How Much Is Pfizer’s Consumer Healthcare Business Worth?

by Trefis Team
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Pfizer’s (NYSE:PFE) consumer healthcare business could be worth as much as $20 billion. The company has been weighing different options for its consumer healthcare business, including a spin-off or sale. In the latest update, Reckitt Benckiser is reported to have pulled out from the auction, potentially leaving GlaxoSmithKline as the key contender for Pfizer’s consumer healthcare business. Note that GSK is already a big player in this segment with annual revenues of over $10 billion, compared to roughly $3.5 billion for Pfizer.

We have created an interactive dashboard that shows our estimates for Pfizer’s Consumer Healthcare business. You can adjust any of our estimates or forecasts to see the impact changes would have on the Consumer Healthcare business valuation. Below we discuss more on the segment.

Pfizer Seeking $20 Billion

Pfizer’s consumer healthcare business could be worth as much as $20 billion, according to certain estimates. We estimate segment revenues of around $3.6 billion in 2018; a $20 billion valuation implies a revenue multiple of 5.6x. We have created two scenarios on our dashboard. The blue color chart shows a valuation of $25 billion using a revenue multiple of 7, while the green charts show a valuation of a little under $18 billion, using a multiple of 5. Based on the auction, the company may be able to fetch anywhere between $15 and $25 billion.

Consumer Healthcare Business Profitability

Pfizer’s gross profit margins currently stands around 79%, translating into profit of $2.8 billion for its consumer healthcare business. The company’s gross margin has been relatively stable for the past few years, with minor declines due to higher cost of goods sold resulting from adverse currency impacts. Looking at the segment revenues, the figure stood at $3.5 billion in 2017, and given the relatively mature business and competitive pressure, we don’t expect growth to accelerate going forward. Accordingly, we expect low single digit growth in revenues to around $3.6 billion in 2018.

Pfizer’s stock hasn’t moved much over the past few quarters. In fact, the stock has remained largely rangebound over the past five years, as the market has likely priced in the impact of a patent cliff on the pharma business. However, it remains to be seen if a sale or spin-off of the consumer business could trigger momentum for Pfizer’s stock. We currently have a price estimate of $41 for Pfizer, which is more than 10% above the current market price.

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