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For a multinational that has grown through mega-acquisitions, drugmaker Pfizer is consciously shedding weight.
In 2006, it had divested a clutch of its consumer products – including mouthwash Listerine, cough syrup Benadryl and skin cream Caladryl – to Johnson & Johnson. And the fate of Pfizer's animal health business, also in divestment mode, awaits closure.
This week started with Pfizer announcing one more divestment - of its nutrition business to Swiss food major Nestle for a consideration of $11.85 billion, in cash. Nestle out-ran fellow competitor Danone in bagging Pfizer's nutritional business.
The transaction will not have a repercussion in India, as the company does not sell nutrition products here.
Difficult times ahead
But Pfizer's strategy is a sign of the difficult times facing drug majors – as it looks to shed its non-core businesses and focus on its staple, pharmaceuticals.
The going is set to get increasingly tough for drug-majors, as their innovative medicines move out of the ‘exclusive-halo' that a patent grants them. In Pfizer's case, for instance, the patent exclusivity on its blockbuster $13 billion cholesterol drug Lipitor ended last year, opening the market to copy cat versions of the same medicine. Further, the new products pipeline too, is under a tremendous squeeze for drug majors, as regulators put in more stringent standards and companies put their funds into fewer research molecules – only those showing the potential to strike success.
Following the latest Nestle transaction, Pfizer Chairman and Chief Executive Officer, Mr Ian Read, said that the sale was “consistent with Pfizer's intention to generate the greatest value for shareholders by maximising the value-creation potential of our businesses and prudently managing our capital allocation”.
More spin-offs?
Pfizer's nutrition business includes paediatric nutrition products including specialty infant and toddler formulas, follow-on formulas and maternal and adult nutrition products. And it has its tentacles across 60 countries, including the US, Latin America, Europe, West Asia, Africa and Asia.
But as global analyst circles expect Pfizer to spin off more businesses, as it sharpens its focus on pharmaceuticals – Pfizer's management plays its cards close to its chest.
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