Pfizer Inc. (NYSE:PFE) announced that it would abandon its plans to divide into two companies and remain a single entity. The company had been considering a breakup for years. Pfizer said in April that it would make a decision on the break up by years’ end. Shares of Pfizer declined 1.7 percent on the New York Stock Exchange during Monday morning’s trading session.
The previous plan was for Pfizer to split into one business focused on patent-protected drugs and another on lucrative older products. Splitting up the company would have reduced its complexity and made operations more efficient. Shareholders would have been rewarded with the windfall from a split into two stocks.
The New York City-based drug company is one of the industry’s largest. The company holds a vast portfolio of cancer drugs and vaccines as well as copies of expensive big-molecule drugs. Pfizer is projected to earn at least $51 billion in revenue this year.
Pfizer’s new-drugs business had $26.8 billion in sales last year. The company’s older-drugs business recorded $22.1 billion in sales. Pfizer products that have lost patent protection include cholesterol-lowering drug Lipitor and menopausal drug Premarin.
Preparing for a potential split has already reportedly cost Pfizer at least $600 million. Working towards the split, Pfizer sold off its animal-health business and created two internal organizations. No outside financial or legal advisers were retained in connection with Pfizer’s evaluation of a split up, according to the company spokeswoman.
A split has not been ruled out completely. Chief Executive Ian Read said in a statement that the company would “preserve our option to split our businesses should factors materially change at some point in the future.”
Some are now expecting the pharmaceutical company to turn to further dealmaking to fuel growth. On Aug. 30, Pfizer announced a $14 billion deal to buy Medivation Inc., a highly sought after cancer drug developer. Earlier in the year, Pfizer agreed to buy atopic dermatitis drug developer Anacor Pharmaceuticals Inc. for $5.2 billion. The company also made a $17 billion deal for Hospira in 2015. Pfizer CFO Frank D’Amelio emphasized that Pfizer has continued capacity to do deals.
However, mega deals have been out of Pfizer’s reach. Late last year, Pfizer pursued an acquisition of Allergan for $150 billion. Actions by the Obama administration to deter tax-lowering inversion deals led to Pfizer walking away from the deal. In 2014, Pfizer failed in its bid to combine with Astrazenca plc for $118 billion.