All Is Well For Pfizer Inc. (NYSE:PFE) Despite Corex Ban
Pfizer Inc. (NYSE:PFE) suffered a setback when its cough syrup Corex was banned in India. Some of the investors’ might have felt that it would likely affect the company. However, it was not the only drug that was banned in the sub-continent. The regulator in India took an unusual step of banning a number of drugs. The reason for banning so many drugs was abuse of morphine derivatives. The cough syrup was a highly abused medicine in the Over-The-Counter exchange (OTC).
Combination Of Fixed Doses Banned
Apart from Pfizer Inc. (NYSE:PFE), there were other big pharmaceutical companies’ products were also banned. There were as many as 344 fixed dose combination drugs that were banned by the regulators in India. One of the reasons for it was that the drug, which was banned in other countries, was available in India. Unlike the developed countries, there are several drugs available through the OTC. The compliance level of the prescribed drug is not at the same level in India than the developed nations. In a nutshell, the ground level adherence of the prescribed drugs is poor. The country is also keen to remove the tag not being serious enough on drug peddlers and took the unusual action.
However, neither Pfizer Inc. (NYSE:PFE) nor others like Abbott Laboratories (NYSE:ABT) remained silent with the ban. Both the companies and the domestic firms have taken up the matter with the court of law. The regulator believes that the nation was flooded with a number of fixed-dose combinations containing banned or never-approved drugs. One of the reasons was also the inconsistent enforcement of the domestic laws among the State and Central regulators. The nation was forced to establish a review committee to re-assess over 6,000 combinations that reached the market because of the regulatory approval of the States. However, the decision is not likely to have any bigger impact on the financials of the American firm.
Loss Of Revenue
There is no doubt that Pfizer Inc. (NYSE:PFE)’s Corex is a highly popular medicine in India. However, because of its codeine content, the drug appeared to have been used for wrong reasons. The country is facing one of the biggest issues of drug addictions. However, it would be a different issue whether the nation could achieve by banning drugs with contents that take people to a different level. The drug seemed to have had adverse impact the people’s lives in India because of the nexus among the illegal drug peddlers. The American firm’s revenue will take a hit. However, the Indian unit might take a bigger hit.
For instance, Pfizer Inc. (NYSE:PFE)’s shares suffered a setback in the Indian stock exchanges when its shares were punished by over 7%. The situation has changed for the better in Indian stock market too. That was partly because the ban was kept in abeyance as the court is set to yet the company’s application later in the month. The company has lost revenue worth about $26 million a year. This is not likely to have any big impact since the overall revenue for the year 2015 was $48.9 billion. That meant that the drug represented only 0.05% of the total revenue. However, it could have its impact on the Indian unit, which would not alter the perceptions from investors’ perspective. The issue would have been purely internal and nothing to impact the overall performance. However, both the Indian unit and the principal firm should learn to live it without the need to fight it.
Blessing In Disguise
In a way Pfizer Inc. (NYSE:PFE) or Abbott Laboratories (NYSE:ABT) or for that matter any other pharmaceutical companies might have to take a decision that respects the domestic laws. Therefore, the ban of Corex could also be termed as a blessing in disguise for the company as it provided an opportunity to abuse the drug in a way certain people wanted it to be. The ban decision might force some of the pharmaceutical firms to think of avoiding the controversial content so that it could bring in newer content-based cough syrup. That would also bring about a fresh commitment towards the health of the people.
Aside from Pfizer Inc. (NYSE:PFE)’s Corex, which contains codeine, Abbott Laboratories (NYSE:ABT)’s Phensedyl cough syrup was also banned for the same content. Both the companies appeal is pending before the Indian courts. The process might take a longer time, and therefore, the company might well be prepared to keep off the product from the stores. That would do more good for the company than any harm to the global image of both the companies.
Merger With Britain Firm
Whatever the issues that Pfizer Inc. (NYSE:PFE) might face will become a small one once it mergers with Allergan plc Ordinary Shares (NYSE:AGN) because of the merged entity size. The advantage that the merger will get is going to be immense, and the loss of $26 million revenue would not be a factor at all. The biggest gain from the merger is the taxation. The new entity will have the residential address of Britain because of which it has to pay less tax than what it has been paying in the United States. Similarly, the American’s profit margin was only about 14.25% while the British firm enjoys 26%. However, the latter has less cash but has more debt. Once the merger happens, such things get neutralized.
There is nothing to worry about Pfizer Inc. (NYSE:PFE)’s Corex cough syrup getting banned in India. Everything is going well for the American firm and the investors can continue to stay invested in it.
Disclaimer: The opinions and data expressed herein by the author are not an investment recommendation and are not meant to be relied upon in investment decisions. The author is not acting in an investment advisory capacity, nor is this an investment research report. The author’s opinions expressed herein address only select aspects of potential investment in securities of the company or companies mentioned and cannot be a substitute for comprehensive investment analysis. Any analysis presented herein is illustrative in nature, limited in scope, based on an incomplete set of information, and has limitations to its accuracy. The author recommends that potential and existing investors conduct thorough investment research of their own, including detailed review of the companies’ SEC filings, and consult a qualified investment advisor. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, the author cannot guarantee its accuracy. Any opinions or estimates constitute the author’s best judgment as of the date of publication, and are subject to change without notice.
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