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Pfizer decides against long-discussed break-up

Says dividing its R&D and generics businesses would disrupt rather than create value

Pfizer has decided it won't be spinning off any of its business units after all, ending years of debating the possible benefits of a split.

The company's chief executive Ian Read has decided against separating its R&D-based proprietary medicines business from its off-patent generic medicines, saying that maintaining the current structure will deliver the best value for shareholders.

Pfizer's chief financial officer Frank D'Amelio said that it has become apparent that a split would not enhance cashflow or the competitive position of each business and would bring with it considerable disruption.

The company has been deliberating a split since it span out its animal health division via an initial public offering (IPO) into stand-alone company Zoetis, and in particular had been evaluating whether there was any 'trapped value' in the remaining businesses.

A lot has happened since then however, including failed merger attempts with AstraZeneca and Allergan, the takeover of Hospira and - most recently - a $14bn deal to acquire cancer specialist Medivation along with the purchase of an anti-infectives portfolio from AstraZeneca.

In the interim, Pfizer has seen its sales performance pick up thanks to new drugs such as fast-growing breast cancer Ibrance (palbociclib) and an improvement in its portfolio and pipeline to a series of bolt-on acquisitions. Medivation adds another fast-growing prostate cancer treatment Xtandi (enzalutamide), which posted $1.9bn in sales last year.

"We believe that by operating two separate and autonomous units within Pfizer we are already accessing many of the potential benefits of a split - sharper focus, increased accountability, and a greater sense of urgency," he said.

Read also pointed to "the operational strength, efficiency and financial flexibility of operating as a single company," which some analysts took as referring to the tax benefits for remaining one large company rather than two smaller ones.

Others suggested that having backed away from a split, Pfizer will likely continue to make smaller acquisitions in what Bernstein's Tim Anderson described in a research note as "the same old Pfizer as before, relying on M&A to grow and to refill its pipeline".

Meanwhile, Read did not rule out returning to the idea of splitting the businesses at some point. "We will continue to generate the financial information necessary to preserve our option to split our businesses should factors materially change at some point in the future," he said.

Article by
Phil Taylor

27th September 2016

From: Sales



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