Wyeth Nutrition could boost Pfizer's revenue outside the U.S. and buffer some upcoming patent losses in its prescription roster through their pending $68 billion acquisition deal.

Though Pfizer has not said whether the OTC unit will stay or go, Wyeth's infant and children's nutritionals are growing overseas and could continue to as Wyeth invests in more facilities there. These products are not marketed in the U.S., but emerging markets present a widening sales opportunity.

Nutrition division sales increased 13 percent to $1.6 billion in 2008, countering a slight drop in consumer health care sales, Wyeth said in announcing year-end results Jan. 26. Overall, the company's combined OTC unit - consumer health, animal health and infant nutritionals - brought in about $5.4 billion of its total $22.8 billion full-year sales.

Emerging market opportunities

Wyeth appears confident its nutritionals business will continue to grow since the firm is investing in new research and development facilities, mainly in emerging markets where sales opportunities are spiking.

Site expansions for nutritionals are under way in the Philippines and Singapore, and the firm recently marked the groundbreaking of its facility in Suzhou, China - a $280 million investment. Wyeth says this site "will be one of the largest state-of-the-art nutritional facilities in the world," and is scheduled to be operational by January 2011.

The China-based site will produce more than 40 thousand tons of nutritional products annually, Wyeth projects.

The pediatric nutrition industry is a $19 billion market, with infant formula comprising 75 percent, or $14 billion, of the global market, according to 2007 figures from Euromonitor.

Wyeth's revenue-driving nutritionals include the infant formulas SMA , Promil and Visoy .

"Whenever we find a new and important component of human milk that we can emulate - we do," the firm said, citing innovations such as adding to infant formula products the antioxidant lutein and the essential amino acid alpha lac, both found naturally in breast milk.

A link also has been observed between nutritionals uptake and biologics sales. At a January conference, Wyeth CEO Bernard Poussot noted infant formula products build overall health, enabling products like the pneumococcal vaccine Prevnar to be introduced in emerging markets.

Wyeth, however, is not the only firm benefiting from an upswing in nutritionals interest.

Mead Johnson Nutritionals, a subsidiary of Bristol-Myers Squibb with a pending initial public offering, also is gaining sales overseas and leads infant formula sales globally. The firm's nutritionals net sales grew 12 percent to $2.9 billion in 2008.

Mead also leads in five of the six largest children's nutrition markets based on retail sales: China, the Philippines, Thailand, Malaysia and Mexico.

Explaining growth trends in its prospectus for the IPO, Mead notes that increasing household incomes of families in these markets enable more people to afford pediatric nutrition products.

"We believe that as the number of working women increases, the use of pediatric nutrition products among such women who are also mothers increases as well," Mead says.

The BMS approach

In spinning off its nutritionals, Bristol-Myers Squibb has opted to focus, rather than diversify, allowing the firm to benefit from growth while directing attention to other aspects of its core pharma business.

But Wyeth's nutritionals do not offer enough stand-alone sales power to drive Pfizer down a similar path at this point, Deutsche Bank analyst Barbara Ryan said.

"Mead Johnson is a huge company with more opportunity to be spun out on its own; I'm not sure Wyeth's business is big enough to really justify that," she added.

BMS announced last April its plans to spin Mead Johnson infant and children nutritionals business off in an IPO of shares, rather than sell the business.

The IPO is on track to initiate the week of Feb. 9, according to a regulatory filing. The firm said BMS will maintain at least 80 percent of its stocks with the IPO.

Another shot at OTC

The move to acquire Wyeth gives Pfizer a second chance, after selling its consumer health unit to Johnson & Johnson in 2006, to offset some generic competition for its core pharma with an OTC business.

Now that patent expiries for Pfizer's blockbuster cholesterol drug Lipitor and others are a much closer reality, the firm likely will think twice before letting another OTC unit go, analysts say.

Pfizer's current management "probably would not have sold that [consumer] business," said Ryan, referring to the firm's 2006 consumer divestiture to J&J.

Wyeth's consumer health business offers opportunity for diversification with potential Rx-to-OTC switches, though it will add only 3.8 percent to Pfizer's total revenues, including nutritionals - a marginally smaller amount than its divested unit.

"The nutritionals is not big enough to make a whole lot of difference to Pfizer," Ryan said. "But the fact that it's performing well, and not poorly, does not signal an urgency to do anything about it either."

Nutritionals, though, are not the obvious revenue booster. If Pfizer decides to keep Wyeth's OTC business, the firm may be more apt to focus on consumer health products, which it can aggressively market in the U.S.

-Carlene Olsen (c.olsen@elsevier.com)

[Editor's note: This story appears courtesy of the editorial staff of ¹ 'The Tan Sheet,' your source for coverage of nonprescription pharmaceuticals and nutritionals. For a sample copy, call customer service at 800-332-2181.]

Wyeth Nutritionals: Pfizer’s New MVP, Or Benchwarmer?

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