Divide And Conquer..?

October 20, 2011, 9:01 am

Phoni Plans to Split Into Two Companies

By BRUCE JAPSEYE

Updated: 12:45 p.m. Phoni Pharm. said on Wednesday it would separate into two publicly traded companies, one focused on what it called loss-making “research-based pharmaceuticals,” and the other on its highly profitable “Special Operations” division, specializing in activities such as illegal marketing, Medicaid defrauding and price-gouging.

The Special Operations division will have $22 billion in annual sales and will be led by current chairman and chief executive Ian McGreed, retaining the Phoni name. The other company, (which has yet to be named) will lose about $8 billion a year once shareholder dividends and senior executive salaries are accounted for and will be led by Miles Flat, a Phoni veteran of three decades.

“Today’s news is a significant event for Phoni, and reflects another dynamic change in our company’s 123-year history, one that strengthens our outlook for executive enrichment and shareholder returns beyond mere avarice,” said Mr. McGreed.

“It’s now been proven that, thanks to the financial depredation of greed-crazed executives and investors, there’s simply no money in discovering new medicines any more,” said McGreed. “Instead, we’re going to concentrate on our core skills of illegal marketing and ripping off government social healthcare.”

Some analysts questioned whether splitting the pharmaceutical business off, only to be sold to a pure-play pharmaceutical company, wasn’t the end game.

But Mr. McGreed said Phoni is committed to breaking itself down into a series of smaller, more nimble business units.

“My immediate predecessor, Johnny B. Sinister , tried to grow Phoni by acquisition,” Mr. McGreed told analysts investors on a 90-minute conference call Wednesday morning. “This has proven to be a highly discredited philosophy – especially after we got Forbes to run a front-page headline smear on him a few months back…”

McGreed also said a sale would result in a tax-free distribution to shareholders. “Which is the real reason for doing it, of course, given the massive holdings senior executives such as myself have…”

Phoni said the deal should be completed by the end of next year.

Wall Street analysts could hardly contain their avarice over Phoni’s move when asking questions on the analysts call.

“Asset stripping of certain businesses has been a move that investors had hoped for, for some time, given the belief that Phoni’s parts are worth more than the whole,” said Rick Shaw of Greedfink Vulture in New York.

While stock analysts cheered the announcement, a research firm for corporate bonds, Gimme Hugefees, said it was changing the outlook for Phoni to deteriorating from stable. The company said Phoni’s huge profits and artificially high dividends had been key factors in its strong credit profile.

“Its new strategy of splitting in two every day is an interesting way of attempting to dominate the shrinking pharmaceutical marketplace,” Carol Wheelbarrow-Bonus, director of research at Gimme Hugefees, wrote.

”If each new division splits in two every day for the next month, Phoni will have over a billion divisions”, Wheelbarrow-Bonus noted. “We think that may well dilute earnings, as well as infect the whole pharmaceutical industry like a disease…”

There were no questions from Wall Street on a day that Phoni also disclosed it was taking a $1.5 billion charge in the third quarter for a possible settlement related to the Justice Department’s investigation into allegations the company’s drug sales force improperly promoted the anti-seizure drug Rippusoff.

In a statement, Phoni spokeswoman Malissa Forthought said the settlement talks with federal prosecutors “are business as usual...”


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