Analysts say Pfizer reorganisation may signal future split: report

According to Geno Germano, president of Pfizer's specialty care and oncology businesses, the company may combine four business units into two, a move analysts said could signal a future split, Bloomberg reported Tuesday. The units cover oncology, primary care, specialty drugs and established products, with Germano noting that this is "probably going to evolve to two, where there’s the innovative business and the value business." ISI Group analyst Mark Schoenebaum said the reorganisation may be another step toward a split by Pfizer in the near future.

Since Ian Read became Pfizer CEO in 2010, the drugmaker has reduced research and operations spending, and divested several non-drug units, including the sale of its nutrition business to Nestle for approximately $11.9 billion in November last year. Pfizer is also in the process of splitting off its animal health unit into a company called Zoetis, with an initial public offering reported to be planned for January or February.

Despite discussing a potential reorganisation, Read has yet to commit to those plans, or a possible split of the company. "Through 2013 and 2014, we’ll continue to refine our operational structure to maximise the values of those two distinct businesses," Read has previously commented, adding that any decision about a breakup will be based on "how the value of those two businesses [is] reflected in our growth and on our share price." Germano stressed that the reorganisation will not be a cost-cutting measure, although the company will attempt to "squeeze out every bit of efficiency we can."

Goldman Sachs Group analyst Jami Rubin indicated that the new drug business will have sales of about $36 billion in 2013, while the generics business will have sales of $17 billion. She added that the company's "incubation stage" could last two or three years as it builds the standalone potential of the two businesses, potentially paving the way for a split in 2015. Schoenebaum remarked that the timing of a split, which could occur as a spinoff or as a sale, will be determined by what the drugmaker can command for its generics business. "Any signal that Pfizer is physically disentangling that business from the rest of those businesses, those would all be viewed as positive steps toward a spinout," Schoenebaum added.

For further analysis, read ViewPoints: Is Pfizer's 'split' posturing set to continue throughout 2013?

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