Pfizer takes 30 cents and runs from its failing Brazilian generics venture

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Pfizer had been growing its presence in Brazil, but the country's economic problems have forced it to retreat.

It wasn’t so long ago that Big Pharma identified Brazil as one of the hottest emerging markets for drugs, an opportunity Pfizer took the lead in pursuing. Part of that effort was a $240 million deal for 40% of the generics maker Laboratório Teuto Brasileiro.

But the 2010 joint venture never lived up to expectations, and that $240 million has evaporated. The company has accepted a payment of 1 real—the equivalent of 30 cents—to relinquish its stake to the heirs of Laboratório Teuto’s founder.

Pfizer confirmed the deal, first reported by Reuters, via email. "Since 2010, both companies have worked together to improve access to medicines in Brazil," a spokesman for Pfizer said. "Pfizer arrived at this decision as a result of a desire to focus resources on ensuring the success of its existing portfolio and pipeline." ​​​​

The transaction ends a year’s worth of effort by Pfizer to offload the Brazilian generics business. Reports emerged last summer that Pfizer and the heirs of Teuto’s founder, Walterci Melo, had brought in Goldman Sachs Group and Grupo BTG Pactual to look into a sale. Among the names bandied about as potential acquirers were generics giants Teva and Mylan. Some investment banks also reportedly expressed interest, including Advent International.

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Brazil is suffering from economic headwinds that have taken a toll on its the generic drug market. Its currency is weak, causing the cost of raw materials to rise. At the same time, the country is in the midst of an historic recession that has dampened drug demand. Pfizer has not revealed much about the inner workings of the joint venture with Teuto, but press reports last year suggested the two partners were struggling to agree on a strategy for dealing with the challenges.

The company hasn't abandoned Brazil altogether; with 65 years in that countries on its résumé, Pfizer says it will remain one of the largest drugmakers in the country, with "one of the broadest and most comprehensive portfolio[s] of medicines in the industry."

Still, Brazil forms a different picture from other emerging markets, where Pfizer is still a leader. In China, for example, the company won approval for its best-selling pneumococcal vaccine Prevenar 13, prompting it to restart its vaccine unit in that country. It also announced plans to build a $350 million biosimilar manufacturing plant in China.

RELATED: Pfizer, AstraZeneca outpace Big Pharma in emerging markets as growth ticks upward

But the news that Pfizer couldn’t even get a private equity firm to take a flyer on Brazil’s generics business shows just how challenging that particular emerging market has become. In March, Reuters broke the news that Advent pulled out of a bidding war with Bain Capital to acquire Teuto. Now, apparently, all potential bidders are out—a tough turn of events for an asset that some shareholders were hoping would be worth at least $324 million, Reuters said at the time.

As for Advent, it’s looking elsewhere for lucrative opportunities in pharma. Today Endo International announced it’s selling its Mexican generics business, Grupo Farmacéutico SOMAR, to Advent for $124 million.