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One step closer to a big Pfizer breakup?

Exec hints at operational reorg that could pave way to the great divorce
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Some Wall Street analysts must be giggling with glee today. A top Pfizer ($PFE) official tells Bloomberg that the company will probably reorganize into two business units--one focused on innovative drugs, the other on off-patent meds (and perhaps consumer health)--from four. And that would pave the way for (insert giggle here) a two-way split.

If you've been following CEO Ian Read's streamlining efforts over the past two years, you know that he's been shedding business units to zero in on Pfizer's core prescription drugs business, and to return cash to shareholders, a not-incidental goal. You also know that some analysts have championed even more streamlining, arguing that Pfizer would be worth more to investors if broken into smaller pieces.

Pfizer has already sold its Capsugel unit. It's in the midst of unloading its nutrition business to Nestle. And it's begun the process of spinning off its animal health unit under the Zoetis name. But Pfizer still has a consumer health unit that some consider ripe for divestment. Another candidate is the "established products" business, i.e., off-patent drugs and generics. Or, perhaps, a combination of those two businesses, which Read calls the "value" side of the company.

Last year, Goldman Sachs analyst Jami Rubin, one of the most vocal backers of the breakup idea, asked Read point-blank whether he'd consider spinning off or otherwise shedding other units after the vet business and nutrition unit are gone. He said he'd consider it. He hinted at an operational reorganization that would sequester the various units into more discrete packages.

Geno Germano, president of Pfizer's specialty drugs and oncology businesses, went a bit further in an interview with Bloomberg. Now divided among oncology, primary care, specialty drugs and established products, Pfizer's prescription drug businesses are "probably going to evolve into two," Germano said. And it wouldn't be an efficiency move. "[T]hat's not the main driver," he told Bloomberg. "We really see the business segmenting into these two segments with pretty different capabilities, and we would want to organize in a way that we realize the most value for shareholders."

Hear that "most value for shareholders" phrase? That's exactly what Read was saying back in 2010 when he said he was reviewing Pfizer's business units--the review that ended with a decision to hive off animal health and nutrition.

Rubin has maintained that the fate of those two units should foreshadow other divestments to come. She figures the prescription drugs units would account for $36 billion in sales this year, with established products offering up another $17 billion. And once Pfizer draws bolder lines between its drug units, the company could focus on building "the stand-alone potential" of each, with a breakup by 2015, Rubin has said.

Any signal that Pfizer is physically disentangling that business from the rest of those businesses, those would all be viewed as positive steps toward a spinout," ISI analyst Mark Schoenebaum told the news service. "It's in their back pocket, should it make sense in a few years."

- read the Bloomberg piece
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