Pfizer Officially Ditches Breakup Plans
As CEO Ian Read hinted earlier, Pfizer has officially ditched plans to break into two separate publicly traded companies dedicated to mature or off-patent products and new, innovative drugs. The announcement ends months of speculation. As one of the arguments for not splitting, Read said during a half-year results conference in August that such a move might not help reduce Pfizer’s US tax bill. At the same time, he noted that recent corporate breakups in the pharmaceutical industry have seen a decline in the stock market valuations of the drugmakers involved.
Pfizer has already divided its business internally into the units Innovative Health and Essential Health. Chief Financial Officer Frank D’Amelio pointed earlier to the costs associated with a split, saying that in particular the “inability to realize any incremental tax efficiencies would likely be value destructive.” The company has already spent $600 million exploring strategies for a corporate breakup.
The largest US drugmaker first acknowledged having second thoughts about a breakup when the US government last year scuttled the company’s plans to acquire Dublin-based Allergan for $160 million and move its corporate headquarters to Ireland. Pfizer’s final decision, if it is final, has left analysts and other industry watchers wondering what concrete plans for growth may lie in its current strategy. The company last month won a race against other international drugmakers such as France’s Sanofi to acquire US biological drugs manufacturer Medivation, paying $14 billion.
Reacting to the drugmaker’s about-face, analysts differed in their outlook on what the future has in store for Pfizer. While some thought the company would continue to be on the prowl for fresh takeover candidates, others said they thought coming deals would be smaller. Some augurs also said they saw the move by UK competitor GlaxoSmithKline to elevate the head of its consumer division to chief executive as a sign that it, too, was abandoning breakup plans mulled earlier.
