US drugmaker Pfizer shelves split plan

US drugmaker Pfizer, which has been considering a split into two companies for more than two years, said yesterday it will not do so because the move would not create any shareholder value.

Pfizer will keep its low-growth generics and patent-protected branded medicines separate, giving it the option to split down the road if “factors materially change at some point in the future.”

Pfizer said the decision would not have an impact on its 2016 financial forecast. 

The decision not to create two publicly-traded companies follows the collapse of its planned $160bn acquisition of Allergan after a change in tax law took away the tax benefits of the deal.

Investors were expecting the company to step back from the split, Sanford Bernstein analyst Tim Anderson said in a research note.

“Where to from here? The company seems likely to leave open its option for a future split-up, but more immediately it may continue hunting for M&A targets,” said Mr Anderson.

The pharma giant began openly planning for the possible split in early 2014, saying it would operate the businesses as separate divisions and track their progress for three years before reaching a decision. In August, it said a decision would be made by year-end.

Pfizer said the sum-of-the-parts analysis showed no benefit to shareholders, and that tax costs and business disruptions were factors it considered. 

The company had considered the move largely because its patent-protected medicines routinely enjoy sales growth while sales in the generics portfolio usually declined.

In August, Pfizer said it was buying cancer drugmaker Medivation for $14bn to get access to blockbuster prostate cancer drug Xtandi for its growing oncology roster.

The Medivation deal illustrates a shift in Pfizer’s mergers and acquisitions strategy from lowering taxes, which was the rationale behind the failed Allergan tax inversion deal, to strengthening its line-up of branded drugs, especially lucrative cancer treatments.

Last year, Pfizer paid $15bn for Hospira, which sells generic hospital products and is developing biosimilars to compete with big-selling injectable biotech drugs.

That deal was seen as a way of bolstering its generic drugs operation ahead of potentially divesting the business.


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