A top
Pfizer ($PFE) official tells Bloomberg that the company will probably
reorganize into two business units--one focused on innovative drugs, the other
on off-patent meds (and perhaps consumer health)--from four. And that would
pave the way for a two-way split.
If you've
been following CEO Ian Read's streamlining efforts over the past two years, you
know that he's been shedding business units to zero in on Pfizer's core
prescription drugs business, and to return cash to shareholders, a
not-incidental goal. You also know that some analysts have championed even more
streamlining, arguing that Pfizer would be worth more to investors if broken
into smaller pieces.
Pfizer has
already sold its Capsugel unit. It's in the midst of unloading its nutrition
business to Nestle. And it's begun the process of spinning off its animal
health unit under the Zoetis name. But Pfizer still has a consumer health unit
that some consider ripe for divestment. Another candidate is the
"established products" business, i.e., off-patent drugs and generics.
Or, perhaps, a combination of those two businesses, which Read calls the
"value" side of the company.
Last year,
Goldman Sachs analyst Jami Rubin, one of the most vocal backers of the breakup
idea, asked Read point-blank whether he'd consider spinning off or otherwise
shedding other units after the vet business and nutrition unit are gone. He
said he'd consider it. He hinted at an operational reorganization that would
sequester the various units into more discrete packages.
Geno
Germano, president of Pfizer's specialty drugs and oncology businesses, went a
bit further in an interview with Bloomberg. Now divided among oncology, primary
care, specialty drugs and established products, Pfizer's prescription drug
businesses are "probably going to evolve into two," Germano said. And
it wouldn't be an efficiency move. "[T]hat's not the main driver," he
told Bloomberg. "We really see the business segmenting into these two
segments with pretty different capabilities, and we would want to organize in a
way that we realize the most value for shareholders."
Hear that
"most value for shareholders" phrase? That's exactly what Read was
saying back in 2010 when he said he was reviewing Pfizer's business units--the
review that ended with a decision to hive off animal health and nutrition.
Rubin has
maintained that the fate of those two units should foreshadow other divestments
to come. She figures the prescription drugs units would account for $36 billion
in sales this year, with established products offering up another $17 billion.
And once Pfizer draws bolder lines between its drug units, the company could
focus on building "the stand-alone potential" of each, with a breakup
by 2015, Rubin has said.
Any signal
that Pfizer is physically disentangling that business from the rest of those
businesses, those would all be viewed as positive steps toward a spinout,"
ISI analyst Mark Schoenebaum told the news service. "It's in their back
pocket, should it make sense in a few years."
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