Behemoth Emerging
Since the respective Indian subsidiaries too would follow suit, GIL's operations will be integrated with SB's group companies in India -- SmithKline Beecham Pharmaceuticals (India) (SBPIL), SmithKline Beecham Consumer Healthcare (SBCHL) and SmithKline Beecham Asia Pvt, a hundred per cent subsidiary, (SBAP).
If the global merger does materialise, it will take at least a year or so before the effect is felt in India. However, the merger will create ripples in the pharmaceutical industry and also the concerned companies.
The combined strength of the two parents is the main advantage accruing to the Indian operations. After acquiring Burroughs Wellcome Plc, GW Plc has became the world's largest pharmaceutical company with a turnover of 8 billion pounds. SB Plc is not far behind, with a turnover of 7 billion pounds occupying the sixth slot in the pharmaceutical industry.
The product profile of the two entities has minimal overlapping, which will give a broad product portfolio. GW is strong in gastrointestinal and respiratory, while SB has a major presence in antibiotics and vaccines.
In the Indian context, apart from a broader product portfolio, size will be a major gain for the new entity. The cumulative turnover of the merged entity - GIL, BWIL, SBCHL and SBPIL is estimated at around Rs 1609.34 crore (annualised) figure based on first half results of calendar year 1997). This will displace Ranbaxy, with a turnover of Rs 1,302 cr, from the No. one slot.
However, analysts opine that SBCHL, which derives a major portion of its revenues from foods may be kept separate. This is so as GIL sold its food products division in 1995 to Heinz to focus on pharmaceuticals only.
The product profile of GIL and SBPIL are highly synergistic. Backed by the original research molecules - ranitidine, cephalexin and betamethasone of GW Plc, GIL's thrust areas are dermatology, vitamins, anti-ulcerants and cephalosporins.
Shedding of interests in non-core areas and slowing down of new product launches has put a brake on GIL's volume growth of late. GIL is currently looking into OTC products for better volume growth. It will immensely benefit from the clubbing of SBPIL's popular OTC brands -- Iodex, Crocin, Tums and Eno (Crocin and Tums are with SBAP).
SBPIL's other strong segment is vaccines segment which will also catalyse volume growth. Its hepatitis B vaccine brand - Engerix - is doing very well. The total market capitalisation of the listed entities is Rs 4,018 crore and the size of the new entity will create a stir. The coming months will reveal the strategy that other MNCs and Indian majors adopt to tackle the likely formation of a pharma Goliath. This could mean further mergers to fight the new entity.