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Anne Law

Pfizer reorg signals possible breakup

by Anne Law | Dun & Bradstreet Editor

July 30, 2013 | No Comments »

PfizerBIZMOLOGY — Weakened by the downfall of its top-selling pharmaceutical, Pfizer continues to pare down operations and shave off expenditures to keep shareholders happy with returns. News this week that Pfizer will restructure into three distinct business units fuels speculation that a future incarnation of the world’s top drugmaker could look even smaller.

The company’s announcement coincided with Q2 earnings reports. Pfizer’s 7% sales decline — on top of a 13% dip in fiscal 2012 following Lipitor’s patent loss — fell in line with analyst expectations, and the company has managed to salvage its profits by conducting asset divestitures and implementing cost-control programs.

While it continues to seek growth through drug launches, collaborations, and acquisitions, Pfizer’s massive downsizing efforts over the past few years have included layoffs, facility closures, and consolidation efforts across its R&D, manufacturing, sales, marketing, and administrative organizations.

Since CEO Ian Read took the helm in 2010, Pfizer has divested entire divisions, including the 2013 spinoff of its animal health unit, Zoetis, and sales of the capsule manufacturing and nutrition businesses during 2011 and 2012.

So it’s no wonder that this recent restructuring announcement would lead to speculation about an even larger breakup, especially since Pfizer has installed new leaders for each of its three commercial divisions and plans to implement an independent financial reporting structure. While a spinoff of one of these massive Pfizer divisions wouldn’t be immediate, the restructuring does hold the potential to improve shareholder value.

Industry Impact: Pfizer is not alone. Most of the top drugmakers are battling the impact of generic competition through cost-cutting efforts and reorganizations. Pfizer’s efforts are doubled as it works to absorb the huge 2009 acquisition of Wyeth. Other drugmakers have chosen to seek growth through smaller acquisitions and partnerships, as well as internal R&D.

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