Global pharmaceutical company Pfizer (NYSE:PFE) today announced plans to make some major changes to its business model. The company will look to sell or spin-off its animal health and nutrition segments, estimated to be worth $16 billion dollars, in order to reallocate assets to its pharmaceutical lines, the firm’s main source of revenues. Pfizer will lose its exclusive right to sell and market its best selling drug, Lipitor, when patent protection expires this fall, a factor thought to partially motivate the move.
CEO Ian Read commented on the decision earlier today, “Both Animal Health and Nutrition are strong businesses with attractive customer bases and solid fundamentals, but distinct enough from our core businesses that their value may be best maximized outside the company. In exploring these alternatives, we can determine what options will best drive their future growth opportunities and expansion, and enable shareholders to potentially realize higher value for these businesses.”
Analysts are urging Pfizer to use money from the sales to fund new R&D initiatives, as the company is currently expected to spend 12% of annual revenue on research, below the industry standard of 15-20%. Miller Tabak’s Les Funtleyder noted, “If you don’t do it right you’re just throwing money out the door. In a perfect world they would take the money and put it into developing new drugs.”
The pharma leader has hired JP Morgan (NYSE:JPM) to advise the sale of its animal health unit, and contracted Morgan Stanley (NYSE:MS) to help with the placement of its nutrition unit. The company’s animal health unit has an estimated net worth of $10-16 billion, while the nutrition unit is valued at $6-7.5 billion. Pfizer has given a timetable of 12-24 months to orchestrate the transactions.
Pfizer is not the only company looking to offload its animal health business, as today EU regulators approved the sale of Johnson and Johnson’s (NYSE:JNJ) animal care division to Eli Lilly (NYSE:ELY) and Co. Animal care is a growing industry, with online veterinary drug retailer PetMed Express (NASDAQ:PETS) and rival Wag.com, recently acquired by Amazon (NASDAQ:AMZN), also garnering lots of attention.