Pfizer Exits Its Brazilian Joint Venture

An agreement has been reached by Pfizer to exit its investment in Brazil’s Laboratorio Teuto Brasileiro SA. According to sources Pfizer will get a token amount following the failure to get an investor to buy the 40% stake that the pharmaceutical giant had in the generic drug manufacturing joint venture.

Sources further added that the heirs to Walterci Melo, the founder of Teuto, will acquire Pfizer’s stake in the joint venture for 1 Brazilian real which translates to approximately $0.30. Pfizer acquired the stake in Laboratorio Teuto Brasileiro SA at a price of $240 million seven years ago.

Confidential terms

Pfizer confirmed the deal in a statement though the terms were not disclosed as they were confidential. The Melo heirs also confirmed the deal though they did not provide additional information.

Pfizer is exiting the joint venture at a time when the management of Laboratorio Teuto Brasileiro SA is in negotiations to refinance loan amounts totaling 600 million Brazilian reals. Currently, generic drug manufacturers based in Brazil are facing numerous challenges including a weak currency which has increased the cost of raw materials. A harsh recession has also slowed down sales.

The deal marks the end of a process that ran for a year and where no firm bidders emerged despite the fact that a couple of pharmaceutical firms as well private equity firms had shown initial interest.

Brazil recession

Late last year Pfizer backpedalled on a previous plan to leave the generic drug manufacturing segment. Though Brazil is the third largest market for generic drugs in the world, performance in the sector has been mixed. Local units of Pfizer’s competitors such as the French-based Sanofi SA has had to deal with excess inventory for instance. Partly this has been attributed to the recession which slowed generic drug sales. Growth in the sector was 12% in 2016 compared to 15% in 2015.

The efforts to look for a buyer had been contracted to Grupo BTG Pactual SA and Goldman Sachs Group Inc by both Pfizer and the Melo heirs. Failure to get a buyer also resulted in a dispute between the two parties getting rekindled over an option that Pfizer held to buy out the Melos between last year and 2014. Attempts by the Melos to make Pfizer exercise the option were unsuccessful.

Pfizer’s exit from its Brazilian joint venture comes a little over a week after the pharmaceutical giant broke ground for a new research and development facility to be located in Chesterfield, Missouri.

 

 

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