Update

Pfizer considers splitting company or going after M&A

By Fiona BARRY contact

- Last updated on GMT

Pfizer may continue pursuing M&As or break up its businesses (Image: Ben Frost)
Pfizer may continue pursuing M&As or break up its businesses (Image: Ben Frost)

Related tags: Income statement, Pfizer

Pfizer says it is considering breaking up the company in 2015, or alternatively continuing its pursuit of a major acquisition.

Preparing the business for “a potential split of the company​” will cost $400m in “one-time costs​” in 2015, CEO Ian Read told investors in a call today.

Frank D’Amelio, CFO, said the decision on whether to break up the company would depend on finding a tax-efficient way to do so, as well as the performance of Pfizer’s businesses and confidence levels that they can perform on a stand-alone basis.

If the company pursues M&As instead of a split, any acquisition would be “biased towards deals with the potential for creating value in the near term,​” CEO Ian Read told investors in a call today.

Tax inversions – still an M&A motive?

Pfizer made its overtures to AstraZeneca in 2014, partly, Read said during the call, to facilitate a tax inversion, given the more favourable UK rates.

With the US Treasury contemplating tightening tax inversion rules, an investor asked whether inversions will still be a factor for Pfizer when it considers acquisitions.

Read said inversions have not been stopped, but that the US government has delayed the gains companies can receive.

So inversions are being tempered by the ability to pay the market price given the slow realization of the inversion value.​” For as long as the practice is possible, “it’s an area that will remain fertile,​” he said, given the US’s “uncompetitive​” tax code.

For the moment, it is only “more problematic to plan inversions. We’ll just have to work around that,​” said Read.

Read added that he was “a little mystified​” by investors’ assumptions that “Pfizer needs to do a deal.​”

I never said we had to do a deal. If I thought there was pressure to do a deal, I would have done one last year.​”

But he stressed that Pfizer has the clout to pull off a big M&A. “I do feel we have the ability and the balance sheet we can use if business development can further our strategies.​”

Rumours arose this week that Pfizer offered to buy generics giant Teva late last year. Both companies told BioPharma-Reporter.com they would not comment on the speculation.

Financials

The company reported Q4 revenue of $13.1bn, a slight increase of $9m year-on-year which CFO D’amelio attributed to the performance of Lyrica, Prevnar and Eliquis in Western markets. He also noted seven per cent operational growth in emerging markets, driven, he said, by Lipitor in China and Prevnar and Enbrel in Latin America.

Pfizer reported $49.6bn in revenues for all of 2014. Its adjusted income for Q4 was $3.4bn, up seven per cent on the same quarter in 2013. Foreign exchange rates last year had a negative effect on adjusted diluted earnings per share, the company said.

The company estimated 2015 revenues between $44.5bn and $46.5bn.

The CEO said Pfizer has taken $5.5bn out of operating expenses in the last four years, but also noted “significant​” revenue loss in the same period due to exclusivity and co-promotion expirations, especially for Lipitor and Spriva.

The largest opportunities for cost-saving have already been realised, said Read.

Related topics: Markets & Regulations

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