Pfizer’s Strategic Shift: Exploring Sale of Hospital Drugs Unit
As the pharmaceutical industry continues to evolve, Pfizer is taking bold steps to refocus its business and alleviate debt. According to insiders, the company is considering the sale of its hospital drugs unit, Pfizer Hospital, in a bid to divest non-core assets and appease activist investor Starboard Value.
A Strategic Acquisition
The hospital drugs unit was formed following Pfizer’s $17 billion acquisition of Hospira in 2015. Since then, the company has integrated the biosimilars business with its own unit, manufacturing lower-cost near copies of expensive biotech drugs. In 2017, Pfizer sold the hospital infusion system business, further streamlining its operations.
A Lucrative Opportunity
Pfizer Hospital, now a subsidiary focused on antibiotics and other drugs delivered as sterile infusions or injectibles in hospitals and clinics, could be worth several billion dollars. The business generates nearly $500 million in earnings before interest, taxes, depreciation, and amortization. Although a deal is not guaranteed, the potential sale could provide a significant boost to Pfizer’s finances.
Debt Reduction Efforts
Pfizer’s debt reduction strategy is well underway. The company has already shed non-core businesses and ownership stakes in companies, including the sale of a $3.26 billion stake in British consumer healthcare group Haleon in October. With long-term debt of $61.5 billion at the end of 2023, Pfizer is committed to reducing its debt pile.
Pressure from Starboard Value
Pfizer’s efforts come as the company faces scrutiny from activist investor Starboard Value, which has criticized management for overspending on big acquisitions and failing to produce profitable new drugs. The acquisition of cancer drugmaker Seagen for $43 billion last year has added to the pressure. As a result, Pfizer’s shares have underperformed the S&P 500, declining about 7% this year.
A Path Forward
On its recent post-earnings conference call, Pfizer CFO Dave Denton emphasized the company’s commitment to evaluating non-core assets for potential sale. With the hospital drugs unit on the table, Pfizer is poised to make significant strides in its debt reduction efforts. As the company navigates this critical period, one thing is clear: Pfizer is committed to refocusing its business and driving growth in the years to come.
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