Pfizer Reorganization Could Set the Stage for Full-Blown Spinoff

 | Jul 11, 2018 | 12:10 PM EDT
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The proposed reorganization of the 169-year-old Pfizer Inc.'s  (PFE) business separating a new major unit covering more innovative drugs including off-patent brands and anti-infection drugs and injectable medicines in 2019 could presage selling off parts of the company, analysts said.

Steve Chesney, of London-based Atlantic Equities who analyzes the pharmaceutical industry said the new structure signals confidence in the ability to innovate while position possible sales of its consumer brand which handles over the counter medications and established brands business that includes off-patent oral medications like Lipitor, Norvasc and Viagra.

"I think it would be attractive for shareholders to want to own that," Chesney said. "Probably a consumer health business is going to trade at a higher multiple. It's sustainable because the drugs are no longer exclusive products as far as the active pharmaceutical ingredients."

In a prepared statement Dean Mastrojohn, a Pfizer spokesman emphasized the reorganization was not related to any immediate plans for a future split of any businesses but to position the company to grow revenue.

Pfizer failed in May to sell Pfizer Consumer Health, the business which handles its over the counter medicines. On Wednesday the company reiterated previous statements that "strategic alternatives" are being reviewed with the company making a decision in 2018.

In a July 11 analyst's note, BMO Capital Markets rated Pfizer to outperform the market, setting a target price of $42, 16 percent over its Wednesday opening price.

BMO Equity Analyst Alex Arfaei said the new structure would maintain or enhance what was seen Pfizer's having optionality to sell or spin off units.

In the company's announcement, executives said the new established brand and consumer brand divisions would, "operate relatively autonomously with dedicated manufacturing and regulatory capabilities."

-- By Martin Cassidy

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