New Firm To Be The Largest Drug Co In India

The merger of Glaxo Wellcome and Smithkline Beecham, the British multinationals, will give rise to the largest pharma company, both globally and in India. While the combined entity will have a 7.5 per cent share of the global pharma market, in India its share will be 8.7 per cent.

According to analysts, the product portfolios will be complementary in India, and, therefore, it makes eminent business sense to bring both houses under one roof.

While cephalosporins, steroids and vitamins contribute 53 per cent of Glaxo Indias turnover, anti-rheumatics - a product that is not in Glaxos stable - and vitamins together constitute 57 per cent of Smithkline Beecham Pharmas turnover, with anti- rheumatics alone contributing 22 per cent.

 

Analysts point out that the two companies had a strong product line. In the vitamins subcategory, for example, Smithlines Zevit commands a 50 per cent share as against 19 per cent share of Glaxos Cobadex. The merged entity will have an undisputed leadership position, industry analysts said.

Reportedly, Glaxo Wellcome shareholders are expected to own 59.5 per cent of the combined entity, Smithkline Beecham shareholders will have the remaining 40.5 per cent. In India, the merger ratio will have to be decided independently.

Pharma analysts said that the merger talks should hasten the process of Burroughs Wellcomes merger with Glaxo India. However, H R Khusrokhan, Glaxo and Burroughs Wellcome managing director, said There is no urgency for us to complete the merger. The process hinges on several issues, which will be resolved. When asked what was the time frame in which the process would be completed, he said We have not put a time frame and the merger will take its own course.

Smithkline will also have to hasten its planned hike in stake in subsidiaries, Smithkline Beec ham Consumer Healthcare and Smithkline Beecham Pharma, where it holds 40 per cent each. However, it is not clear whether the consumer healthcare business would be de-merged.

If the proposed merger goes through, Smithkline Beecham Plc will hold 40.5 per cent in Smithkline Beecham Asia Pvt Ltd, where it currently has a 100 per cent holding.

The Smithkline Beecham Pharma scrip closed at Rs 550.50 on the National Stock Exchange on Friday while the Glaxo scrip closed at Rs 344.15.

While Glaxo and Smithkline have a work force of 21,200 employees in UK, the workforce of the Indian subsidiaries of both companies is estimated at 7,000. The merger will inevitably see the workforce being reduced further.

Analysts say that the merger could see a greater emphasis being placed on OTC products in India as Glaxo was planning to transfer some prescription products to the OTC category and Smithkline Beecham already has major OTC products like Crocin and Tums.