Pfizer’s Read Says Animal, Nutritional Decisions ‘On Track’
“It is on track and we are happy with the way it is going,” Read said today during an interview at the J.P. Morgan Healthcare Conference in San Francisco. He also said he had no plans for a large acquisition.
Nestle SA (NESN), Danone, Abbott Laboratories and Heinz (HNZ) are among potential buyers with nutrition lines of their own. Heinz has an existing infant food business and no formula line, said Lee Linthicum, an analyst with Euromonitor International. New York- based Pfizer’s infant formula lines are also strong in the Asian and Middle Eastern markets, where Danone (BN) and Nestle are weaker, Linthicum said in a telephone interview last month.
The divestitures are part of Read’s plan to slim the world’s largest drugmaker and focus on new medicines in the wake of top-selling cholesterol pill Lipitor facing generic competition last month.
Those plans don’t include another “mega” merger, Read said. “I’m very disinclined to be looking at any possibility of a mega acquisition,” he said. “You never say never, but we have all the science we need and we have the geographic breadth.” Instead, the company will look at mid-size “bolt- on” deals.
Pfizer didn’t make any such purchases in 2011, according to data compiled by Bloomberg. The largest was a $49.8 million purchase of the company’s remaining stake in Icagen Inc.
Instead, the company authorized a $10 billion share repurchase program. Read said the stock is undervalued, though share buybacks “are not a growth strategy.”
Pfizer has been fighting to hang on to sales of Lipitor (PHAM1150) during the 180-day period in which only Ranbaxy Laboratories Ltd. (RBXY) and Watson Pharmaceuticals Inc. (WPI) can sell the copycat versions. In the last week of 2011, it had 41 percent of the market for the drug, according to a report by Bloomberg Industries.
“It is playing out how we expected,” Read said. The company has made agreements with insurers to block sales of the generics in return for rebates from Pfizer. The company has also distributed cards to patients that offer a discounted copayment at the pharmacy when they get the brand-name version of Lipitor.
There have been some hang-ups with the co-pay card plan, Read said. “Patients are encountering resistance” when they go to pharmacy with the card, he said. “They have to be insistent” to get Pfizer’s brand-name version, he said.
Pfizer’s nutritionals unit sells prenatal vitamins and infant formula worldwide. The nutritionals unit had $1.87 billion in 2010 revenue. The company is also divesting its $3.56 billion animal health unit. Both transactions will be announced this year and completed from July 2012 to July 2013, said Joan Campion, a Pfizer spokeswoman.
Pfizer acquired the infant nutrition business as part of its $68 billion takeover of Wyeth in 2009. Read is shedding the units as part of his plan to slim down Pfizer and focus on creating new drugs.
Nestle, Danone and Abbott (ABT) spoke to financial advisers about the business, and were likely to bid, people with knowledge of the process said in July. The people declined to be identified because the talks are private.
Abbott, of Abbott Park, Illinois, is separating its pharmaceuticals business from one that includes medical devices, nutritional products and generic drugs. Chief Financial Officer Tom Freyman said today the split wouldn’t hamper merger and acquisition efforts if a “valuable” prospect arose.
“If there’s an opportunity that’s useful or valuable to the company, certainly we would pursue it,” Freyman told investors today at the JPMorgan (JPM) conference. “At this time there isn’t anything of that nature out there that I’m in a position to talk about today.”
Freyman said he was aware Pfizer’s looking to divest its nutritionals unit, and declined to comment further.
“We’re happy with our business,” Freyman said in an interview today. “I’ll leave it at that.”
Pfizer gained less than 1 percent to $21.94 at 4 p.m. New York time, and has increased 20 percent in the past 12 months. Abbott rose less than 1 percent to $56.11, and is up 17 percent in the last year.
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