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Pfizer to close two Indian plants

January 11, 2019 | Expert Insights

U.S. drugmaker Pfizer Inc said it was shutting down two manufacturing plants in India that make generic injectables like penicillin in response to falling demand.

Background

Pfizer is an American pharmaceutical corporation headquartered in New York City, with its research headquarters in Groton, Connecticut. It is one of the world's largest pharmaceutical companies. It is listed on the New York Stock Exchange, and its shares have been a component of the Dow Jones Industrial Average since 2004. Pfizer ranked No. 57 on the 2018 Fortune 500 list of the largest United States corporations by total revenue.

The company develops and produces medicines and vaccines for a wide range of medical disciplines, including immunology, oncology, cardiology, endocrinology, and neurology. Its products include the blockbuster drug Lipitor (atorvastatin), used to lower LDL blood cholesterol; Lyrica (pregabalin) for neuropathic pain and fibromyalgia; Diflucan (fluconazole), an oral antifungal medication; Zithromax (azithromycin), an antibiotic; Viagra (sildenafil) for erectile dysfunction; and Celebrex (also Celebra, celecoxib), an anti-inflammatory drug.

On December 19, 2018, Pfizer announced a joint merger of their consumer healthcare division with UK pharma giant GlaxoSmithKline; the British company will maintain a controlling share (listed at 68 per cent).

Pfizer had acquired two manufacturing plants in the Indian states of Tamil Nadu and Maharashtra as part of its $15 billion purchase of Hospira Inc in 2015.

Analysis

Pfizer is closing two of its export-oriented manufacturing plants in India. The company employs around 1,700 workers at the two factories in the states of Tamil Nadu and Maharashtra - nearly 6 per cent of Pfizer’s global manufacturing workforce.

“Pfizer has conducted a thorough evaluation of the ... sites in India and concluded that due to the very significant long term loss of product demand, manufacturing at these sites is not viable,” the company said in an emailed statement. Pfizer acquired the sites as part of its $15 billion purchase of Hospira Inc in 2015, to boost its portfolio of generic injectable drugs and copies of biotech medicines. The company is also closing a Hospira research and development lab in Taramani, Chennai, but spokesman Steven Danehy said that was unrelated to the shutdown of the two plants.

The roughly 150 employees at that facility were informed of that shut down in the fourth quarter, he said. The plant in Chennai makes generic injectable cephalosporin, penems and penicillin. The Maharashtra plant supplied the Chennai unit with certain products.

Both plants do not manufacture products for the India market, Pfizer said, adding that it is expanding operations in its Visakhapatnam facility in south India. The recommendation to exit both the sites are the result of significant loss of product demand making manufacturing at these sites unviable, it said. Its Irungattukottai unit in Tamil Nadu currently employs approximately 1,000 workers and Maharashtra’s Aurangabad site employs approximately 700. The exact timing of the exit of these sites is yet to be determined, the drug major said.

Both sites will immediately cease manufacturing with the intention to exit as soon as possible in 2019. 

Both plants are purely export-oriented sites and do not supply products for Pfizer’s India commercial operations, it said. The Vizag site is now being expanded into a global Terminally Sterilized Manufacturing Center of Excellence. It will cater to export markets, such as the United States and eventually, to Canada

IKKT manufactured generic injectable cephalosporin, penems, and penicillin for the US, EU and the rest of the world markets. It also produces branded Maxipime. The Aurangabad also supports IKKT by supplying penems and penicillin.   

Assessment

Our assessment is that Pfizer is cutting down on its production facilities purely due to a lack of demand. We believe that Pfizer could re-open these two plants if it decides to produce medicines for Asian markets as well.