Pfizer adds more clarity to break-up plans

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Pfizer is making it officialish: the company said Monday that it was creating three distinct internal divisions, a move that will put it in fine shape for a spin-off. As of January, the company will be divided into three internal businesses, two “innovative” businesses and one “value business.” Pfizer spun off its animal care business in February.

Those internal businesses, and their leaders, will be as follows. Geno Germano will serve as group president of the Innovative Products Group, which will include inflammation and immunology, cardiovascular/metabolic, neuroscience and pain, rare diseases and women's and men's health. Products in Germano's group will have patents that live past 2015.

Amy Schulman will be group president of the innovative business that covers vaccines, oncology and consumer healthcare. Germano and Schulman's groups are on their own. “Each of these businesses will operate as a separate global business and require distinct specialization in terms of science, talent and market approach,” the company said in a statement.

John Young will head up the value products division, which will include products that are set to lose patent protection from now through 2015, biosimilars and established product collaborations.

Helping with the transition is that each of these businesses will have its own emerging markets business unit. Though comprising just three lines of the press release, this is one of the critical pieces of the potential split-up. Pfizer has been saying for some time that emerging markets were the one thing that was keeping it from mimicking peers like Abbott, which spun off its pharma unit at the beginning of this year, because its emerging markets operations were a meshed operation, unlike the rest of the company which was neatly divided between innovative and mature businesses.

CEO Ian Read told investors in March that the company could easily break out P&Ls for innovative and mature businesses but that emerging markets were a sticky business because of how consumer and manufacturing businesses overlap. He also said a break-up would eliminate “distractions” for the innovative side of the business.

The company indicated in April that it was getting ready to establish a record of financial performance, and said it was going to evaluate the strengths of its innovative and value businesses over a three-year period. The starting point, however, was not set, which could have meant before or after 2013. The internal split sets a deadline—the company will begin reporting financials for each of these separate businesses as of next year.

Bernstein analyst Tim Anderson wrote in a research note this morning that Pfizer has been in the process of divesting itself of non-core businesses and has “advanced its late stage pipeline almost without fail.” He wrote that investors would applaud a break-up, even though it would bring some inefficiencies by decentralizing certain operations. He also noted that his group's Pfizer model “shows a distinct lack of longer-term revenue growth,” and that this prospect “is in fact the imperative beyond management's consideration of splitting up.”
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