RB sales +11.8% in 2020; Biofreeze in, Scholl out

RB recorded its highest-ever sales increase in 2020, with net revenue up 11.8% on a like-for-like basis to £14bn (US$20bn). Health grew by 12.1% to £4.9bn (US$6.9bn), while Hygiene sales had an even better year (+19.5%) in 2020 and Nutrition sales were flat. E-Commerce sales grew by a record +56% in 2020 and now account for around 12% of group net revenue.

In Q4 2020, total RB net revenue was £3.6bn (US$5.1bn), +10.2%. Health grew by 2.8% to £1.2bn (US$1.7bn), with strong growth for Dettol, Durex and Gaviscon partially offset by the expected impact of the weak cough, cold & flu season, which resulted in the OTC portfolio being down just over 20% in the quarter. Hygiene (+25.7%) was even more the main growth driver for RB in Q4, while Nutrition sales were 3.5% lower, with excellent growth for Airborne and Neuriva offset by lower sales for Infant & Child Nutrition products in Greater China; a strategic review of the infant formula business in China, which represents 6% of group revenue, is underway. E-Commerce sales were up 50% in Q4, accounting for around 13% of total group revenue.

At the same time, RB announced it has entered into a definitive agreement to acquire the Biofreeze brand from US-based Performance Health (Madison Dearborn Partners). Financial terms were not disclosed. In USA, Biofreeze is the No.1 clinically-recommended topical pain relief brand and has delivered robust double-digit sales growth. “We see compelling opportunities to develop the topical pain relief category globally with Biofreeze and other RB pain management brands including Nurofen, Moov and Tempra,” said RB CEO Laxman Narasimhan. “The brand taps into the growing global trend for wellness and self-care and aligns with our strategy to build our US Health footprint into new spaces and places.” The deal is expected to close in Q2 2021.

In addition, US-based private equity group Yellow Wood Partners has agreed to acquire RB’s Scholl foot care brand, which operates globally outside of the Americas, for an undisclosed sum. The acquisition will reunite Scholl with the Dr Scholl’s brand – operated by Yellow Wood as a standalone company since its acquisition from Bayer in 2019 – as one entity after more than 30 years of separate ownership. The combined company, which generates annual retail sales in excess of US$700mn, with leading market shares in the global foot care category, will operate in 50+ countries. The deal is expected to be completed by Q3 2021.

Now is your final chance to register for our webinar on 3 March focusing on Mental Wellness across the Americas — join Nicholas Hall and Jennifer Cooper to explore the Sleep, Memory & Mood markets. For more information, or to take a look at the full schedule of webinars for 2021, please contact elizabeth.bernos@NicholasHall.com.

Ad Watch: 2020 A+P Trends

Two advertising stories caught our attention this week. First was the news that P&G is no longer the world’s No.1 advertiser, with Amazon taking the top spot, according to Ad Age, which publishes an annual list of the largest marketing spenders. The online retail giant spent US$11bn on A+P in 2019, 34% ahead of 2018, when it ranked fifth. P&G was placed second, with US$10.7bn in ad spending in its fiscal year ending in June 2020, while L’Oréal came in at No.3, spending US$10.3bn in 2019. Ad Age notes: “2020 ad spending figures for top marketers are going to be depressed – with exceptions for some advertisers that increased spending to take advantage of market opportunities amid the coronavirus pandemic.”

Secondly, Contagious published its review of the biggest trends in advertising and the best campaigns of 2020. Among the Top 25 campaigns of the year, there were several healthcare & beauty brands listed, including RB’s Dettol, backed by a huge social media initiative on TikTok (#HandWashChallenge) in India. According to Contagious, the campaign involved some of India’s biggest influencers and generated over 125bn views on Dettol’s TikTok page.

Another campaign highlighted was Bayer’s support of Berocca in Vietnam, an A+P initiative that we also profiled earlier this year. Working with digital agency Carnival, Bayer devised the Get Supercharged at 2pm campaign, creating a TikTok music video and encouraging people to post videos of themselves copying its dance moves by offering prizes for the most views. This led to 70,000 videos being created by people participating in the #BeroccaMango2PM hashtag challenge. The campaign directed users to e-Commerce platform Shopee, where they could purchase Berocca bundles and combos. Online sales rose 223% compared with the same period the year before, according to Bayer, while offline sales also increased 32%.

Various beauty brands also featured in the Contagious roundup of the Top 25 campaigns of 2020, most notably P&G’s Dove, which was backed by a Courage Is Beautiful campaign at the height of the pandemic, highlighting the strength and resilience of frontline healthcare workers. The Contagious report also cited recent YouGov research that places both Dettol and J&J’s Tylenol among the Top 25 Best Global Brands 2020 in terms of consumer awareness.

You can review innovation by region and country, including a review of the most active marketers globally in terms of NPD, in our recent report from CHC New Products Tracker, Innovation in CHC. This report also highlights ingredient and delivery format trends, showcases 100 innovative products in 2019, plus much more. For further details, or to order your copy, currently available with a 30% discount until 31 December, please contact melissa.lee@NicholasHall.com without delay. 

Q2 company results: Key trends & developments

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With all Top 6 CHC marketers and several important mid-tier companies having now reported their Q2 results, it’s a good time to analyse some of the key consumer health trends that have emerged in the second quarter of this turbulent year. Most notable is the downturn in Europe’s CHC market in Q2 2020, after an especially strong Q1, while North America’s CHC market has proven to be more robust so far. Also of note is the strong rise in e-Commerce sales for several CHC marketers.

Europe: Medicine cupboards already stocked

Marketers with well-developed CHC portfolios in Europe reported how “destocking” of medicine stores built up in Q1 had impacted regional OTC sales in Q2. GSK reported low single-digit decline for its pain portfolio in Q2, largely the result of this pantry unloading trend and the weak performance of Voltaren in Europe. Likewise, Sanofi reported a 13% decline in CHC sales in Europe in Q2, citing “consumer destocking” and low pharmacy traffic as key contributors to the regional fall.

Bayer, reporting on the wider EMEA geography, said regional sales fell 8.2% in Q2 after strong consumer stockpiling in Q1, with Allergy & Cold and Digestive Health the two categories most affected. Likewise, Mylan reported a 6% fall in its sales in Europe in Q2, as did several smaller CHC marketers, including Boiron, which recorded a 21% quarterly decline in sales in France owing to fewer doctors’ appointments and pharmacy visits.

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North America: J&J and P&G benefit from geographic mix

Bayer and GSK both reported dynamic VMS growth in the region in Q2, while Sanofi cited the “strong spring allergy season”, which boosted its Xyzal brand, as a factor in better Q2 sales in North America compared to Europe. Marketers with CHC portfolios more focused on the US market performed well, notably J&J, which reported a 10.7% rise in OTC sales in Q2 thanks to strong growth of Tylenol and Zarbee’s Naturals.

Like J&J, P&G benefits from a clear geographic focus on North America, and reported strong growth in the region in Q2 as a factor behind the double-digit rise in sales of its Personal Health Care portfolio, with Vicks and several other brands gaining share. Other CHC marketers with a particular focus on the region, including Perrigo and Church & Dwight, also reported stronger quarterly results in Q2 compared to competitors.

e-Commerce: RB and Nestlé report high growth

Another factor in rising organic CHC sales for Perrigo in North America in Q2 was continued robust growth in e-Commerce, more than offsetting category declines owing to lower brick & mortar foot traffic. Two other marketers that cited the impact of e-Commerce in their Q2 results were RB and Nestlé. For RB, e-Commerce sales rose by 50%+ and now represent 15% of total Health net revenue, while for Nestlé e-Commerce sales grew by 48.9%, reaching 12.4% of total sales.

Are the leading CHC marketers investing in e-Commerce? Do they have online platforms for their brands? Find out in our report Digital Marketing & e-Commerce: Tapping the Potential of Online Sales and Digital Promotion in Consumer Healthcare.  To order your copy, or to find out more, please contact melissa.lee@NicholasHall.com.

Market Movers Q1: CCA, VMS brands among fastest movers

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In this week’s blog, we take a closer look at our newly published Market Movers data for MAT Q1 2020, which highlights the brands that performed best and worst in terms of value sales growth or decline in that period. Certain marketers like RB, which last week reported a 12% rise in its OTC portfolio in Q2 2020, have found success from having a well-positioned portfolio of power brands in fast-growing, Covid-driven CHC categories, such as cough & cold remedies (Mucinex), immunity supplements (Airborne) and antiseptics & disinfectants (Dettol).

P&G also reported double-digit organic growth of its Personal Health Care portfolio in Q2 (fiscal Q4), powered by Vicks, which continues to gain share. Vicks NyQuil / DayQuil combo packs were among the six fastest-growing brands in MAT Q1 2020, along with one of China’s leading systemic cold & flu remedies, 999 Gan Mao Ling. VMS products also featured strongly among the Top 6 fastest-growing brands, with Olly and Emergen-C performing well in the US market thanks to their stress / immunity positioning, and Double Whale Vitamin D Drops achieving high growth in China. J&J’s Tylenol, the No.1 analgesic brand globally, also continues to produce dynamic Covid-driven growth.

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Asia-Pacific was the region that underperformed most in MAT Q1 2020 – achieving just 3.4% growth vs 6.3% for North America and Europe – so it is no surprise that five of the Top 6 worst-performing brands are from China or Japan. Tonics & cure alls was the subcategory most responsible for Asia-Pacific’s relatively low growth, with category sales down 25% in China, owing to issues with donkey breeding that have resulted in rising raw material costs and subsequent price rises, affecting two brands in particular – Dong-e E-jiao and Fu Fang E Jiao Jiang – while Hong Mao Medicated Wine was affected by negative claims.

OTC tonic drinks is another VMS subcategory hit by declining sales, with a continued downturn in Japan where the old, male consumer base is retiring and brands face competition from energy drinks. Takeda’s Alinamin EX was among the brands that declined fastest in MAT Q1 2020. Another CHC subcategory affected by weaker sales in Q1 was antacids, as a result of the withdrawal of ranitidine-based antacids from the market owing to concerns around NDMA in the formulation. Sanofi’s Zantac was among the key brands impacted, with Zantac 150 in sharp decline in the US market.

Today is the last chance to pre-order our upcoming Analgesics 2020: Assessing the Current & Future Self-Care Market for Pain Relief at the discounted rate and save up to GB£1,800! Contact melissa.lee@NicholasHall.com to order or find out about special discounts available on purchases of more than one report title!

e-Commerce CHC growth accelerating

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All the signs point to accelerated growth for the internet & mail order channel of the global CHC market in the first quarter of 2020. In 2019, the overall global retail CHC market recorded growth of 3.9%, while internet & mail order sales achieved much faster growth of 12.4% that same year, and the channel is forecast to rise by 22.5% in 2020.

Several leading CHC companies reported dynamic e-Commerce growth in their latest quarterly results, with RB reporting a strong e-Commerce upturn across all major platforms and market places, particularly in Greater China, led by Dettol and Infant & Child Nutrition (IFCN), and North America, with Mucinex and VMS in particular making good progress. Likewise, P&G reported 35% growth for e-Commerce channels in its fiscal third quarter (calendar Q1 2020), translating into around 10% of company business. CFO Jon Moeller acknowledged social distancing orders were a key driving factor, but still expects a permanent shift in the portion of business conducted online post-pandemic.

GSK is another company that has been boosted by increased online demand for its analgesics, CCA and VMS products. The company reported that the impact of Covid-19 varied across regions in Q1 2020, as a result of differing government actions and consumer behaviour. USA, UK, Australia and several other markets benefited from increased demand and shopper activity in both traditional retail and e-Commerce channels, which resulted in accelerated purchases across all categories, while some markets, including India and China, were negatively impacted by mandated retailer shutdowns.

Likewise, the benefits of increasing trade channel liberalisation will not be shared equally among all CHC marketers. While many leading companies are well prepared for this increasing consumer appetite for internet & mail order purchases, some marketers with a more limited e-Commerce profile may find it hard to adapt to this shift in demand, especially if they’re highly leveraged in brick & mortar retail outlets, as is the case – for example – with Prestige Brands and the convenience store channel in the USA.

Coming this month — with two timing options on 22 and 23 July — is an all-new Hot Topic webinar focusing on COVID-19: The Impact on the Global and Regional CHC Markets. To find out more or register to join your preferred session, contact elizabeth.bernos@NicholasHall.com.

Q4 update: Middle East & Africa highlights

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One key feature of your CHC DASHBOARD subscription is exclusive reporting on the consumer healthcare market in the Rest of World region, predominantly the Middle East & Africa. This dynamic region now accounts for almost 7% of the global CHC market, and produced continued strong growth in 2019, with sales up 7.0% to total US$9.6bn. Three countries in the region – South Africa, Turkey and Saudi Arabia – rank 20th, 24th and 25th respectively in terms of CHC market size.

Company Watch: Unsurprisingly, dominant global No.1 GSK is the leading CHC marketer in the region, as it is in all regions except Latin America. Multinationals Sanofi, Bayer and RB also feature in the regional Top 5, and each of these companies produced growth in 2019 in excess of the regional average of 7%. South Africa’s No.1 CHC marketer Adcock Ingram is the only local company to feature at the top of the rankings, while Abdi Ibrahim sits just outside the Top 5.

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Category Watch: Strong growth for analgesics (+8.1%) and Derma (+8.1%) helped ensure the region’s impressive rise in 2019. Three of the Top 5 regional analgesic brands – Panadol, Voltaren and Grand-Pa – are marketed by GSK, while RB markets another of the Top 5 regional CHC analgesic brands, Nurofen. As for Derma, a strong upturn for the leading dermatologicals category in the region, wound healers (+11.9%), was powered by Bayer’s Bepanthen / Bepanthol and Madecassol brands.

Brand Watch: Thanks to M&A activity in recent years, GSK now markets four of the Top 10 brands in the region, with No.3 Otrivin and No.8 Centrum added to the company’s existing key brands, Panadol and Voltaren. RB also markets multiple brands in the regional Top 10, with analgesic Nurofen, antacid Gaviscon and sore throat remedy Strepsils all featuring at the top of the rankings. However, the fastest-growing brand in the Top 10 in 2019 was Galderma / Nestle’s eczema & psoriasis treatment Cetaphil.

We are pleased to announce that Nicholas Hall’s CHC Yearbook 2020 is now published digitally, with print copies landing on desks next week! With the latest facts & figures, it offers the most up-to-date and fully-informed picture of the CHC industry around the world. To order or explore digital licence and multiple copy discount options, please contact melissa.lee@NicholasHall.com.

Focus on China: Trade agreement with USA imminent?

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Some welcome news for the global economy which broke over the weekend, as announced by the US trade representative, is that the US and China are “close to finalising some sections” of an interim agreement to ease trade tensions between the two countries. This is also a welcome development for OTC marketers, including RB, whose newly-appointed CEO Laxman Narasimhan recently stated that the company’s disappointing Q3 performance was primarily due to issues in USA and China.

Growth in China’s OTC market slowed to 5.3% in the MAT Q2 2019 period, owing to a low key cough & cold season and a weakening economy. Nicholas Hall was a speaker at the Global Self-Care Federation (GCSF) conference – a joint meeting of the Chinese, Asian and global CHC associations, held in Beijing last week – and wrote: “It is always valuable to come to the second-largest CHC market, which in just a few years will be the world’s biggest economy. There are major opportunities here, but increasing challenges too as the Government takes a tougher line on pricing and distribution, without easing the regulatory barriers.”

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Judy Stenmark kicked off proceedings at the GSCF 2019 conference

Nicholas Hall also wrote that: “Among the many presentations during the 2 days, some of which lasted for as little as 15 minutes – this was truly a conveyor belt conference, with only one panel discussion and no questions from the floor – a presentation that stood out for me was from Conba, a company about which I knew very little. Hu Jiqiang, Chairman of Conba Group, made the startling claim that Conba will become the biggest producer of medical cannabis in China and possibly the world … And, of course, the presentation by Alibaba Health was one to sit up and listen to at the end of an exhausting two days. This really is a game-changing company as I discuss in my New Paradigms report.

The rise of Chinese marketers within the global OTC rankings has been a notable trend in 2019. Our latest MAT Q2 2019 data shows that China Resources 999 now takes 9th position globally, and grew by 7.3% in the year to end-June 2019. Additionally, as explored in one of our recent blog posts, By-Health has broken into the global Top 20 and now claims 15th spot. This company has bucked the trend of decelerating growth in China, with sales growing by 31% in MAT Q2 2019. China accounts for over 90% of By-Health’s OTC portfolio turnover, with Australia accounting for the remainder.

Some of the latest innovations and technologies impacting CHC will be at the forefront of the agenda at next month’s OTC.NewDirections Executive Conference, which will take place in London on 14 November, with speakers from key players including Mundipharma, J&J and Bayer. Please contact jennifer.odonnell@NicholasHall.com to book your place or find out more. If you are unable to join us, you can always view Nicholas’ opening address live at 09:05 GMT here

RB 2.0: E-commerce a key focus

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With CEO Rakesh Kapoor retiring at the end of the year, and ambitious plans for RB 2.0 to be implemented within the next year, this is without doubt a transformational time for RB. Nicholas Hall believes RB 2.0 will lead to the “end-point of divesting the Hygiene Home business, and with the company quickly moving on to v3.0 and a major merger. I can think of at least four CHC companies that may want to be associated with RB v3.0, not all of whom could be considered equals, but who would be attracted by a cashless transaction and the benefits of scale.” 

RB released its full year results last week, with net revenue in 2018 up by 3% on a like-for-like basis, while Health grew by 2%. Within Health, the OTC segment rose by 5%, driven by innovations (Nurofen 24-hour patch, Strepsils flurbiprofen spray) and strong regional performances (Lemsip in UK, Luftal in Brazil, Moov in India and Tempra in Mexico). As part of its RB 2.0 mission, the company is planning to “supercharge” innovation even further, focusing on new categories (i.e. the launch of brain health supplement Neuriva later in H1 2019), new consumers and new channels (i.e. MegaRed and Move Free in e-commerce outlets in China).

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In its 2018 results presentation, RB emphasised its “best-in-class digital and e-commerce capability” as a key driver behind RB 2.0 growth, highlighting the specific case of China where the company’s online sales already outweigh “offline” sales thanks to strong partnerships with the likes of Alibaba and JD.com. Innovations such as MegaRed CoQ10, Move Free Ultra and Move Free Advanced have been specially developed for the e-commerce channel in China and the USA. 

In its results, the company also reported that 9% of RB Health sales are generated in the e-commerce channel, which it says ranks second among its consumer healthcare peers, while its operating margin of 28% is way ahead of the consumer healthcare average. RB attributes its success in e-commerce to its FMCG heritage and its strong margins to the relatively high proportion of its portfolio devoted to Consumer Health vs key OTC competitors.

Nicholas Hall’s New Paradigms for CHC 2019: Over the Horizon, our upcoming new Signature Report written by Nicholas, includes a chapter dedicated to reviewing M&A within the CHC industry. Exploring recent transactions, multiples and the buyers and sellers — with predictions of likely future deals — Nicholas also asks whether M&A actually works and examines the role of private equity. An essential read for all players striving to compete in this rapidly-evolving marketplace, for the full table of contents or to pre-order your copy, please contact melissa.lee@NicholasHall.com.

 

MAT Q2 2018: 5 Key Trends & Developments

Our latest Q2 2018 trend reports on the OTC market at global, regional and Top 20 level are now available on the OTC DASHBOARD website. Here we highlight some of the key trends & developments that have emerged in the latest data.

  1. Europe and Asia drive CCA upturn: Improving CCA growth helped the global OTC market report a slight upturn in Q2 (+4.2%). This followed a return to CCA growth in Europe (+2.7%) in Q2 2018, powered by the UK (+5.8%) and Germany (+4.1%), while France (+0.5%) also returned to positive territory. CCA growth in Asia-Pacific (+5.7%) likewise improved in Q2, thanks to a clear upturn for Systemic cold & flu (+4.7%), with key markets like S Korea enjoying high growth (+6.6%) on the back of OTC innovations such as the relaunch of Dong-A’s Pantec Q.
  2. Sanofi reclaims the No.3 spot from J&J: While GSK maintains its clear lead as the global OTC No.1 marketer, a tight three-way race remains in play for the No.2 spot between Bayer, Sanofi and J&J. Bayer is still the global No.2, while Sanofi reclaimed its position as the global No.3 in Q2 2018, moving ahead of J&J. In Sanofi’s Q2 results, the company reported a return to OTC growth in Europe and a continued strong rise in Emerging Markets, especially in Latin America. The company reported a CCA upturn in both regions, offsetting US allergy decline.
  3. US market behind VMS upturn: Higher Q2 growth in North America’s vast supplements market (+4.0%) has been the key trend behind the improving global picture. In Q2, multivitamins (+2.8%) underwent a clear upturn while the trend for probiotics (+6.9%) and immune supplements (+10.4%) also improved. The latter category has been a particularly vibrant source of OTC innovation in recent months; for example, Nestle has launched elderberry immune gummies as part of its mykind Organics line, while post-surgery immunity supplements and those with a digestive health crossover have also been popular.
  4. Where’s the growth potential? 1. Adjacencies: OTC marketers are increasingly looking to build new consumer healthcare adjacencies, either via switch – in the case of erectile dysfunction and Pfizer’s Viagra Connect – or new product innovation, in the case of medical cannabis. Canada recently voted to legalise cannabis, though the future for CBD and THC supplements remains uncertain. We don’t yet include sales of medical cannabis products in OTC DASHBOARD, though we do track developments in this category closely in both our innovation database, OTC New Products Tracker, and regulatory newsletter, OTC.NewDirections.
  5. Where’s the growth potential? 2. New territories: Rest of World countries (mainly Middle East & Africa) enjoyed continued high in Q2 2018, with sales up 6.6% in the 12 months to end-June 2018, to total US$9.2bn. High growth for analgesics (+7.2%) and CCA products (+6.7%) ensured a strong regional rise overall, allied with a dynamic performance in the key regional market of Turkey (+13.3%). RB is one marketer performing well in the region, claiming a spot among the Top 5 OTC marketers in Q2 2018, following dynamic growth of its CCA portfolio, powered by sore throat remedy Strepsils and its strong support via A+P and line extensions.

With M&A activity in the CHC industry increasing rapidly, now may be the right time for your business to explore growth opportunities. Our specialist M&A boutique is working with a number of strategic and financial partners to assess potential opportunities — for buyers and sellers — and is well placed to discuss the current business climate and possible synergies. To find out more, please contact ammar.basit@NicholasHall.com

GSK, RB pull out of running for Pfizer OTC

Last week was a dramatic one for M&A news in the OTC industry. In the days running up to the deadline for binding offers for Pfizer Consumer Healthcare, both RB and GSK announced they had withdrawn from the process. 

RB’s CEO, Rakesh Kapoor, said: “Our priority remains organic growth, including the completion of the integration of Mead Johnson Nutrition and creating further value from re-organising into two new business units — Health and Hygiene Home … An acquisition for the whole Pfizer consumer health business did not fit our acquisition criteria and an acquisition of part of the business was not possible.”

GSK’s CEO, Emma Walmsley, later commented: “While we will continue to review opportunities that may accelerate our strategy, they must meet our criteria for returns and not compromise our priorities for capital allocation.”

All three companies are in the Top 6 globally, and a tie-up between No.6 RB and No.5 Pfizer would have created a new No.1 globally. Meanwhile, if the current No.1 GSK had acquired Pfizer, its lead would have been significantly enhanced – see the chart below for a sense of what might have been (assuming both GSK and Pfizer would not have had to make divestments).

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Investors have reacted positively to the news of no M&A deal, sending shares in both RB and GSK higher. In the latter case, some had been concerned that the potential US$20bn deal could have distracted from GSK’s focus on pharma, and jeopardise its dividend.

After RB’s withdrawal, Pfizer stated that it “continues to evaluate potential strategic alternatives for the CH business, which include a spin off, sale or other transaction, and Pfizer ultimately retaining the business. We have not yet made a decision, but continue to expect to make one in 2018.”

Nicholas Hall, in Friday’s OTC.Newsflash, commented: “I recently addressed a group of private equity and hedge fund investors about the future of CHC, and all they wanted to talk about was RB, GSK and the disruption of the industry by private label and Big Tech. The investment community is very concerned about the growth prospects of the CHC industry, and that is one of the reasons strong signals were sent to RB not to overpay for Pfizer Consumer Health; as we now know RB subsequently pulled out of the bidding. Briefly, that left “the last woman standing”, GSK’s Emma Walmsley, but GSK like RB was unprepared to pay the $20bn that seems the generally-accepted valuation for PCH. As readers of this column know, my thinking had tilted towards “no sale” in the past few weeks, and unless there is a last-minute change of heart, the likelihood is that Pfizer will keep its CHC division and look at other options: retain and grow; spin off; make a j-v.”