Don't count out a consumer spinoff, Pfizer executives say amid Q3 M&A grilling

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Pfizer CEO Ian Read said Tuesday that the company is "agnostic” to deal size and that it has "a core competency in business development and integrating companies, and we’ll continue to use it.”

In the opening remarks of Tuesday’s Q3 earnings conference call, Pfizer CEO Ian Read offered up prescription trends and launch details on the company’s key products, including cancer treatments Ibrance and Xtandi.

But it didn’t take long for analysts to turn the conversation back to their favorite Pfizer topic: M&A.

As the call's Q&A began, analysts grilled execs on tax reform and its potential impact on their acquisition strategy; asked them to lay out options they're considering for Pfizer's on-the-block consumer health unit; and demanded to know whether they thought Pfizer’s previous megamergers had been successful.

Read wasn’t quick to dole out many hints this quarter, however, noting (as he has in the past) that “we’re agnostic” to deal size and that “we have a core competency in business development and integrating companies, and we’ll continue to use it.”

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And on the potential for Pfizer to upgrade its status in immuno-oncology through dealmaking, he was particularly tight-lipped, pointing out that he’s answered similar questions in quarters past.

One topic execs spoke on freely? Consumer health. The company earlier this month announced it was weighing options for the unit, setting off speculation that a bidding war could ensue between giants such GlaxoSmithKline, Sanofi, Johnson & Johnson and Reckitt Benckiser.

But as Read cautioned, that portfolio isn't necessarily destined for a sale. “This process we’ve undertaken may shake loose more alternatives,” he said in response to whether an asset swap could be in the works. And CFO Frank D’Amelio pointed to the company’s divestment track record, which includes both sales and spinoffs.

When the company was working through a transaction for animal health unit Zoetis, “we were receiving incoming calls and had offers,” but Pfizer “went ahead and we proceeded with a split” to maximize value for shareholders, D’Amelio said.

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Whatever cash Pfizer can drum up by jettisoning consumer health could come in handy at the M&A table. While many pharma-watchers expected tax reform to free up a trove of dealmaking funds this year—including a sizable chunk for the New York drugmaker—so far, that hasn’t happened, and Pfizer has cited the tax uncertainty as a reason to sit on its hands.

Meanwhile, Pfizer's current product lineup helped revenue meet Wall Street projections; its top-line haul reached $13.17 billion for the quarter to hit consensus expectations on the nose. Notably, while high-flying breast cancer-fighter Ibrance grew by 60% over last year’s Q3, it fell short of analysts’ forecasts, coming in at $878 million to their $891 million.

Pfizer Innovative Health Group President Albert Bourla, though, said he expects a pair of new rivals—Novartis’ Kisqali and Eli Lilly’s Verzenio—to grow the “confidence of physicians in the class,” which has seen just 50% penetration. That could only benefit Ibrance, which holds a nearly 50% share in new patient starts.

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Viagra was another product to fall short of expectations as it declined by 20% year over year. The erectile dysfunction med, which generated $308 million, felt the impact of wholesalers preparing for the entry of generic competition this December, and it hurt the company’s established product portfolio, which fell by 12%.

The Prevnar family, on the other hand, helped pick up the slack; the pneumococcal vaccines churned out $1.52 billion in sales, far surpassing an expected $1.47 billion. With all said and done, Pfizer narrowed its full-year revenue guidance range to $52.4 billion to $53.1 billion, tweaking a previous $52 billion to $54 billion projection.

Earnings, meanwhile, exceeded expectations, with non-GAAP earnings per share of 67 cents beating a 64-cent consensus. Pfizer also raised its full-year EPS midpoint guidance by 3 cents.