The world’s biotechs would be wise to polish up their shop windows, tidy up their benches and straighten up their lab coats: Pfizer is coming.
Inquiring minds have wanted to know: What does Pfizer, loaded up with buckets of cash from the successful COVID-19 vaccine Comirnaty, want to buy? Well, the New York Big Pharma doled out a bit of that bounty today with its $6.7 billion Arena Pharmaceuticals buyout.
And in talking about how that biotech will fit into Pfizer’s portfolio, executives gave a preview of what else they want.
Pfizer plans to be “thoughtful and disciplined about resource allocation,” Aamir Malik, executive VP and chief business innovation officer, said on an investor call Monday. But the company has set two priorities for future acquisitions: compelling later-stage assets that can provide revenue in the back half of the decade and potential medical breakthroughs in earlier-stage development.
“We see focusing in these areas as creating more value than synergy-driven deals which require resources and integrations which can take a long time to complete,” Malik said.
The company has “significant firepower” to engage in M&A and plans “to be very active in dealmaking,” Malik said.
Pfizer’s revenue is expected to reach $101.3 billion in 2022, thanks to the BioNTech-partnered COVID-19 vaccine and an antiviral, Paxlovid, that has posted strong data. Comirnaty alone is expected to bring in $29.7 billion next year, according to recent analyst projections.
The company will also pour resources into its internal pipeline while adding new external opportunities that match its criteria.
“We like the risk of earlier-stage deals where we know not all of them will work out, but the scope for what we can do to add value is significant,” Malik said.
And don’t rule out a blockbuster deal just yet: Malik said that if a larger opportunity comes up, Pfizer is willing to pounce. Several large transactions, at $50 billion or more, are likely to occur next year, PwC predicted last week.
“If we see a larger acquisition opportunity that is strategic and we deem as value-creating, we certainly have the very solid balance sheet we can utilize to pursue that,” Malik said. “We will not speak in absolutes, and we never say never because we know circumstances can change.”
Besides external M&A, Pfizer will also look to add any data and technology that can help accelerate its delivery of medicines and bring value to patients.
“We will use business development to bolster our pipeline with targeted investments that we believe will be fundamental breakthroughs to bring in more and better substrate to Pfizer,” Malik said.
The Arena deal is Pfizer’s largest since snatching up Array BioPharma for $11 billion in June 2019, according to Mizuho analyst Vamil Divan.
“We like Pfizer being aggressive deploying cash that they have received and will receive from sales of their COVID-19 vaccine Comirnaty and the oral treatment option Paxlovid, which we expect to be approved soon,” Divan said in a Monday morning note.
The company also recently picked up Trillium for $2.2 billion and partnered up with Arvinas and Biohaven, all deals that were struck to provide long-term value, Divan wrote.
“We assume they will look to continue to aggressively use their ‘COVID cash’ for bolt-on deals like Arena that can boost the company's mid-late stage pipeline,” Divan said. Larger acquisitions could follow closer to 2026 if the smaller deals don’t pick up enough steam in terms of sales and earnings, he added.