Kudos to Pfizer (PFE 1.80%) for its decision to acquire Trillium Therapeutics (TRIL). The small biotech's cancer pipeline is a great fit for Pfizer. Trillium's candidates could begin contributing to Pfizer's growth in the second half of the decade, just when the big drugmaker will need a boost due to patent expirations for several of its top drugs.

The price tag of the transaction is close to $2.3 billion. That leaves Pfizer with a huge amount of cash that it could use in making more deals. There's one biotech in particular that I think Pfizer should consider acquiring next.

A person drawing a picture of a big fish about to eat a smaller fish.

Image source: Getty Images.

Going solo doesn't rule out getting some help

Pfizer and its partner BioNTech (BNTX -0.40%) achieved remarkable success with their messenger RNA (mRNA) vaccine Comirnaty (BNT162b2). The companies continue to work together on developing mRNA COVID-19 vaccines that are effective against emerging coronavirus variants. They're also collaborating on an mRNA flu vaccine program.

However, Pfizer CEO Albert Bourla revealed in a March 2021 interview with The Wall Street Journal that his company plans to move forward on its own with additional mRNA programs. Bourla said Pfizer is "the best-positioned company right now to take [mRNA technology] to the next step because of our size and our expertise."

There's no doubt that Pfizer's team did gain quite a bit of expertise with its work alongside BioNTech's scientists. Still, though, I suspect that the big pharma company wouldn't hesitate to build up that expertise even more, and gain promising mRNA technology at the same time.

That's why I think that Pfizer could be the ideal suitor for Gritstone Bio (GRTS -1.88%). It's understandable why Pfizer might be reluctant to buy BioNTech, with the German biotech's market cap near $80 billion. But Gritstone's market cap remains below $500 million. Pfizer could practically acquire the up-and-coming biotech with its spare change.

mRNA and more

Gritstone is developing its own COVID vaccine candidate that's expected to advance into early-stage clinical testing this year. But the biotech doesn't employ the ordinary mRNA approach that's used with Pfizer's Comirnaty. Gritstone's experimental vaccine uses a viral vector for the prime dose following by a self-amplifying mRNA (SAM) vector for the boost. The company believes this method could provide better protection against emerging variants than first-generation vaccines such as Comirnaty.

The small biotech brings more than just this promising mRNA technology to the table, though. Gritstone's Edge technology uses neural networks to predict which mutations will generate antigens most likely to be present on cell surfaces of viruses and tumors. The company then delivers those specific antigens using its viral prime/SAM boost vaccines.  

Gritstone already has a couple of pipeline programs in phase 2 testing. Granite is an individualized immunotherapy targeting solid tumors including metastatic microsatellite stable colorectal cancer (MSS-CRC), gastroesophageal cancer, and non-small cell lung cancer (NSCLC). Slate is an "off the shelf" immunotherapy targeting solid tumors with select KRAS mutations.

If Pfizer acquired Gritstone, the company would pick up two promising cancer immunotherapy candidates. It would gain a COVID vaccine candidate that could be ideal for battling emerging variants. The company would also add a platform that could enable it to more effectively develop a stable of new drugs targeting a variety of diseases.

Bigger targets in sight?

It's entirely possible that Pfizer could choose to buy a much larger drugmaker that would immediately boost its revenue and earnings. The company could afford to do so with its fast-growing cash stockpile.

But my view is that deals along the lines of the Trillium acquisition are a better use of Pfizer's money. The company should be able to deliver strong growth at least through 2025. Spending less now to gobble up smaller biotechs that could pay off after that point appears to be a smart game plan.

I think an acquisition of Gritstone by Pfizer could fit quite nicely with such a strategy. And it could make the big pharma stock a bigger winner over the long term.