Pfizer Inc. (PFE) continues to expand its presence in emerging markets. The company recently announced its intention to acquire a 40% stake in Brazilian generic drugs company, Laboratorio Teuto Brasileiro S.A.
Terms of the Deal
Pfizer will make an upfront payment of approximately $240 million. The company could also make a performance-based milestone payment. Besides this, the company could acquire the balance 60% of Teuto beginning in 2014. Teuto’s shareholders could exercise an option to sell their shares to Pfizer from 2015.
Once the partnership deal is in place, Pfizer will not only gain access to Teuto’s portfolio of more than 250 products, it will also have access to Teuto’s distribution networks in rural and suburban areas of Brazil. Teuto’s products target a wide range of therapeutic areas including pain and inflammation, cardiovascular, anti-infectives, central nervous system and respiratory. Pfizer will also have the right to register and commercialize Teuto’s products outside Brazil under its own brand.
Meanwhile, Teuto will have the right to commercialize certain products of Pfizer under its own brand in Brazil.
Generics Market Offers Significant Potential
This deal, which is scheduled to close in the fourth quarter, is in-line with Pfizer’s aim of strengthening its presence in emerging markets. The global generics market, which was estimated to be worth $750 billion in 2008, is expected to grow to $920 billion by 2013. A major part of this growth is expected from emerging markets. Brazil is one of the six priority markets in the company’s Emerging Markets Business Unit.
Our Take
We currently have a Neutral recommendation on Pfizer, which is supported by a Zacks #3 Rank (short-term Hold rating). The Teuto deal comes on the heels of Pfizer’s agreement with Indian biotech company Biocon and the company’s announcement regarding its intention to acquire King Pharmaceuticals (KG).
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