Pfizer May Sell or Spin Off Its $14 Billion Consumer Health Biz

Published: Nov 10, 2016

Pfizer May Sell or Spin Off Its $14 Billion Consumer Health Biz November 10, 2016
By Mark Terry, Breaking News Staff

Only a few months after Pfizer  indicated it did not plan on splitting into two companies, inside sources are suggesting it’s considering selling or spinning off its consumer health division.

Since at least 2012, Pfizer has considered breaking the company into two, one focused on newer, high-growth drugs and one into its more mature, often off-patent drugs. At the end of September, the company made it official, there were no plans to split. But there are clearly plans for acquisitions, such as the recent acquisition of Medivation (MDVN).

Rumors came out today that the company is deciding whether it wants to sell off its consumer health division. If so, it could bring in as much as $14 billion. This division sells products like Chapstick and Advil. The division has annual sales of about $3.5 billion.

Reuters notes that if it did opt to sell, it wouldn’t be the first big pharmaceutical company to do so. Merck & Co. (MRK) sold its consumer care business in 2014 to Germany’s Bayer AG for $14.2 billion. GlaxoSmithKline (GSK) and Novartis (NVS) merged their consumer health businesses in 2015 via a joint venture, which is run by GSK as part of an asset swap worth $20 billion.

The rationale is that consumer over-the-counter drugs have lower margins than prescription drugs. On the other hand, they have little or nothing to do with insurance companies and government payment programs, which sets them up as two slightly different business models.

If Pfizer does decide to sell, it’s possible that a potential buyer will be Reckitt Benckiser. In December 2015, when the possibility was floated, the company expressed interest. Reckitt Benckiser already sells Nurofen painkillers and Durex condoms. It unsuccessfully attempted to acquire Merck’s consumer unit and before that, paid $482 million to Bristol-Myers Squibb (BMY) to license some of its Latin American consumer health brands. But there are other potential customers, including Bayer and Sanofi, which indicated in late 2015 that it hoped to grow its consumer health through acquisitions.

It was just yesterday that Pfizer announced it was closing two of three facilities in the UK. They will close over the next four years and affect about 370 jobs. One site was picked up during the Hospira acquisition. The other is a global cold chain packaging and distribution plant in Havant, Portsmouth, UK.

Pfizer also announced yesterday that the European Medicines Agency (EMA) had approved Ibrance for the European market. Simultaneously, Novartis is preparing a competitive drug, ribociclib. They are cancer medications used in combination with other drugs in estrogen-based tumors that are not caused by the HER2 protein.

Ibrance was approved by the U.S. Food and Drug Administration (FDA) in February 2015, and is projected to have $2.1 billion in sales this year. Novartis expects to file for worldwide approval for ribociclib before the end of this year.

Ribociclib received Breakthrough Therapy designation from the FDA in August of this year for HR+/HER2- advanced breast cancer. It was based mostly in positive data from the Phase III MONALEESA-2 trial of the drug in combination with letrozole in postmenopausal women who had not been treated for their cancer.

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