Pfizer Back In The Deal Game In 2025

After pulling back on M&A last year to digest the $43bn acquisition of Seagen in 2023, Pfizer said it is in a position to complete bigger deals this year, but that the company will be strategic about business development. The company outlined its business development strategy during its fourth quarter sales and earnings call on 4 February.

From a capital allocation perspective, chief financial officer Dave Denton said the company is moving into 2025 with a solid foundation for business development after enhancing cash flow yield and reducing debt.

“Now as we enter 2025, we will be in a position from a cash and a de-levering perspective to have a more balanced capital allocation strategy, allowing us to do slightly bigger business development programs, if so desired in 2025,” Denton said.

“We have the capacity in the $10-$15bn dollar ZIP code from a business development perspective,” he added.

In 2022, Pfizer laid out a strategy to investors to offset what is expected to be a $17bn drop in revenue coming from exclusivity losses in 2025-2030 by ramping up business development. The ambition was to add $25bn in risk-adjusted revenue to 2030 revenues through business development activities, a goal the company believes it has nearly achieved through the acquisition of Seagen in 2023 and a series of smaller buyouts: Biohaven’s migraine portfolio, Arena Pharmaceuticals, Global Blood Therapeutics and Reviral.

“We have acquired $20bn of 2030 revenues,” CEO Albert Bourla said. “We are very confident that we will hit this number.” Looking forward, he said Pfizer will be looking more for strategic opportunities to enhance the pipeline rather than for near-term commercial opportunities to fill loss of exclusivity (LOE) revenue gaps.

“Everything we do, we will do through a strategic lens of building around our core competencies or building competencies in the areas that we maybe have not been in previously,” chief strategy and innovation officer Andrew Baum added. The company has recently narrowed is therapeutic areas of focus into three broad areas: oncology, vaccines and internal medicine.

“Those are fairly broad areas. They’re big buckets that you can put lots of therapeutic indications in,” Baum said. “If we were to explore adjacencies, or indeed therapeutic areas where Pfizer hasn’t been active, I think firstly we’ll be looking for truly breakthrough science that’s tractable with a drug, second an unmet medical need that we feel can be monetized, and thirdly, and most importantly, we have to have the talent with it in order to develop those assets if we go into a therapeutic area that is one that is unfamiliar to us.”

Reevaluating To Reenergize Pfizer Investors

Baum said he and chief scientific officer Chris Boshoff have also been culling through the pipeline over the last year to prioritize assets that will deliver value to patients – but also shareholders.

“Historically, when you look back, there’s no shortage of first-in-class breakthrough molecules that we’ve successfully shepherded through development. However, some of those really have not delivered in terms of financial revenues and therefore to shareholders,” he said.

Pfizer has been working through a portfolio prioritization, bringing a commercial view earlier into the process and assuring revenue estimates are unbiased, he added. Baum joined Pfizer last year from outside big pharma, after a lengthy career as an industry analyst, and was charged with overseeing the company’s portfolio management and capital deployment.

Disappointing returns for shareholders on R&D investment and M&A are what led activist investor Starboard Value to buy a $1bn stake in Pfizer last year. Pfizer, however, had already taken a number of steps to realign costs, pivot its commercial organization and recruit new strategists at the time, steps Pfizer said are making a difference.

In the near-term, investors are focused on an upcoming data readout for the oral, once-daily GLP-1 agonist danuglipron, which is expected in the first quarter. Data from the dose-optimization study will inform how Pfizer intends to move forward with development of the drug in obesity, a therapeutic area investors are intently focused on. Boshoff warned investors that weight loss is a secondary endpoint in the trial and the data point may be unreliable due to the small number of patients in the study.

Pfizer experienced a setback in the development of danuglipron in 2023 when a Phase IIb trial testing a twice-daily formula showed poor tolerability, leading the company back to the laboratory to design a new once-daily formula, which is the one currently being tested.

Pfizer’s fourth quarter financial performance was strong, with the company reporting $17.76bn in revenues, growth of 22% over the year-ago period, while revenues for the year were $63.63bn, up 7% versus 2024. The quarterly performance benefited from an increase of $3.2bn due to a one-time non-cash Paxlovid revenue reversal of $3.5bn recorded in the fourth quarter of 2023, as well as contributions from the legacy Seagen portfolio and higher sales of Vyndaqel, which grew 61% in the quarter.

The company reaffirmed financial guidance for 2025, which calls for essentially flat revenue growth of $61bn-$64bn and adjusted diluted earnings per share in the range of $2.80-$3.00.