The New York-based pharmaceutical company said the timing of the move came as part of its regular review of businesses, combined with "improved financial-market conditions." Like many large pharmaceutical companies, Pfizer is facing generic competition on some of its biggest-selling drugs in coming years and has been adjusting its strategy accordingly.
"This is definitely outside the core area of focus for Pfizer, so it makes sense," Morningstar analyst Damien Conover said of the Capsugel business.
The potential price tag for the operation is a mystery. Capsugel brought in $740 million in 2009 revenue, but Pfizer doesn't break down its profitability, obviously key to any potential buyer.
Those profits probably aren't comparable to selling high-margin branded drugs, noted Miller Tabak analyst Les Funtleyder, and Pfizer likely questioned whether it should continue investing in the business.
"This is a resource allocation decision," he said. "At least Pfizer is taking the time to enhance the returns of its assets."
Capsugel became part of Pfizer through a series of acquisitions. It was originally part of Parke-Davis, a drug maker bought in 1970 by Warner-Lambert, which was then bought by Pfizer in 2000.
Capsugel has manufacturing operations in the U.S., along with similar locations in Europe and Asia, including China and India.
A Pfizer spokeswoman said Pfizer will likely remain a customer of Capsugel, regardless of the review's outcome. It has hired Morgan Stanley to conduct the review, and expects an announcement by the end of the first quarter.
Conover believes that a more diversified drug maker, such as Johnson & Johnson (JNJ) or GlaxoSmithKline PLC (GSK, GSK.LN) might be interested in owning Capsugel.
But it also could bring interest from generic companies that produce large amounts of pills with lower margins, including Teva Pharmaceutical Industries Ltd. (TEVA) and Watson Pharmaceuticals Inc. (WPI). In addition, generic companies could benefit from selling new versions of an existing drug.
Officials from all four companies declined to comment on any deal speculation, citing policy.
Conover noted that the business of finding new formulations and delivery methods for existing drugs, part of Capsugel's business, isn't as important to the large pharmaceutical companies as it was a decade ago.
"The industry is focusing on major steps forward in innovation. Not evolutionary, but revolutionary steps forward in drug development," he said.
As Pfizer streamlines its business--it has announced layoffs and site closures as a result of its $68 billion acquisition of Wyeth last year--the company is expected to shed more businesses.
"I would expect that they will discover things that should either be done differently or done elsewhere," Funtleyder said.
Capsugel is one of Pfizer's nine operating units. Five of them are in the Biopharmaceutical businesses group, while the other four fall into the Diversified businesses, which includes Capsugel, Animal Health, Consumer Healthcare and Nutrition.
Conover fingered Pfizer's nutrition business as a likely target for divestiture. He noted that the company may emulate Bristol-Myers Squibb Co. (BMY), which found success in spinning off a similar business as Mead Johnson Nutrition Co. (MJN)
The Pfizer spokeswoman said the review of Capsugel has "no bearing" on the other units and the company "remains committed to the Animal Health, Consumer Healthcare and Nutrition businesses."
Shares of Pfizer recently slipped 5 cents to $17.18.
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