Pfizer's COVID cash pile opens opportunities for deals

Manas Mishra, Reuters

Posted at Feb 08 2022 08:16 AM

Vials with a sticker reading,
Vials with a sticker reading, "COVID-19 / Coronavirus vaccine / Injection only" and a medical syringe are seen in front of a displayed Pfizer logo in this illustration taken October 31, 2020. Dado Ruvic, Reuters/Illustration/File Photo

Investors on Tuesday hope to learn Pfizer Inc's plans for what could be a once-in-a-generation cash infusion from COVID-19 treatments and vaccines in 2022, with some looking for the drugmaker to spend on deals.

Pfizer's 2021 sales are expected to top $80 billion - its highest ever annual figure, according to Chief Executive Albert Bourla. Analysts expect revenue to top $100 billion in 2022 as production of Pfizer's oral antiviral treatment Paxlovid picks up.

The 173-year-old US drugmaker expects 2021 sales of $36 billion and another $29 billion in 2022 just for its COVID-19 vaccine developed with Germany's BioNTech SE.

Pfizer has said it books profit in the high 20s percent of vaccine revenue.

Expectations are also high for Paxlovid, which is being used in the United States and has been authorized in Canada, UK and Europe.

Analysts on average have forecast sales of nearly $23 billion this year. The US purchase contract alone - for just one sixth of Pfizer's expected 2022 production of 120 million Paxlovid courses - topped $10 billion.

Profits from the drug are expected to be high.

"What are they actually going to do with all this cash?" said Mizuho analyst Vamil Divan, adding that Pfizer may need to bring in new experimental drugs to replace sales from those losing patent protection in the next few years.

"Is future growth coming from the vaccine and Paxlovid, or are they buying things to boost their pipeline? I think we want to see them do more things like that to build their pipeline," Divan said.

Pfizer's profit surge comes at an opportune time for deals. The Nasdaq biotechnology index is down more than 21 percent in the past 12 months.

"There was very little M&A in biotech last year and that’s one of the things that held the sector back. Biotech investors expect and are hoping that it picks up this year, and we think Pfizer is going to be a major driver of M&A," said healthcare investor Brad Loncar.

In 2021, Pfizer bought Arena Pharmaceuticals Inc for $6.7 billion in cash and cancer drug developer Trillium Therapeutics for $2.3 billion.

Pfizer also could take other steps to reward shareholders.

"They’ve had such a flood of money come in that there might be a component of buybacks or dividend to Pfizer's capital deployment, but the main event will be M&A," Loncar said.

Pfizer's dividend yield of roughly 3 percent compares favorably to the nearly 2 percent dividend yield for the Dow Jones industrial average index.

Pfizer's shares have risen over 50 percent in the past 12 months, outperforming the 17 percent gain for the S&P 500 index in the same time period. Prior to the pandemic, Pfizer's shares traded in a range below $44 for several years.

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