Pfizer Inc (NYSE:PFE) demerging “innovation” and “value”
Pfizer Inc (NYSE:PFE) is all set to spin-of its generic-drug business. It has now also announced that it plans on segregating the company’s commercial operations into 2 units. This is primarily for patent-protected brands. A third segment will consist of generics. PFE is the largest drugmaker in the U.S and said that the changes will take place by January 2014, in countries that do not need any consultation with various labor unions.
Early in 2013, the company said that it will start examining its patent-protected unit’s finances. PFE refers to this as its “innovative” business. The company’s generic operation is referred to as its “value” business and it will take PFE three years to review the spin-off decision.
The innovation factor
Pfizer generics have much lower margins than the company’s patented drugs. Last year, global sales of the latter touched $10.02 billion. This business represents 17% of the company’s total sales and a major part of it comes from overseas. One of the “innovative” businesses will include drugs that are patent-protected till 2015. These focus on areas such as immunology, inflammation, metabolic, pain and neuroscience, cardiovascular, men’s and women’s health as well as rare diseases.
PFE’s second “innovative” business will encompass cancer, vaccines and consumer healthcare. Many analysts are of the opinion that this particular bundling will not work very well. The speculation is that though they are far removed from one another, all are very dependable revenue-sources and that was probably the basis of bunching them up. Numerous analyst have been urging PFE to spin-off the generics business, exactly in the manner that it very recently did with its animal-health and nutritional products units.
This will help it focus on the core, branded, lucrative pharma business. The general feel is that the examination will take at least until 2016 and no spin-off can be expected till that point of time.