Pfizer Reviewing Idea of Potential Split, CFO Says

Pfizer Inc., the world’s biggest drugmaker, will analyze over the next eight months whether it will split itself into brand name and generics businesses, Chief Financial Officer Frank D’Amelio said.

Pfizer hasn’t made a final decision on whether to break up the New York-based company and an official divide wouldn’t happen until at least 2016, Chief Executive Officer Ian Read said today. In the meantime, Pfizer is working to figure out whether its emerging markets operations would benefit from being organized more like its business in the U.S., Europe and Japan where the company has distinct brand and generics units, D’Amelio said today in a telephone interview.

This “is a study year,” D’Amelio said. “What we don’t want to do is take the positive out of what the model’s already generating.”

Talk of a possible split has dominated company conference calls with analysts since Read floated the idea last year. Such a break up is “perhaps the last big lever management has left to pull,” Tim Anderson, an analyst with Sanford C. Bernstein & Co., said before Pfizer earlier today announced its first-quarter earnings.

D’Amelio said feedback hasn’t been unanimous, or final. “If you talk to investors, I think you’ll get mixed comments,” he said. “There’s never a subject where I think the investment community is all-in one way or the other.”

Lipitor Sales

Pfizer has been working to remake itself after it lost exclusive sales rights in 2011 to Lipitor, the cholesterol treatment that was once the world’s top-selling medicine with almost $13 billion. The company won U.S. marketing approval in the past six months for two new potential blockbusters, the rheumatoid arthritis pill Xeljanz and the blood thinner Eliquis.

Earlier today, Pfizer reduced its forecast for 2013 profit excluding certain items after first-quarter sales missed analysts’ estimates. Pfizer shares fell 4.5 percent to $29.07 at the close in New York, their worst one-day loss since August 2011.

Judson Clark, an analyst Edward Jones & Co. who has a buy rating on the stock, said he’s neutral on the idea of a split.

“It’s almost a one-time resetting,” Clark said. “I can’t imagine every five or 10 years they’re going to spin off their drugs that are in life-cycle management. I don’t know if this is a recurring way to create shareholder value.”

The key decision is whether the brand-name and generics businesses can exist inside Pfizer separately and still create value, or whether a formal split is necessary, Read said.

“The first order of business is to find a way we can separate them and give the management as much authority and independence as necessary,” Read said today on a conference call. “I believe it’s worth creating that separation internally, because I believe it creates focus and management focus and improves the performance of those two businesses.”

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