Pfizer said today it will continue to operate as one company rather than split off its “Innovative Health” new drug business from its older established drug or “Essential Health” business into separate public companies.
The single company offers the best prospects for maximizing future value for shareholders, Pfizer’s top executives and Board of Directors concluded following what they called “an extensive evaluation.”
“By operating two separate and autonomous units within Pfizer, we are already accessing many of the potential benefits of a split—sharper focus, increased accountability, and a greater sense of urgency—while also retaining the operational strength, efficiency, and financial flexibility of operating as a single company as compared with operating as two, separate publicly traded companies,” Pfizer Chairman and CEO Ian Read said in a statement.
Pfizer first publicly discussed a company split in 2012, soon after Goldman Sachs analysts suggested the idea in a research report. With the spin-off its Animal Health unit in 2013, the concept of a companywide split remained a subject of speculation through last year, when Pfizer disclosed plans to acquire Allergan for $160 billion. But 2 days after the Obama administration issued new rules designed to discourage the deal and other tax-slicing “inversion” mergers, Pfizer ended the deal, with Read hinting at a single company going forward by stating at the time: “We remain focused on continuing to enhance the value of our innovative and established businesses.”
More recently, talk among investors called for Pfizer to remain intact, especially in the weeks since the company announced its planned $14 billion acquisition of Medivation, a deal designed to strengthen its Innovative Health business.
The Medivation deal is one reason why Pfizer said it anticipates future growth in Innovative Health, along with incremental revenues recently launched products and the $5.2 billion acquisition of Anacor Pharmaceuticals, completed in June. Pfizer also said it expects its Essential Health business to return over the next few years to “sustainable” growth driven by its sterile injectables and biosimilars businesses, as well as growth in emerging markets.
Pfizer said its criteria for the decision included evaluating the performance of each business, determining if each business could compete as a stand-alone entity, assessing if hidden or “trapped” value existed in a combined entity, and if that value could be unlocked efficiently. The pharma giant said it also assessed whether key strategic and operating imperatives could best be achieved through one or two public companies.
“Pfizer will move forward with a focus on its strategic priorities to grow and increase operational efficiency to be more competitive,” the company added.
The decision to remain one company will not affect Pfizer’s 2016 guidance for investors, which the company reaffirmed today.