There has been speculation for about two years that Pfizer Inc. (NYSE:PFE) might split up. The business was supposed to be divided into two groups – one focusing on their patent-protected drugs, and the other on generic drugs. Pfizer’s generics are on the decline, while the patent-protected drugs are showing good sales growth.
Pfizer Inc. however, announced on Monday that the split is not going to happen. This means the NYC-based drug maker will remain as one of the biggest pharmaceutical companies in the world. Pfizer is also the biggest drug manufacturer in the United States. This year, the company is projecting revenue of at least $51 billion. They have many big-molecule drugs and a rich portfolio of cancer drugs in their kitty.
The Split Will Not Help Pfizer
Apparently, after carrying out a detailed analysis, Pfizer has found that the split won’t boost their cash flow or make them more competitive. If anything, the move might disrupt the operations and lower tax efficiencies.
The company has spent $600 million on the potential split. Issuing a statement, the company said they retain the option of splitting sometime in the future. For now, developing and buying new oncology and other therapeutic drugs are going to be the focus areas of Pfizer Inc. (NYSE:PFE).
The planning for a split started in early 2014. The company said the performances of both the divisions will be tracked for three years before a final decision will be taken. Last August, the company announced that a decision will be taken by the end of the year. But it came much before that.
In a statement, the company said, “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”.
More Deals Now For Pfizer
Company shareholders are expecting more deals now, as they will improve the medicine portfolio of the business. On Monday, the Pfizer stock performed poorly, falling by 1.81% to reach $33.64 by the end of the trading day. That was not surprising, as the split would have given them two stocks – a windfall for the shareholders.
Pfizer has assured shareholders that their financial forecast won’t be affected by this decision not to split.