One of the world’s largest drugmakers, Pfizer, says it will make a decision whether to split up or not by the fourth quarter of 2016, based on the results of an ongoing restructuring plan which will cost several billion dollars.
“When you restructure what do you do?” CFO Frank D'Amelio asked delegates at the Morgan Stanley Global Healthcare Brokers Conference last week. “You consolidate, you combine, you integrate,” citing examples of historic Pfizer spin-outs Zoetis and Capsugel.
Pfizer launched a $300m (€265m) restructuring project in 2014, however, the scope of the scheme has increased.
In January, the firm announced it was spending a further $400m (€350m) in preparation for a potential split this year (which, incidently, was just a few weeks after it said it would buy Hospira for $17bn.)
“The overall cost of the project would be in the low billions of dollars,” D'Amelio said, adding Pfizer is spending that money in four major areas:
The first is the company’s financial structure and ensuring the tax structure is in place to support two separate companies.
The second area is manufacturing and supply chain, he continued: “We're trying to do work obviously to align our manufacturing capabilities, our supply chain capabilities with the two businesses.”
The third area is regulatory, and ensuring the dossiers are re-registered into the appropriate new legal entities, while the fourth is managing systems to support two separate companies.
“What we've said is we would make a decision by no later than the fourth quarter of 2016,” D'Amelio confirmed, based on four questions he said Pfizer is reviewing:
1) Are the businesses executing with excellence and are they operating extremely well inside the Company?
2) Will they continue to execute with excellence on a standalone basis?
3) Is there an opportunity to unlock trapped value?
4) Can [Pfizer] unlock that trapped value in an efficient way?
“Those are the four questions, the answer to all four questions needs to be yes.”