With the Need to Focus on Rx Pipeline, Pfizer Mulls Divestiture of Consumer Health Unit
LITTLE FALLS, N.J., Feb. 12 /PRNewswire/ — Some of the brands found in millions of Americans’ medicine cabinets, including Listerine, Neosporin, and Sudafed, may soon be sold off once again. The fate of Pfizer’s Consumer Healthcare unit will be determined later this year as the company focuses its attention on the future of its prescription drug business.
Faced with the impending patent expirations for some of its key prescription medications, including Zyrtec, Zoloft, and Norvasc, as well as challenges to Lipitor’s patent by generic competitors and safety issues with its COX-2 inhibitors Celebrex and Bextra, Pfizer will need to invest even more aggressively in filling its pipeline with the next generation of prescription drugs. To fund this effort, the Consumer Healthcare unit — or components of it — may be sold off or divested to help management address these challenges to its prescription drugs business.
“Pfizer’s Consumer Healthcare unit represents one of the most diverse portfolios of consumer medicines and healthcare products and will command top dollar if divested,” says Laura Mahecha, healthcare industry manager for Kline & Company’s research division. “While the company’s cash position is very strong today, the additional cash earned could be used to quickly acquire late-stage development drugs to help fill the Rx pipeline.”
While the Consumer Healthcare unit’s sales account for only about 7% of Pfizer’s total revenues, this equates to nearly $4 billion, which gives the drug giant one of the largest consumer products portfolios in the nonprescription drugs industry, ranked third behind Johnson & Johnson and Wyeth.
Pfizer’s Consumer Healthcare unit comprises many leading brands across a wide range of categories. Market-leading brands include Listerine, Benadryl, Sudafed, Neosporin, Zantac, and Rogaine. These stalwarts would appeal to other nonprescription drug companies as well as consumer products companies, but the list of suitors with such deep pockets is limited. Potential acquirers include Johnson & Johnson, GlaxoSmithKline, Procter & Gamble, Novartis, or Unilever.
“Given the vast array of brands in Pfizer’s portfolio, regulators would likely require the acquiring company to divest any duplicative brands before approving the divestiture to avoid antitrust issues,” says Susan Babinsky, senior vice president and head of Kline’s healthcare consulting practice.
The business unit itself would likely command a selling price of $10 billion to $15 billion. Pfizer may decide to spin off the unit as a separate company, although a divestiture seems more likely.
Sales of the unit have not demonstrated growth since the acquisition of Warner-Lambert’s and Pharmacia’s OTC units in 1999 and 2002, respectively. U.S. sales remain at about $1.5 billion, according to the latest edition of Kline’s NONPRESCRIPTION DRUGS USA.
“Flat sales, coupled with the fact that this is a much lower margin business than prescription drugs, means Pfizer is more likely to divest itself of the unit and use the cash to bolster its Rx pipeline,” says Mahecha.
The company is expected to decide the fate of the Consumer Healthcare unit by the third quarter of this year. The impact of Pfizer’s decision will be analyzed in this year’s edition of NONPRESCRIPTION DRUGS USA.
Kline’s study, published annually since 1965, analyzes 35 product categories and 15 leading suppliers of OTC medications to the U.S. market. It provides comprehensive brand and segment sales data through all consumer outlets, including drug stores, food stores, mass merchandisers, convenience stores, health food stores, mail order, and the Internet.
For information on this study, go to http://www.klinegroup.com/cia3.htm or contact Laura Mahecha at +1-973-435-3446 or laura_mahecha@klinegroup.com. In Europe, contact Pilar Pardo at +32-2-776-0737 or pilar.pardo@kline-europe.com.
To learn more about Kline’s customized healthcare consulting capabilities for the healthcare field, including merger and acquisition assessments, contact Susan Babinsky at +1-973-435-3365 or susan_babinsky@klinegroup.com.
Established in 1959, Kline & Company (http://www.klinegroup.com/) is an international business consulting and market research firm serving the life sciences, consumer products, specialty chemicals, and energy industries.
For more information, contact: Laura Mahecha Industry Manager, Healthcare Practice +1-973-435-3446 laura_mahecha@klinegroup.com
Kline & Company
CONTACT: Laura Mahecha, Industry Manager, Healthcare Practice,+1-973-435-3446, laura_mahecha@klinegroup.com, for Kline & Company
Web site: http://www.klinegroup.com/cia3.htmhttp://www.klinegroup.com/