This Covid portfolio was supposed to take the company to new heights.
However, the all-or-nothing strategy has taken Pfizer downhill in recent years. To quote its chief executive, the “pride of the pharmaceutical industry” has “ended up in a situation that very rapidly deteriorated”.
How the covid boom gave way to a deep slump
The covid boom flushed the company with cash, which the Seattle-headquartered global biotechnology company deployed towards a string of new deals. In fact, against a combined covid portfolio sales of $56 billion in 2022, Pfizer signed deals worth a whopping $70 billion. Apart from the mega $43 billion deal for oncology pioneer Seagan in 2023, the deals included the $11.6 billion acquisition of migraine drug maker Biohaven Pharmaceutical Holding Co. Ltd and the $5.4 billion acquisition of Global Blood Therapeutics Inc., which manufactures drugs for sickle cell anemia.
But as the pandemic ebbed, Pfizer’s covid portfolio sales dwindled from a peak of $56 billion in 2022 to $9 billion in 2024. Also, its new deals were not exactly playing out as expected. The sickle cell anemia drug had to be recalled after clinical trials uncovered higher mortality rates, the efficacy of the migraine drugs was nothing to write home about, and Pfizer’s dreams with obesity drugs got sidetracked after discovering serious side effects.
It can be argued that many of Pfizer’s deals were miscalculated and may turn out to be funds down the drain. An activist investor, Starboard has been challenging management on these capital allocation decisions. Investors, in general, have also lost patience.
NYSE-listed Pfizer Inc. has corrected by more than 50% from its peak in 2021. NSE-listed Pfizer Ltd, in which the global parent has a 64% stake, has had a similar journey. Of course, the NSE stock has been coloured by local factors such as currency-depreciation tailwinds and headwinds from the FII sell-off since September 2024.
Are things looking up?
One of Pfizer’s largest deals has been the acquisition of Seagen in 2023 for $43 billion. And from the looks of it, this may very well be the deal reviving Pfizer’s fortunes. In response to the deal (among other things), Pfizer Ltd’s stock had appreciated by 74% to peak at ₹6,164 apiece in September 2024.
In the quarter ended December 2024, $1 billion of Pfizer’s $4 billion oncology-driven revenue had come from Seagen. In fact, buoyed by Pfizer’s scale, Seagan’s 33% share in FDA-approved antibody-drug conjugate (ADC) technology is expected to contribute $10 billion to Pfizer’s risk-adjusted revenues in 2030.
Even excluding Seagan, Pfizer’s oncology portfolio has been rising from strength to strength. Its cancer drug Xtandi, which received NMPA approval in July 2024, clocked more than $500 million in revenues in the quarter ended December 2024. Furthermore, the combination of Xtandi and Talzenna has been proven to improve survival by 9-14 months, and the FDA has approved Pfizer-Astella’s Padcev for the treatment of typically unresponsive refractory lymphomas.
Braftovi and Mektovi, cancer drugs for which Pfizer has exclusive rights in the US, Canada, and certain emerging markets, have witnessed 65% year-on-year sales growth.
Thanks to these positive developments in its oncology portfolio, along with a seasonal uptick in its covid portfolio sales to $4.1 billion, Pfizer has been able to report revenue growth for two consecutive quarters now. Full-year revenues came in at $63.6 billion, having witnessed 12% year-on-year growth even after excluding the seasonally higher growth seen in its covid portfolio. Supported by significant developments in its internal medicine and oncology R&D pipelines, the company has reaffirmed its revenue guidance of $61-64 billion for 2026.
More recently and closer home, Pfizer Ltd surged by 9% intraday on Monday, shining bright against the gloomy backdrop of the 1% correction in the broader Nifty 50 index. The optimistic turn in sentiment was brought about by the company’s board approval for a marketing and supply partnership with Mylan Pharmaceuticals Inc.
Under the agreement, the companies will jointly market and sell Ativan and Pacitane in India. Given Mylan’s established networks with super-specialists in central nervous system therapy, the partnership is expected to help Pfizer enhance its distribution and in-clinic presence.
Are Pfizer’s corrective steps sufficient?
In what can be perceived as an acknowledgement of indiscriminate acquisitions during the covid windfall, Pfizer has shifted focus to cost-cutting in the last couple of years. Costs were cut by $4 billion, and debt was paid down by $7.8 billion in 2024. This has not come at the cost of R&D expenses, which have grown by about 6% over last year to $3 billion in the three months ended December 2024.
Dividend payouts have also continued during the year. The company has also shaken up its leadership by promoting its Oncology chief to the position of chief scientific officer, thereby reiterating Pfizer’s commitment to growing its oncology portfolio. A new chief strategy and innovation officer and two new board members have also been instated.
Notwithstanding these corrective steps, in addition to the deals gone wrong, Pfizer has been falling behind competition in a tough regulatory environment. It lost the RSV vaccine race to GSK even as the CDC’s revised RSV recommendations shrunk the RSV market in the US. It also gave up control of a bowel control drug before it could bear fruit.
It has also lost exclusivity in Canada, while some of Pfizer’s key drug trials failed and had to be withdrawn from the markets. Furthermore, its patents for sale of Eliquis and Prevnar are slated to expire in 2026, which is expected to impact more than 10% of its revenues.
The company also has a kitty of $10 billion to fuel further inorganic expansion, the fate of which is a matter of conjecture.
Finally, in terms of macro impact, former US President Joe Biden’s Inflation Reduction Act has been squeezing the margins of pharma companies. Matters have been made worse by a change in the US presidency and anticipated cuts in government funding for biopharma research.
Conspiracy theories in the US around vaccines, the newly appointed US health secretary who holds an “anti-vaccine” view, and a growing resentment of US citizens towards healthcare and insurance industries have also added fuel to the fire. While the president’s and health secretary’s meetings with the who’s who of the pharma industry lend some hope, the US president’s turn is anybody’s guess.
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Ananya Roy is the founder of Credibull Capital, a SEBI-registered investment adviser. X: @ananyaroycfa
Disclosure: The author does not hold any shares of the companies discussed, except SBI Life. The views expressed are for informational purposes only and should not be considered investment advice. Readers are encouraged to conduct their own research and consult a financial professional before making any investment decisions.
