Pfizer decides against splitting Essential Health, Innovative Health divisions


NEW YORK — After a period of evaluation, Pfizer announced Monday that its board of directors and executive leadership team had decided not to split the company into two separate companies, Pfizer Innovative Health and Pfizer Essential Health. The two will remain separately managed units within Pfizer. 


“We believe that by operating two separate and autonomous units within Pfizer we are already accessing many of the potential benefits of a split — sharper focus, increased accountability, and a greater sense of urgency — while also retaining the operational strength, efficiency and financial flexibility of operating as a single company as compared with operating as two, separate publicly traded companies,” Pfizer chairman and CEO Ian Read said. “We will continue to generate the financial information necessary to preserve our option to split our businesses should factors materially change at some point in the future.”


The company evaluated the performance of both businesses, and they both demonstrated the ability to compete on a standalone basis, but according to Pfizer EVP business operations and CFO Frank D’Amelio, “In our analysis, we concluded that splitting into two companies at this time would not enhance the cash flow generation and competitive positioning of the businesses and the operational disruption, increased costs of a split and inability to realize any incremental tax efficiencies would likely be value destructive.”


Instead, Pfizer said it’s poised to grow the both the Innovative Health and Essential Health Business, and over the past years has improved the Essential Health business’s research and development capability, among other efforts to maximize its R&D investments’ value. Since 2010, Pfizer has received 20 new drug approvals. 


Similarly, the company said its Essential Health division has been strengthened by the completed acquisition of Anacor and its pending Medivation acquisition. This division was also bolstered by acquisitions of Hospira and Innopharma, as well as the pending acquisition of AstraZeneca’s small molecule anti-infectives business. 


Pfizer said that since 2010, it has captured approximately $32 billion from the disposition of its Capsugel and Pfizer Nutrition businesses, and its Animal Health business spinoff’s IPO and share exchange returned $88.1 billion to shareholders. The company said it will more fully allocate indirect expenses for each of the two business by including estimates of the dollar value of these expenses, starting with quarterly financials for Q1 2017. 


Read said this course of action “is currently the best structure to continue to deliver on our commitments to patients, physicians, payers and governments, and to drive value for our shareholders.”


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