The world’s largest drugmaker will pay $136m (€103m) for an additional 34 per cent stake in its Indian unit, taking its total holding in the Mumbai-based unit to around 75 per cent.
A Pfizer spokesperson said the firm is “increasing its investments to further develop its business in India as part of our overall strategy to grow in emerging markets,” according to the Times of India newspaper.
Pfizer like the majority of Big Pharma has begun targeting emerging drug markets in a bid to lessen the impact of the impending loss of patent protection for blockbuster drugs in Europe, the US and Japan.
Predictably, Pfizer India’s share price leapt around 10 per cent to 685.4 rupees per share on the Bombay Stock Exchange when news of its investment plan broke yesterday.
Some observers suggest that the US giant may be forced to revise its offer as a result .For example, Mumbai-based analyst Ranjit Kapadia told India’s Business Standard that: “Pfizer’s decision to offer an 8 per cent premium is not at all attractive.”
Pfizer said that the offer, which it plans to tender in the next few weeks, is a 23 per cent premium on its Indian unit’s April 9 closing price.
Will other Big Pharmas follow suit?
Pfizer’s move has fuelled speculation that other multinationals will increase investment in India in a bid to strengthen market position.
Deloitte analyst Robert Go told India’s Economic Times that: “Emerging markets are viewed as very important markets to sell products. So, pharma companies around the world are interested in them because of the sheer size alone.”
The report goes on to speculate that companies like GlaxoSmithKline (GSK), Sanofi Aventis and Merck & Co, all of which have subsidiaries operating in the country, may be about to follow Novartis and Pfizer’s lead.
CLSA analyst Hemant Bakhru agreed that investment in India would fit with GSK and Sanofi’s desire to focus on emerging markets but suggested that for the UK firm in particular gaining control of its subsidiaries may be difficult.
He said that while GSK, the world’s second biggest drugmaker by sales, has the cash reserves needed for such an investment, it currently has only a 17 per cent stake in its Indian unit.