UPDATED: Big deal, small deal, any kind of good deal would help ready Pfizer for the Big Split

By Tracy Staton

No one can pin down Pfizer ($PFE) CEO Ian Read when it comes to whether the company will split up–not publicly, anyway. That word won’t come till late next year at least. But repeated questioning from analysts during the company’s first-quarter earnings call did yield some facts in the matter.

The gist? Looks like Pfizer has fully signed on to the “go big to get small” idea. And news reports suggest it’s looking to Swedish Orphan Biovitrum–or Sobi–as one potential add-on.

Read has mentioned the grow-to-split strategy as Pfizer scouted for deals in recent months. When Pfizer agreed to shell out $18 billion for Hospira ($HSP), it was no secret that the deal would beef up the Established Products business that analysts think would be the sale or spin-off of choice. Even Pfizer’s AstraZeneca ($AZN) offer last year seemed like an opportunity to grow units that would eventually split.

As Read said during the Q1 earnings call, “[W]hen we were looking at previous [deals] last year, at times we talked about getting bigger to get smaller. Because by getting bigger, we could add to and strengthen the independent businesses and then get smaller if it made sense.”

Now, Read says he’s “agnostic” to the size of potential deals. He’s agnostic about where purchases would fit on Pfizer’s new income statement: either innovative products, established products or both–or consumer health, for that matter, which falls under the innovative umbrella these days.

Hence Sobi, which specializes in rare diseases, as its name would indicate. Its market value is around $4.3 billion, a nice bite size for Pfizer. The Swedish company said Monday it had received a buyout offer, without naming the bidder. Reuters’ sources now say it’s Pfizer; both companies declined to comment for the news service.

Obviously, that’s just one buyout idea. And Tuesday, Read refused to estimate the odds of a split-up after he wraps the requisite M&A. He did remind listeners that Pfizer needs three years of financials to decide about a split, and those financials will be in hand by the end of next year. To start a split in 2017–a previously stated target–a decision will have to come by the end of next year, too, Read said.

In the meantime, “I’m waiting to see our pipeline develop; I’m waiting to add as we have done with Hospira, more attractive assets into established products,” the CEO said. “And then I’m also looking to see how does the street value the Pfizer as it is today … [I]s the sum of the parts different from the whole.”

Read had to expect that analysts would continue pressing him about a Great Divorce, given the general chatter about the idea. A salvo of questions wouldn’t make him budge on his timeline, though. And anyone hoping that the Hospira buyout would hasten a split? Forget it. The deal furthered the split-up idea, but it didn’t change the timing, CFO Frank D’Amelio said during the call.

What might alter the schedule, D’Amelio allowed, is a megadeal. “If we were to do a large transaction, and as Ian said before, we’re agnostic to size … it clearly could impact our timeline,” D’Amelio said.

http://www.fiercepharma.com/story/big-deal-small-deal-any-kind-good-deal-would-help-ready-pfizer-big-split/2015-04-29

Leave a Reply