Pfizer-Zoetis transition shouldn't impact veterinarians, industry expert says

Animal health division to be independent company by July 2013

June 20, 2012 (published)
By Jim Downing
Veterinarians likely won't notice much of a change when Pfizer Inc.'s animal health division becomes the stand-alone company Zoetis, says an animal-health industry analyst who follows the pharmaceutical industry.

John Volk, with Brakke Consulting, a Dallas-based management consultancy specializing in the animal-health sector, said that aside from the name change, the shift from Pfizer Animal Health to Zoetis shouldn't disrupt research and development or relationships with customers.

Volk noted that Pfizer's animal-health research and development center in Kalamazoo, Mich., already is fairly independent from the pharmaceutical giant's human-pharmaceutical research hub in Groton, Conn. Volk speculated that Pfizer and Zoetis might retain research ties that would give Zoetis access to molecules developed by Pfizer with potential animal-health applications.

Pfizer Animal Health employs 9,000 and recorded revenue of $4.2 billion in 2011.

Pfizer, the world's largest drug company, has been looking openly for ways to jettison its animal-health business since last summer. On June 7, the company announced that rather than selling the division, it is preparing to spin off the animal-health business into an independent company, to be called Zoetis. 

Pfizer is planning an initial public offering for a minority stake in Zoetis. More details on the stock offering will be provided as part of Pfizer's second-quarter earnings announcement, according to the news release (in 2011, Pfizer released second-quarter earnings Aug. 2). Pfizer plans for Zoetis to be an standalone company by July 2013.

According to the Pfizer Animal Health website, feline and canine pharmaceuticals marketed by the company include Antisedan, Assure Parvo, Assure FeLV, Brochicine, Cerenia, Clavamox, Convenia, Dexdomitor, Felocell, Fungassay, Leukocell, Ovassy, Palladia, ProHeart, Revolution, Rimadyl, Simplicef, Temaril-P, Zeniquin, Vanguard and Witness.

On its own, Pfizer's animal-health business could be valued at $15 billion to $18 billion, according to analyst estimates cited by the Wall Street Journal and Reuters

Pfizer said in the news release that it is spinning off the animal-health business in order to sharpen its focus on is core pharmaceutical products. Pfizer sold its infant nutrition business, a unit that made baby formulas, in April to Nestle SA for $11.85 billion. While Pfizer initially will hold a majority stake in Zoetis, analysts speculate that the company will divest completely, perhaps through a stock-exchange deal that would reduce the total number of Pfizer shares, according to the Wall Street Journal. Pfizer also has said that it may use cash from the sale of the animal-health business to repurchase shares. 

Reducing the number of Pfizer shares could help to increase the company's per-share earnings as it looks for ways to replace the revenue it is expected to lose as patent protection ends for some of its top-selling products, including Lipitor. The cholesterol drug, which brought in $9.6 billion in revenue in 2011, was opened to generic competition in November 2011.

Volk, the animal-health industry analyst, noted that a long-term challenge for Zoetis will be to establish the brand cachet that Pfizer Animal Health enjoyed by virtue of being part of a company with a very strong scientific reputation. 

"Because Pfizer has been associated with very important human pharmaceuticals, it has created an image of strong science," Volk said. "The onus will be on Zoetis to prove what they stand for."

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