Pfizer May No Longer Need to Split Post-Medivation

Pfizer May No Longer Need to Split After Medivation Acquisition September 16, 2016
By Mark Terry, Breaking News Staff

For some time, especially during the period when it was attempting to merge with Allergan , part of Pfizer ’s long-term strategy was to split the company into two companies. One company would focus on older, mature brands. The other would focus on research-and-development-oriented drug development, which has higher growth.

Now that Pfizer acquired Medivation for $14 billion, that split may not be necessary.

The primary reason for a proposed split was to give its two innovative drugs segments, Global Innovation Products (GIP) and Vaccines Oncology and Consumer (VOC) a chance to break out on their own without being dragged down by the slower growth products. In a recent report by Jefferies, a financial research firm, it noted that, “The proposed Medivation acquisition is a strategic fit for the oncology business and will be accretive.”

It also maintained a “buy” rating, but dropped its target price from $40 to $39. Pfizer is currently trading for $34.17.

In the Medivation acquisition, Pfizer picked up the blockbuster prostate cancer drug Xtandi, as well as a small, but strong pipeline, which are also expected to become blockbusters. Talazoparib is a PARP inhibitor currently being tested for gBRCA mutated breast cancer. Another in the pipeline is pidilizumab to treat refractory diffuse large B-cell lymphoma. These assets all strengthen Pfizer’s GIP and VOC divisions.

As Bidnessetc writes, “The addition of Medivation ensures a consistent growth in revenue for both GIP and VOC segments in years to come.”

In early August, investors and analysts were pushing Pfizer’s chief executive, Ian Read, to say whether he would break up the company, but he responded that the company’s stock had been outperforming lately, and said, “I do believe the trapped value question has become more complicated.”

He also indicated that any decision would likely wait until after the U.S. presidential election. “Hopefully if we have a new administration,” Read said at the time, “whichever administration is in, there will be a need to look at tax reform, and tax reform has implications for what you want to do and what kind of taxes you want to play. So it is an influence in our thinking.”

Meanwhile, Pfizer has received some good news this week. For years, Pfizer has been trying to get the U.S. Food and Drug Administration (FDA)’s “black box” warning off its smoking cessation product, Chantix. After reviewing additional data, an FDA panel recommended that the warning be removed. The vote was 10 to remove, 9 to keep it.

And today, an advisory committee at the European Medicines Agency (EMA) approved Pfizer’s cancer drug, Ibrance, to be used in combination with two other therapies in women who have already undergone endocrine therapy. That clears the way for a final review by the EMA.

Ibrance was approved in the U.S. in February 2015. In its last quarter of this year, Ibrance brought in about $500 million.

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