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Pfizer May Sell Capsugel Unit, Maker of Drug Capsules

Pfizer Inc. may sell its Capsugel business, which makes gelatin capsules for drugs and dietary supplements, after a review that will be completed in the first quarter of 2011.

Capsugel, the smallest of Pfizer’s nine business units, had revenue of $740 million last year. Pfizer is “reviewing strategic alternatives,” which may include a sale, the New York-based company said in a statement today.

Pfizer, the world’s biggest drugmaker, is looking to offset some of the revenue it will start losing next year, when the company faces competition from cheaper generic copies of its cholesterol pill Lipitor, which had $11.4 billion in sales last year. Pfizer gained Capsugel with its acquisition of Warner- Lambert Co. for $116 billion in 2000.

“Pfizer has the Lipitor patent coming up and they might just want the extra cash to bolster themselves,” said Les Funtleyder, a health-care analyst with New York-based Miller Tabak & Co., in a telephone interview. “Capsugel is an asset that seems like it might be better off somewhere else. If you’re Pfizer, do you really want what amounts to be an outsourcing and manufacturing business?”

Funtleyder said Capsugel won’t demand a “massive premium price,” because it is largely a manufacturing business.

Pfizer hired Morgan Stanley to conduct a strategic review for the unit, a process that will be completed by the end of the first quarter of next year, according to today’s statement.

Pfizer rose 3 cents to $17.26 at 4 p.m. in New York Stock Exchange composite trading. The stock has declined 5.1 percent this year.

Every health-care spinoff in the last 15 years has increased shareholder value, wrote analyst Jami Rubin of Goldman Sachs in a Sept. 21 note. Pfizer would have the most to gain of all the big pharmaceutical companies from a spinoff, she wrote.

Goldman rates Pfizer a “buy,” “but see further upside potential if they took aggressive action to unlock value in non- core assets,” wrote Rubin, who is based in New York.

To contact the reporter on this story: Elizabeth Lopatto in New York at elopatto@bloomberg.net; Tom Randall in New York at trandall6@bloomberg.net.

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net.

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