U.S. drugmaker Pfizer Inc (PFE.N) said on Monday it had decided not to separate into two publicly traded companies by separating its low-growth generics from its patent-protected branded medicines.<\/p>\n
Instead, with the two operating as separate businesses within Pfizer, the company was already accessing many of the potential benefits of a split while retaining the operational strength, efficiency and financial flexibility of operating as a single company, Chief Executive Ian Read said.<\/p>\n
” … Over time, any potential gap between Pfizer’s market valuation and an implied Sum of the Parts (SOTP) market valuation has closed,” said Chief Financial Officer Frank D’Amelio.<\/p>\n
“We concluded that splitting into two companies at this time would not enhance the cash flow generation and competitive positioning of the businesses and the operational disruption, increased costs of a split and inability to realize any incremental tax efficiencies would likely be value destructive.”<\/p>\n
Pfizer’s shares were down 1.3 percent in premarket trading on Monday.<\/p>\n
The company has for several years weighed whether a split made sense, largely because its patent-protected medicines routinely enjoy sales growth, while its portfolio of generics usually posted sales declines.<\/p>\n
Investors shifted their focus to whether Pfizer would split after the company terminated a $160 billion deal to acquire Irish drugmaker Allergan Plc (AGN.N) in April due to new U.S. tax inversion rules.<\/p>\n
Pfizer said on Monday the decision to not split itself would not impact its 2016 forecast, and that it preserved the option to split in the future.<\/p>\n
Pfizer in August announced it had agreed to buy cancer drugmaker Medivation Inc (MDVN.O) for $14 billion to gain access to blockbuster prostate cancer drug Xtandi for its growing oncology roster.<\/p>\n
The Medivation deal illustrates a shift in Pfizer’s M&A strategy from lowering taxes – the rationale behind the failed Allergan tax inversion deal – to strengthening its lineup of branded drugs, especially lucrative cancer treatments.<\/p>\n
A year ago, Pfizer paid $15 billion for Hospira, which sells generic hospital products and is developing biosimilars meant to compete with big-selling injectable biotech drugs. That deal was seen by Wall Street as a way of bolstering its generic drugs ahead of potentially divesting the business.<\/p>\n
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