Pfizer plans to internally separate its commercial operations into three business segments, two of which would focus mainly on patent-protected brands (Pfizer’s so-called ‘innovative’ core), and one that would focus on generics (which the company terms its ‘value’ business). The announcement has been seen as a possible move towards spinning off Pfizer’s generics drugs business.

Separate businesses
The changes will be implemented in the next fiscal year in countries that do not require a consultation with works councils or unions, and will be implemented in countries that require consultation after the successful conclusion of those processes. The final split is not expected before 2017, partly because Pfizer needs three years of audited financial statements, and partly because it needs time to get the businesses running smoothly on a separate basis.

According to Reuters, Pfizer generics had global sales last year of US$10.2 billion, with considerably lower profit margins than patent-protected drugs. The business represents 17% of total sales, with the vast majority from overseas.

Having already spun off its nutritional products and animal health units, analysts have been urging Pfizer to spin off its generics business. Earlier in the year, Pfizer’s CEO, Mr Ian Read had said there was little point speculating on a split before the company was able to evaluate whether shareholders would prefer to invest in two distinct companies (patented drugs and generics). This latest announcement marks the beginning of that evaluation, which will continue for the next three years.

Generics production and collaboration
The ‘value’ business will be headed by Mr John Young, currently President and General Manager of Pfizer's Primary Care Business Unit and a member of Pfizer's Executive Leadership Team. The business will include products that will lose patent protection in major markets by 2015, as well as biosimilars and current and future established product collaborations, such as the company’s existing partnerships with Mylan in Japan, Teuto in Brazil and Hisun in China. First-quarter sales of Pfizer generics in 2013 fell 16% to US$2.35 billion, reducing overall company results.

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