Pfizer sells nutrition biz to Nestle for $11.9B

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Pfizer is bagging on the baby food business. The company today announced it is selling its nutrition division to food giant Nestle for $11.9 billion.

The Pfizer product line, which includes S-26 Gold, SMA and Promil, brought $2 billion into Pfizer's coffers last year, with sales up 15% from 2010. The handover will fill out Nestle's baby brand book, which includes Gerber, Nan and Lactogen, among others. Pfizer has previously stated that it wanted to sell or spin off its nutrition and animal health divisions as part of chief Ian Read's vision of whittling the company down to its core business in pharmaceuticals.

Monday's announcement follows a weekend of speculation which pitted Nestle against Danone and comes days after Pfizer cut ties with Amgen, ceding all marketing responsibility for the anti-inflammatory blockbuster Enbrel to its partner. The sale also comes soon before Pfizer's anti-inflammatory drug tofacitnib—a potential Enbrel competitor-- heads to the FDA for its May 9 review. Its blood-thinner Eliquis also comes before the FDA June 28.

CEO Read said in a statement that the company may use the $11.9 billion to buy up shares or use the money for business development. Several analysts are alluding to the need for the latter.

“Looking three years out, approximately 15% of revenues from the remaining businesses are exposed to patent expiry, not including the annualization of the patent lapse of Lipitor during 2012,” Michael Zbinovec of Fitch Ratings said in a research note. Jefferies analyst Jeffrey Holford said in a research note that Pfizer needs to boost its R&D platform, and said Abbot spin-off AbbVie or Bristol-Myers Squibb could be good acquisition targets.

Nestle said the deal could add $2 billion to its infant nutrition sales, and that the acquisition could enhance its standing in emerging markets, which account for 85% of Pfizer's nutrition business. That includes China, where Nestle has projected the market to grow 19% between 2010 and 2016.

The deal could also potentially bring on 5,400 Pfizer employees, five factories and three R&D centers. Nestle told MM&M it was too early to discuss whether the deal includes absorbing the infrastructure and employees as well as the brands. “This is a growth story, it is not about downsizing” they said. Nestle did not comment on whether the Pfizer brands will remain or be rolled into other Nestle product lines.
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