Pfizer’s Animal-Health Unit is Seeking $2.2 Billion in IPO

In June 2012, pharmaceutical mogul Pfizer announced Zoetis, Inc., the company’s spin-off group of its animal health sector. Zoetis is now looking to become a public company, and is seeking $2.2 billion in an initial public offering.

When Pfizer announced Zoetis last summer, the spin-off was set to be complete by July 2013; instead, Pfizer is selling Zoetis, along with some of its other non-drug units, in an effort to downsize Pfizer due to revenue losses. Last April, Pfizer sold its infant-nutrition business to Nestle for $11.9 billion.

Like Pfizer, Zoetis’ concentration is drugs. A third of the company’s revenue derives from anti-infectives, vaccines, parasite killers, food additives and other drugs. The remainder of its revenue comes from the livestock market and companion animals, or pets.

Since Zoetis specializes in animals, its business model is quite different from a human drug company. Namely, animals don’t have health insurance, so Zoetis receives money through different means: pet owners, ranchers and farmers who are willing to invest in the company. Zoetis doesn’t make blockbuster drugs like its parent; yet, because animal drugs aren’t bound to similar patent rules as human drugs, drug developers don’t have to worry about generic competition.

Pfizer is offering 86.1 million shares for purchase, $22-25 each. On September 30, Zoetis was almost $580 million in debt; in early January, the company was able to raise $3.65 billion in its first public debt sale. Zoetis forecasts an annual growth of 5.7% from now to 2016 — human medicines have higher drug failure rates than animal medicines, since there are less safety concerns, and animals have lower life expectancies.

Pfizer has many pharmaceutical competitors: Merck, Bayer, Boehringer, Ingelheim, Newport Laboratories and Sanofi-Merial. Bayer’s newest drug, the blood thinner Xarelto, is facing stiff competition from Pfizer’s blood thinner Eliquis, which recently won approval in the US. Though Pfizer is downsizing, it is still coming out on top in the human medicine world.

Conceived, Developed and Written by Dr. Subodh Das and Tara Mahadevan

January 31, 2013

Fluid Management Systems

Copyright 2013   All rights Reserved by Fluid Management Systems, Inc.

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