Financial Daily from THE HINDU group of publications
Saturday, Feb 28, 2004
Financial Daily from THE HINDU group of publications Saturday, Feb 28, 2004 |
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Corporate
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Performance Columns - Microscope Pfizer: Will 2004 erase bitter taste of 2003? Nath Balakrishnan
2003 has proved to be a tough year for Pfizer. If the fall in offtake on account of the confusion surrounding the implementation of the VAT regime and the truckers' strike in the early part of the year were not a drag enough, Pfizer was further hamstrung by the protracted process of completing the legal merger of Parke-Davis with itself. The combination of these events has had a telling impact on Pfizer's year-end earnings card. Sales fell by 17 per cent; the bottomline registered a steeper fall of 38 per cent. Pfizer's topline has been hit largely because of the fall in sales seen in two of its key brands, Corex and Becosules, both of which generate sales of close to Rs 100 crore per annum at the retail level. A Government-mandated reduction in the price of a few vitamins saw the price of Becosules fall, by extension. As a result, overall operating margins for the year ended November 2003 have dropped by six percentage points to 14.4 per cent. Admittedly 2003 was a tough year for the pharma industry as a whole; ORG statistics indicate that the industry grew by a rather sluggish 5.1 per cent in calendar 2003. MNC pharma companies have not found the going easy to ramp up topline; sales growth in their case has, at best, been in line with industry growth rates or has remained stagnant. A significant portion of the growth has come through new product launches, which have seen domestic pharma companies at the forefront. MNC pharma companies, including Pfizer, have been relatively cautious in new product launches, largely on account of the extant patent regime that permits copies to made at a fraction of the original price. But the future may not be all that bleak. Pfizer has already set in motion a restructuring process to reverse this declining trend - shutting down or selling off factories where operations are unviable; streamlining the workforce; rationalising product line; and entering into an agreement to promote its tail-end brands. The effect of all these initiatives would manifest itself, going forward. And with Pharmacia, too, part of its fold now, Pfizer's product basket has enviable width. The introduction of new products from its parent's stable might well hold the key to Pfizer's ability to buck the disappointing trend seen in 2003.
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