Goldman Sachs' Position On US Pharma Supported By PFE's New CEO

Goldman Sachs' long-held position that US pharma should get smaller through portfolio rationalizing is further supported by Pfizer Inc.'s PFE new CEO's announcement to consider breakups or spin-offs of some or all of its business units. “We believe that if PFE were to lead the industry to downsize and be rewarded by the market, as it has been thus far this year (ytd up 15% versus S&P up 2%) many of its diversified peers could follow its lead. Pharma companies have subscale exposure to diversified businesses, barring JNJ which already trades at its SOTP valuation,” Goldman Sachs writes. “In our view, pharma companies should divest these assets to monetize the 40% premium that Consumer trades over Pharma rather than scale up. We see mixed implications for the Consumer sector given a likely lower M&A premium driven by Pharma.” Pfizer closed Friday at $20.18.