Pfizer Inc. (NYSE: PFE) shares traded down marginally Monday morning after the company announced that it will abandon its plan to split into two companies. This pharma giant has decided against this move, ultimately determining this is not the best course of action to maximize future shareholder value.
As the company previously indicated, the process for making a decision was guided by criteria that included evaluating the performance of each business within Pfizer, determining if each business could compete as a stand-alone entity, assessing if trapped value existed in a combined entity and if any trapped value could be unlocked efficiently. In addition, the company evaluated whether key strategic and operating imperatives could best be achieved in the current structure versus two, separate publicly traded companies.
Pfizer believes it is poised to grow its Innovative Health and Essential Health businesses, so that they can be leaders in their markets. Since 2010, Pfizer received 20 new drug approvals and launched multiple products to address patients unmet medical needs. Also the company has established an industry leading portfolio of sterile injectables, biosimilars and effective, high-value treatments that have lost their market exclusivity. Keeping both together, makes more sense from a value perspective.
The company expects to move forward with a focus on its strategic priorities to grow and increase operational efficiency to be more competitive. This decision is said to not impact the 2016 financial guidance, while the company reaffirmed its guidance for 2016.
Ian Read, board chair and chief executive of Pfizer, commented:
With this decision, our two distinct businesses will remain separately managed units within Pfizer, which we believe is currently the best structure to continue to deliver on our commitments to patients, physicians, payers and governments, and to drive value for our shareholders. 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 as compared with operating as two, separate publicly traded companies. We will continue to generate the financial information necessary to preserve our option to split our businesses should factors materially change at some point in the future.
Shares of Pfizer were last seen down 1.6% at $33.73, with a consensus analyst price target of $39.47 and a 52-week trading range of $28.25 to $37.39.