Trends in the M&A Environment: Kristen Peck, Senior VP, Worldwide Strategy and Innovation, Pfizer Inc.

On January 26th 2010 Kristen Peck, Senior VP of Worldwide Strategy and Innovation for Pfizer, spoke at the Leadership in Corporate Divestitures and Acquisitions meeting. The purpose of this talk for Peck was to discuss current trends in the M&A environment.

After speaking for a bit about what was happening in the healthcare industry in general, Peck began the bulk of her speech by stating that there is a trend that is centered on risk diversification and diversification of the revenue stream. The reason for this, she continued, is because many companies are unsure of their R&D pipeline, and do not wish to put all of their eggs in one basket.

Peck then explained that many companies are looking to lower their revenue exposure to patent expirations. According to Peck, investors are currently rewarding companies engaged in this activity. “They really think that's creating value and diversifying the risks that investors have, because investors are really not sure about the value of the R&D investments we're making at this point.” She added that risk diversification is something of a necessity at the moment, as companies like Pfizer are currently getting almost zero value on the stock price in their pipeline.

Turning to another industry trend, Peck stated that there has been a bit of a shift towards self-pay, as companies that utilize self-pay are less dependent on whether or not bills will be paid by insurance companies.

In terms of what this all means for Pfizer’s overall M&A strategy, Peck commented that the first thing to do is follow the corporate strategy. In Pfizer’s case, this means adhering to “The Path Forward,” which is a Pfizer strategy focused on doing deals which refocused its patent protected portfolio.

The second part of Pfizer’s overall strategy, according to Peck is to find new opportunities for established products. Peck continued by stating her belief that Pfizer has a competitive advantage in this space because there is less trust in the emerging markets than in the U.S. when it comes to these products.

Thirdly, Peck said that Pfizer is concentrating on growing in emerging markets. Peck didn’t feel the need to expound upon this much further, as according to her, “That’s where the growth is.” She then listed the fourth leg of the Pfizer strategy, which was to look closely at diversified businesses.

The last strategy for Pfizer was a general culture shift, as the company is now heavily focused on innovation and how its products are innovated.

Peck then concluded the main portion of her speech by reflecting on the results of Pfizer’s strategy. She continued that the company has met its growth rate expectations. She went on to say that this strategy will include a heavy focus on M&A. “We're going to invest in key disease areas in technologies that we really think are going to drive revenue growth.  We're going to invest in established products and emerging markets and we're going to invest in growing those complementary businesses or diversified businesses to really grow those and make those a better risk diversification for the company.”

Peck then stopped her presentation to answer questions from the audience. These questions dealt with issues such as how Pfizer balances the sheets, whether or not the company has adjusted in light of U.S. healthcare reform, and whether diversification at Pfizer includes healthcare services or medical devices.