Possible sale of Pfizer consumer unit wins support

NEW YORK - Pfizer's announcement that it may spin off or sell its consumer products division lifted its shares today and sparked predictions that the struggling drugmaker could use billions of dollars in proceeds to acquire badly needed new medicines.

"By our calculation, Pfizer's consumer business has an implied market value of US$4.6 billion ($6.9 billion) but could be sold for 2 to 2.5 times that amount, or US$10 billion," Deutsche Bank drug analyst Barbara Ryan said in a research note.

News of the possible sale came late on Tuesday, ahead of Pfizer's annual meeting on Friday with analysts and portfolio managers.

The company in October yanked its earnings forecasts for 2006 and 2007 amid competition from generic drugs and safety concerns that have halved the sales of its Celebrex arthritis pill. It is expected to provide new forecasts at the meeting, along with progress updates on its experimental drugs.

Should Pfizer sell the consumer unit outright, JP Morgan analyst Chris Shibutani said it would be "prudent" to use the funds to buy new prescription medicines, including oncology drugs that are becoming a bigger industry focus as the baby boomer population ages and becomes more prey to cancer.

He said revenue from the new drugs could offset declining sales of big Pfizer medicines losing patent protection, including Norvasc for high blood pressure and its Zoloft anti-depressant.

The world's largest drugmaker said it was undertaking a review to determine the value of the consumer products unit at a time when prices are attractive for large, high-quality consumer businesses. It also said retaining the unit was an option.

"We believe Pfizer is more likely to either sell this consumer health business or perhaps create some type of partnership with another consumer health business where synergies could exist," said Lehman Brothers analyst Tony Butler.

The consumer division, whose US$3.9 billion in sales last year accounted for 8 per cent of company revenue, includes popular brands such as Rolaids antacid, Sudafed cold pills, Listerine mouthwash and Rogaine hair-growth product.

Shares of Pfizer were up 5 per cent to US$26.21 in afternoon trade on the New York Stock Exchange.

Bill Schmitz, a consumer products analyst for Deutsche Bank, said Colgate-Palmolive Co. is an obvious potential buyer. He said household products company Procter & Gamble Co is a less likely buyer because its Crest Pro-Health mouthwash might pose an antitrust conflict with Pfizer's Listerine.

He said Colgate, which does not have a mouthwash brand in the United States, would be most interested in Listerine.

"It will fit in nicely for them," Schmitz said.

"Also, (Colgate) is in the midst of their restructuring, but it gives them a whole other leg of growth after their restructuring is completed."

- REUTERS