizer fold internationally, Pfizer would further inherit brands such as Benadryl, Gelusil and Listerine in its fold. These brands form part of Parke Davis (as Warner Lambert is known in India).
Despite apprehensions about the intentions of the management, after the setting up of a 100% subsidiary, Pfizer continues to report healthy growth rates.
The company has delivered a 74% increase in pre–tax profits in the first six months of the current year, despite Becousules (its B–complex vitamin) being brought under price control. Becousules contributes around 20% to the company’s turnover and the National Pharmaceutical Pricing Authority has reduced its prices by 30% in the current year.
Interestingly, Corex and Benadryl dominate the cough segment and merger would only consolidate Pfizer’s dominance in this segment. Infact, Corex has even upstaged Becousules as the top selling brand (as per ORG MARG quoted in the Financial Express) in July 2000.
Value (Rs m)
Source: Glemark Pharma
Further, Pfizer’s dependence on its six brands would also reduce post meger. (In India six brands viz. Becousules, Lorex, Protinex, Dolonex, Terramycin and Minipress XL account for 80% of the company’s sales.)
Besides, Pfizer has entered into a co–marketing tie up with Shanta Biotech to market the latter’s Hepatitis B vaccine under the brand name Hepashield. Shanta Biotech markets the vaccine under the brand name ‘Shanvac’.
The key impact of the co–marketing deal is the fact that competition within Hep B segment will become considerably tighter. Smithkline Pharma has by far been the leader in this segment with its brand Engerix B dominating the segment, but with Pfizer’s brand name attached to Hepashield, doctors would now be more comfortable recommending Hepashield.
Further the company has plans to introduce an anti–cancer vaccine in India, which if introduced through the listed company could propel’s Pfizer’s bottomline by over 30% next year. (Pfizer’s year ends in November.)
We expect the company to report a net profit in the range of Rs 400 m for the current year (without considering Parke Davis’ numbers) which implies a per share earnings in the range of Rs 17.50. The stock currently quotes at an earning multiple of 33 times. Going forward, this multiple is expected to be sustained despite the presence of 100% subsidiaries of both Pfizer and Parke Davis.
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