Drugmaker Pfizer decides against business break-up
Drug giant Pfizer says it won’t split into two publicly traded companies, despite pressure from investors frustrated by its lagging stock price, ending years of Wall St speculation over its strategy and future.
The biggest United States drugmaker yesterday said it believed it was best positioned to maximise shareholder value in its current form, but it reserved the right to split in the future if the situation changed.
For several years, the maker of Viagra and painkiller Lyrica has been under growing pressure from analysts and investors who say that by splitting up, the resulting two firms might grow faster than one.
As a result, Pfizer has been reporting detailed financial results for each of its business segments, information that would be required by regulators for a split.
Pfizer promised a decision by the end of the year, but then it reorganised and renamed those segments — a sign a breakup was less likely.
Chances of the breakup began to fade even more in recent months, due in part to increasing sales for key new drugs from Pfizer and rising prospects for its drugs under development.
Chief executive Ian Read told analysts last month the prospect of a split was not a “make-or-break decision” for the company. Pfizer recently said it had spent US$600 million ($824m) on preparations for such a split.
“Given that Pfizer has been talking down expectations for a separation in recent months, we think the stock will only be down modestly on this news,” Jeffries analyst Jeffrey Holford wrote to investors.
The stock is up about 5.4 per cent over the past year.
Pfizer said this week that a split would not help the competitive positioning of its businesses and would create disruptions and increased costs.
Its most likely path forward involves hunting for more acquisition targets, according to Bernstein ana- lyst Tim Anderson, who had pressed Pfizer repeatedly on its quarterly results conference calls to break up.
Pfizer has been buying several companies and products to help make up for a wave of sales losses to cheaper, generic competition, notably for the cholesterol pill Lipitor.
It also tried and failed at two megaacquisitions, of Britain’s AstraZeneca in 2014 and Ireland’s Allergan this year. Both deals had been structured as tax inversions, meant to allow Pfizer to move its headquarters from New York — but just on paper — to a country with lower tax rates.
AstraZeneca rebuffed Pfizer and the US Treasury Department set up new rules that effectively blocked the Allergan acquisition.
Last month, Pfizer said it would spend about US$14 billion ($19.2b) to buy the cancer drug developer Medivation, and it is buying rights to AstraZeneca’s portfolio of approved and experimental antibiotic and antifungal pills.
In June, Pfizer completed a $5.2b ($7.1b) acquisition of Anacor Pharmaceuticals, which could get a new eczema drug, crisaborole, approved by January.
“A critic could argue that Pfizer is back to being the same old Pfizer as before, relying on [mergers and acquisitions] to grow and to refill its pipeline, but at the expense of growing larger in the process depending on the size of deals it chases,” Anderson said in a research note.