Pfizer's radical surgery looking more like a $5 billion nip and tuck

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Pfizer took a big step back from plans for a radical streamlining, announcing plans to look at spinning off or selling its Animal Health and Nutrition businesses but not the much larger Established Products unit or its Consumer Healthcare portfolio.

“Both Animal Health and Nutrition are strong businesses with attractive customer bases and solid fundamentals,” said Pfizer chief Ian Read in a statement, “but distinct enough from our core businesses that their value may be best maximized outside the company.”

Pfizer Animal Health's 2010 global revenues totaled $3.6 billion, while Nutrition generated $1.9 billion. Established Products took in $10.1 billion and Consumer Healthcare $2.8 billion.

The company is loathe to cut loose Established Products, which houses its mature brands, at a time when sales of off-patent and generic drugs in emerging markets is the industry's great hope for growth, and the Consumer Healthcare division offers a means of extending the life of some of those brands in established markets through OTC switches.

Decisions are expected on Animal Health and Nutrition within the next two years, the company said.

Bernstein analyst Tim Anderson said news of the planned divestments, while welcome, will leave some investors disappointed “that PFE is not going the full distance by not getting rid of everything.”

Pfizer is the quintessential big pharma firm, a $68-billion behemoth born of a succession of mega-mergers, most recently that of Wyeth, for $68 billion in 2009. The company is in the midst of a wave of massive patent expirations, including that of $10 billion Lipitor, which loses US exclusivity in November, and has suffered a series of late-stage developmental disappointments over the past few years. It was in that context that then-new CEO Read shocked the financial community in March with talk of a root-and-branch dismantling of the cumbersome giant. 

A more modest revamp is now taking shape, with the company casting off Capsugel, Nutrition and Animal Health, stripping out a layer of management and putting R&D on a diet while looking to a promising pipeline. Anderson, who rates Pfizer ‘Outperform,' says Pfizer boasts “perhaps the best late-stage pipeline” of the companies his team covers, with a raft of potential blockbusters including tofacitinib, Prevnar-13v, apixaban and crizotinib up for approval in the next year or so.
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