Bloomberg News

Pfizer Rises After Goldman Raises Potential for Full Breakup

March 27, 2012

Pfizer Inc. (PFE:US), the world’s largest drugmaker, rose to its highest price in more than four years after Goldman Sachs Group Inc. analysts said the company may go beyond the divestiture plans it has already announced.

Pfizer climbed 1.5 percent to $22.50 at the close in New York, the highest value since $22.55 in February 2008. The shares (PFE:US) have increased 8.3 percent since July 6, the day before Pfizer Chief Executive Officer Ian Read said the New York-based company was exploring strategic alternatives for its animal health and nutrition businesses.

Read, at a recent meeting with Goldman analysts, indicated he may be willing to further split up the company after selling or spinning off those two units, Jami Rubin, a Goldman analyst, wrote in a note to investors.

“We see these moves as first steps in a potential full- scale breakup,” akin to the split now taking place at Abbott Laboratories (ABT:US), Rubin wrote.

Abbott, based in Abbott Park, Illinois, said Oct. 19 it plans to divide into two publicly traded companies, with one focused on drug development and the other on products including medical devices, infant formula and generics.

Rubin said a further breakup would be dependent on Pfizer’s success in getting new, brand-name drugs approved by U.S. regulators. “If the pipeline is successful and drives meaningful top-line growth, management will want to separate the businesses so investors can better value the pharma business,” Rubin said in her note. She said that a breakup could happen by 2015.

‘Value Creation’

“Ultimately, our decisions will be driven by value creation for the businesses and delivering the greatest after- tax value for our shareholders over time,” Ray Kerins, a Pfizer spokesman, wrote in an e-mailed response to questions about the Goldman report.

Read previously said he intends to create more detailed financial reports for the generic and brand-name products, to help investors better understand the two units.

Of Pfizer’s $67.4 billion in 2011 revenue (PFE:US), $18.5 billion fell under “established products” or “emerging markets.” The animal health and infant nutrition units that Pfizer is currently divesting had $6.32 billion in sales last year.

The Goldman report said Abbott’s share jump “will likely pressure other CEOs to consider similar strategies if the sum of the parts is greater than the whole,” Rubin said in the note. “Our recent meeting with PFE’s CEO Ian Read suggests he is open to all options to unlock shareholder value, including considering going further in divesting non-core assets.”

To contact the reporter on this story: Drew Armstrong in New York at darmstrong17@bloomberg.net.

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net


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Companies Mentioned

  • PFE
    (Pfizer Inc)
    • $28.6 USD
    • 0.30
    • 1.05%
  • ABT
    (Abbott Laboratories)
    • $42.43 USD
    • 0.84
    • 1.98%
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