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Nath Balakrishnan

INVESTORS looking for a sound pharma company to deploy their funds can consider doing so in Pfizer, one of the better pharma p0lays in the market today.

At the current price of Rs 412, the stock trades at a multiple of about 16 times its sustainable FY02 earnings and scope for appreciation does exist from this level.

Pfizer, which has December-November financial year, has not declared numbers since November 2002.

This follows a court stay on its merger proceedings with Parke-Davis (PD) on account of minority shareholders of PD raised objections to the swap ratio. The finanicals for the year ended November 2003 included those of Parke Davis as well.

Pfizer may not have the widest product basket in the market today but what it possesses is a set of strong brands backed up by a sales force of 1,200 (including those of Parke-Davis).

For instance, two of Pfizer's brands are the leading brands in the Indian pharmaceutical industry — Becosules (vitamin tablets) and Corex (cough syrup).

Both these brands do about Rs 100 crore each every year and continue to have a strong franchise. Additionally, Becosules continues to come under the purview of price control. Should it move out of it, which is likely, it would provide a fillip to Pfizer.

The merger with Parke-Davis has also brought into Pfizer's fold a set of brands that are household names in the consumer healthcare space.

Brands such as Benadryl, Listerine and Gelusil would only serve to further fortify Pfizer's position.The company has also been constantly streamlining its product offerings to focus on its competency area of prescription pharmaceuticals.

As part of this focus, it sold the Protinex and Dumex brands to EAC Nutrition for an upfront consideration; it will continue to make and co-promote these products over a three-year period. It has discontinued trading activity of the Hepashield vaccine. Courtesy Parke-Davis' product basket, Pfizer also now has access to a set of drugs in therapeutic areas.

Moreover, with the acquisition of Pharmacia worldwide by Pfizer, the Indian arm of the former would also be merged with Pfizer, going forward. This would further widen Pfizer's offerings; the strength of its field force would more than come in handy when it comes to distributing these products.

Stock outlook

As the Indian arm of the largest pharma company in the world that has one of the strongest research pipelines, bringing in top-of-the line products after 2005 — when India migrates to the product patent regime — would certainly be an option. Valuations are also considerably lower than that accorded to GlaxoSmithKline, which trades at about 25 times its trailing four-quarter earnings per share.

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