Pfizer ($PFE) has pulled back the veil on its three new operating segments. It's the long-awaited peek at these units, created last July as a prelude to potential sales or spin-offs. Do the numbers bear out analyst enthusiasm for more Pfizer split-up action?
Well, the jury is still out on that. Pfizer had a weak first quarter, with sales down all over the place. The established products business--which comprises drugs that are off-patent, or will be by next year--saw a 13% drop in sales. Revenues in the global innovative products unit slipped by 7%. Consumer health fell by 6%. The only bright spots were oncology--up 7%--and vaccines, which managed a slight increase.
Overall, the company's revenue dropped by 9%, including the loss of sales. That's a $1.1 billion slide. Total: $11.4 billion. Analysts had expected $12.1 billion.
So, some market-watchers are billing Pfizer's Q1 results as motivation for its behemoth bid for AstraZeneca ($AZN). With AstraZeneca's products in hand, Pfizer could beef up each of its three units for sale or spinoff action.
 |
Consider the established products unit, flagged as the likely first choice for disposal, because it's seen as a lower-growth business. Sales for Q1 dropped on new generic rivals for the bladder drug Detrol LA and continued competition for the once-top-selling statin, Lipitor. But even after that sales slide, it's still the largest of the three businesses, at $6 billion in sales. AstraZeneca's off-patent products--such as the original formulation of its antipsychotic blockbuster Seroquel, which brought in $350 million last year--could join the line-up.
And then there's Nexium, which goes off patent in the U.S. this month; the stomach-acid fighter could add a hefty chunk of sales, at least till multiple generics hit the market. Crestor copies don't go on sale till mid-2016, under the terms of a patent settlement, but Pfizer could theoretically add that statin drug to the established products mix--and it's a $6 billion-plus product, for now. Pfizer could add these meds to its near-term revenue, and then capitalize on them if and when it decides to hive off that business.
 |
| Pfizer CEO Ian Read |
It's a similar story for each of the remaining Pfizer businesses, with AstraZeneca adding marketed drugs and pipeline products. Brilinta, which the U.K. company is pushing as a new-growth product, would join the innovative products group. The group comprising vaccines, oncology and consumer health would notably get AZ's promising cancer immunotherapies and its new four-strain flu vaccine.
Essentially, it's a case of getting bigger to go smaller. "The crux [of the AZ deal] is the potential break-up," Seamus Fernandez, a Leerink analyst, said last week. "[W]e believe [it] is more realistic than without AstraZeneca."
There's one catch--buying AstraZeneca could put off those hoped-for split-offs. Pfizer CEO Ian Read has said the company needs three years of financials to show investors. Under that rule, if the AZ deal closes mid-2015, deals would have to wait till 2018.
- see the Pfizer release
- get more from the Financial Times
Special Reports: Top 10 pharma companies by 2013 revenue - Pfizer -AstraZeneca | Top 10 pharma layoffs of 2013 - AstraZeneca