Here's Which Pharma Giants Might Want to Buy Pfizer's Consumer Health Unit

A potential sale or spinoff of Pfizer's (PFE) consumer health unit looks like a sound move for Ian Read's pharmaceutical company after scrapping plans to split into two public companies. Such a move would likely command interest from a number of Big Pharma companies looking to bulk up their own over-the-counter units. 

Pfizer's consumer health business, which operates as part of the Pfizer Innovative Health segment and is home to brands including Chapstick and Advil, could fit with a lot of pharmaceutical companies that already encompass consumer units.

At the same time, such a move could theoretically add to the pharma giant's existing war chest for potential transformative M&A, which looks more likely following a Republican sweep that increases the likelihood that offshore profits are repatriated to the U.S. 

The potential buyer pool for the consumer health unit likely includes GlaxoSmithKline  (GSK) , Johnson & Johnson  (JNJ) and Sanofi  (SNY) , said Damien Conover of Morningstar.

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Germany's Bayer  (BAYRY) , which spent $14.2 billion for Merck's (MRK) unit in 2014 to add brands including Claritin allergy medication and Dr. Scholl's footcare products, would also be a logical buyer if it weren't still working to complete its $66 billion deal for Monsanto (MON) , he added. Meanwhile, Glaxo and Novartis (NVS) in 2015 fused their consumer health businesses through a joint venture to be run by Glaxo. 

"It's one of the better consumer units out there," Conover said in an interview Thursday, describing the unit as solidly positioned but not "critical" for the New York pharma to retain. "It's going to get a solid valuation."

Pfizer shares rallied about 4.7% to $33.64 Thursday after Reuters reported late Wednesday that the company is evaluating a potential sale or spinoff of its consumer health division that could value the unit at as much as $14 billion. 

Pfizer spokeswoman Sally Beatty told The Deal Thursday the company doesn't comment on speculation, but noted by email that Read's comments about the unit on Pfizer's Nov. 1 third-quarter earnings call stand true. 

In last week's discussion with investors, the chairman and CEO called its consumer health unit a "valuable business," though hinted that everything is on the table.  

"It's growing well," Read said on the call. "We're investing. We've made acquisitions. But like all our businesses, we all look at them and we subject them to tests of are they worth more inside or outside of Pfizer? And we'll continue to run those tests."

Given the management team has successfully completed spinoff transactions in the past and is always looking for new ways to unlock additional value, it would make sense for Pfizer to evaluate the unit. The company in 2013 spun off its animal health division into Zoetis  (ZTS) , which today is the world's largest provider of therapies for livestock and companion animals.   

In September Pfizer decided against splitting into two public independent companies, having evaluated for several year the possible break up of its established, older drug product portfolio that makes up Essential Health, and its newer, patent-protected drugs, otherwise known as Innovative Health.

Innovative Health encompasses five therapeutics-focused integrated businesses plus the consumer health unit. 

The probability the board would call for a breakup waned as a result of the absence of larger-scale, transformative M&A, John T. Boris of SunTrust said at the time. Before failing to merge with Brent Saunders' Allergan  (AGN) earlier this year, Pfizer had in 2014 failed to combine with AstraZeneca  (AZN) for $118 billion.

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The addition of Anacor and Medivation, as well as a $17 billion deal for Hospira in 2015 that bulked up its Essential Health division, weren't enough to position the businesses so that each would perform well as stand-alone entities, according to the analyst. 

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