Pfizer CFO says no decision yet on divestitures

Pfizer Inc has not decided how it might divest its nutrition or animal health businesses, the drugmaker’s chief financial officer said on Wednesday.

Pfizer in July announced it was exploring options, including spin-off or sale, of the two businesses. Their combined value could reach about $25 billion to $32 billion, according to Credit Suisse analyst Catherine Arnold.

A Bloomberg News report on Tuesday, citing anonymous sources, said that Pfizer was delaying a sale of the nutrition business to explore whether a tax-free spin-off was a better option. Asked about the report, Pfizer CFO Frank D’Amelio told an investor conference that no decision had been reached.

“We haven’t reached a conclusion on any structure,” D’Amelio said at the Morgan Stanley Global Healthcare Conference in New York.

He said the variables involved in the decision for the units included tax consequences, regulatory hurdles, potential buyers and market conditions. Pfizer has said it does not expect to make any announcement about the businesses until next year.

Some analysts have said that a spin-off of the animal health business is more likely because a sale could encounter objections from anti-trust regulators.

The drugmaker’s decision on the units came after a review of the company’s entire business portfolio under CEO Ian Read, a company veteran who took the helm in December.

The review concluded that Pfizer should hang on to its established-products unit, which sells generic drugs, and which some on Wall Street also hoped would be a candidate to be sold off.

At the conference, D’Amelio said his vision for the future of Pfizer included one business that sells innovative products and another that sells established ones, which includes generic drugs and would generate a lot of cash.

“When you get out several years, I think we’ll have those two kinds of distinct businesses,” he said. The financial goal with that structure, he said, is “consistent sustainable earnings growth over time.”

D’Amelio also said Pfizer was improving its return on investment in its research operations.

He pointed to the fact that, at the time Pfizer announced its $68 billion purchase of Wyeth in 2009, the combined research budget of the companies was $11 billion. Next year, he said, Pfizer is forecasting research spending of $6.5 billion to $7 billion.

That spending is lower than what Pfizer was spending on its own at the time of the Wyeth deal, D’Amelio said, “and I believe our productivity, our output is better.”

Pfizer’s decision to cut back research spending has been controversial. While praised by some on Wall Street as a needed move after a decade of the industry’s failure to see return on huge research spending, the cuts are a worrisome sign to others in the industry.

Eli Lilly CEO John Lechleiter, for example, has said it would be a mistake for the company to significantly cut its research budget in order to discover new therapies.

Pfizer shares were down 1 percent at $18.14 on Wednesday morning.

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By Lewis Krauskopf

Wed Sep