Intellectual Thoughts by Sanjay Panda: Pfizer bid for Wyeth set to spur consolidation in drug industry

Pfizer bid for Wyeth set to spur consolidation in drug industry

Pfizer Inc's bid to buy rival Wyeth for more than $60 billion is expected to increase the level of competition for capturing the generic drugs market, especially in economies like India. However, before the deal can go through here, it would need an independent valuation of the companies to determine how much shares the investor of each company would hold in a new entity.

New York-based Pfizer, the world's biggest drugmaker, and Wyeth, of Madison, New Jersey, have been negotiating for months, media reports say. The combined company would have annual sales of more than $70 billion, a 45% increase for Pfizer. The deal makes sense in an industry attempting to consolidate to take on the impact of a thinner pipeline of new products and increasing generic competition.

In India, Wyeth is active in antibiotics, steroids, vitamins, vaccines and drugs for the central nervous system and cardiovascular system. For the year ended March 31, 2008, Wyeth Ltd, the Indian arm of the MNC, had sales of Rs 332 crore with a profit after tax of Rs 81 crore. Pfizer India, had a net profit of Rs 340 crore on an income of Rs 1019.76 crore for FY 07. The company will announce its FY08 results this February.

Pfizer has launched five patented products in India after 2005 Vfend, Viagra, Lyrica, Caduet and Macugen. Two of Pfizer India's brands, Corex (cough formulation) and Becosules (multivitamin), continue to rank as the No1 and 2 brands amongst all pharmaceutical drugs produced in India.

Although a buyout of Wyeth will enable Pfizer to enter new segments like antibiotics and women's health in India, some analysts feel the deal will have a minimal impact since Wyeth is selling just a few patented drugs here.

Most MNCs have been reluctant to launch patented products in the Indian market because of slack patent norms in the country.

If one big company makes a move, one can absolutely imagine that triggering off a series of moves..The industry has historically, habitually demonstrated its inability to sit on its hands when someone moves. The question is whether somebody big is going to finally pull the trigger."

Pfizer  must replace more than $12 billion in revenue the company may lose within three years when its Lipitor cholesterol pill, the best-selling medicine in history, faces generic competition. With Wyeth in its fold, Pfizer's earnings may fall as little as 10%, unlike the 23% expected drop when Lipitor loses patent protection in 2011.


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