ACQUISTION OF PARKE DAVIS PAKISTAN LTD.

BY
PFIZER LABORATORIES PAKISTAN LTD.

Assignment - 01

SUBMITTED BY: MUNEER HUSSAIN

REGISTRATION NO. L1F18MBAM0246
Submitted to: Mr. Waqas Javed
 Acquisition of Parke Davis Company Limited by Pfizer Laboratories Ltd.

Table of Contents
Introduction of Companies ........................................................................................................................ 2
Pfizer Laboratories Limited................................................................................................................... 2
Timeline of Pfizer Operations ................................................................................................................ 3
Pfizer Product Portfolio ......................................................................................................................... 4
Pizer Essential Health ......................................................................................................................... 4
Pfizer Innovative Health..................................................................................................................... 4
Competitors of Pfizer .............................................................................................................................. 4
Parke Davis Pakistan (Pvt.) Limited ..................................................................................................... 5
Product Portfolio ................................................................................................................................. 5
Pre-Acquisition Performance................................................................................................................. 6
Reasons of Acquisition of Parke Davis by Pfizer ..................................................................................... 7
Post-Acquisition Performance of Pfizer ................................................................................................ 8
 Acquisition of Parke Davis Company Limited by Pfizer Laboratories Ltd.

Introduction of Companies
Pfizer Laboratories Limited
Pfizer Pakistan Limited is an affiliate of the world’s largest bio-pharmaceutical company,
Pfizer Inc. (Est 1849 in New York City, USA). Pfizer first entered the Pakistan market in
the year 1959, establishing during 1960-61. Pfizer Pakistan shares its parent company’s
global vision of ‘working together for a healthier world’ by providing affordable and
quality health solutions to its most valued customers.
The team at Pfizer is committed to applying science and global resources to improve
health and well-being at every stage of life. It strives to provide access to safe, effective
and affordable medicines and related health care services to the people who need them.
The company has breakthrough treatments in various therapeutic areas including,
cardiovascular, oncology, central nervous system, anti-infective portfolio, vaccines and
biologic products.
In a 50-year long history of existence in Pakistan, the affiliate has merged with other
companies as a result of global acquisitions, including Parke Davis in 2000, Pharmacia in
2003 and lately the merger with Wyeth in 2009. Wyeth is now a wholly owned subsidiary
of Pfizer Inc.
As part of the Emerging Markets Business Unit, Pfizer Pakistan is committed to meeting
the diverse medical needs of the patients in an innovative, socially responsible and
commercially viable manner.
In Pakistan, Pfizer is represented through the Worldwide Biopharmaceuticals (WBB)
Business Unit, Pfizer Global Manufacturing (PGM) and Animal Health. Consumer
Products and Nutrition is also a part of WBB division.
Pfizer Pakistan adheres to the highest levels of standards in all business functions. As a
socially responsible company, Pfizer puts great emphasis on Environment, Health and
Safety, the Communities around it and to drive projects in public interest and awareness.
In Pakistan, Pfizer is holds 2.69% market share. Pfizer Pakistan is also a member of the
American Business Council (ABC). Almost 1,000 people are associated with Pfizer
Pakistan with its head office located in Karachi. There are two manufacturing plants in
Karachi and a nationwide coverage of its valued customers through a robust network.
 Acquisition of Parke Davis Company Limited by Pfizer Laboratories Ltd.

Timeline of Pfizer Operations

 Acquisition of Parke Davis Company Limited by Pfizer Laboratories Ltd.

Pfizer Product Portfolio

Product portfolio of Pfizer includes:
1. Pfizer Essential Health
2. Pfizer Innovative Health
Pizer Essential Health
Pfizer Essential Health combines its history of industry leadership, comprehensive
knowledge of global healthcare markets, and a vast portfolio of trusted, quality medicines
to benefit patients around the world at virtually every stage of life. It manufactures more
than 600 medicines, delivered through a reliable and sustainable supply chain, serve
patients at virtually every stage of life.

Pfizer Innovative Health

Pfizer is committed to protecting lives with innovative vaccines to fight serious diseases
worldwide, helping people live longer, healthier lives. Its leading vaccines organization
combines unrelenting passion, global impact, and an enduring quest for progress to
unlock the promise and value that vaccines hold for world.

Pfizer has six vaccines on the market for three diseases in scope. Its portfolio comprises
four vaccines for meningococcal disease (Mencevax®, NeisVac-C®, Nimenrix®,
Trumenba®), one for pneumococcal disease (Prevenar 13®) and one for tick-borne
encephalitis (FSME-IMMUN/TicoVac®).

Competitors of Pfizer
Competitors of Pfizer are:
• GlaxoSmithKline Pakistan
• Abbott Laboratories Pakistan
• Getz Pharma Pakistan
• Sami Pharmaceuticals
• Sanofi-Aventis Pakistan etc.
 Acquisition of Parke Davis Company Limited by Pfizer Laboratories Ltd.

Parke Davis Pakistan (Pvt.) Limited

Parke Davis was established in the USA in 1866 and is one of the largest manufacturers
of pharmaceutical and biological preparations in the world. Parke Davis is a unit of the
Warner-Lambert Group. The worldwide operations of the Warner-Lambert Group are
spread in more than 140 countries. The Warner-Lambert Group, has the research and
technical support of four major research centers and more than 100 manufacturing
facilities. Approximately 45,000 people work worldwide for it.

Parke Davis was incorporated in Pakistan as a private limited company in 1960. The
production facility was constructed in 1963, ensuring local production of a wide range of
Parke-Davis world renowned products, previously being imported and costing a huge sum
of foreign exchange.

Parke Davis had a Philosophy of worldwide standardization with the same quality
standards maintained at all production facilities operating under its license. The local
production plant was capable of maintaining the same standard and quality of products,
as those produced anywhere else in the world.

The initial Public offering was announced in June 1983 and Parke Davis Private Limited
was converted into the Public Limited Company. Parke-Davis Pakistan Public Limited
Company acquired the shares of Warner-Lambert (Pak) Limited and the restructuring
process was finalized in November 1984. The company was declared amongst the top 25
companies by the Karachi Stock Exchange for the three consecutive years i.e.1984, 1985,
1986.

Product Portfolio
Parke Davis & Company was successfully manufacturing and marketing 30 products
including:

• Ponstan
• Cholormyecetin
• Basoquin
• Benadryl
• Mylanta-2 etc.
 Acquisition of Parke Davis Company Limited by Pfizer Laboratories Ltd.

Pre-Acquisition Performance
In year 2006 company registered sales in terms of value at Rs 1.157 billion showing 8.3%
growth over the preceding year. Gross profit at Rs 513.84 million showed increase by
32.9% over the preceding year's GP at Rs 386.74 million. The growth in GP was driven by
increase in sales as well as increase in margins. GP margin showed remarkable rise by
8.21 percentage points to 44.38% from 36.17% in the previous year.

The Parke-Davis share was highly priced and it had also record of very high dividend
payout. The Annual Report of the company reported the process and progress in
amalgamation of the company with Pfizer Laboratories Ltd, (PLL).

The directors emphasized that the growth in profitability is entirely due to increase in
volume sales, as price increases were not granted to pharmaceutical industry during the
year under review. As at 31 December 2003, Pfizer Corporation, Panama, a subsidiary of
Pfizer Inc, USA owned 1.48% million shares of Parke-Davis & Company Ltd,
(incorporated in Pakistan) which works out to 65.6% stake the equity of the Pakistani
subsidiary.

The company's shares were quoted on the Karachi and Lahore Stock Exchanges. It was
listed at Karachi Stock Exchange in 1983. Its 10-rupee shares were quoted at a very high
rate. During the last one year the price of the share increased further from Rs 637 to Rs
1021 per share.

Apart from being a multinational company, the high and consistent dividend payouts
placed the share in high demand pushing up very high price.

All major products of Parke-Davis performed well and consolidated their market share.
The company's more penetrating, distribution set up, that was implemented in the
beginning of 2003 not only helped in improving the sales but generated savings in the
distribution cost also thereby improving the margins further. Its star performer products
are Ponstan (its largest selling brand), Chloromycetin, Basoquin, Benadryl and Benatus.
Ponstan recorded double digit growth, while all others also recorded healthy growth. In
April 2003, the company launched Benylin E cough syrup. The initial market response
for the product has been satisfactory.
 Acquisition of Parke Davis Company Limited by Pfizer Laboratories Ltd.

Reasons of Acquisition of Parke Davis by Pfizer

Parke Davis Company was acquired by Pfizer in 2008 due to following reasons:
One of the reasons of acquisition has to do with government regulation regarding pricing.
The government, for many years, had been following the policy of ‘price freeze’, whereby
prices of medicines remained frozen at a particular level for some time. The last prize
freeze went into effect in 2001, and remained intact till 2013. This policy, among other
things, meant that pharma firms could not increase the price of their medicines despite
substantial increase in the cost of production. For Parke Davis, additional cost pressure
came in the form of maintaining a certain level of quality as per their own high standards.
But given policies like centrally administered prices, this proved unsustainable since not
only were there lesser Returns on Investment (ROI), but profit repatriation also suffered.

Two other factors that are cited for the acquisition are the lack of Intellectual Property
(IP) rights enforcement and tough competition from the local firms. The lax
implementation of IP laws meant that generic substitutes and copies having different
brand names printed on them appear quickly in the market, with little oversight.
Moreover, local pharmaceutical manufacturers have improved leaps and bounds in terms
of quality and variety in drug manufacturing. These all combined to make life difficult for
Parke David.

Research and Development costs were rising significantly which resulted in the
acquisition company. It provided more opportunities to launch and support new products
with R&D function of over 12,000 people and annual budget of $ 4.7 billion much more
than any of the competitors around the globe.
 Acquisition of Parke Davis Company Limited by Pfizer Laboratories Ltd.

Post-Acquisition Performance of Pfizer

Source: http://jcrvis.com.pk/docs/Pharma201803.pdf
Acquisition of Parke Davis Company Limited by Pfizer Laboratories Ltd.