Pfizer dropped a bombshell yesterday, saying it would reorganize into three distinct business units, each with its own group president and financial reports. The thinking, of course, is that the company has a breakup in mind. And who wouldn't like to talk about that?
Indeed, Pfizer's ($PFE) restructuring news remains so newsworthy that it's overshadowing the company's second-quarter earnings report. It's a solid, if not particularly exciting, quarter: Revenue fell more than some analysts had expected, though not as much as others feared. And though profits were up--way up--the bottom line has asset sales and other gains to thank. Excluding items, adjusted earnings fell to 56 cents per share from 59 cents last year, The Wall Street Journal noted.
It's no surprise that a 55% decline in Lipitor sales helped push revenues down by 7% to $12.97 billion. Nor is it particularly shocking that primary-care sales slid by 15%, while specialty drugs managed to turn in sales relatively even with last year. Cancer drugs were particularly strong, with 28% growth; CEO Ian Read highlighted a surge in uptake of the targeted lung cancer drug Xalkori and liver cancer treatment Inlyta. "From a total company view, we are tracking to our expectations for the full year," Read said in a statement.
So, market-watchers are looking past the numbers for an idea about Pfizer's long-term future. By dividing into three operating units, the company will at the very least give investors an idea about which units might be worth hiving off. As Leerink Swann analyst Seamus Fernandez said in an investor note, the new structure "offers greater flexibility" for Pfizer's "shareholder friendly" focus these days.
Pfizer itself was pretty noncommittal on the subject in announcing the new structure; the company focused on the operational advantages of tighter focus within each new unit. So today, Read will face plenty of questions about split-offs going forward. "People will most likely try to gauge how committed they are to the various disposals," Atlantic Equities analyst Richard Purkiss told Bloomberg. "Based on the nature of how they've announced it, if I had to bet on it, in two to three years' time we'll be seeing this company split."
As a continuation of the company's so-far-successful slimdown, the reorg is worth debate, even if it doesn't actually come to pass. Rival drugmakers are keeping an eye on Pfizer's sell-offs and spinoffs and no doubt will face continued questions about potential divestments. GlaxoSmithKline ($GSK), for one, said it planned to start separately reporting results of some operations, which could lead to asset sales. On the other hand, Bayer recently proclaimed its lack of interest in splitting into pieces--but without Pfizer's example, it might not have faced the question at all.
- get the release from Pfizer
- see the Bloomberg story
- read the WSJ piece (sub. req.)
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