Take An Advil? Pfizer Looking At Options For Consumer Health Business

Way back in 2013, Pfizer (PFE) CEO Ian Read plotted a future course that could have included a spinoff several years down the line. Since then there have been constant rumors and speculations about possible breakups and portfolio changes, but those were ultimately rejected. Last week though, the company shifted gears by formally announcing that it is considering its strategic options for its consumer health business and that a decision would be made sometime in 2018. No one can accuse them of rushing this decision.

Pfizer’s consumer health business generated ~$3.4b in revenue last year and has some very well known brands within its portfolio including Advil, Chapstick and Centrum. That was a surprise to me. According to Mr. Read, there is a connection between consumer health and Pfizer’s other businesses, but ‘it is also distinct enough…that there is potential for its value to be more fully realized outside the company.’ The company has pursued some extraordinarily large deals over the past few years including Allergan (AGN), but it hasn’t worked out. Perhaps they felt it was time for a different tact?

Regular readers of this site know that ‘strategic options’ typically end up as either a sale or a spinoff. It seems Pfizer’s portfolio could be attractive to all of the major players in the consumer health market and some are even tossing Nestle’s name around as a potential suitor. In terms of price tags, the press has tossed around numbers ranging from $10-15b which would be a nice multiple. It will be interesting to see what impact Merck’s (MRK) planned consumer health sale has on this process.

There are lots of factors which go into these ‘strategic’ decisions, but I imagine that the price tag (and associated taxes) are very important considerations. Pfizer split-off its animal health business Zoetis (ZTS) in a two step transaction back in early 2013 so it is experienced in this space. For now, it seems like there isn’t much to do until 2018, but we will keep you updated as more information is released.

Disclosure: Author holds no position in any stock mentioned.