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Pfizer chief sets sights on smaller targets

by Ben Fidler  |  Published January 10, 2012 at 4:29 PM
pfizer_227x128.jpgAnyone looking for Pfizer Inc. to repeat its megamerger history in the wake of Lipitor's patent expiration apparently should look elsewhere.

Speaking at the J.P. Morgan Healthcare Conference in San Francisco Tuesday morning, Jan. 10, Pfizer CEO Ian Read expressed a preference for smaller acquisitions rather than the blockbuster purchases the New York-based pharmaceutical titan has made in the past.

"I'm disinclined in looking at mega-acquisitions," Read said. "You never say never, but ... more and more, the value gets transferred too much to the seller and not the buyer."

Pfizer has carried out some of the largest deals in the history of the drug sector, including acquisitions of Wyeth ($68 billion), Pharmacia ($57 billion) and Warner-Lambert ($114 billion). The company's most substantial deal in the past two years came when it paid $3.6 billion for King Pharmaceuticals Inc. in October 2010. Since then, however, Pfizer has become more focused on shrinking rather than acquiring, as it prepared for its largest revenue producer, the cholesterol pill Lipitor, to go off patent, which happened on Nov. 30.

"2011 was a year of setting a new direction and committing the company to being a focused, innovative pharma company," Read declared.

As part of a strategic review based on the idea of becoming such an entity, Pfizer cut its research and development spending in areas where it felt it didn't have a competitive advantage, Read said, and formed strategic partnerships with contract research organizations Parexel International Corp. and Icon plc while shedding agreements with a number of entities that were previously carrying out its clinical trials.

"Before, we were dealing with 18, 19, 20-plus partners," Read said. "It's difficult to have quality of work."

Pfizer has also been shrinking through divestitures. It shed its capsule-making Capsugel Belgium NV business in April and plans to either sell or spin off its animal health and nutrition divisions.

"Those businesses are great businesses, but they represent unlockable value that can be better [realized] outside of Pfizer," Read said.

Pfizer has also moved toward buyouts of the middle-market variety, with deals for companies such as Icagen Inc. ($56 million) and a 40% piece of Brazil-based Laboratório Teuto Brasileiro SA ($240 million). The Icagen move gave Pfizer a company developing orally administered small-molecule drugs that modulate ion channels, hoping to utilize those modulators in disease areas such as epilepsy, pain and inflammation. Through the Brazil purchase, Pfizer expanded its presence in an emerging market and in generic drugs -- Teuto boasts a portfolio of about 250 generic products. Pfizer has the option to buy the remaining 60% of Teuto's shares beginning in 2014.

It was strategic moves such as those that Read showed enthusiasm for Tuesday.

"Bolt-on acquisitions are the type I really want [Pfizer] to do," he said.
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Tags: Capsugel Belgium NV | Ian Read | Icagen Inc. | Icon plc | J.P. Morgan Healthcare Conference | King Pharmaceuticals Inc. | Laboratório Teuto Brasileiro SA | Lipitor | Parexel International Corp. | Pfizer Inc. | Pharmacia | Warner-Lambert | Wyeth

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