The mega global takeover of Pharmacia by Pfizer Inc has cheered very few in the Indian pharma industry. The reason touted is that the takeover is not going to have any serious impact on the domestic formulation business scenario due to the small size of Pharmacia's business.

Analysts recall how Pfizer grew to the current position from number 14 in the world in 1990. It became number one pharma company in 2000 with the $115 bn purchase of Warner-Lambert, and the current takeover of Pharmacia gives it an annual revenue of $48 bn, compared with GlaxoSmithKline's $30bn.

Not everybody is enthused by the takeover. Some in the industry feel that this shows Pfizer's inability to continue to produce new blockbusters, the last one being Viagra. So Pfizer is taking the easier route to profit by buying another company with a host of new successful patented launches. And Pharmacia has in its treasure chest Celebrex, the arthritis drug which is the seventh largest selling medicine in the world. Pharmacia also has Bextra, another top arthritis drug and Detrol, a drug for bladder problems.

The chief executive of a multinational company in India who spoke to Pharmabiz.com on condition of anonymity said that it has been proved time and again that merged companies grow faster than the individual companies would have. "Pfizer stalks companies to get blockbusters, as they did with Warner for Lipitor. They are doing a repeat now with Pharmacia for Celebrex. It may make sense financially, i.e., in terms of profit. However, whether Pfizer will be able to sustain continuous growth, in terms of sales, is open to question. Unfortunately Pfizer may have to look for another acquisition down the road to show growth."

"It gives you quick growth to get ownership of an existing block-buster. However, I maintain that future growth is going to be tough", the MNC CEO said.

This source also warned that one day only a handful of pharmaceutical companies would remain, just like in the automobile sector, who will control the global business. "One huge component of value chain in pharma industry is research. You can consolidate manufacturing plants and maybe distribution and sales forces, but not brains. Therefore, there will be small companies with billion dollar molecules and bio-techs aspiring to be full fledged pharma companies and so on."

Informed sources say that large pharma bureaucracies, a euphemism for overgrown companies, stifle creativity and innovation. This means the larger you are, the more you need to go outside, i.e., do in-licensing and acquisitions, to maintain a decent percentage growth if you are keen on impressing the Wall Street."

In India, Pharmacia India Private Ltd (PIPL) and its listed subsidiary Pharmacia Healthcare Limited (PHL), which is the erstwhile Abbott Laboratories, together have sales of Rs 123.4 crore with a field force of 491. Pharmacia's Indian operations were much below the critical mass of Rs 300 crore, and the company was probably looking at more acquisitions to grow in this country when the news of the takeover came.

PIPL acquired Rs 80 crore Abbott Laboratories India Ltd the name of which was changed to Pharmacia Healthcare Limited (PHL) on April 19 this year. Pharmacia was in the running for several takeovers in India over the last two years and when it had succeeded in taking over one company, however small, it found its international parent swallowed by Pfizer. There are analysts who wonder if the deal was in the making for the last one and a half years, as reported in the global press, why Pharmacia should have frittered away its time and energy in a takeover here which by itself did not add much of a sales value. The management of Pharmacia in India too might have been kept in the dark about the international merger which may not be surprising for MNC chief executives in India.

For Pfizer which has just last year grappled with labour issues like VRS out of the Parke-Davis merger, and is still to complete the legal integration, the takeover of Pharmacia would mean multiple integration issues. This could also be time consuming just as it could be cumbersome. A senior source with Pfizer India Ltd, when asked if a lot of people would be axed, said that Pfizer has never had a blemish on its human rights record. The entire field force of Parke-Davis was integrated with Pfizer India Ltd., he said. This should come as a relief for all those employees of erstwhile Abbott Laboratories as well as PIPL.

According to analysts, while the takeover would give Pfizer free access to the product and research pipeline of Pharmacia Corporation, for the latter this would be an opportunity to go global with its products.

While a Pfizer source in India said there were rumours all along about the takeover, this announcement came in as a surprise to most of the employees.

Investors in the US drove down the Pfizer share by over 10 per cent yesterday, worried whether Pfizer was paying too much for the smaller company. But Dr. Henry A. McKinnell, Pfizer's chairman and chief executive, has been quoted as saying that he had expected an initial decline in its stock price. In a morning conference call formally announcing the deal, he said, "Simply put, Pfizer and Pharmacia are much stronger together." Dr McKinnell apparently believes that size will bring in growth in the highly competitive pharma business. While economies of scale does matter, it must be noted that rising drug prices are inviting public wrath the world over.

By combining with Pharmacia, Pfizer will have the opportunity to support as many as 12 products with annual revenues greater than $1 billion.

Category leadership includes key products in cardiovascular, endocrinology, neuroscience, arthritis and inflammation, infectious diseases, urology, ophthalmology and oncology. The combined portfolio will have a strong patent position, and a stronger pipeline and expanded R&D program. The combined company will have an R&D pipeline containing nearly 120 new chemical entities in development and over 80 additional projects for product enhancements.

The companies' combined R&D budget for 2002 exceeds $7 billion, making it by far the largest privately funded biomedical research organization in the world.

With Pharmacia, Pfizer plans to file 20 new drug applications with global regulatory authorities over the next five years.

Pfizer's late-stage pipeline will be enhanced by major Pharmacia products that include eplerenone, a new category of treatment for cardiovascular diseases; parecoxib, the first injectable selective COX-2 inhibitor; and CDP-870 for rheumatoid arthritis.

In 1999, Pfizer and Pharmacia jointly introduced the anti-inflammatory Celebrex, the first-in-class selective COX-2 inhibitor. It was the most successful new product launch ever in the industry. This medicine has become the number one branded treatment for arthritis in the world, and it has been prescribed to more than 35 million patients worldwide. With its recent approval in the U.S. for acute pain and for dysmenorrhea, Celebrex has the most complete range of approved indications among selective COX-2 inhibitors on the market today.

Pfizer and Pharmacia sales representatives began promoting a second selective COX-2 inhibitor, Bextra, in April, 2002. Together, Celebrex and Bextra now account for over 23% of new NSAID prescriptions. In addition, launches of Bextra and parecoxib (branded Dynastat in Europe) are in progress in a number of international markets. Pharmacia is currently conducting studies to support the NDA filing for parecoxib in the U.S.

Pharmacia's Xalatan (latanoprost ophthalmic solution) lowers eye pressure in patients with open-angle glaucoma not controlled by other medications. This is now the leading ophthalmic prescription medicine in the world. Pharmacia's Genotropin, the world's top-selling recombinant growth hormone, is indicated for the treatment of children and adults with growth hormone deficiency. Pharmacia also has world-class oncology products, which include Camptosar for treatment of metastatic colorectal cancer as well as therapies for breast cancer.

Most major Pfizer products are patent protected through this decade. For example, U.S. patents for Lipitor expire in 2010, and for Viagra in 2011. Pharmacia's most significant U.S. patents expire in the next decade (Celebrex in 2013, Bextra in 2015).

Pfizer and Pharmacia will have combined annual revenues for 2002 of approximately $48 billion, including $39 billion in prescription sales. Already the leading pharmaceutical company in the United States and Canada, Pfizer with Pharmacia will move from fourth to first in Europe; from third to first in Japan; and from fifth to first in Latin America in pharmaceutical sales.

Synergies will be phased in, starting at $1.4 billion in 2003 and increasing to $2.2 billion in 2004 and $2.5 billion in 2005. The companies' combined product portfolios are highly complementary.

The latest takeover has once again bolstered speculation regarding further mergers and acquisitions in the splintered global pharmaceutical industry. GlaxoSmithKline, the second biggest drug maker in the world, was reported to be eyeing struggling rival Bristol Myers Squibbs to become the number one pharma company in revenue terms. All eyes are on GSK now.