Goldman Sachs Predicts Three Stages for Potential Pfizer Breakup

In a research report published earlier today, Goldman Sachs mentioned that it predicts three stages for a full breakup of Pfizer Inc.

. According to Goldman Sachs, “PFE is currently in Stage 1, with the announced separation of Animal Health and Nutrition. We expect the divestitures will be used for buybacks, which we estimate could drive $0.18 in EPS accretion. Mr. Read laid out what he saw for PFE after the disposals: a Pharma business (innovative growth) and Generics business (stable value), in what we call Stage 2. We see the business reporting structure being re-characterized around these business units and business unit leaders laying out different goals to optimize each business. Our SOTP value under this base-case is $26. Stage 3 (a full breakup) could take two or three years to build the stand-alone potential of the two businesses and very much depends on the drug pipeline's success. In our bull case, pipeline success could drive $5.7 bn in additional sales, $0.93 in EPS accretion, and an SOTP value of $33 which assumes no P/E expansion. A breakup could drive even further upside ($37.50 SOTP value) due to a Pharma multiple expansion if investors can see visible mid-single-digit growth (4% 2013-2017 sales CAGR) unfettered by the slower Generics business.” Goldman Sachs maintains its Buy rating and $26 PT on Pfizer, which closed yesterday at $22.16.