When Albert Bourla assumed the role of chairman and chief executive officer at Pfizer (PFE -0.19%) at the beginning of 2019, he moved quickly to create a smaller, more research-based organization. With Monday's news of positive trial results from Pfizer and partner BioNTech's coronarvirus vaccine candidate, we're seeing how those actions may have set the company up to reward shareholders for the coming decade.
Under Bourla's leadership in 2019, Pfizer began a joint venture with GlaxoSmithKline (GSK -0.92%) for the over-the-counter business, purchased Array BioPharma for $11.4 billion and biotech Therachon Holding for $340 million, and announced the spinoff of its generic division (Upjohn). In short, Bourla wasted little time reshaping the business. The company closed out 2019 well positioned to deliver innovative treatments to patients, moving past the products whose glory days were gone.
It may seem like COVID-19 would have derailed the strategy for the time being, but the breakthrough research the company is doing with partner BioNTech (BNTX -0.45%) is just the kind of work Bourla imagined when he began changing the company -- and early results show the moves are paying off.
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A long history
Two decades ago, Pfizer had a stable of blockbuster drugs and enviable shelf space in every grocery store and pharmacy. Viagra, Lipitor, and Zoloft were brand-name drugs that brought in billions, while consumer brands like Trident, Dentyne, Listerine, Advil, and Rolaids, among others, gave the company a diverse healthcare business rivaling that of Johnson & Johnson (JNJ -0.69%).
The company's new direction has done shareholders no favors in the short term: A week after Pfizer and BioNTech announced in May that they would collaborate on a vaccine candidate for COVID-19, Pfizer stock closed down 33% from when Bourla had taken over. The market was showing a lack of faith in the changes he was leading.
But that vaccine candidate represented exactly the kind of change the company wanted: a partnership with a cutting-edge biotech company, with Pfizer lending its expertise, distribution, and regulatory experience in the hopes of innovating to improve -- and even save -- people's lives. This was an opportunity to show how the new Pfizer could be a leader in research and development.
The vaccine
Pfizer has a history of developing vaccines, so it was no surprise when it announced its intention to tackle COVID-19. Previous vaccines included drugs to prevent diphtheria, pertussis, and tetanus. When Pfizer and BioNTech launched their collaboration, they started with four vaccine candidates. BioNTech had been working with messenger ribonucleic acid (messenger RNA or mRNA) for a decade, and Pfizer was a great partner to help the company get the tech from the lab to regulatory approval.
It is often said that actions mean more than words. In his desire to focus the company on the science of drug making again, Pfizer's CEO had made some transformational deals. But it's one decision in particular that highlights how serious he was about prioritizing research and innovation. Unlike most other companies in its position, Pfizer chose not to accept funding from the U.S. government's Operation Warp Speed. Explaining his decision, Bourla said he simply wanted to keep his company out of politics and keep it focused only on the scientific challenges:
I wanted to liberate our scientists from any bureaucracy. When you get money from someone, that always comes with strings. They want to see how we are growing to progress, what types of moves you are going to do. They want reports. I didn't want to have any of that.
Up next and down the road
The announcement that the vaccine candidate was more than 90% effective at preventing COVID-19 in trial participants was welcome news across the globe. By the third week of November, the 43,000-person trial will have the two months of data needed to file with the U.S. Food and Drug Administration (FDA) for an emergency use authorization (EUA), which allows the use of unapproved drugs in a public emergency such as the one we're in now.
Pfizer and BioNTech have set up many deals for doses once they can be broadly distributed. In July, the U.S. government agreed to purchase 100 million doses of the vaccine with an option for an additional 500 million eventually. Japan, in preparation for the postponed 2020 Olympic Games, agreed to purchase 120 million doses, and the U.K. signed on for 30 million doses over the next two years. All told, the companies aim to deliver 50 million doses worldwide by the end of the year and as many as 1.3 billion through 2021. The company has previously said it should have hundreds of thousands of doses available immediately when the vaccine is approved.
The future for Pfizer
The future for Pfizer is much bigger than the success or failure of its COVID-19 vaccine. Its next decade of profits will be driven by its robust pipeline, which includes candidates to fight cancer, inflammation and immune disorders, and rare diseases, among other things. With nearly $10 billion in revenues from oncology -- up 32% over the past five years -- and drugs to treat Crohn's disease, lupus, psoriasis, and rheumatoid arthritis, just to name a few, the future for Pfizer looks bright.
By slimming the company down and prioritizing research, the new CEO set the company up to bet on its expertise instead of resting on its laurels. If the success of the company's COVID-19 vaccine, developed without the burden of politics and bureaucracy, is any indication, those were the right moves. At a $220 billion market cap, shareholders are unlikely to experience the roller-coaster ride of a smaller drug company. But for patient investors, Pfizer has the makings of a millionaire-maker stock.
