Biotech Values

[Biowatch]

Pfizer PFE May Sell Animal Health, Nutrition Units

By Tom Randall - Jul 7, 2011 12:26 PM ET

Pfizer Inc. (PFE)... [will] divest only the Animal Health and Baby Food units, with combined annual sales of $5.5 billion.

...it will keep the larger established products and consumer health units within the parent company. Those businesses had revenue of $12.9 billion last year. Investors have been pressing Chief Executive Officer Ian Read to slim the drugmaker and focus on developing new medicines.

Read said on Feb. 1 he was reviewing each of the four business areas that aren’t involved in drug discovery as the company faces loss of exclusivity for its biggest product, the Lipitor cholesterol pill...

“It doesn’t transform Pfizer, it only adjusts it,” said Erik Gordon, a University of Michigan business professor in Ann Arbor who studies the biomedical industry. “Shedding the consumer business would have been more interesting.”...

Pfizer was smart to keep the established products unit, which makes generic drugs and medicines that have lost patent exclusivity, said David Maris, an analyst with CLSA in New York. Read said in May that about $915 million of the unit’s $2.37 billion in first-quarter sales were in emerging markets, an area where the company plans to grow.

“To give up emerging markets is a silly proposition, because that is the future,” Maris said in a telephone interview. “I’m sure there was some subset of investors that was still hoping for established products to be divested. We’ve said for a long time that wouldn’t make sense.”

Various Buyers

Maris said the animal health and baby food units will attract a variety of potential buyers, including private equity and pharmaceutical companies hoping to diversify their product offerings or gain market share in animal medicines or infant formula sales. He said a spinoff of either unit is possible, though a sale is more likely.

Tim Anderson, the Sanford C. Bernstein analyst whose March 14 research report drove up Pfizer shares on speculation the company may halve its revenue base, said the company might take different approaches to each unit.

“Our best guess is that animal health could be a spin-out, a tax-free transaction like Bristol-Myers Squibb did with Mead Johnson in 2009, and that Nutrition could be sold,” Anderson said in a note to clients today...

http://www.bloomberg.com/news/2011-07-07/pfizer-says-it-may-sell-animal-health-nutrition-businesses-after-review.html