Drug­maker Pfizer de­cides not to break up busi­ness

Daily Local News (West Chester, PA) - - BUSINESS - By Linda A. John­son AP Med­i­cal Writer

TREN­TON, N.J. » 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 Street spec­u­la­tion over its strat­egy and fu­ture.

The big­gest U.S.-based drug­maker said Mon­day it be­lieves it is best po­si­tioned to max­i­mize share­holder value in its cur­rent form, but it re­serves the right to split in the fu­ture if the sit­u­a­tion changes.

For sev­eral years, the maker of Vi­a­gra and the pain treat­ment Lyrica has been un­der grow­ing pres­sure from an­a­lysts and in­vestors who ar­gued that by split­ting up, the re­sult­ing two com­pa­nies 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. Ear­lier this year, Pfizer promised a de­ci­sion by the end of the year, but then it re­or­ga­nized and re­named those seg­ments — a sign a breakup was less likely.

Chances of the breakup be­gan to fade even more over the sum­mer, due in part to in­creas­ing sales for key new drugs from Pfizer and ris­ing prospects for its drugs un­der de­vel­op­ment.

Pfizer CEO Ian Read told an­a­lysts last month that the prospect of a split was not a “makeor-break de­ci­sion” for the com­pany. The com­pany re­cently said it had spent $600 mil­lion 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.

Shares of Pfizer Inc. fell 70 cents, or 2 per­cent, to $33.56 in af­ter­noon trad­ing Mon­day. The stock is up about 5.4 per­cent over the past year.

Pfizer said Mon­day that a split would not help the com­pet­i­tive po­si­tion­ing of its busi­nesses,

and such a move would cre­ate dis­rup­tions and in­creased costs.

The drug­maker’s most likely path for­ward in­volves hunt­ing for more ac­qui­si­tion tar­gets, ac­cord­ing to Bern­stein an­a­lyst Dr. 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, most no­tably

for the choles­terol pill Lip­i­tor. It also at­tempted and failed at two mega-ac­qui­si­tions, of Bri­tain’s As­traZeneca Plc in 2014 and this year of Ire­land’s Al­ler­gan Plc.

Both those 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 to re­duce its U.S. tax bill. As­traZeneca re­buffed Pfizer, and the U.S. Trea­sury De­part­ment set up new rules that ef­fec­tively blocked the Al­ler­gan ac­qui­si­tion.

Last month, Pfizer said it would spend about $14 bil­lion to buy 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 $5.2-bil­lion ac­qui­si­tion of Ana­cor Phar­ma­ceu­ti­cals Inc., 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.


Pfizer will not split into two pub­licly traded com­pa­nies, a de­ci­sion that, at least for now, ends Wall Street spec­u­la­tion over the drug­maker’s fu­ture. The com­pany be­lieves it is best po­si­tioned to max­i­mize share­holder value in its cur­rent form, but said Mon­day that it’s re­serv­ing the right to split in the fu­ture if the sit­u­a­tion changes.

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