Pfizer, Inc. PFE announced that it is re-organizing its business into three business segments, separating its consumer healthcare business into a standalone unit. Beginning 2019, Pfizer will report under three new business units — Innovative Medicines, Established Medicines and Consumer Healthcare. Presently, Pfizer has two reporting segments — Innovative Health and Essential Health.

The present Innovative Health unit will be called Innovative Medicines. Other than including all the current Innovative Health business units, Innovative Medicines will include a new Hospital Medicines business unit created for sterile injectable and anti-infective medicines, which are presently recorded under Pfizer’s Essential Health unit. Also, biosimilars will now be included under the Oncology and Inflammation & Immunology business segments in the Innovative Medicines unit.

The Essential Health unit will be renamed to Established Medicines. This unit will continue to include Pfizer’s legacy brands that have lost or will lose market exclusivity including Lyrica, Lipitor, Norvasc and Viagra, and certain generic medicines. While Lipitor, Norvasc and Viagra have already lost patent exclusivity, Lyrica is expected to lose the same in December this year.

Pfizer expects a significant reduction in the impact of patent protection losses post-2020 (after Lyrica’s loss of exclusivity). Last year, Pfizer had said that while loss of exclusivities (LOE) hurt 2017 sales by $2.1 billion, the negative impact will go down to about $2 billion in each of the next three years (through 2020). The LOE impact will reduce further post 2020 and will go down to approximately $1 billion in 2021.  It will not be more than $500 million from 2022 through 2025. With potentially lower LOE impact, Pfizer is optimistic that the Established Medicines unit can generate sustainable modest revenue growth. 

The Consumer Healthcare unit, which was until now a part of Innovative Health, will include all of Pfizer’s over-the-counter drugs. Pfizer is exploring strategic alternatives for its Consumer Healthcare segment including a partial of a full separation through a spin-off, sale or other transaction. A decision regarding the same is expected to be made this year and Pfizer may ultimately opt to retain the business.

Pfizer is having a tough time finding a buyer for its Consumer Healthcare segment, In March, British companies Reckitt Benckiser Group and Glaxo GSK pulled out of the discussion with Pfizer to buy its Consumer Health segment. 

Some investors believe the split can make the sale easier. Some also speculate that Pfizer may sell its generics unit in a couple of years.

The news of business re-organization comes a day after Pfizer deferred its recent price increases of several prescription drugs after being criticized by Trump. There are concerns that price hike by one company may soon trigger a market-wide increase in prices by drugmakers like J&J JNJ, Merck MRK and others.

This year so far, Pfizer’s shares have increased 2.7% against a decrease of 1.4% for the industry.

Pfizer currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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