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Strong start for Pfizer spin-out Zoetis

Animal health unit makes stock market debut

Zoetis launch

Pfizer completed the spin-out of animal health unit Zoetis last Friday via an initial public offering (IPO) that appears to have been well-received by the market.

Zoetis debuted on the New York Stock Exchange under the ZTS ticker symbol and closed the day up 20 per cent from its start price at $31.01 - a little down from a high of $31.50 during the day - giving the new company a market capitalisation of $15.51bn.

The IPO raised $2.2bn, which will be used to pay down Pfizer debt, and created a company with annual sales of $4.2bn from veterinary medicines, diagnostics and vaccines. It is the largest player in the animal health sector with around 9,500 employees worldwide.

Pfizer has already sold off its infant nutrition business to Swiss food giant Nestle last year for $11.9bn and divested capsule business Capsugel to a private equity firm for $2.4bn in 2011.

Analysts have suggested that the company may go even further than hiving off non-pharmaceutical operations, possibly separating its branded and generic drug businesses, which already have separate management and operate as discrete units.

Adding some credence to the notion, Pfizer's chief executive Ian Read said during its fourth quarter results call last week that he expects the pharma industry to "globally separate into business models with an innovative core and a value core".

In the meantime, Read said the Zoetis IPO has left the company "better positioned to focus on our core business as an innovative biopharmaceutical company by unlocking value from the animal health business that will return value to Pfizer shareholders".

Pfizer owns around 80 per cent of Zoetis following the IPO, and analysts expect it to divest much of its remaining stake in the new company over the coming quarters.

The IPO was the largest on the NYSE since Facebook debuted on the stock exchange in May 2012.

4th February 2013

From: Sales, Healthcare

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