No final decision has been taken but Ian Read told Reuters there were clear attractions for shareholders in a tax-free spin-off of the operation, which is the biggest in the industry.
I would probably handicap animal health as more likely to be a spin than a sale, the CEO of the world's biggest drugmaker said in an interview in London.
Read, who took over as Pfizer chief in December 2010 at a challenging time, is shrinking the group by divesting non-core businesses, including veterinary medicine and infant nutrition.
Pfizer is losing billions of dollars of revenue from cholesterol blockbuster Lipitor, which is now off patent in many markets, although Read said he hopes to carve out a new future for the medicine as an over-the-counter (OTC) product.
The nutrition business is widely expected to be sold outright for around $10 billion (6 billion pounds). Bidders were asked to submit offers last week, with Nestle SA
The process for animal health, however, is less well advanced and the case for a sale less obvious. Pfizer faces a hefty tax bill if it sells outright and any buyer would also faces substantial antitrust hurdles.
It's the largest animal health business and it would stand alone as an individual company. There's huge interest among investors to own a company like that, Read said.
With nutritional there are lots of companies that are already in the nutritional business and have it as a major development area.
Speculation about a possible sale of animal health, which analysts believe could be worth $15-20 billion, was fuelled last week by reports that Novartis AG
The plans to dispose of both units, which Pfizer has said would be completed between July 2012 and July 2013, follows a far-reaching review and a decision to focus on core pharmaceutical operations.
The outcome of that review was to concentrate on five core areas of drug research, while maintaining a strong presence in generic and OTC medicines.
NEW LANDSCAPE FOR OTC DRUGS
Read said Pfizer hoped to introduce a non-prescription form of Lipitor, but this would not happen in the short term.
Pfizer is discussing the issue with the U.S. Food and Drug Administration (FDA), which is seeking public comment on the idea of making more medicines available OTC.
We would like to sell it over the counter. We're in discussions and development with the FDA on that, Read said, adding a recent change to remove the need for liver monitoring was positive for the drug class.
Back in 2008, the FDA rejected a bid to sell Mevacor, another cholesterol drug from Merck & Co Inc
In the past, Pfizer has been a mergers and acquisitions machine, snapping up smaller rivals and partners to build out its portfolio.
It will continue to look for bolt-on acquisitions, including deals that could be multiples of 2010's $3.6 billion purchase of King Pharmaceuticals, Read said.
But he did not see a need for another large-scale deal such as the $67 billion purchase of Wyeth in 2009.
Asked about the possibility of buying out Bristol-Myers Squibb Co
Read, a Scot who has worked at Pfizer for more than 30 years, took over following the sudden departure of Jeff Kindler and has used the past 15 months to make the company much leaner.
The new slimmed-down company will focus on five key areas: immunology and inflammation; oncology; cardiovascular and metabolic diseases; neuroscience and pain; and vaccines.
By cutting the research budget -- including shuttering its large R&D centre in Sandwich, southern England -- Read believes he can deliver a better return on investment.
But he stressed there would still be a place for a few speculative projects, such as a planned clinical trial in Britain using stem cells as a treatment for age-related macular degeneration, a common form of blindness in the elderly.
Also in the long-shot category is Pfizer's work on Alzheimer's drug bapineuzumab, being developed with Johnson & Johnson
(Editing by Chris Wickham)