Pfizer Reorganises Company Into Three Major Divisions

Pfizer Reorganises Company Into Three Major Divisions
July 12, 2018

 

Pharmaceutical conglomerate Pfizer Inc. (NYSE: PFE) announced that it is reorganising its business into three units, a day after delaying drug price increases for a maximum period of six months, following opposition from the US President Trump for increasing the prices of some medicines. The reorganisation effectively segregates consumer health-care business that Pfizer has been trying to divest since last year. As explained below, this is expected to benefit the company in the long-term. Therefore, we are expecting the stock of Pfizer, which closed at $37.21, to move up in the days ahead.

The New York-based company will reorganize its business into three divisions namely Innovative Medicines, Established Medicines and Consumer Healthcare. The changes will become effective at the beginning of fiscal 2019.

Pfizer stated that Innovative Medicines business will include all the units of Pfizer Innovative Health business as well as a new Hospital Medicines business division. Pfizer’s global portfolio of anti-infective medicines and sterile injectable will be commercialised by Hospital Medicines business. Pfizer believes that this will enable the company to focus better. Pfizer also plans to include its biosimilar portfolio into its Oncology and Inflammation & Immunology business units. As these divisions have considerable therapeutic area specialisation in the commercial, medical and patient experience domains, Pfizer believes that it will provide a strong commercialisation platform for these medicines.

Pfizer sees an increasing demand for new innovative medicines. Therefore, it is fast tracking biological science research, leading to breakthrough solutions. With a strong portfolio of products, a flurry of launches starting in 2020, and a powerful product pipeline, Pfizer is confident of registering an impressive growth in this business.

The Established Medicines business will include a major portion of Pfizer’s off-patent solid oral dose legacy brands, including Lipitor, Viagra, Lyrica, Norvasc and few other generic medicines. This business will have its operations across the globe.  Therefore, it will have unique and fully-dedicated manufacturing, regulatory and marketing functions that will provide greater autonomy and make it operate as a perfect stand-alone business within Pfizer.

Pfizer will lose the exclusivity of Lyrica in the US in December 2018. The company believes that Established Medicines business is well positioned to provide sustainable, medium revenue growth. Pfizer also estimates the rising middle class in emerging markets will generate considerable demand for its branded and established generic medicines.

All of Pfizer’s over-the-counter medicines will come under the Consumer Healthcare (PCH) business. This segment will operate in a relatively autonomous manner, with its own manufacturing and regulatory capabilities.

Pfizer stated that the announced changes will not impact “capital allocation priorities” of FY18 outlook. The reorganization will reflect in 1Q19 earnings. Considering the advantages the reorganization will offer to Pfizer, fundamentally, we expect the stock to perform well in the near-term.

Technically, the stock has broken the resistance at 36.75 levels, as shown in the price chart below. The Chaikin money flow indicator is in the positive region. Furthermore, the stock is also trading above its 50-day moving average. Therefore, we are expecting Pfizer to move up in the short-term.

Pfizer - Technical Analysis - 12th July 2018

Instead of buying the stock by investing a large sum of money, we are planning to trade a binary call option contract. However, we require Pfizer to trade near $37. Furthermore, the contract should remain valid at least until July 19th.

Disclaimer: The trading analysis offered here is our opinion. It is not provided as trading advice, merely an indication of our trading plan. We cannot guarantee success and we encourage traders to incorporate a strong money management strategy to limit losses. Please use this article as part of your own research before formulating strategies prior to trading.

Richard W

Richard W

Richard is the guy who know everything there is about the financial industry, working in a top firm for over 15 years, he will give the lowdown on some of the biggest companies in the world


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