Global pharmaceutical giant Pfizer may be considering selling its hospital drug division. Foreign media reported this week that Pfizer is seeking to sell its hospital drug division to divest non core assets due to pressure from radical investor Starboard Value.
Faced with the situation of declining stock price and performance, Pfizer has frequently taken measures to vigorously cut expenses.
Exposed to consider selling business or worth billions of dollars
According to three informed sources cited by foreign media, Pfizer is seeking to sell its hospital drug division to divest non core assets due to pressure from radical investor Starboard Value.
This department was established after Pfizer acquired Hospira for approximately $17 billion in 2015 and is now named Pfizer Hospital Pharmaceuticals. Insiders say that the pharmaceutical giant has hired Goldman Sachs to assess potential buyers' interests, including private equity firms and other pharmaceutical companies. Due to the confidentiality of this discussion, informed sources have requested anonymity.
After acquiring Hospira, Pfizer merged its biosimilar business with its existing department to form a new division that produces expensive biosimilar drugs at lower costs. In 2017, Pfizer chose to sell its acquired hospital infusion system business. At present, Pfizer's hospital division is a subsidiary of Pfizer, mainly focusing on anti infective drugs and sterile injections used in clinics and hospitals.
The aforementioned insider stated that the business could be worth billions of dollars and currently generate nearly $500 million in revenue (before deducting expenses such as interest, taxes, depreciation, etc.). Insiders also suggest that Pfizer may choose to retain the department.
Pfizer and Goldman Sachs declined to comment on this.
As a hedge fund, Starboard Value has launched radical advocacy campaigns against large pharmaceutical companies such as Bristol Myers Squibb. In recent months, Starboard Value has been increasing its holdings of Pfizer Inc. stock. According to reports, as of mid October this year, the fund has held approximately $1 billion worth of shares in Pfizer, equivalent to about 0.6% of its market value.
Pfizer is currently burdened with high levels of debt, with the New York based company holding $61.5 billion in long-term debt by the end of 2023. In recent years, Pfizer has also been continuously divesting its non core businesses and ownership shares to reduce its debt scale. In October of this year, Pfizer also sold its stake in British consumer healthcare company Helion worth approximately $3.26 billion. Pfizer's decision to take this action is due to pressure from Starboard Value. The latter has criticized Pfizer's management for overspending on large-scale acquisition projects and failing to generate high profit returns from these transactions or internal research and development of new drugs.
Selling over $5.5 billion in cost reduction targets
Relying on the profits brought by COVID-19 oral medicine and vaccine products, Pfizer will achieve a revenue of 100.3 billion dollars in 2022, with a year-on-year growth of 23.43%, a record high. Since then, due to the weakening of COVID-19 related products' contribution to the performance, Pfizer's performance began to decline. In 2023, its revenue fell 41.7% year on year, to 58.496 billion US dollars, and its ranking in the global pharmaceutical enterprises' revenue scale also dropped from the first place to the fourth place.
Pfizer is also taking measures to prevent a decline in performance. Last year, Pfizer acquired Seagen, a leading antibody conjugated drug company, for $43 billion, making it one of the largest transactions in the company's history. The CEO of Pfizer has stated that the transaction is expected to increase the company's performance by $3 billion in 2024 and drive future growth.
At the same time as external acquisitions, Pfizer is also adjusting its internal structure and cutting expenses. Pfizer stated in a conference call at the end of last year that the company is considering rebuilding its oncology business unit, with the newly established department responsible for all aspects of drug early development, research collaboration, and product commercialization.
Reducing expenses is also an important measure taken by Pfizer to cope with the decline in performance. Last October, Pfizer released a cost adjustment plan totaling $3.5 billion, which included measures such as closing a factory in New Jersey. By the end of last year, Pfizer planned to cut another $500 million in costs based on this foundation. In May of this year, Pfizer announced in a statement that it would launch a multi-year cost reduction plan that involves improving operational efficiency, improving work structure, enhancing product portfolio, and other aspects. The plan will be implemented in multiple stages, including saving $1.5 billion by the end of 2027. So far, Pfizer's total cost cutting goal has reached $5.5 billion. The reporter found through reviewing public information that since the plan was announced, Pfizer has closed factories in New Jersey, Ireland, and other places, with a cumulative layoff of over 1000 people.
Under a series of measures, Pfizer's performance has improved, achieving revenue of $45.864 billion in the first three quarters, a year-on-year increase of 2%, and adjusted profit of $14.124 billion, a year-on-year increase of 43%. Pfizer has also raised its full year revenue guidance, raising the revenue range for 2024 from $59.5 billion to $62.5 billion to $61 billion to $64 billion. However, the capital market does not foot the bill. Since the beginning of this year, Pfizer's stock price has fallen by about 7%, while the S&P 500 index (S&P 500) has risen by nearly 26% during the same period.
Selling assets may be the next move for this pharmaceutical giant. During the recent earnings conference call, Pfizer CFO Dave Denton stated that the company has already repaid approximately $4.4 billion in debt this year and will continue to evaluate non core assets available for sale.
New Beijing News reporter Zhang Xiulan