Thursday, August 2, 2012

Is Pfizer looking to seperate its Off-patented drug business

At the 2nd quarter 2012 conference call on July 31st, Pfizer CEO Ian read in his response to an analyst question on his vision on reshaping the business commented that he looks at Pfizer as a company that has two core businesses -  An innovative core  driven by R&D being the growth business and the Second is  a value core (of off-patent drugs). By 2013-14, they are likely to restructure the business on the same lines to maximise returns from each. 
We believe this is likely to be a challenging exercise as separating these business, where  infrastructure are common and value of one business being derived from the other may be difficult. The separation certainly would enhance valuations of the off-patented drug business, but may also increase the operational costs, hence whether or not we would see enhancement of the shareholder value is a big question.  In order to enable this transition, we believe Pfizer may need to buy a Generic company, whose low cost infrastructure can be combined with Pfizer's brand to deliver value in the longer term.