In February, 2000, Pfizer Inc and Warner Lambert Company announced a merger. Post-merger, the R&D operations of the company will have a worldwide scientific staff of over 12,000 with $4.7 billion in annual R&D expenditure and more than 138 compounds in development, the largest in the industry.

Pfizer Inc's proposal for a 100 per cent subsidiary has dampened the sentiments on the company for some time. However, the parent's proposal should be understood in terms of its legitimate interest in protecting its intellectual property rights. More so, considering the enormous research effort it puts in.

Ultimately, one could see the marketing of new molecules in India being routed through Pfizer Ltd. The latter will thus be able to earn marketing commissions on these sales. This by itself is not bad. Some ofthe Indian companies do have arrangement to market their products abroad, on which they pay a decent commission. It is also quite likely that the Indian manufacturing facilities would be used to manufacture the new products, both for the Indian and global markets. This would become possible once the facilities get approved.

The company, according to reports will undertake upgrading of its facility at Navi Mumbai at a cost of around Rs 12 crore to Rs 14 crore. The Thane unit too is being upgraded and it along with the Chandigarh unit could form the manufacturing base for global supplies. Investors have perhaps been put off by the proposal of the parent company to set up a 100 per cent subsidiary.

It is important that they take a realistic view. It is necessary to take stock of the Indian operations per se on their own merit. Later one could give or debit credit for the future likelihood of the company not being able to take advantage of the parent's new discoveries. ORG ranked Pfizer as No 6 in the industry in 1999. Nine of its 30 marketed brands were among the top 300 brands of the industry with Corex as the No.1 pharmaceutical product.

Antitussives forms 40.5 per cent of its sales. Anti-infectives account for 20.1 per cent, anti-arthritics 15.1 per cent and vitamins 11.0 per cent. It has a presence in cardio-vasculars which contributes 7.4 per cent of sales.

Others bring up 5.9 per cent. In cardiovasculars, Minipress XL, an anti-hypertensive grew by 50 per cent in 1999. It ranked amongst the top ten cardiovascular brands amongst 300 brands marketed in India. Protinex retained its leadership position. The company has been successful in its launch of new products. Combantrin A, an anthelminitic for eliminating intestinal worms launched in mid 1999 ranked 4 th among the 38 marketed Albendazole brands.

That indicates the company's marketing skills and set up, which is what the parent would exploit. The company claims to have improved the productivity of the field force by over 20 per cent.

The right way to look at its future is this. The Indian pharma industry has been growing at the annual rate of 8.4 per cent in 1999.The company can be expected to post a rate of growth commensurate with this. If it is not able to do better, that must be attributed to the weakness in the portfolio, despite some brands being high flyers.

Sales had grown from Rs 235.73 crore to Rs 295.94 crore in FY1999. Operating profit margin has been restored to the 18.32 per cent level from the dip to 14.65 per cent in the previous year.

EPS has jumped from Rs 10.33 to Rs 25.80. However, you should note that the EPS in 1997 was Rs 17.19. The profit margin of the company does get affected from time to time by government price regulations. For the first quarter of the current year ending Feb 2000 it has reported a sale of Rs 72.16 crore with a net profit of Rs 6.59 crore. The operating profit margin is 17.48 per cent. The company is taking advantage of Internet. Its website will now be extended to the medical practitioners. One should consider picking up the scrip during dips.

At the current levels the upside expectations can only be modest. Pfizer cannot escape being compared with outer pharma companies who have their own research outfits in India, whose products will add to bottomline sizeably.