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Pfizer’s Read Finds Reason to Keep Consumer Health Unit

Pfizer Inc. (PFE) plans to keep its $3.2 billion-a-year consumer health business because the unit will be critical to selling prescription drugs that become over-the- counter products, Chief Executive Officer Ian Read said.

The unit that makes ChapStick lip balm, Advil pain pills and Centrum vitamins will “absolutely” stay within New York- based Pfizer, Read told investors on a conference call arranged by Sanford C. Bernstein & Co. last week. Medicines shifting to nonprescription status will be a growing trend, he said.

“It’s a business that has a great store of value for us,” Read said on the March 26 call. A recording of the call was posted online.

Pfizer, the world’s biggest drugmaker, has been shrinking since Read took over in late 2010, cutting expenses and divesting its animal health and infant nutrition units. The CEO has talked about splitting the drug business in two, with one unit focusing on brand-name medicines and another on those that don’t have patent protection.

“Pfizer does still very much seem to be contemplating this possibility, but no firm decision has been made yet,” said Tim Anderson, a Bernstein analyst, said in a note to clients after the call.

The drugmaker’s shares rose less than 1 percent to close at $29.16 in New York. The stock had gained 30 percent in the last 12 months.

The consumer business is headed by Amy Schulman, who also serves as general counsel and ran the infant nutrition business until it was sold to Nestle SA (NESN) last year for $11.9 billion.

Unlock Value

“I do see the synergies with the branded and the generics part of the business -- much more so than existed with animal health or with nutritionals,” said Mark Schoenebaum, an analyst at New York-based International Strategy & Investment Group Inc. said in e-mail. Still, “a separation could unlock a bit of value.”

If Pfizer chooses to split the company in two, the consumer unit might be bundled with its generic-drug business, he said.

Pfizer has been trying to expand the consumer line. In August, the company bought the rights to sell AstraZeneca Plc (AZN)’s heartburn pill Nexium over the counter. Pfizer paid $250 million up front, and will pay royalties once the drug goes on sale, likely in the U.S. about 2014. The company has also said it may try and develop a nonprescription version of the cholesterol pill Lipitor, which was once Pfizer’s best-selling product.

Comfortable Fit

“It in many ways has a very comfortable fit within our current platform,” Schulman said on the investor call. “It’s also an important harbinger of where the market is going.”

In emerging markets, prescription drugs will be more readily available over the counter than they will be in the U.S., Read predicted.

“You could potentially see emerging markets moving faster on this OTC switch than the very cautious” U.S. Food and Drug Administration, Read said.

Drugmaker Merck & Co. (MRK) is evaluating its consumer unit because it may not be big enough, Merck CEO Ken Frazier said at a January investor conference. The Whitehouse Station, New Jersey-based company got $1.95 billion in sales from the business last year, with more than a quarter of that coming from allergy medicine Claritin OTC.

Schulman said that Pfizer’s business, which is larger than Merck’s, has enough depth in the products and geographies in which it chooses to sell. “I think we have scale in the areas in which we compete,” she said.

To contact the reporter on this story: Drew Armstrong in New York at darmstrong17@bloomberg.net;

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

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