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Pfizer's $11.85B Deal a Baby Step in Drugs Refocusing (Update 1)

In December 2010, Read took over as CEO of Pfizer after the retirement of Jeffrey Kindler, and has led sweeping change. The company has revamped its drug R&D processes, launched dividend and share buyback increases and announced multi-billion dollar sale and spinoff efforts.

Still, Monday's deal could put Pfizer back in the acquisitions game, where it's been a prolific spender. That's especially the case as Pfizer tries to revamp its drugs R&D pipeline after years of underinvestment relative to some competitors.

"We continue to believe that Pfizer needs to make more significant acquisitions in the future to offset industry-wide price pressures as well as to build a stronger R&D platform for the long term," wrote Jefferies analyst Jeffrey Holford in a Monday note reacting to the baby health unit sale. Because of the higher-than-expected price tag, Holford says that Pfizer may target spun off drugs units of Abbot Labs and Bristol-Myers (BMY).

"The rich multiple offered for Pfizer's Nutrition business reinforces our view that Abbott is significantly undervalued on a sum of the parts basis and that significant value can be unlocked following the spin-off of AbbVie."

Previous to Monday's deal, Pfizer had been one of the most aggressive post-crisis M&A players, buying Wyeth in 2009 for over $60 billion and King Pharmaceuticals for $3.3 billion a year later. Overall, Pfizer has cut $230 billion worth of deals since 1987, according to Bloomberg data, which shows that its average acquisition is nearly $4 billion.

In 2011, Pfizer saw its profitability rise to a post-recession high of $12.8 billion on sales of nearly $67.5 billion.

For more on health care sector spinoffs see how a Covidien split continues the breakup of the Tyco empire. See 5 short sighted stock spinoffs for more on corporate breakups.

-- Written by Antoine Gara in New York.
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