• CEO Read said that there is no ‘wrong answer’ in decision
  • ‘It really doesn’t sound like they’re going to,’ analyst says

Five months out from Pfizer Inc.’s self-imposed deadline on whether to break into two separate companies, Chief Executive Officer Ian Read made clear he’s still mulling whether the drug giant is better together or apart.

Read said Tuesday that there’s no “wrong answer” in what’s ultimately chosen and it’s not a “make-or-break” decision. Pfizer could also re-examine a split later on if it initially decides against separating the New York-based company, which has a market valuation of $220 billion.

“We continue to have very robust dialogue in the company, preparing for this decision,” Read said on a conference call discussing second-quarter financial results. Pfizer beat analysts’ predictions, though sales of its biggest product, the vaccine Prevnar, dropped.

Investors have been waiting for a decision since 2012, when a Goldman Sachs Group Inc. analysts suggested the company was heading down that path. Pfizer has separated some operations internally, and breaks out separate financial results for what it calls its Innovative Health and Essential Health units.

Less Likely

While Read emphasized that no decision has been made, analysts are now speculating that a breakup may not happen.

“It really doesn’t sound like they’re going to split up,” said Alex Arfaei, an analyst with BMO Capital Markets Corp. “It sounds like they’re gradually lowering expectations” over splitting. He pointed out that Read said on the call that he didn’t see much trapped operational value in splitting, and that the two units would be growing at the same rate if they were independent.

Tim Anderson, an analyst at Sanford C. Bernstein & Co., said he also doesn’t expect a split, after assessing the company’s comments Tuesday.

“The majority of questions were on the pending split-up decision,” Anderson said in a note to clients. “Management answered these questions in a way that seemed to support our newly-adopted view that the company is in fact not likely to split up.”

Pfizer’s easiest path to a split could have come after a deal with Allergan Plc. The $160 billion merger fell through when federal regulators announced rules that would have reduced the tax benefits from the inversion, which would have allowed Pfizer to shift its legal address overseas.

Tax Decisions

Taxes remain a factor in whether to split, although a separation isn’t seen as a fast way for improving Pfizer’s rates, Read said.

“A separation doesn’t, under current tax laws, facilitate a speedy ability to change the domiciles of either of the companies,” Read said.

In the meantime, Pfizer has continued to pursue deals to grow larger, and Read said he’ll pursue future acquisitions with few limitations on size. In June, it acquired Anacor Pharmaceuticals Inc. for $5.2 billion, gaining its experimental treatment for the skin condition eczema. And in 2015 it paid $17 billion for Hospira Inc. and its stable of injected medicines.

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