Despite record-breaking earnings, a rock-bottom valuation, and a top-notch dividend yield, Pfizer's (PFE 0.67%) shares have slid by an unsightly 17.3% so far this year.
NYSE: PFE
Key Data Points
Pfizer's stock price has been under pressure this year for a variety of reasons, including but not limited to the following:
- The company's potential liability stemming from the ongoing litigation involving the heartburn medication Zantac.
- Pfizer and Bristol Myers Squibb's megablockbuster blood thinner medication Eliquis is facing a possible generic threat as soon as 2026.
- Pfizer's ultra high-growth Vyndaqel/Vyndamax franchise, a drug indicated for a rare form of heart failure, is set to square off against new competitors soon.
- The drugmaker's COVID-19 franchise, consisting of the anti-viral Paxlovid and the mRNA vaccine Comirnaty, is set to peak from a sales standpoint this year. As a direct result, Wall Street expects Pfizer's top line to fall by 20.7% in 2023.
Pfizer's response to these headwinds has been to go shopping
Over the past two years, the drugmaker has significantly ramped up its deal-making in an effort to add $25 billion of risk-adjusted revenue by 2030. Here are Pfizer's most significant deals over this period:
| Company Name | Price Tag | Key Assets |
|---|---|---|
| Arena Pharmaceuticals | $6.7 billion | Late-stage ulcerative colitis medication etrasimod |
| Biohaven Pharmaceutical | $11.6 billion | Migraine drug Nurtec ODT/CGRP inhibitor portfolio |
| Global Blood Therapeutics | $5.4 billion | Sickle cell disease drug Oxbryta and other pipeline candidates |
| ReViral | $525 million | Respiratory syncytial virus candidates |
| Trillium Therapeutics | $2.3 billion | CD47 cancer therapies |
Are these deals enough to meet Pfizer's financial goal?
Estimating the net present value (NPV) of these recent acquisitions is next to impossible at this stage because there are several moving parts at play within each of these transactions (e.g., key clinical trials pending, possible label expansions, uncertain competitive landscapes, etc.).
As things stand now, though, these deals could account for anywhere from $5 billion (in a worst-case scenario) to perhaps $30 billion (in a best-case scenario) in sales by 2030. The higher end of this speculative revenue forecast probably isn't realistic, however. Here's why:
- Arena's experimental ulcerative colitis medicine is poised to enter a highly competitive space.
- Biohaven's migraine drug is performing well so far, but it is operating in a saturated market.
- The drugmaker's newly acquired sickle cell disease assets -- via the Global Blood Therapeutics acquisition -- will likely have to compete against cutting-edge gene therapies in the near future.
- ReViral's RSV pipeline is a high-risk, high-reward endeavor. RSV product candidates, after all, have a sky-high failure rate in late-stage testing.
- Trillium's CD47 candidates are on watch after rival therapies stumbled in the clinic earlier this year.
The key takeaway is that Pfizer probably hasn't hit its stated financial goal of adding $25 billion in risk-adjusted revenue by 2030.
What's next?
The healthcare giant's mergers and acquisitions (M&A) ramp is sure to continue. On this note, Pfizer may choose to accelerate its revenue hunt by moving up the price ladder. By doing so, Pfizer could target rare-disease giants like Alnylam Pharmaceuticals and/or BioMarin Pharmaceutical. Both of these companies sport high growth franchises with formidable competitive moats -- features which would go a long way toward shoring up the pharma titan's long-term outlook.
Alternatively, Pfizer could simply continue to snap up small-to-mid-sized companies in a so-called "string of pearls" strategy. This route, however, probably won't do much for its share price in the near term. Wall Street, after all, clearly isn't impressed with its recent spate of deep-value deals. So, to change investor sentiment around its stock, Pfizer may have to go big on its next set of acquisitions. Alnylam and BioMarin are the most logical targets in this next rung of the pharma-acquisition price ladder.
