Pfizer drops split after tax change

US DRUG maker Pfizer, which has been considering splitting into two companies for more than two years, said on Monday it would not do so because the move would not create any shareholder value.

Pfizer will keep its lowgrowth generics and patentprotected branded medicines separate, giving it the option to split later if “factors materially change at some point in the future”. Pfizer said on Monday the decision would not affect its 2016 financial forecast.

The decision not to create two publicly traded companies follows the collapse of its planned $160bn acquisition of Allergan after a change in tax law took away the tax benefits of the deal.

Investors were expecting the company to step back from the split, Sanford Bernstein analyst Tim Anderson said.

“The company seems likely to leave open its option for a future split-up, but more immediately, it may continue hunting for M&A (merger and acquisitions) targets,” Anderson wrote.

The pharma giant’s shares were down 1.2% to $33.85 in premarket trading on Monday.

Pfizer began openly planning for the possible split in early 2014, saying it would operate the businesses as separate divisions. In August, it said a decision would be made by year-end.

The sum-of-the-parts analysis showed no benefit to shareholders, and that tax costs and business disruptions were factors it considered, Pfizer said.

The company had considered the move largely because its patent-protected medicines routinely enjoyed sales growth while sales in the generics portfolio usually declined.

Investors shifted their focus to whether Pfizer would split after the company terminated the deal for Irish drug maker Allergan in April.

In August, Pfizer announced it was buying cancer drug maker Medivation for $14bn to get access to blockbuster prostate cancer drug Xtandi for its growing oncology roster.

The Medivation deal illustrates a shift in Pfizer’s M&A

Medivation deal illustrates a shift in … mergers and acquisitions strategy from lowering taxes to strengthening line-up of branded drugs

strategy from lowering taxes, which was the rationale behind the failed Allergan tax inversion deal, to strengthening its line-up of branded drugs, especially lucrative cancer treatments.

A year ago, Pfizer paid $15bn for Hospira, which sells generic hospital products and is developing biosimilars to compete with big-selling injectable biotech drugs.

That deal was seen by Wall Street as a way of bolstering its generic drugs operation ahead of potentially divesting the business.