Pfizer has approached several Indian drugmakers for possible alliances as part of moves to try and bolster revenues threatened by the expiry of patents on key blockbuster drugs in the next three years, three persons with direct knowledge of the matter said.
The $48-billion US drugmaker has tapped Zydus Cadila, Emcure, Intas Pharma and Mankind Pharma, but the Indian companies have not responded favourably to offers by the world’s largest drugmaker, said one of the persons, a senior industry executive.
While the US firm has approached some of these companies directly, it chose to send feelers to the rest, added the executive, requesting anonymity.
“Pfizer approached Mankind Pharma with a lucrative offer, valuing the Indian company at $1 billion,” said another person familiar with the matter, asking not to be named.
However, RC Juneja, the founder managing director of the Rs 1,000-crore company, denied that any MNC has approached it with an offer. Intas and Zydus Cadila did not respond, while Emcure officials could not be contacted.
One executive familiar with Pfizer’s India plans said: “Top executives of Pfizer are regularly assessing opportunities and have been approaching select Indian companies.”
Some of Pfizer’s blockbuster drugs, including cholesterol fighting drug Lipitor which accounts for a quarter of its sales, and erectile dysfunction pill Viagra that contributes $2 billion annually to its revenues, are set to go off-patent in the next three years, exposing the company to competition from cheaper copycat versions of these drugs.
Indian companies that sell generic versions of off-patent blockbuster drugs could help the New York-based firm grab a share of the growing generics market. Indian firms have made their presence felt in most of the biggest markets in the world, including the US and Europe.
Most Indian drug companies are family-owned and the promoters are reluctant to sell their businesses, the Singh brothers who sold their entire stake in Ranbaxy last year being a notable exception. Similarly, the Burmans of Dabur sold their pharma company to German firm Fresenius Kabi.
Pfizer is ranked among the top 15 pharma companies in India’s highly fragmented Rs 36,000-crore drug retail market with a share of around 2%.
“The Indian companies on Pfizer’s radar have strong presence in India and have grown substantially with a good cash flow from the domestic
market,” said Hemant Bakhru, pharma analyst with CLSA.
Explaining the possible rationale behind the US firm’s move, Mr Bakhru said Pfizer’s current product basket mostly consisted of old molecules unlike the Indian companies, which have launched new brands across thereupatic areas.
Pfizer has already linked several deals with Indian firms in the recent past. It succeeded in acquiring one of them, the veterinary business of RFCL, a Delhi-based company owned by ICICI Ventures for around $75 million. It also sealed two drug-supply agreements with Claris Lifesciences and Aurobindo.
In June last year, when Japan’s Daiichi Sankyo bought Ranbaxy, there were rumours that Pfizer would make a bid. Around the same time, there were speculation that Pfizer was in talks to buy a strategic stake in Ahmedabad-based Torrent Pharma. The company was also in talks to buy a part or certain businesses of Wockhardt.
Globally, Pfizer is in the process of consummating a $68-billion deal with Wyeth. Following Pfizer’s merger with Wyeth in India, the combined entity will have surplus cash of over Rs 1,000 crore. With this cash in hand and big field force, it would like to add more products and buying a company would make sense,” said Ranjit Kapadia, vice-president, institutional sales, HDFC Securities.
However, promoters of the four companies said to have been approached by Pfizer are keen to continue running their companies and are unlikely to exit, he added.
Another industry executive said Pfizer has also evinced interest in a Hyderabad-based vaccine maker for a strategic buy. But the promoters and private equity investors in the company have both denied any such possibility.
Like Pfizer, other global pharma firms such as GlaxoSmithKline and Sanofi Aventis are also facing problems due to patent expiry. Drugs worth an estimated $65-70 billion are projected to go off-patent in five years, and these companies will have to depend on few new drugs for a bulk of their sales.
These companies, traditionally developers of new drugs, have now accepted low-cost versions of drugs as an integral part of the pharma business, and thus, scouting for buys and alliances opportunities in India to leverage the low-cost operation. Besides, such deals can also increase their market share in emerging markets.