Novo Nordisk has stepped closer to a spinoff. The Danish drugmaker wants to hive off its information technology business, NNIT, and it has chosen Morgan Stanley and Danske Bank to advise it on the potential deal.
If Novo Nordisk ($NVO) does launch an initial public offering for NNIT, it would be the latest drugmaker to sell or spin off an ancillary business. Pfizer CEO Ian Read may have kicked off the trend with his strategic review, but other Big Pharma companies quickly joined the party, with their own asset sales and business-unit analyses.
As Reuters notes, NNIT today reported a 2013 operating profit of 246 million kroner ($46 million), up 14% year over year, on 2.2 billion kroner ($410 million) in sales. The company has said it's expecting up to $440 million in 2014 sales. The latest results strengthen the investor appeal, CFO Carsten Krogsgaard Thomsen said. "So this means the evaluation of a potential listing on the stock exchange continues as planned," he said in a statement, adding that it's "way too early" to announce a decision.
So far, only Pfizer ($PFE) and Abbott Laboratories ($ABT) have chosen the IPO route. Pfizer spun off its animal health business, Zoetis, in a two-stage offering that wrapped up last spring. The IPO was over-subscribed, with share prices above the expected range. Abbott parted ways with its entire branded-pharma business, now dubbed AbbVie ($ABBV), in another popular offering.
NNIT started as an internal IT unit, charged with managing Novo Nordisk's computer systems and data analysis. Eventually, it began marketing its services to other pharma companies. Now, as drugmakers increasingly turn to technology to make their businesses more efficient and R&D more productive, the demand for IT services is growing.
NNIT has been riding that wave, accumulating customers to the point where only half of its 2014 business will come from Novo Nordisk. The question now is whether NNIT is more valuable on its own, or in the Novo Nordisk family. In January, the company brought in Thomsen as CFO to help it decide.
Logistically, an NNIT public offering wouldn't be as difficult as some Big Pharma spinoffs could be. Novo Nordisk formally separated NNIT into an independent subsidiary back in 1998. It's currently a limited liability company 100% owned by Novo Nordisk, with Novo executives serving as chairman and vice chairman of its board.
- see the NNIT release
- read the Reuters news
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