Pfizer to Sell Infusion Systems Business to ICU Medical

Sale would enable the drug behemoth to better focus on its core pharmaceuticals business

p1Drug behemoth Pfizer Inc. (NYSE: PFE) is selling its global infusion systems business to ICU Medical Inc. (NASDAQ: ICUI) for $1 billion in cash and stock in order to better focus on its core pharmaceuticals business, as reported by Reuters on October 6th, 2016. Pfizer had acquired the hospital infusion system business, which has annual sales of about $1.2 billion, through its $15-billion purchase of Hospira in September 2015. With the current deal, Pfizer will receive $600 million in cash and nearly $400 million in newly issued shares of ICU Medical, translating into a shareholding of about 16.6% in the company.

p2Hospira’s infusion pumps and intravenous solutions are seen to ideally complement ICU Medical’s needle-free connectors and other intravenous accessories, thereby creating an infusion therapy company that offers a complete range of products. ICU also makes devices and supplies used in hospital critical care as well as safety systems for managing and delivering hazardous chemotherapy drugs. The San Clemente, California-based company expects to report adjusted EPS of $4.60 on revenue of $370 million in FY16.

ICU Medical’s financial advisers are Barclays and Wells Fargo Securities, while Latham & Watkins is its legal adviser. Pfizer’s financial advisers are Goldman Sachs and Guggenheim Securities. Skadden, Arps, Slate, Meagher & Flom LLP and Ropes & Gray LLP are its legal advisers. The deal is expected to close in Q1 FY17.

Pfizer decides to remain a single entity

p3Pfizer’s purchase of Hospira in 2015 was aimed at strengthening its generic drugs portfolio ahead of potentially divesting them. However, Pfizer announced on September 26th, 2016, after several years of analysis, that it had decided not to split into two entities. Pfizer was earlier planning to split into two entities, with one business focused on patent-protected drugs and another on cash-rich older products. Instead, the Company will retain its low-growth generics business because splitting it from Pfizer’s patent-protected products would not boost cash flow or better position the businesses in an intensely competitive market.

Pfizer had so far spent at least $600 million preparing for a potential split as a means to reduce its complexity, while rewarding shareholders with rich dividends from a split into two stocks. Toward that goal, Pfizer let go of its animal-health business and created two internal organizations.

Hospira mainly deals with sterile injectables such as antibiotics and pain medicines preloaded into syringes. Combined with such products already owned by Pfizer, they generate annual sales of about $6 billion. Pfizer projects at least $51 billion in revenue in FY16 from its portfolio of cancer drugs and vaccines as well as its generics drugs.

Pfizer’s new-drugs business reported sales of $26.8 billion in 2015 from the Prevnar pneumonia vaccine, Ibrance breast-cancer treatment and other patent-protected medicines whose sales are increasing. Meanwhile, the company’s older-drugs business notched $22.1 billion in sales mostly from products that have lost patent protection, such as cholesterol-lowering drug Lipitor and menopausal drug Premarin.

Pfizer to lay off hundreds of workers at Rocky Mount

Pfizer has been facing headwinds in the form of patent expiry for its best-selling drugs and the associated generic competition from biosimilars. To add to its woes, Pfizer is also gearing up to face a tougher pricing environment in the U.S. after both U.S. presidential candidates Hillary Clinton and Donald Trump pledged to clamp down on drug price rises. Hence, it comes as no surprise that Pfizer announced on October 3rd, 2016, that it is laying off about 400 workers at its manufacturing plant in Rocky Mount, North Carolina, which it acquired from Hospira in 2015.

The layoffs, to be implemented in H2 FY16, come in the wake of recent changes in market demand for certain products as well as the associated reduction in manufacturing volume and staffing levels at Rocky Mount. On the other hand, Pfizer’s previously announced investments in a new state-of-the-art sterile injectable manufacturing facility and new quality laboratory at the same site will continue as planned. The Rocky Mount site remains an important facility in Pfizer’s sterile injectable supply network, employing about 2,000 people at the complex.

Pfizer to sell New York headquarters

p4Pfizer plans to sell its buildings in Midtown at East 42nd Street and Second Avenue by the end of 2017 and expects to move into more modern facilities in Manhattan no sooner than H1 FY19. The company plans to lease rather than buy a new headquarters. The company moved to its headquarters at 235 E. 42nd St. in 1961 and later also occupied the adjacent building at 219 E. 42nd St.

These buildings that Pfizer own have indoor access between them and a million square feet of space. A newer complex would have more work space and room for collaboration.

Stock Performance

p5Pfizer’s stock ended the day at $33.61, gaining 0.15%, at the close on Monday, October 10th, 2016, having vacillated between an intraday high of $33.84 and a low of $33.57 during the session. The stock’s trading volume was at 16,327,152 for the day. The Company’s market cap was at $204.41 billion as of Monday’s close.

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