Replies to post #548 on Pfizer Inc (PFE)

[RandolRocketman]

BY Reuters
— 3:06 AM ET 01/14/2014
By Nadia Damouni, Jessica Toonkel and Soyoung Kim
NEW YORK (Reuters) - Drugmakers Valeant Pharmaceuticals International Inc , Actavis Plc and Mylan Inc have all expressed interest in buying Pfizer Inc's (PFE) branded generics business, but no active discussions are going on at this time, according to three people close to the matter.
The "established products" unit, which makes off-patent drugs, had global sales of $7 billion in the first nine months of 2013, accounting for 18 percent of Pfizer's revenue. Pfizer said in July it planned to separate its commercial operations into three units -- two mainly for patent-protected brands and the third for generics.
According to the people close to the matter, Pfizer is aware of each of the companies' interest but is not yet ready to entertain a deal as it prepares the groundwork for a potential separation of the generics business. It has said the review could take three years.
Pfizer, Valeant, Actavis and Mylan all declined to comment. All the sources asked not to be named because they were not authorized to speak with the media.
A deal for the business -- which houses medicines that have lost market exclusivity, as well as mature, patent-protected products that
are expected to lose exclusivity through 2015 -- could catapult a buyer like Valeant into the ranks of the biggest pharmaceutical
companies in the world, but several hurdles remain.
The Pfizer generics business is far bigger than the three pharmaceutical companies.
Valeant had $3.7 billion in revenue in the first nine months of 2013, while Mylan and Actavis posted revenues of $5.10 billion and $5.9 billion, respectively.
Structuring a deal would also be a challenge because a sale could incur heavy taxes for Pfizer. One way to reduce the tax bill would be to use a structure known as a Reverse Morris Trust, according to the people close to the matter.
In that structure, a company spins off a unit that it wants to divest and that unit merges with a smaller company, with the smaller company running the combined entity. Overall, the transaction allows a parent company to sell a subsidiary in a tax-free manner.
It is not clear whether Pfizer would entertain such a deal structure.
Another challenge for potential buyers is the lack of historical financial information for the generics business, as Pfizer's efforts to split its commercial operations is a work in progress.