Merck and Schering-Plough, both New Jersey-based, had announced significant job cuts in the recent past, and have been striving to become more efficient amid setbacks to Vytorin and Zetia, whose combined fourth-quarter sales slumped 26%.
The deal, however, will not have a major impact on the Indian subsidiaries of these two companies, according to industry analysts. Merck is present in the country through subsidiary MSD Pharmaceuticals, while Schering-Plough has a presence through Fulford India Ltd. Fulfords shares were down 3.25% on the BSE on Monday to close at Rs 290.30. The company had revenues of Rs 180 crore for the full year ending Dec 2008. MSD Pharma is unlisted.
According to Ranjit Kapadia, head (private client group) at Prabhudas Lilladher, the deal will not have a major impact in India. As much as 53.93% of Fulford has been acquired by Dashtag, an unlisted UK company, which itself is a 100% indirect subsidiary of Schering-Plough. As Dashtag is not a direct subsidiary, there will not be any impact on Fulford India following Mercks buyout, he said. However, the picture will be clearer after the terms of the final agreement is disclosed, he added.
In 2007, Dashtag made an open offer to acquire 7.8 lakh equity shares, representing 20% of the post-preferential issue capital, from existing shareholders of Fulford India. Reitering the limited impact on the Indian operations of either company, Angel Broking vice-president-research Sarabjit Kaur Nangra said, Merck will continue to launch all its future products in India through MSD.
Pointing out that such consolidation in the industry was on expected lines, Nangra said innovative drug makers around the word were going through a troubled phase. R&D pipelines are not as productive and average revenues per day were declining. There is pressure on the pipeline and productivity, Nangra added.
The product pipelines of MNC pharma companies will no longer be able to compensate for revenue losses from blockbusters that lose patent protection in coming years. Also, there is an increased government pressure to lower drug prices.
The Merck-Schering Plough transaction, which offers a premium of 34% for Schering-Plough shareholders based on Fridays closing price, will double the number of potential medicines Merck has in late-stage development to 18. It will also diversify Mercks portfolio of medicines to include cardiovascular, respiratory, oncology, neuroscience, infectious disease and immunology.